[opendtv] Re: New transition web site

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Mon, 12 Mar 2007 10:25:18 -0500

At 3:23 PM -0500 3/10/07, Bob Miller wrote:
They don't have to recover the cost of the spectrum. That is an
investment. You try to make a return on an investment. You get the
cost of the spectrum back, plus or minus, when you sell it.

Sorry Bob, but they do not own the spectrum when they bid on it.

It is just a lease with an end date when the spectrum will be auctioned again. History teaches that first use of these auction-based leases is most important. The incumbent operating in this spectrum has a huge advantage when the lease ends as they will have infrastructure in place and ongoing cash flows. New bidders will need to calculate infrastructure costs into their plans for this spectrum should they bid on it. In some cases new technologies may make the spectrum more valuable for new uses, but in most cases the incumbent will be able to out bid potential competitors and get the spectrum again at a significantly lower price than the original auction.

This is one of the fatal flaws in spectrum auctions - the government gets lots of money the first time the spectrum is auctioned, then future revenues decline because of the entrenched players. THis is why the spectrum should be operated as a market (utility) so that revenues grow along with the economic uses of the spectrum.

All they have to do once their check has been cashed is try to make as
much money with this spectrum as they can for as long as they have it.

Yup. And this means that they are not likely to compete with "Free TV," which is being subsidized by retrans consent fees. They will compete with paid services in order to cover both operating costs and to recover the cost of the spectrum.

Agreed but I don't see retrans fees as necessarily a good thing for
broadcasters. It may in the end be seen as a distraction that led to
failure. What if no one uses OTA below channel 51? What if after the
transition Congress decides that no one is using OTA  channels below
51 and therefore they too should be sold. Especially if they get big
bucks for next springs auction.

Congress looks at the big picture - they do not care how the broadcast signals get to the consumers. In fact they enjoy the melodrama, the perceived tension between broadcasters and multi-channel operators, as this keeps them coming back to the politicians to protect their empires. The only thin important to the politicians is that the media oligopoly gets their programs into 100% of U.S. homes - if 99% get there via cable or DBS it is of no concern. What the politicians DO NOT WANT is to lose control over this medium. As long as they can hold the threat of censorship over the heads of the media conglomerates they can depend on them to stay in power.

The large problem for the political types is that technology is making it possible to use spectrum in much more efficient ways. Ultimately this devalues the spectrum when it comes up for new lease/auctions. They need broadcasters to prop up the artificial scarcity rhetoric.

As to broadcasters political clout. Is it possible that it is waning?
What with smart radios being allowed to operate in their spectrum, the
abject fear they displayed in the modulation fights (except for
Sinclair) and the failure so far to get multicast must carry. Is it
possible that Congress does not see them as being the power they once

Perhaps. The way I see it, the whole political house of cards is going to crumble in a decade or two at most. The politicians cannot sustain the massive spending programs that they are using to stay and attempt to grow their power. They were able to use the mass media to build the house of cards, but there's nothing that the politicians or the media can do to deal with the fact that the future obligations of the government are now approaching the projected gross national product.

It is likely that they will fall together when the government is devouring more than half of the total GNP.

There is a company, Cyren Call, that is proposing to manage a chunk of
spectrum including that set aside for early responders. They would
sell slots of time to commercial customers and make all the spectrum
needed by early responders to be available on a priority basis.
Something we verbally proposed doing both to the FCC and Senator
McCain's office years ago.

I think that it is time to make a similar proposal for spectrum below
51. Do as Craig has suggested for years. Time is right. Take the
spectrum back, bundle it in large statistically multiplexed channels
using the latest and greatest modulation and codec.

Thanks Bob. It would be a step in the right direction. But we are going to need to deal with the fundamentals soon. Medicare and Social Security will be out of money in the next decade.


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