On March 11, Nielsen (“We study consumers in more than 100 countries to give you the most complete view of trends and habits worldwide”) announced
“It’s true. Most people watch TV in their living rooms using traditional cable or satellite options. In fact, more than 95 percent of Americans get their information and entertainment that way. But as we explored what the other 5 percent are doing, we found some interesting consumer behaviors that we want to keep an eye on.
This small group of video enthusiasts is tuning out traditional TV—and the trend is growing. This “Zero-TV” group, which makes up less than 5 percent of U.S. households, has bucked tradition by opting to get the information they need and want from non-traditional TV devices and services.”
While the Zero TV homes are only 5% of US households, the number has increased by a factor of 2.5 in the past 6 years and Nielsen found that “these video homes tend to be younger with almost half under the age of 35” - the same prime demographic that advertisers, other than AARP and Republican candidates, seek.
Bloomberg reported today
So as the mechanism of the incentive auction slowly moves on to the 2014 deadline maybe TV broadcasters should think more about whether their business model should be pumping hundreds of kilowatts of RF power into the ether when it is rarely received by anyone other than headends of cable and other non broadcast video distributors, or should it be putting together packages of compelling programming and distributing it by whatever mechanism is appropriate for our era.
Together, the major broadcasters account for more than 21 percent of prime-time viewing in the current TV season, down from almost 75 percent in the early 1950s, before cable programmers emerged, according to Nielsen data.
It is ironic that a National Broadband Plan insider told me that the first draft of NBP included a similar discussion. But so impressive are the powers of the broadcast interests and so “captured” is the FCC, as are many other regulatory agencies, that within 30 minutes of the release of the first NBP draft to the FCC Media Bureau the Chairman’s Office started getting calls from the Hill objecting to this approach.
Wow! That’s raw political power and regulatory capture! NAB - real impressive. CTIA may still have at the moment the inside track on the 8th Floor, but don’t count out the broadcasters with their decades of experience with playing power games.
(Of course, one might also want to address why there is such regulatory capture and start countermeasures, but I doubt anyone at FCC wants to address that issue. I believe that an active program of job rotation by career civil servants would be a major step to deter such capture. But there has never been interest on the 8th Floor in such an approach since the focus is always on near term gains not long term benefits and rotations would have near term costs.)
US broadcasters have no property rights in spectrum,
says academic research:
The work claims the legal status of broadcasting spectrum is as clear as mud
but incentive auctions are a wayof sidestepping the problem
by Dugie Standeford
© PT Publishing 2012 Tel: +44 (0)20 7100 2875
Reprinted by permission
Legal claims to property rights in spectrum are “highly tenuous” and would likely allow the US government to reclaim the spectrum without compensation
The US Spectrum Act authorising “reverse” and incentive auctions gives broadcasters the option of handing back their 6 MHz licences, relinquishing spectrum and sharing their TV channel with other licencees, or moving from a UHF to a VHF channel. In the reverse auction phase, broadcast TV licensees will be able to bid to voluntarily give up spectrum usage rights in exchange for payments. But one vexing, and still unresolved, question – on which the Federal Communications Commission (FCC) is now seeking comment – is how to determine how much winners of the reverse auction should receive.
Two academic papers by financial analyst Armand Musey, founder of Summit Ridge Group LLC, explore possible property rights broadcasters may have in the spectrum they hold and legal bases on which the government could reallocate the spectrum and assess compensation.
One article, “How the Traditional Property Rights Model Informs the Broadcast Television Spectrum Rationalization Challenge,” appeared in the Spring 2012 Hastings Communication and Entertainment Law Journal. The second, “Broadcasting Licenses: Ownership Rights and the Spectrum Rationalization Challenge,” is in the Spring 2012 issue of the Columbia Science and Technology Law Review. Musey's research focuses on telecom and media regulation with an emphasis on how regulatory policy affects business models and public welfare, and he's particularly interested in wireless spectrum valuation, he said.
The National Association of Broadcasters would not discuss the specifics of the property rights question. But Dennis Wharton, executive vice president, communications, told PolicyTracker that the premise that broadband is somehow a higher and better use of spectrum than broadcasting “is fundamentally flawed.” Musey's research doesn't acknowledge that broadcasting's “one-to-everyone” transmission architecture is far more efficient that the inefficient “one-to-one” architecture of cellphones and the Internet, he said. “The reality is that broadcast and broadband are complementary services, and the government ought not be in the business of favouring one over the other,” he said in an email.
Broadcasters' legal claim
Legal claims to property rights in spectrum are “highly tenuous” and would likely allow the US government to reclaim the spectrum without compensation when broadcast licences expire, Musey wrote in the Hastings article. But the fact that the US has made the reverse auction voluntary, and that it won't force broadcasters to relinquish spectrum, shows that it “is essentially recognizing even greater possession rights for the broadcasters than owners of private property traditionally enjoy,” he said.
There is inherent tension” between the 1934 act, which says spectrum licence holders have no property rights, and the “seeming implicit guarantees of renewal and increased ability to transfer” in later law
But claims that FCC licences confer property rights are weak, the Columbia article argued. Broadcasters' right to control their spectrum are set out in the Communications Act of 1934 and the Telecommunications Act of 1996. Analysed according to their text and relevant legislative history, those measures indicate that broadcasters don't have a claim to property rights that would entitle them to payment for non-renewal of their licences, Musey said. But if one considers how the laws have been applied in some situations, broadcasters may have some “legitimate (and growing)” expectation of property rights, he said.
One area where those rights might be implicated is in the fact that all FCC licence holders expect their licences to be renewed automatically unless they egregiously violate the terms, Musey wrote. Moreover, broadcasters' increased ability to transfer licences suggests they may have some property rights in them. All this is countered, however, by other language in the 1996 act that lets the FCC change a broadcaster's rights upon renewal by, say, reducing the current spectrum allocation of 6 MHz or moving it to a less desirable part of the band. The fact that the regulator has the discretion to make such changes signals that the government still has significant control over the spectrum, he said.
“There is inherent tension” between the text of the 1934 act, which says that spectrum licence holders have no property rights, and the “seeming implicit guarantees of renewal and increased ability to transfer” in the later law, Musey wrote. While 60 years of FCC and congressional policy decisions seem to give broadcasters some expectation of property rights in their licences, however, the fact that Congress has never amended the provision that states explicitly that no such property rights exist makes it likely that any claim for property rights would fail, he said. And even if broadcasters did have some rights in the spectrum and were entitled to compensation for non-renewal, they wouldn't be entitled to payment for any increased value arising from the government's future use and/or need of the spectrum for higher-value, mobile broadband applications, he said.
A need to “fudge”
For practical and political reasons, the most expedient solution to reallocating TV spectrum is for the government to negotiate a price to buy out broadcasters that is more generous than the minimal legal compensation required to give them due process, Musey wrote. But it will be hard for the government to legally justify such a payment without facing claims of waste of government assets; and, conversely, it would be difficult to maximise the value of future FCC auctions to motivate licencees to invest in advanced services on their spectrum if the FCC has a policy of depriving licencees of their expected licence rights, he said. Finding a solution is a challenge, he said.
Maybe that's why the FCC and Congress decided to “fudge” the issue by settling on the idea of a voluntary incentive auction, Musey said. The Spectrum Act requires the regulator to base the incentive auction price on the result of a reverse auction to determine broadcasters' asking price for relinquishing their spectrum. That payment will likely reflect a discount to the market value of the spectrum to its higher-value use but also perhaps be slightly higher than its current use value, he said. The “stick” to encourage broadcasters to participate in the voluntary process is the FCC's argument that it can modify the licences at any time, and the implicit threat to take the spectrum away, he said. While the Spectrum Act prevents the FCC from doing that during the auction process, it could do so after the auction to clear spectrum in problem markets with holdout broadcasters, he said.
'Politically influenced” higher payment best?
Treating spectrum rights as having elements of private property prompts questions about how the government will pay broadcasters for the loss of their rights, Musey wrote. If the FCC can't reach a voluntary settlement with broadcasters, it could try to seize the spectrum under “eminent domain” principles, he said. Under that approach, the government, under the Takings Clause of the US Constitution, would buy licences at the fair market value of the loss it causes a broadcaster's current business.
Eminent domain law prevents payments based on the increase in value of the property for the government's higher-value intended future use, but the political pressures surrounding the incentive auction could push the government to sweeten the offer beyond the current market value of TV broadcast use, Musey wrote. In fact, offering a sum that exceeds market value “may be the most expeditious solution” to shifting broadcasters off the spectrum, he said.
Can the analysis help broadcasters set reverse auction prices?
Asked if his approach could help broadcasters come up with prices for the reverse auction, Musey said, “Yes and no.” Broadcasters can set their fees, but the FCC will decide which bids to accept, he said. If the regulator decides the prices are too high, or not enough broadcasters submit bids in the market where the FCC wants spectrum, “we are back to square one with the government theoretically having the ability to not renew the licenses,” he said.
The FCC's “not so subtle message” to broadcasters is, “We are going to get this spectrum one way or another and if you don't submit sufficient[ly] reasonable bids and we have to pry it away later, it will be on much less attractive terms,” Musey said. There is very much a negotiation over what is reasonable, he said. The FCC must also try not to apply too much pressure and undermine the success of later auctions, or deter other current and future licencees from investing in new services out of concern over the stability of their spectrum licences, he said.•
an alternative vision”. You probably did not see anything about it on US TV news programs, perhaps it was overshadowed by the Olympics. Or perhaps it was too troubling for the networks, or NAB, to address in a timely way. (As of this posting, NAB, CTIA, and Broadcasting & Cable have nothing about this report on their websites.)
(While we learned in high school and from Gilbert & Sullivan that the House of Lords consisted of hereditary peers, the scions of ancient dukes and earls, as a result of reforms in recent decades only 92 out of the present 775 members are hereditary peers, the rest being life peers appointed for life based on their own achievements.)
Here is the header from the article on the Daily Mail’s website:
The end of broadcast TV? House of Lords calls for all channels to go online (but you'll have to buy yet another box to watch them)
* Plan could see internet only TV service across the UK
* Report warns broadband speeds in rural areas will need to be improved before the move
The Daily Mail wrote
If you have only just managed to switch your TV to digital, bad news - you may soon have to buy yet another box.
A parliamentary inquiry today forecast a second wave of switchover as TV moves online.
The House of Lords says the government should begin planning for every channel to be available online to free up spectrum for services like high speed mobile phone services’.
Eventually the case for transferring the carriage of broadcast content, including public service broadcasting, from spectrum to the internet altogether will become overwhelming,' the Lords communications committee said in its report on internet infrastructure.
FCC sources report that the first draft of the National Broadband Plan had a discussion of reallocation from broadcast to broadband that was bolder than the final report but not as bold as this UK proposal. Within 30 minutes after the draft was given to the FCC Media Bureau, the Chairman’s Office started receiving calls from “The Hill” telling them to back off - such is the power of broadcasters in Washington!
Here is the text of the UK report that gives its controversial recommendation (para. 141)
We recommend that the Government, Ofcom and the industry begin to consider the desirability of the transfer of terrestrial broadcast content from spectrum to the internet and the consequent switching off of broadcast transmission over spectrum, and in particular what the consequences of this might be and how we ought to begin to prepare.
The UK report clearly recognizes that the switch would not be easy and that it should not be done until alternatives for media distribution are in place, operational, and affordable for all. But it recognizes the huge economic benefits of increasing broadband penetration - not just the benefit for certain industries, but for the whole society and economy.
The US National Broadband Plan has a key issue that is clearly missing, no doubt as a result of the political intervention on the first draft: If the US can achieve near universal penetration of broadband to US households by policies including making broadband the universal service equivalent of dial tone, why do we need over-the-air TV in populated areas. Indeed, if we are willing to use DBS for universal service-like video distribution, why do we even need over-the-air TV in rural areas?
Such a dramatic change has to be carefully planned and must respect the equities of the broadcasting industry. But is NBC in the business of pumping electromagnetic energy into the spectrum, most of which passes houses without any TV antenna, or is it in the business of putting together compelling programming that people want to watch and bundling that with compatible ads? Any such evolution must consider the needs of the economically disadvantaged and their right to continued access to “basic TV” as well as rural needs, but that is why FCC has had universal service programs.
Readers may recall a January post here with the following quote from Justice Alito during a Supreme Court oral argument:
What does Justice Alito and the House of Lords’ Communications Committee have in common? Appointments based on excellence in life accomplishments and life tenure. It would appear that officials without such life tenure are unwilling to raise serious long term questions of the public interest for even debate if they are unacceptable to strong trade associations.
FCC v. Fox, Justice Alito, a Bush 43 appointee, engaged in the following dialogue with Fox’s attorney, Carter Phillips:
JUSTICE ALITO: Well, broadcast TV is living on borrowed time. It is not going to be long before it goes the way of vinyl records and 8 track tapes.
MR. PHILLIPS: I hope that -- I'm sure my client is not thrilled to have you say that.
JUSTICE ALITO: Well, I'm sure -
JUSTICE ALITO: I'm sure your clients will continue to make billions of dollars on their programs which are transmitted by cable and by satellite and by internet. But to the extent they are making money from people who are using Rabbit ears, that is disappearing. Do you disagree with that?
MR. PHILLIPS: No, I -- it would be -- you know, obviously not, because that's why we are not uniquely accessible or uniquely pervasive.
JUSTICE ALITO: Yeah. So why not let this die a natural death? Or why do you want us to intervene -
The two mentions of “laughter” in the transcript clearly show the crowd was enjoying this line of discussion at the usually staid Supreme Court. Perhaps only a judge with lifetime tenure - as long as Newt Gingrich or Rick Perry don’t change the Constitution - could say something like this. FCC commissioners and members of Congress are clearly too intimidated by the broadcast lobby to even raise the issue.
Consider the following goal statement from the National Broadband Plan:
This establishes as a long term goal that “at least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second.” Essentially Title II universal service goes from being a “black phone” to 100 Mbps broadband for at least a third of the population. For reference, over-the-air HDTV is 18 Mbps per channel although a given video signal is less since the bandwidth usually is shared with more than 1 video stream. If everyone in an area had 100 Mbps service with “affordable access”, why do we need over-the-air TV with “rabbit ears”?
Now NAB would quickly say we need “rabbit ears” to serve poor people who can’t afford MVPD. This assumes that MVPD has the same pricing model it has today which of necessity would change in the NBP-envisioned universal service. For example, the money raised from recycling the VHF and UHF spectrum, “digital dividend” in Eurospeak, could be used to endow low cost or free broadband service to the economically disadvantaged. Alternatively, MVPDs could switch to a “freemium” pricing model with present over-the-air channels free and charge for the traditional cable channels.
What is truly amazing is the unwillingness of public officials, except Justice Alito, to talk about these long term options.
I have been a fan of the The New York Times’ David Pogue for a long time. He always writes witty and accurate pieces about the latest IT gadgets and trends. The above piece appeared recently on The Times website and deals with a possible evolutionary path for radio broadcasting, which is not doing well in the Internet age. The broadcasting establishment tried HD Radio as as way to breath life into AM/FM. Thinking that the problem with AM stereo was the way FCC failed to pick a standard, they bullied FCC into picking a standard for HD Radio. Of course, they failed to notice that AM stereo was a worldwide failure - failing even in countries and regions where Soviet-style planning decisively picked a standard. HD Radio may well be heading to the same fate.
receivers in cell phones. We haven’t heard anything about that in a while, perhaps the Congress that is mad about Obama allegedly mandating a phase out of incandescent light bulbs (Bush 43 actually signed the legislation with bipartisan support) is also wary about a new mandate on consumers.