For those who don’t know, “spectrum” is techno-speak for the airwaves used to transmit TV shows and cell phone calls among other things. And it’s at the center of what is being called one of the biggest telecom lobbying battles of the year. National Association Of Broadcasters chief Gordon Smith told station owners last week at their annual convention in Las Vegas that the trade group is “in full battle mode.” If he means it, then it would be a big threat to the Obama administration’s wireless broadband plan. The broadcasters’ trade group would rather eat glass than give up the medium they’ve used to transmit shows since the 1950s, when Milton Berle ruled primetime. The NAB’s biggest concern is that the government might seize spectrum without a broadcaster’s consent. CBS chief Les Moonves echoed that message when he said last week that, as long as it “remains voluntary, we’re fine with that. Because we’re not going to volunteer.”
True, FCC Chairman Julius Genachowski promises that “no broadcaster will be forced to offer up spectrum for auction.” Those who do, he adds, “will know exactly what the deal is before relinquishing any rights.” And that’s the key. Will this turn into a titanic battle that will shape the future of media and the digital economy? I’m of the opinion that there isn’t thatbig a divide between the FCC and NAB’s positions. And I think all the posturing and threats will end as soon as Genachowski and the NAB can agree on how much stations owners should receive for giving up their claim on what used to be thought of as the public’s property.
Here’s what you need to know now:
The Obama administration wants TV stations to give up some of their spectrum so it can be redeployed to offer Internet services to smartphones, iPads, and other mobile devices. The White House considers broadband to be the new national medium. But it sees a crisis coming with too littlespectrum available to accommodate the millions who want to use portable devices to stream videos, data, entertainment and everything else. So the administration wants to free up 300 megahertz over the next five years, and 500 mhz over the next decade, for wireless Internet. (A smartphone typically uses 24 times more spectrum than a conventional cell phone uses, while a tablet computer uses 122 times more spectrum.) Without more wireless broadband capacity, there could have a perfect storm of dropped calls, dead zones, slow speeds, and high prices. To help do that, Genachowski is offering a deal to TV stations ranging from big-city network O&Os to tiny independents in places like Peoria. It goes like this: voluntarily give up your spectrum, and the government will share the proceeds when it auctions the airwaves to a wireless broadband company.
Sounds fair? Not to the National Association Of Broadcasters. The airwaves that the FCC wants TV stations to give up are worth at least $33 billion — but that’s according to a study in February that was supported by two lobbying groups that have a lot at stake in wireless broadband: the Consumer Electronics Association and the cellular phone industry’s CTIA. The NAB says the estimate is bogus because it makes too many big assumptions. Yet there’s no doubt that there’s a lot of money to be had.
True, Genachowski hasn’t hesitated to compromise in other controversies. But he told the NAB gathering last week that “the costs now of delaying voluntary incentive auctions would be severe.” The FCC has the legal authority to simply take broadcast spectrum if it decided that it would serve the public interest. But it needs NAB help to win congressional approval to offer stations a deal. The law requires all cash from spectrum auctions to go to the U.S. Treasury.
People in the know tell me too many TV stations want the cash they could collect by going along with Genachowski’s plan. The big question for them is how big a cut they’ll receive from an auction. The local TV business used to be a cash cow in the good old days before the latest economic crisis, and the outlook could grow bleaker as cable channels and digital media outlets including Netflix lure viewers away from broadcasters’ shows. Advertisers spent just $15.6 billion on local TV last year, down from $18.7 billion in 2006, according to the Television Bureau of Advertising. Put another way, a typical TV station likely will receive $132.77 in advertising for each household it reaches this year, down from $159.53 in 2008, research firm SNL Kagan estimates.
Station owners themselves talk about how difficult broadcasting has become when they insist that cable operators pay for the right to retransmit their programs — even though consumers with antennas can receive them for free. Those fights illustrate how little difference there is between a broadcast station and a cable channel at a time when more than 85% of all homes receive their TV signals via cable or satellite. That provides the groundwork for a compromise. Major broadcast network O&Os and affiliates probably will continue to broadcast over the air. But several stations that are unaffiliated with a major network, including those offering religious and home shopping shows, will take the money. Some will survive on cable. Some will transmit separate signals on the spectrum provided to a single station. And some will just fold.