Spectrum Category

Spectrum Fees and the Urban Legend of Free Spectrum

Scott R. Flick

Posted September 13, 2011

By Scott R. Flick

In the past few days, details have emerged from the White House regarding the funding sources being proposed to cover the cost of the American Jobs Act. In the government's search for cash, it should surprise no one that in addition to broadcast spectrum auction language (which seems to be in every new funding bill these days), spectrum fees are also being proposed. While there is some good news for television broadcasters, who are exempt from the fees in the current draft of the bill, you can never tell if that exemption will survive the rough and tumble legislative process. Radio broadcasters aren't so lucky--no exemption for them.

One trend is clear--the government's growing reliance on fees from broadcasters and other FCC license holders. When I started practicing in the 1980s, the FCC did not generally charge fees. Congress later instructed the FCC to collect a fee for each application or report filed, and to set the size of the fee at an amount that would cover the cost of processing that particular application/report. While there was some grumbling about having to pay the FCC to process reports that the FCC had required be filed in the first place, most understood that the government was not going to surrender this newly-found revenue source.

However, when Congress later required the FCC to also collect annual regulatory fees from spectrum users in amounts sufficient to cover the FCC's total operating budget, spectrum users cried foul. They were already paying a filing fee to have the FCC process their applications, and now were expected to pay a separate annual fee to cover all of the FCC's operating costs (including application processing). This meant that the government was double-dipping--collecting fees under the guise of "covering costs" that in fact exceeded those costs. To his credit, Commissioner McDowell acknowledged this strange situation in 2009, when he urged the FCC to "take another look at why we continue to levy a tax of sorts of allegedly $25 million or so per year on industry, after the Commission has fully funded its operations through regulatory fees. That money goes straight to the Treasury and is not used to fund the agency." Despite the protests, the FCC continues to be required by Congress to collect those fees, which increase every year.

So broadcasters and other spectrum users can be forgiven if they are skeptical of calls for yet one more government fee on their existence. Even if the exemption for television broadcasters stays in the bill, that is limited comfort for TV licensees, since any spectrum fee adopted will almost inevitably creep over to television as Congress continues its search for revenue sources that can be called "fees" rather than "taxes."

Sensitive to these complaints, the White House attempted to bolster its case in a summary of the bill, stating that "it is expected that fees would encourage efficient allocation and use of the radio spectrum, as the opportunity cost of spectrum resources would be reflected to commercial license holders that did not receive authorizations through competitive bidding." This perennial argument, that broadcasters shouldn't complain about any governmentally-imposed burden because "they got their spectrum for free," remains one of the urban legends of Washington. Like most urban legends, however, it has no basis in fact.

Very few current broadcasters "got their spectrum for free." The FCC has been auctioning off broadcast spectrum for over a decade, and broadcast stations that were licensed before that time have typically been sold and resold at "fair market value" many times over the years. As a result, it is a rare broadcaster that currently holds a broadcast license obtained directly from the FCC "for free". Most broadcasters have paid dearly for that license, both in terms of the station purchase price and the public service obligations that come with the license.

Still, fee proponents argue that because the original license holder didn't have to pay the government for the spectrum, the "free" argument still applies, no matter how many times the station has changed hands since then. That argument is eviscerated, however, by a simple analogy. When the United States was settled, the government issued land grants to settlers who "staked a claim" to virgin territory by promising to make productive use of that land (the "Sooners" being one of the better-known examples). Other than the promise to use the land, these settlers did not pay the government for their land grants. The land then passed from generation to generation and from seller to buyer many times in the years since the original grant. However, despite the fact that the original owners "got their land for free", I would wager there are few homeowners among us who would agree that we received "our" land for free, much less accept a governmental fee premised on that assertion.

How spectrum/licenses were originally assigned by the FCC (or its predecessor agency) many years ago bears no more relevance to today's broadcaster than 19th century land grants relate to the modern homeowner. In both cases, the original owner lived up to its commitment to the government to make productive use of the asset, and was therefore permitted to eventually sell its claim to others. To assert that these buyers are somehow suspect beneficiaries of land or spectrum ignores reality. Today's broadcasters are merely the spiritual descendants of a different kind of settler--the pioneers of the airwaves.


The First Domino Falls: Say Goodbye to Channel 51

Scott R. Flick

Posted August 22, 2011

By Scott R. Flick

The FCC this morning announced a "temporary" freeze on the filing and processing of applications for full power and low power television stations on Channel 51. The freeze was announced in response to a petition filed in March by CTIA - the Wireless Association and the Rural Cellular Association asking the FCC to take steps to "prevent further interference caused by TV broadcast stations on channel 51" to wireless broadband services in the Lower 700 MHz A Block. More specifically, the petition urged the FCC to "(1) revise its rules to prohibit future licensing of TV broadcast stations on channel 51, (2) implement freezes, effective immediately, on the acceptance, processing and grant of applications for new or modified broadcast facilities seeking to operate on channel 51, and (3) accelerate clearance of channel 51 where incumbent channel 51 broadcasters reach voluntary agreements to relocate to an alternate channel."

What is odd about the FCC's announcement, however, is that freezes are normally implemented to "lock down" the engineering database to permit the FCC to analyze various engineering solutions using a stable database. For example, during the DTV transition, the FCC issued numerous freezes as it attempted to engineer a DTV channel plan that would allow each full power station both a digital and an analog channel to operate during the transition. That task would have been much harder if the database had kept changing during that time.

Here, however, the FCC is not freezing Channel 51 applications to give it time to resolve a Channel 51 engineering issue. Instead, it is freezing Channel 51 applications to ostensibly give it time to determine whether to freeze Channel 51 applications. That is a novel use for a freeze, and seems to prejudge the ultimate question of whether the FCC should grant the underlying petition.

Of particular interest is the fact that today's notice goes farther than just a freeze, as it "(1) announces a general freeze, effectively [sic] immediately, on the filing of new applications on channel 51 and the processing of pending applications on channel 51; (2) lifts the existing freeze as applied to, and will accept, petitions for rulemaking filed by full power television stations seeking to relocate from channel 51 pursuant to a voluntary relocation agreement; and (3) opens a 60-day window for parties with pending low power television station applications on channel 51 to amend their applications to request a voluntary channel assignment."

Typically, when the FCC issues a freeze, it is only on the filing of new applications. As a matter of fairness, the FCC will normally process applications already on file when a freeze is announced since such an applicant has already expended its resources to file an application that was fully grantable before the freeze was announced. That makes this freeze unusual, as it freezes even pending applications, and in doing so, pretty much "temporarily" grants the wireless industry's petition.

That last aspect is particularly odd. In contrast to a freeze designed to "lock in" the current engineering situation while options are assessed, the freeze notice does the opposite, specifically encouraging Channel 51 applicants and licensees to amend their applications and modify their facilities to change the current Channel 51 engineering terrain. In other words, it is a freeze that is not designed to lock in the current situation, but to actively change the current situation.

If it wasn't already clear where the FCC is heading, establishing a 60-day "window" for low power applicants to clear off of Channel 51 in response to only a "temporary" freeze would make no sense if the FCC didn't intend the freeze to be permanent. A low power station that fails to file a displacement application during those 60 days could well be deprived of a subsequent opportunity to amend when the FCC adopts a permanent Channel 51 freeze. Otherwise, there would be no point in limiting such applications to a 60-day window. In that regard, the assertion in the freeze notice that the FCC's action is purely procedural and therefore "not subject to the notice and comment and effective date requirements of the Administrative Procedure Act" will be of little comfort to the low power applicant who waits to see what "permanent" action the FCC takes in this proceeding.

While the freeze does leave the FCC staff some wiggle room to grant waivers for modification applications by existing Channel 51 stations where necessary to maintain service to the public (thank you Media Bureau!), it is apparent that the FCC has decided to begin winding down use of Channel 51, even though the wireless entities that bid on the adjacent spectrum knew that they were subject to interference from Channel 51 stations when they bought it.

Broadcasters not affected by this freeze should derive little comfort from that fact. The FCC has made clear its desire to recover 120 MHz of contiguous broadcast spectrum, which means that all channels higher than 30 would disappear. This Channel 51 freeze merely establishes the template for those future FCC actions, and soon the bell could be tolling for far more than just Channel 51.


FCC Freezes TV Station Channel Changes in Preparation for Spectrum Repacking

Scott R. Flick

Posted May 31, 2011

By Scott R. Flick

The FCC today announced a freeze on the acceptance of any petitions for rulemaking seeking to change a station's assigned channel in the Post-Transition Table of DTV Allotments. While application freezes were once relatively rare at the FCC, they became quite common as a planning mechanism during the years when the FCC was creating a new Table of Allotments to initiate and complete the transition to digital television.

Given the FCC's announced intent to begin reclaiming broadcast television spectrum for wireless broadband as part of the National Broadband Plan, and to then repack the remaining television stations into a smaller chunk of spectrum, today's announcement was not a surprise. The Commission's brief announcement stated that the freeze is necessary to "permit the Commission to evaluate its reallocation and repacking proposals and their impact on the Post-Transition Table of DTV Allotments...."

The freeze will put a stop to the steady migration of stations from the VHF to the UHF band, where reception is generally better and the opportunities for successful mobile DTV operations greater. While not discussed in the FCC's announcement, proponents of transferring broadcast spectrum to wireless broadband have no interest in VHF spectrum, so each station that moves from the VHF band to the UHF band makes the FCC's efforts to clear UHF spectrum for broadband that much more difficult. The FCC noted in its announcement that since the lifting of the last freeze in 2008, it has processed nearly 100 television channel changes, and that it therefore believes most stations interested in making a channel change have had sufficient time to do so. The FCC indicated that it would continue to process channel change requests filed before the new freeze commenced.

And so it begins. While the prospects for legislation to implement the National Broadband Plan's broadcast spectrum incentive auctions remain murky, the FCC does not need the blessing of Congress in order to commence the process of spectrum repacking. Now well over a year old, the National Broadband Plan remains mostly that--a plan. Today's freeze marks one of the first concrete steps by the FCC to implement at least some aspects of that plan. Setting aside the issue of whom the ultimate winners and losers in the spectrum debate will be, the painful and expensive process of implementing a new Table of Allotments for digital television is still far too fresh a memory for many broadcasters to want to be subjected to a similar process now.

At least with the transition to digital, broadcasters could see the benefits of enduring the difficult process in order to be able to garner the benefits of high definition programming, multicasting, and datacasting. Unfortunately, for broadcasters not interested in selling spectrum in an incentive auction, repacking means all pain and no gain. The best case scenario for a television broadcaster in a repacking is just to survive the disruption and distraction without losing signal coverage of viewers and cable headends. That doesn't leave broadcasters with much light at the end of the tunnel to guide them through the difficult days ahead.


Deadline to Obtain Interference Protection From White Spaces Devices Just Days Away

Paul A. Cicelski Lauren Lynch Flick

Posted March 31, 2011

By Paul A. Cicelski and Lauren Lynch Flick

Last Fall, the FCC adopted final rules allowing Part 15 unlicensed Television Band Devices (TVBDs) to operate in "white spaces", the slivers of unused spectrum in the television band. To find available slivers of spectrum, the TVBDs will consult a database that is intended to contain information about every use being made of TV spectrum throughout the United States. However, certain users of television spectrum have only until April 5, 2011, to ask the FCC to grant a waiver in order to be included in the interference protection database or risk debilitating interference.

Any facility, including a cable headend, satellite receive facility, TV translator, Class A television station, low power television station or broadcast auxiliary station, that picks up an over-the-air broadcast signal at a point located more than 80 kilometers outside the originating station's protected contour must file a waiver request with the FCC by April 5, 2011 seeking to have that use included in the white spaces database and protected from interference.

At a later date, the FCC will allow users to register without a waiver those receive sites that are located within the 80 kilometer zone (but outside the station's protected contour) for interference protection. They cannot do so now because the database is still being developed. In the meantime, waiver requests for locations located outside of the 80 kilometer zone must be filed now and should include the coordinates of the receive site, the call sign of the originating station received over-the-air, and an indication of how potential white space devices would disrupt existing service. According to the FCC, it will accept public comment on waiver requests prior to making a decision on whether or not to grant them.

As a result, any cable headend that has built a tower with a directional receive antenna to pick up particularly distant television station signals, or any broadcaster or TV translator that uses over-the-air signals or a UHF microwave backbone to connect a series of translator facilities, will be prevented from registering such sites outside the 80 kilometer zone unless they seek a waiver by the April 5 deadline. Unintended interference to a cable system's ability to receive a television station's signal could result in the television station being dropped from the cable system. Interference to a single link in a long microwave backbone could interrupt signal delivery to all sites further down the line.

While the 80 kilometer "no waiver" zone may seem large, one multiple system cable operator has already filed a waiver request with the FCC indicating that it has headends receiving over-the-air television signals outside that zone in eleven different locations spread across multiple states, including Alabama, Arizona, Illinois, Iowa, Michigan and Minnesota. Thus, if a station is being carried by a far off cable or satellite system, it would be wise for cable and satellite operators as well as TV licensees to double check how and where the TV station's signal is being received. For TV signals being picked up over-the-air more than 80 kilometers from their protected contour, a waiver request now will be required to ensure continued interference-free signal delivery.

Although receive sites located within the 80 kilometer zone do not face the April 5, 2011 waiver deadline, they will still be affected by the implementation of the white spaces database. Because the data that will be used to populate the database will be taken from the FCC's existing records, it is important that parties review the data in the FCC's databases to make sure it is accurate to avoid potential interference from future white space operations.

In January, the FCC's Office of Engineering and Technology (OET) conditionally designated nine companies as white-space device database administrators: Comsearch, Frequency Finder Inc., Google Inc., KB Enterprises LLC/LS Telcom, Key Bridge Global LLC, Neustar Inc., Spectrum Bridge Inc., Telcordia Technologies, and WSdb LLC. The FCC held a training session for these entities earlier this month. Thus, the rollout of these databases will soon be at hand. OET recently stated that it intends to "exercise strong oversight of the TV bands databases and administrators." That said, parties should still exercise their own diligence in reviewing the FCC's databases, registering receive sites, and applying for any needed waivers if they want to avoid interference problems down the road.


Perspectives on the FCC's First Broadcast Spectrum Reallocation Rulemaking

John K. Hane

Posted March 1, 2011

By John K. Hane

More than two months after the FCC released a Notice of Proposed Rulemaking proposing preliminary steps to reallocate and reassign television broadcast spectrum for wireless broadband, the government machinery has finally announced comment deadlines: March 18 for initial comments and April 18 for replies. This is the first of several proceedings the FCC intends to pursue in its goal to repurpose broadcast spectrum.

The notice makes three proposals and asks a number of questions about each. It proposes:

  • To add new fixed and mobile service allocations to the TV bands and give them co-primary status;
  • To permit two or more stations to share a single 6 MHz channel; and
  • To take steps to improve the performance of broadcast signals in the VHF band.

Almost everyone interested in the topic of broadcast spectrum repurposing has a strong view, and opinions differ even among broadcasters. With station transactions at all time lows, some welcome the prospect of another possible exit. Those that don't want to sell are worried about transition costs, being moved to less desirable channels, losing coverage area, or being coerced to sell by threat of hefty spectrum fees. Many broadcasters don't know where they stand. For those, here are two things to keep in mind.

Timing. Regardless of what you read about timetables, it is extremely unlikely that auctions of any reclaimed broadcast spectrum will take place within the next three years. Congress has not authorized incentive auctions. Even if it does so this year, it will be later in the year, and the FCC will then have to adopt implementing rules. Only then can the FCC schedule an auction and can stations determine whether they want to sell. If Congress doesn't permit incentive auctions, the FCC has other options, but those take time to develop too. Right now, there's no coherent Plan B.

The FCC is breaking new ground here, and even without political pressures these are hard questions. They'll take a lot of time and thought to resolve. Almost a year after the release of the National Broadband Plan, we still haven't seen the model the FCC is using to figure out how broadcast spectrum can be cleared and stations repacked.

Apparently, the FCC is having a hard time finding daylight even without second-guessing by outsiders. Assuming everything goes smoothly for the FCC's agenda, it's conceivable auctions could take place in late 2014, with settlements and transition in 2015.

Eligibility and appeal. Most stations either won't be eligible to participate in incentive auctions or the prospect won't be very enticing. The FCC will almost certainly draw some bright lines. It might offer incentives only in the most densely populated areas, or it may preclude certain classes of stations from participating altogether. It might offer bigger incentives to higher band UHF stations, or it might offer better incentives to those stations, and it may preclude VHF or lower UHF stations from participating, or it may offer weaker incentives to them. Much depends on what the yet-unreleased "optimization" models show and what Congress does or does not authorize.

Among eligible stations, only a few are likely to find incentive payments to be attractive. At least today, even the most aggressive projections show spectrum shortages only in a handful of the most densely populated areas. It is not clear that the FCC will seek to clear broadcast spectrum in every market, and even if it does, auction proceeds (and thus, incentive payments) will be progressively lower as market size declines. In the 2007 auction of vacated TV spectrum, some markets commanded more than $3 per "MHz/pop" (one MHz covering one person), while others sold for about a tenth of that.

Except in the very largest markets, incentive payments probably won't exceed the enterprise value of a profitable television station. Auction proceeds have to be split at least three ways. The U.S. Treasury will take its pound of flesh (Congress needs incentives too!) and transition costs will have to be paid. As an example, about two million people live in the Kansas City Metropolitan Statistical Area. Assuming a Kansas City station is credited with covering them all, auction of its 6 MHz channel at $1/MHz/pop would yield $12 million. A lot of this would be spent on whatever transition mechanism is used and the Treasury will keep a substantial portion of the remainder. Perhaps $1 million to $3 million would be available as an "incentive" payment to the station.

Of course, the FCC has time and means to create negative incentives. Stations that don't sell may be moved to much less attractive channels, or forced to reduce power or coverage, or (if Congress approves) assessed substantial spectrum fees.

The FCC's rulemaking notice doesn't ask questions about these sorts of issues, but broadcasters should keep them in mind as they formulate their comments in response to the notice.


FCC Begins Proposed Reallocation of TV Broadcast Spectrum

Scott R. Flick Paul A. Cicelski

Posted December 1, 2010

By Paul A. Cicelski and Scott R. Flick

As we discussed in a post back in March, the FCC's staff had just released its National Broadband Plan, which announced a controversial proposal to reclaim 120 MHz of spectrum from television broadcasters. Yesterday evening, the FCC moved this process forward by issuing a Notice of Proposed Rulemaking to open TV spectrum to use by fixed and mobile wireless facilities, including mobile broadband. We are in the process of preparing a detailed Client Advisory analyzing the FCC's Notice for publication later today. However, for those that can't wait, there are a number of big issues raised by the Notice.

First, the FCC proposes to give wireless broadband providers new primary allocations in the broadcast television spectrum. If adopted, this new rule would give fixed and mobile wireless users co-primary status throughout the entirety of the TV spectrum (as opposed to just in the upper-UHF band). Having primary status is important: it means non-primary services have to accept any interference from you, and you don't have to worry about interference you cause to non-primary services (like low power television stations). If the FCC issues fixed and mobile wireless licenses in the TV band, and gives them co-primary status, then those wireless broadband providers would have the exact same interference protections as full-power TV stations enjoy today. As a result, full-power TV stations would be prevented from modifying their facilities if the modification would cause interference to a newly-licensed wireless operator. Regardless of which licensee was there "first", co-primary status means that neither service can propose modified facilities if interference would be caused to the existing facilities of the other service.

Second, the FCC proposes to establish a legal framework allowing two or more broadcast stations, potentially including Class A and low power television stations, to voluntarily share a single six-megahertz channel. The Notice proposes to allow parties flexibility to decide for themselves how best to share the six-megahertz channel, and envisions more than two stations potentially sharing the same channel. According to the Notice, two sharing stations could each broadcast one primary HD stream, while more than two stations sharing a six-megahertz channel would each broadcast in Standard Definition (although note that the engineering community has been pretty vocal regarding losses in picture quality caused when two HD signals jockey for room in a single 6MHz channel). The FCC also proposes, regardless of the number of stations sharing a channel, that each of the full-power stations retain must-carry rights on cable and satellite systems for their primary program stream.

Finally, the Notice asks for comment on ways to improve VHF TV reception to increase the attractiveness of the VHF band to digital TV stations. The FCC recognizes that UHF spectrum is much more desirable for flexible digital TV service (as well as for mobile broadband) than VHF spectrum. In an effort to encourage increased use of VHF channels by digital broadcasters, the FCC asks for comment on proposals to increase the performance standards of indoor VHF antennas. The Notice also proposes to make technical changes to the FCC's VHF service rules, including allowing VHF stations to operate at higher power than the rules currently permit. The FCC is also asking for any other ideas that might improve reception of digital VHF TV signals.

To say that these proceedings represent a big deal for broadcasters and wireless operators understates the meaning of both "big" and "deal". These proceedings will lay out the framework for how all affected services will develop and interact with each other for the foreseeable future. They also represent the FCC's continuing shift from dedicating spectrum to specific uses to allowing multiple services to share the same spectrum. While, if done correctly, shared spectrum use can increase spectrum efficiency, the etiquette of that sharing arrangement is a critical component of how the FCC, and the residents of that spectrum, proceed from here.

There is a maxim that "good fences make good neighbors." In moving toward shared use, the FCC is proposing to tear down the fences separating spectrum users, and each of those users is about to learn more about their neighbors than they ever wanted to know. What rules the FCC adopts to protect each party's flower bed from being trampled by its neighbors is going to be critically important. Keep a close eye on these proceedings, and on your flower bed.


If We're Over-the-Top, Is It All Downhill?

Posted October 11, 2010

By John K. Hane

In October of 1996 my boss, the chairman of a $3 billion television production and distribution empire (and one of the smartest television dealmakers I ever met) scoffed when I said that television could be delivered over the Internet. I told him to wait ten years. Well, in 2006 we had YouTube, but I doubt Bill Bevins would count that as television.

In the first ten days of October 2010:

  • I spoke on the "Hot Topics" panel at the annual TPRC conference, where leading academics and policy makers discuss legal, economic, social, and technical issues on national and international information and communications policy. The hot topic this year: over-the-top (OTT) television.
  • A friend called asking for advice - he'd been offered a senior executive post with a very large broadcasting company paying a great salary, and a senior position with a scrappy OTT startup, paying lots of stock and the chance to hit big. In 2010, he sees this as a tough call.
  • I watched Forrest Gump in "high definition" on a 50" plasma monitor, streamed by Netflix to my son's Xbox. The quality was stunning.
  • I installed my new AppleTV and watched a high definition podcast, also streamed, and several "high definition" videos on YouTube and Netflix. In several cases, the quality was very good. And the Apple TV interface is much more elegant and easier to use than our FiOS set top box.

I should have told Bill 14 years.

OTT is here. There's a lot of long tail and niche content online. It's getting easier to find and use, and if you have a fast broadband connection, the quality can be outstanding. So just what is cord cutting and how do you define OTT? And what do they mean for traditional video providers?

Cord cutting at its extreme means a household drops MVPD service and relies on other sources of television - primarily free OTA television supplemented by long-tail OTT internet services like Netflix and Hulu. OTT means traditional television content delivered through non-traditional (generally Internet) television distribution channels. It doesn't refer to non-traditional video content (YouTube and other user generated content) regardless of distribution channel. We make this distinction because, rightly or wrongly, we consider YouTube and Vimeo to be something entirely different (and less threatening to incumbent providers) than the delivery of high resolution, full-format, traditional programming over the Internet.

Many fear OTT will lead to tens of millions of households to cut the cord. This is naturally a concern for cable and satellite providers, but many broadcasters worry too, because MVPDs won't pay broadcasters for cord cutting households. Personally, I think we are likely to see a fair amount of cord cutting in the next few years, and an even larger amount of what I call cord trimming - dropping premium services or higher tier services. In new households, broadband is essential, while pay television service is often optional. And the combination of gorgeous, over-the-air, live high definition broadcast service and increasingly compelling long tail OTT options is likely to be a better option for many households than traditional MVPD service.

But there's a silver lining for cable systems and broadcasters, and even for DBS providers.


  • Cable systems may lose video subs, but demand for OTT television will drive broadband adoption into more of the 40 million households that haven't adopted it so far, and it will lead others to upgrade their connections, at higher prices. Since broadband service is generally more profitable than video services, cable profit margins could actually rise even if gross revenue shrinks.

  • Broadcasters could lose retransmission consent fees from cord cutting households, but cord shrinking will affect broadcast competitors - cable networks - before broadcasters, because it's the expensive higher tiers and premium services that cord-shrinking customers drop. The broadcast and sports channels are the last to go before cord is cut altogether.

  • If total MVPD penetration falls from the high eighties to the mid sixties in the next seven to ten years, as I suspect it will, tens of millions in advertising will migrate back from cable and satellite to broadcast, because reach is still important. Twelve or so years ago, with MVPD penetration in the mid 60s, broadcasters were far more profitable, even without retransmission revenue.

  • Much higher broadband penetration could breathe new life into the DBS business model, which is an incredibly cost efficient way to distribute high quality linear television. With more broadband homes to sell into, DBS providers can create a hybrid satellite-OTT service that meets and in many ways exceeds what the cable operators can do with their own video services.


OTT service will have many effects beyond cord shrinking and cord cutting. But incumbent providers should embrace OTT, because the opportunities it enables - the best of which we can't imagine yet - far outweigh the risks that it poses to all incumbent business models. It creates opportunities for greater efficiencies and more varied service offerings for all incumbents, if they have the vision to see the opportunities and the perseverance to follow through. Best of all, OTT can make television more satisfying for consumers, more measurable, and easier to use - leading, inevitably, to more usage. In the television business, we all like more usage, as long as we get our share. Getting that share is the challenge and the opportunity.


White Spaces and the FCC: A Decision Behind It and a Challenge Ahead

Posted September 23, 2010

By Scott R. Flick

The FCC today released an order refining, but largely reaffirming, its earlier decision to allow unlicensed devices to operate in the TV band as long as they do not cause interference to existing users such as TV stations and wireless microphone operators. While many refer to this spectrum as "white spaces" on the theory that it is vacant spectrum located between existing television signals, veterans of the digital television transition question whether white spaces more appropriately fall into the same category of mythical creatures as unicorns.

The digital transition's compression of television stations that previously occupied Channels 2-69 nationwide into Channels 2-51 took a miraculous feat of engineering (and the displacement of a lot of LPTV stations). Many stations had to be wedged into the shrunken TV band with a shoehorn, which, at least in urban areas, left very little free spectrum. While the phrase "white spaces" evokes a mental image of vast open prairies, the densely populated areas that are the target markets for manufacturers of unlicensed equipment are already spectrum congested, and are more likely to offer "white spots" or "white specks" than white spaces. The benefit of the Commission's order will likely be greater in rural areas, where spectrum congestion is not an issue even after the digital transition.

As long as the FCC lives up to the Prime Directive of not causing interference to existing inhabitants of the TV band, the benefits of better utilization of spectrum are hard to dispute. Broadcasters understand as well as anyone the challenge of eking out every last ounce of potential from spectrum. However, broadcasters are understandably concerned with a significant change made by the FCC in today's order -- the elimination of the FCC's requirement that white spaces devices be able to sense local signals and avoid causing interference to them. By eliminating that requirement, the FCC removed the "safety valve" it had installed in its original plan. Instead, the FCC is placing its faith entirely in the creation of one or more privately-created and run databases of existing spectrum users that unlicensed devices will consult before selecting a frequency on which to operate.

Many in the broadcast industry have been strong proponents of requiring unlicensed devices to have "sensing" capability rather than relying solely on a national database of existing signals. "System redundancy" is an important feature in designing reliable communications systems, and removing that redundancy inevitably makes for a less reliable system. As the FCC has noted, eliminating the "sensing" requirement will reduce the cost of unlicensed devices, but as we discovered in the recent Gulf oil spill, short term decisions to reduce costs by reducing safety margins can have far greater and more expensive long term consequences.

While lacking any backup protection, a spectrum database could be a workable solution if properly implemented. However, the challenges of implementation are immense. Ensuring the accuracy of the database itself will be a challenge given constantly changing spectrum use by new and existing operators. Also, signals propagate differently depending on frequency, what part of the country you are in, local terrain, and various other factors, making the database either incredibly complex, or inadequate to address real world circumstances.

Viewers of TV stations in Fresno, whose real world signals extend far beyond their predicted contours because of terrain effect, will suddenly be subject to interference from unlicensed devices. In addition, you have to think that users of those unlicensed devices aren't going to be too happy when their wireless network won't function because (unknown to them) it is receiving interference from a TV signal that the database swears isn't there.

Because of these and many other issues, the FCC needs to keep an open mind as it implements its proposed use of white spaces. A well-performing database that keeps licensed and unlicensed operators adequately separated is in everyone's interest. If some of the FCC's initial conclusions need to be rethought in order to accomplish that, those discussions will be healthy ones.

Equally important is ensuring that equipment manufacturers fastidiously comply with the FCC's interference protocols. Broadcasters are rightly concerned that non-compliant or just poorly designed and manufactured unlicensed devices can cause immense damage, and the FCC lacks the tools to put the genie back in the bottle should that occur. Fining such manufacturers after the fact won't help much if millions of interference-inducing devices are already out there interfering with the public's ability to watch TV, listen to a sermon, or attend a Broadway show. As the FCC proceeds down this path, getting it right is going to be far more difficult than just getting it done.


Let Them Eat Fees: Broadcasters and the Spectrum Measurement and Policy Reform Act

Posted July 20, 2010

By Scott R. Flick

At a recent presentation on legislative matters affecting the communications industry, I noted that broadcasters, while lately feeling much under siege, should not underestimate their part in the digital future. It is true that the government wants broadcasters' spectrum (the National Broadband Plan), cable operators want broadcasters' programming, ideally for free (the retransmission battles in Congress and at the FCC), politicians want broadcasters' airtime (the DISCLOSE Act), musicians want broadcasters' money (the Performance Tax), and the Internet would love to have broadcasters' audiences. However, the conclusion to be drawn from those facts is that broadcasters have what everyone else wants, and need to themselves capitalize on those important assets.

Let there be no doubt that broadcasters are in for some challenging times fending off those who covet their riches, but that is a far better position than having no riches to covet in the first place. As the possibilities for television and radio multicasting become better developed through experimentation and innovation, mobile video gains the prominence in the U.S. that it is experiencing overseas, and broadcasters continue to refine how best to leverage their content on multiple platforms, broadcasters have as good an opportunity as anyone to make their mark in a digital future, while others fall by the wayside as "one-idea wonders."

Unfortunately, government has begun to place its thumb on the scale, discouraging broadcasting while encouraging other wireless uses. The latest example is this week's introduction of the Spectrum Measurement and Policy Reform Act (S. 3610) by Senate Communications Subcommittee Chairman John Kerry (D-Mass.) and Senator Olympia Snowe (R-Maine). The legislation would encourage broadcasters to abandon spectrum for a share of the government's auction proceeds for that spectrum, and authorize the government to impose spectrum fees on broadcasters. In other words, the FCC can use spectrum fees to "encourage" broadcasters to relinquish their spectrum.

This government push is propelled by one of the oldest myths regarding broadcasting, and one of the newest myths. The first myth is that broadcasters are the only licensees who have not paid for their spectrum, and therefore merit less leeway in how they use it, or whether they get to use it at all. Of the thousands of broadcasters I have worked with over the years, however, only a handful actually received their spectrum for free. The vast majority bought their stations (and FCC licenses) from another party, paying full market price, and therefore being really no different than the wireless telephone licensee that also bought its FCC authorization from a prior licensee. Whether some earlier, long-gone broadcast licensee that built the station enjoyed some financial windfall doesn't bring any benefit to the current licensee. The current licensee inherited the dense regulatory restrictions of broadcasting, but not the "free spectrum."

In addition, new broadcast licensees have generally purchased their spectrum at FCC auction since Congress changed the law in 1997, just like wireless licensees. Despite that, no one has suggested that even these more recent licensees should be released from FCC broadcast regulations because they paid the government for their spectrum.

The second and newer myth, propogated by advocates of the National Broadband Plan, is that broadcasting is a less valuable use of spectrum than wireless broadband since spectrum sold for wireless uses goes for more money at auction than broadcast spectrum. That is, however, a distorted view of value. Everyone, including the FCC and the wireless industry, has denoted broadcast spectrum as "beachfront property" from a desirability standpoint, meaning that it is not the spectrum, but the regulatory limits placed on it, that is creating the difference in cash value at auction. An alternate way of viewing it is that the public receives that difference in auction value every day from broadcasters in the form of free programming and news, rather than in the form of a one-time cash payment to the government. That the public receives more value for their spectrum from continuing broadcast service than from a one-time auction payment (that is swallowed by the national deficit in a matter of seconds) becomes more obvious when you realize that the public will then spend the rest of their lives leasing "their" spectrum back from the auction winner in the form of bills for cellular and broadband service.

An apt analogy is national parks. Would selling them outright for industrial use bring in more cash than keeping them and allowing them to be enjoyed by the public? Certainly. Is selling them for industrial use therefore the most valued use of parkland? Hardly.

Broadcasters have been good tenants of the government's spectrum, paying the public every day for the right to remain there. If they stop those public service payments, they lose their license, making way for a new tenant. This new legislation aims to entice these paying tenants from their spectrum so that the spectrum can be sold outright to the bidder who perceives the greatest opportunity to extract a greater sum than the auction payment from the public. That may be poor public policy, but it is at least voluntary for the broadcaster, though not for the public. Threatening to tax broadcasters with spectrum fees until they surrender their spectrum is not marketplace forces at work, but the government forcing the marketplace to a desired result. Proponents of wireless broadband must have little confidence in their value proposition if they feel they can come out ahead only if they first devalue broadcast facilities by imposing yet more legal and financial burdens on broadcasters.


The National Broadband Plan's Other Shoe Drops... on LPTV Applicants

Posted June 28, 2010

By Lauren Lynch Flick and Scott R. Flick

One of many questions persisting since the release of the FCC's National Broadband Plan has been "what is the impact on low power television stations?" Officially, the NBP's call for repurposing television broadcast spectrum was not to affect LPTV stations, as the NBP indicated that LPTV stations would not be required to participate in the spectrum repacking and reallocation proposed for full power television stations.

As we noted at the time, however, it was unclear how the NBP's spectrum reallotment proposals could not have a substantial impact upon the LPTV service. When full power stations are repacked into fewer channels to make room for wireless broadband, the secondary status of LPTV stations seems to ensure that they will be squeezed out of existence by the repacking. The NBP's sunny language regarding the future of LPTV service therefore appeared more about selling the plan politically than about actually addressing the reality of spectrum repacking.

Today, President Obama issued a Presidential Memorandum directing the heads of all Executive Departments and Agencies to cooperate in "unleashing" the wireless broadband revolution by working with the NTIA and FCC to free up the 500 MHz of additional spectrum envisioned by the NBP. Immediately after the President's action, the FCC's Media Bureau released a Public Notice slamming the door on a much-anticipated opportunity to file digital LPTV and Translator applications that was scheduled to begin on July 26, 2010.

The Media Bureau had announced this filing opportunity on June 29, 2009, almost a year ago to the day of today's announcement rescinding it. The filing opportunity was to have been for those seeking authorizations to build new digital LPTV stations. It was announced just after the conclusion of the nationwide DTV transition and the channel-shifting by full power stations (and displacement of LPTV stations) that process entailed. Applicants that had been prevented from filing before could now examine this vastly changed spectrum landscape with an eye toward providing LPTV service in places and on channels not previously available. Applications were to be considered on a first come, first served basis. To prevent a potential deluge of applications, the Media Bureau broke the process into two steps. In the first step, the FCC began permitting the filing of digital LPTV applications in rural areas in August 2009. The second step was to permit such applications in all areas of the country beginning in January 2010. As mentioned above, that date was first delayed until July 2010, and now, indefinitely.

Today's announcement that new LPTV applications will not be permitted in urban areas, at least until the spectrum rulemakings surrounding the National Broadband Plan are resolved, officially confirms that the LPTV service is indeed going to be affected by the NBP's thirst for broadcast spectrum. In a nod to that future reality, the Media Bureau also announced that the FCC will allow existing analog LPTV stations to apply for companion digital channels. While that may at first seem contrary to the goal of clearing broadcast spectrum, the purpose is to encourage the transition of the LPTV service to digital, which will ultimately allow it to be packed into less spectrum. However, even the transition of LPTV service into digital format is not likely to clear the amount of television spectrum envisioned by the NBP. As a result, if today's action dropped the proverbial shoe on applicants for new LPTV stations, there likely will be one more shoe to drop... on existing LPTV stations.


Stop the Presses! Federal Trade Commission Does Not Support Taxes on Broadcasters and Others to Help "Reinvent" Newspapers After All?

Posted June 17, 2010

By Paul A. Cicelski

Earlier this week, FTC Chairman Jon Leibowitz began the FTC's final workshop concerning the future of media "How Will Journalism Survive the Internet Age?" by dismissing as a " non-starter" any chance that his agency would recommend new taxes to support or "save" journalism. In advance of this workshop, the FTC staff had prepared and released a discussion document entitled "Potential Policy Recommendations to Support the Reinvention of Journalism." One of the goals of the document is to try and save the current newspaper business model by, in part, imposing substantial new taxes on other media, including broadcasters. While the FTC says that the term "journalism" used throughout the document does not mean that that the FTC favors newspapers over broadcasters or other media, a close reading of the draft indicates that newspapers would be the primary beneficiary of the FTC proposals should they be adopted.

Shortly after the release of the document, the FTC issued a statement to the effect that the draft did not reflect a formal intention on the part of the FTC to seek new taxes and that the paper was for discussion purposes only. However, in order to fund the proposals, including those to provide potentially billions of dollars in subsidies and various tax breaks and credits to newspapers, the document proposes that the government institute:

• A 7 percent tax on broadcast spectrum to raise $3 to $6 billion while at the same time relieving broadcasters of their obligation to air "public-interest programming."

• A 5 percent tax on consumer electronics that "would generate approximately $4 billion annually."

• A spectrum auction tax "on the auction sales prices for commercial communication spectrum, with the proceeds going to the public-media fund."

• A 2 percent sales tax on advertising to generate approximately $5 to $6 billion annually" and to change "the tax write-off of all advertising as a business expense in a single year to a write-off over a 5-year period [to] generate an additional $2 billion per year."

• A 3 percent Internet Service Provider-cell phone tax requiring consumers to pay a tax on their "monthly ISP-cell phone bills to fund content they access on their digital services" to raise $6 billion annually for the FTC's proposals.

While the FTC's look to the future of news gathering might be noble, the proposals to raise taxes on broadcasters, consumer electronics, Internet Service Provider customers, and others would undoubtedly increase costs for consumers and businesses alike, not to mention they raise a host of First Amendment and Constitutional questions regarding politicization and governmental interference with a supposedly impartial press.

In the real world, most newspaper publishers recognize that innovation and new business models are the best ways to survive and thrive going forward as opposed to having the government impose harsh taxes on other media in the "robbing Peter to pay Paul" manner envisioned by much of the FTC report. According to press reports, John Sturm, President and CEO of the Newspaper Association of America commented on the FTC report by stating that "We've never sought or asked for anything like a bailout" and Rupert Murdoch is on record warning against the FTC proposals and the "heavy hand" of governmental regulation.

Chairman Leibowitz stated that the FTC's workshops "have always been more about the future of journalism than saving the past." While the Chairman might be right, the staff report circulating at the FTC would suggest otherwise as many of its proposals are clearly backward looking. Given the stakes and dollar amounts involved, broadcasters, consumer electronics manufacturers, Internet Service Providers as well as consumers should pay close attention to this proceeding as it continues to unfold at the FTC. The FTC plans to issue its final report on the future of media sometime this Fall.


Drop That Microphone and Slowly Back Away

Posted June 10, 2010

By Scott R. Flick

Not only broadcast stations, but churches, schools, concert venues, live theater, film productions, business presenters, sporting events, and motivational speakers will have to change the way they operate, starting this weekend. As we wrote in a Client Advisory back in January, the FCC set June 12th, 2010--the anniversary of the DTV transition--as the date by which wireless microphones and other devices must cease using the spectrum that was formerly TV channels 52-59. While popularly referred to as the "700 MHz Band", the spectrum being cleared actually runs from 698 MHz to 806 MHz.

Although the elimination of wireless microphones from this band has drawn the most attention, many other devices commonly use this spectrum and must also cease operating in this band on June 12th, 2010. These include wireless intercoms, wireless in-ear monitors, wireless audio instrument links, and wireless cuing equipment. The impact is not limited to audio devices, as even devices that synchronize TV camera signals using the 700 MHz Band must vacate the band starting this weekend.

The reason for the FCC's band-clearing effort is to make it available (and interference free) for public safety operations, as well as for providers of wireless service that have acquired the right to use portions of the band. Those failing to cease operating their 700 MHz devices are subject to fines ($10,000 is the FCC's base fine for illegal operation), arrest, and criminal sanctions, including imprisonment, as the FCC notes that "interference from wireless microphones can affect the ability of public safety groups to receive information over the air and respond to emergencies," putting "public safety personnel in grave danger." While it may be tempting to continue using 700 MHz equipment in hopes that you won't get caught, your community theater production does not want the liability of causing interference to a rescue operation by public safety personnel.

To avoid this result, users of affected 700 MHz equipment must either modify their equipment to operate in other permitted portions of the spectrum, or cease using the equipment entirely if it cannot be modified to operate in other bands. To assist users in determining whether they have a 700 MHz microphone, the FCC has created a webpage listing many makes and models of wireless microphones, as well as the frequencies on which they operate. The site also includes contact information for many of the manufacturers of wireless microphones to obtain further information about particular microphones.

So inspect your equipment and do the research necessary to determine whether it operates in the 700 MHz Band. If so, see if it can be modified to prevent operation in that band. If not, then it looks like this weekend would be an excellent time to go shopping for that new microphone you've always wanted.


Chairman Genachowski's "Third Way" to Net Neutrality

Posted May 6, 2010

By John Hane

The press is buzzing with news, leaked late yesterday and announced today in a document entitled The Third Way: A Narrowly Tailored Broadband Framework, that FCC Chairman Genachowski is proposing to reclassify the transmission component of broadband Internet access as a "telecommunications service" subject to FCC regulation. As almost everyone in the telecom world knows, the US Court of Appeals recently found that the FCC does not have direct jurisdiction to impose "network neutrality" rules as long as it classifies broadband as just an "information service."

With the Chairman's support, three of the five FCC Commissioners now favor reclassifying broadband as a telecommunications service, a first step towards adopting network neutrality rules.

For broadcasters, the net effect of net neutrality rules isn't as easy to assess as it may at first seem. As producers and distributors of broadband and mobile services, net neutrality rules should assure broadcasters that their content will not be blocked or unfairly degraded by broadband network operators. Broadcasters that provide mobile news apps and operate rich media web sites have the same general interest in nondiscriminatory network access as do Internet behemoths like Google, Amazon and eBay.

On the other hand, broadband providers have argued convincingly that their networks are extremely expensive to build and that they must have flexibility to manage Internet traffic on their networks to assure a good quality of service to their subscribers. If the FCC limits broadband operators' ability to manage traffic, those operators may have to upgrade their infrastructure, raising costs to web publishers and end users alike.

Mobile network operators assert that network neutrality rules could have proportionally greater adverse effects on them. Mobile network capacity is generally more costly and less robust than that of copper and fiber networks. If network neutrality rules increase the load on mobile networks and limit the ability of network operators to manage that traffic, their arguments that they need more spectrum to meet growing demand may be more convincing.

At this stage, no one knows how any proposed network neutrality rules would treat mobile broadband operators. However, it is plausible that aggressive network neutrality rules could increase the load on mobile networks, and mobile operators are sure to argue that they will need more spectrum to respond.

With broadcast spectrum already squarely in the sights of the same FCC that is now proposing to impose network neutrality rules, broadcasters should pay close attention to this debate.


Blair Levin to Leave the FCC

Posted April 16, 2010

By John Hane

Blair Levin, who headed the FCC's Omnibus Broadband Initiative (OBI) for the past year and who was the principle architect of the National Broadband Plan, announced yesterday that he's leaving the FCC on May 7 to join the Aspen Institute, a large and prestigious think tank.

Levin created the OBI from scratch. He moved in to the FCC, but he hired many new staff. He adopted new procedures for gathering public input, including blogging, "staff workshops", and what amounted to frequent cold calls to people in business and academia to solicit views and information. The OBI was not your father's FCC proceeding!

Levin also drew a dauntingly broad scope for the effort, and the OBI staff continued to expand that scope almost until the last minute. The proceeding, and the Plan, addressed broadband technology, deployment, services, adoption, financing, and usage. It asked how broadband affects other institutions and industries, from broadcasting, cable, wireless, and voice services to education, politics, energy and the environment, to name just a few.

Levin's efforts drew enthusiastic support from some quarters and criticism from others. Some disliked his unorthodox procedural approach and others welcomed it. Some who agreed with his positions questioned his procedures, and vice versa. Whatever one thinks of the procedure or the recommendations, the National Broadband Plan is a remarkable document - comprehensive, polished and beautifully written and presented.

The most polarizing issue was a proposal to reallocate broadcast spectrum for wireless broadband use. I've questioned some aspects of the broadband plan, especially whether proponents of more broadband spectrum have really made their case. But I've been awed by Levin's ability to "shake things up" in a town where the status quo can last for decades.

Reactions to Levin's announcement have been as mixed as views of the National Broadband Plan. I'm disappointed to see him go. Levin is one of the smartest, hardest working, most effective, and best-intentioned people to work at the FCC (and that's a big club). I disagree with some of his views, but I've never doubted his sincerity or the honesty of his motives.

Levin didn't start the debate over broadcast spectrum - that began in the 1980s - and it won't end on May 7. But he focused the issue and gave it legs. The country is now having a debate about the future of broadcasting that would have seemed unthinkable a year ago.

I'm an optimist -- perhaps a delusional optimist. But if downsizing the nation's broadcasting service is suddenly thinkable today, maybe real deregulation of broadcasting, including much-needed ownership reform, is also thinkable. The FCC's Future of Media proceeding essentially asks that question.

I've harbored hope that ongoing engagement on "the spectrum issue" will eventually lead to grounds-up rethinking of the broadcast ownership rules. Broadcast regulation needs some serious shaking up, and the constituencies around many of those regulations are honed in the art of the status quo. Levin demonstrated an uncanny ability to reset people's conceptions about what is and isn't achievable. Broadcasters could use some of that energy focused on ownership rules which artificially limit their participation in a digital broadband future. He's leaving, but perhaps someone will learn from Levin how to pull off something as ambitious as repealing anachronistic broadcast regulations. I hope so. And I hope the Aspen Institute knows what it's getting into!


Rethinking the Spectrum Crisis

Posted April 12, 2010

By Scott R. Flick

Here at the NAB Show in Las Vegas, you can hardly attend a session where the National Broadband Plan's proposal to reallocate 120 MHz of television spectrum to wireless broadband is not a major topic of discussion. As we mentioned in a posting last week, and based on the discussions here at NAB, it is increasingly clear that there is indeed a spectrum crisis. However, the crisis relates not to a shortage of spectrum, but to a growing crisis of confidence that the FCC looked at the full record in reaching its dire conclusion that the spectrum sky is falling (seemingly on broadcasters).

In a commentary in today's TVNewsCheck (free registration) by our Pillsbury colleague and resident skeptic John Hane entitled The Emperor's New Spectrum Crisis, John follows up on our discussion last week of Verizon CEO Ivan Seidenberg's statement that he doesn't see a looming spectrum crisis, and is confident that issues of wireless capacity can and will be addressed through technological developments rather than through reallocating broadcast spectrum.

John's commentary, which is a compelling read, focuses not on Mr. Seidenberg's statement, but on the somewhat surprising response to it in a blog post by FCC Chief of Staff Edward Lazarus. The post says the record in the National Broadband Plan proceeding shows "overwhelming" agreement that America needs more broadband spectrum, and pretty much indicates total befuddlement that Mr. Seidenberg could disagree. However, John's commentary discusses numerous sources in the record of the broadband proceeding and elsewhere that challenge that conclusion.

I won't give away the ending, because John's commentary deserves a full read rather than just a summary by me. However, it does make one wonder if the dedicated team at the FCC behind the National Broadband Plan -- obviously big fans of broadband and the Internet -- aren't falling prey to that most common of Internet phenomena, groupthink. Victims of groupthink tend to congregate with those of similar views, and when faced with information that conflicts with those views, prefer to reflexively reject that information as wrong rather than seeking to integrate it into their analysis and then revise their conclusions accordingly.

There certainly will be demand for additional wireless broadband spectrum in the future, just as there is currently demand for more spectrum for existing technologies, and will be in the future for technologies yet unimagined. However, demand for spectrum and a spectrum crisis are two very different things. The first has existed since Marconi came upon the scene, and the second has never come to pass, with technology always jumping in to avert such a result. By seeking to fling immense quantities of spectrum at broadband, the FCC would actually discourage this ingenuity and the development of more spectrum-efficient broadband technologies. History has shown repeatedly that a resource will only be fully exploited if the supply is limited. Abundance leads to waste, and 500 MHz of spectrum is abundance of the first order.

If the spectrum to be provided was currently unused, you could argue that the harm is theoretical. However, where a major portion of the spectrum would come from a lifeline service available at no cost to all Americans, you have to be sure that every bit of that spectrum is needed, and not just wanted, by the broadband industry. When a major figure in the broadband industry tells you the spectrum isn't needed, it is worth considering whether that aspect of the National Broadband Plan needs revisiting.