Yesterday the focus became the issue of whether TV white space was an interference threat to OTA DTV. There was a link to a Re/code blog post entitled “FCC’s hot mess of a database may not bode well for future airwaves sharing”, one your blogger had retweeted as soon as it appeared. It seemed odd that Re/code had been so interested in the quirks of the TVWS databases, but maybe it was a tip off from industry.
But then things got stranger. An article onThe Hill’s website on net neutrality, bound to get attention in the telecom policy community, was plastered with ads about “Johnny Interference” and @JohnnyInterfere:
Nearly simultaneously “Johnny”’s twitter page started getting multiple tweets about how “Super Wi-Fi”/TV white space (TVWS) systems would cause interference to TV broadcasters. This is particularly ironic because the database-driven TVWS rules were adopted by FCC in response to NAB’s concerns that FCC’s original cognitive radio/listen-before-talk (CR/LBT) proposal who cause interference. Indeed, NAB was so concerned that they lobbied against any objective testing of a CR/LBT prototype during the long FCC testing process. (MSS client Adaptrum, Inc submitted a prototype for FCC testing that was capable of operating in a fully automatic CR/LBT mode but was never tested in that mode. The TV signal detector was tested and the transmuter was tested, but they were never tested together.)
CR/LBT systems would not be subject to the database issues that Re/code and “Johnny” are now concerned about. (While CR/LBT systems can detect TV signals at levels much lower than a TV set can receive using cyclostationary detector technology, a point NAB has never acknowledged, they probably could not have detected wireless microphone signals adequately given the chaos of wireless mic that lacks a standard band plan, high frequency stability, and a well defined modulation as well as being on any possible TV channel. FCC adoption of CR/LBT for TVWS would have forced some discipline and probably more efficient technology on wireless mic users - most of which were operating illegally at the time.)
Just prior to the appearance of “Johnny”, NAB launch a surprisingly aggressive commenting campaign against Adaptrum’s, a small Silicon Valley firm, request for a waiver of TVWS tower height limits in an obscure area in northeast Maine that lacks much broadband coverage and totally lacks any UHF TV signals.
We note that former long term FCC stafferJane Mago recently retired as NAB General Counsel and EVP/Legal Affairs and was replaced by another FCC alum, Rick Kaplan, who was not at FCC as long as the well respected Ms. Mago. It is interesting to note that when he first arrived at NAB, it was proudly announced that “(w)hile with the FCC, Kaplan had a reputation as a consensus-builder and a leading voice on spectrum policy, championing causes such as spectral efficiency and spectrum sharing”.
Shortly after Comm. Baker took over CTIA, the 2 most confrontational CTIA staffers left the organization and CTIA’s spectrum advocacy has become less shrill and confrontational. Has NAB now assumed the mantle of CTIA’s former confrontational approach? Is NAB now behind the well funded “covert action”/“false flag” operation @JohnnyInterfere? What happened to Mr. Kaplan’s former interests in being a “consensus-builder” and “championing causes such as spectral efficiency and spectrum sharing”.
In any case, if NAB would sit back for a second, they might realize that the decimation proposed of the FCC’s spectrum enforcement staff is a much greater threat to all broadcasters - not just TV broadcasters - than problems with the TVWS database that can be addressed in a less confrontational approach than anonymous ads in the Hill and mysterious Twitter pages.
So let’s work out database issues in a less confrontational forum and all collaborate on the issue of saving spectrum enforcement at a reasonable level.
Blogs and tweets get answers sometimes! Shortly after this was posted, the following tweet from Mr. Kaplan appeared:
A phone message left by NAB’s Patrick McFadden on the Johnny Interference issue said “there is no mystery or anything covert about it. It's an education campaign that we've launched.”
Note that our above blogpost clearly said “MSS client Adaptrum” and that by Googling both “Marcus” and “Adaptrum” that the long standing relationship between Adaptrum and MSS is very clear and well documented. The NAB staff is also well aware of the MSS/Adaptrum connection going back to the FCC Lab tests of TVWS technology. Googling NAB and “JohnnyInterfere” or “Johnny Interference” results in no such connection. The @JohnnyInterfere Twitter page has no mention of NAB and the multiple ads in The Hill also have no mention. Was the new campaign “covert”? Readers can decide for themselves.
This “education campaign” ’s connection with NAB was only revealed in the public domain after our tweets and blog post.
Two weeks ago we reported the dismal showing of over-the-air DTV programming in the Golden Globe Awards - only one award went to OTA DTV and that was to PBS, not a commercial broadcaster. In this week’s Screen Actors Guild (SAG) Awards, at last a commercial network actually won an award! And OTA DTV broadcasters actually won 2 out of 8 award. Clearly a justification for keeping lots of spectrum for TV broadcasting.
Here are the Television winners:
Outstanding Performance by an Ensemble in a Drama Series
"Downton Abbey" - (PBS)
Outstanding Performance by an Ensemble in a Comedy Series
"Orange is the New Black" - (Netflix)
Outstanding Performance by a Male Actor in a Drama Series
Kevin Spacey - "House of Cards" - (Netflix)
Outstanding Performance by a Female Actor in a Drama Series
Viola Davis - "How to Get Away with Murder" - (ABC)
Outstanding Performance by a Male Actor in a Comedy Series
William H. Macy - "Shameless" - (Showtime)
Outstanding Performance by a Female Actor in a Comedy Series
Uzo Aduba - "Orange is the New Black" - (Netflix)
Outstanding Performance by a Male Actor in a Television Movie or Miniseries
Mark Ruffalo - "The Normal Heart" - (HBO)
Outstanding Performance by a Female Actor in a Television Movie or Miniseries
Frances McDormand - "Olive Kitteridge" - (HBO)
Notice something spectrum-related in last night’s Golden Globe awards? All the commercial over-the-air (OTA) TV broadcasters got skunked! The only OTA channel/network that got an award was PBS for Downton Abbey .
The Winner: The Affair - Showtime
Actor, drama series
Winner: Kevin Spacey, House of Cards - Netflix
Actress, drama series
Winner: Ruth Wilson, The Affair - Showtime
Winner: Transparent - Amazon
Actor, comedy series
Winner: Jeffrey Tambor, Transparent - Amazon
Actress, comedy series
Winner: Gina Rodriguez, Jane the Virgin - The CW
Miniseries or TV movie
Winner: Fargo - FX
Actor, miniseries or TV movie
Winner: Billy Bob Thornton, Fargo - FX
Supporting actor, series, miniseries or TV movie
Winner: Matt Bomer, The Normal Heart - HBO
Actress, miniseries or TV movie
Winner: Maggie Gyllenhaal, The Honorable Woman - SundanceTV
Supporting actress, series, miniseries or TV movie
Winner: Joanne Froggatt, Downton Abbey - PBS
So as the TV broadcast establishment thinks the solution to their problems is giving away free TV antennas to wean people from nonspectrum alternatives, maybe when they gather in Las Vegas in April for the annual NAB Show, which all FCC commissioners must attend (just like for CTIA) and genuflect at, they should discuss if they really have a product that the public wants to view? Or perhaps in this day and age they should consider the Incentive Auction as a positive option? Maybe they should heed the advice of Justice Alito -- who has life tenure and doesn’t have to be as obsequious as FCC commissioners and members of Congress:
On Saturday the following tweet appeared from NAB Labs - “an initiative of the National Association of Broadcasters (NAB) to foster innovation and propel broadcast television and radio into the future.”
One immediate question is what really is NAB Labs? Earlier this year we speculated that “NAB Labs might appear possibly promising, but is most likely just a PR effort from a PR-focused trade association wanting the appearance of a counterpart to CableLabs.” Is NAL Labs an “initiative” or is it a technical facility? First we see that the address is the same as the NAB headquarters - near the former FCC location. Not exactly a technical hotbed area, although I miss all those nice restaurants. How big is NAB Labs? No budget information can be found. Their site gives 10 names, but policy wonk readers will recognize that several have NAB policy positions and are not primarily involved in R&D or testing.
By comparison, the similarly named CableLabs near Boulder CO has 175 employees in the building shown above. While it is unclear what the total size of the building is, it includes “over 12,000 square feet of lab space to suppliers and members who wish to use this development area.”
Electric Power Research Institute (EPRI), located in Palo Alto, CA - also more conducive to R&D than the Dupont Circle area. EPRI has 700 employees and an annual budget of nearly $400M. An inspection of their main office on Google Maps shows a complex with 8 buildings. So it would appear that both the CATV industry and electric power industry has “brick and mortar” labs, whereas “NAB Labs” is of a different genre.
But back to the original NAB Lab tweet. It dealt with the long standing FM in cellphone issue that has been a recurring topic here. This started as an attempt by NAB in 2009 to solve a totally unrelated copyright issue by agreeing with MusicFirst, a copyright holders group, to a package of terms that included joint lobbying for legislation to require FM receivers in all cellphones. While there has been no public discussion of such a legislative requirement recently, the new NAB Labs tweets signals something is warming up. The tweet has a link to a NAB Labs page entitled “FM Radio in Smartphones”.
NAB Labs has discovered data that
“indicates that essentially all of the 90 million smartphones sold in the U.S. during that period (2013) were equipped with an FM radio tuner, yet FM reception was activated for users in only about 4 percent of those phones. About 18 million of those phones (20 percent of the top sellers) have fully operative FM radios in their versions sold outside the U.S., indicating that FM reception could be easily activated by carriers in the U.S. versions, likely without changing the smartphone hardware.
Why does it matter? Americans are consuming more audio and video on the go than ever before. Smartphones and tablets have turned into walking entertainment centers. But the convenience of on-the-go entertainment can carry a hefty price tag as wireless companies charge by the bit. With FM radio capability, a mobile device user doesn't have to stream audio, but receives it over the air for free – with less battery drain on the device. And during crisis situations when cellular networks can go down, over-the-air radio stays on.”
Now if NAB is right, why doesn’t the marketplace work here? CTIA argues below that its does:
This continuing attempt by NAB to counteract marketplace forces sounded analogous to action by their Japanese counterparts a year ago. When faced with a new TV model with Internet capabilities that were threatening to their industry model. An English language peer in Japan reported
Panasonic says Japanese TV stations are refusing to air commercials for its new “smart” television, apparently because they feel threatened by its combined TV-Internet function.
Private broadcasters, in a rare case of turning down a major advertiser, have said they will not show commercials for the product, claiming the split screen simultaneously showing broadcast content and Web pages may confuse viewers, according to reports.
So it looks like Japanese broadcasters are also trying to put their finger in the dike to slow marketplace and new technology forces.
Even major NAB member CBS is jumping on the bandwagon of alternatives to spectrum! Today they announced CBS All Access:
“a new digital subscription video on demand and Nielsen-measured live streaming service for the CBS Television Network. CBS All Access will offer subscribers thousands of episodes from the current season, previous seasons and classic shows on demand, as well as the ability to stream local CBS Television stations live in 14 of the largest U.S. markets at launch”.
Since the end of WWII broadcast over-the-air (OTA) TV has been both a large spectrum user and a huge player in spectrum regulation. When I joined FCC in 1979, we were at the end of a spectrum policy era in which the TV broadcasters, Motorola, and AT&T were the key players and virtually dictated how spectrum would be divided between their constituencies. Now Motorola and AT&T are a shadow of their former selves and perhaps the time has come for the TV broadcasters to “exit left” from the spectrum policy dictating business.
Sources have told us that the early drafts of the National Broadband Plan pointed out that when 50+ Mbps broadband becomes a universal service-like national norm - something that is critical to US society and economy for reasons not directly related to spectrum policy, then spectrum for OTA TV in urban areas will no longer be important since the content can be easily distributed over the broadband. Now some will ask about the economically disadvantaged - a real concern. But is allocating 100s of MHz and pumping megawatts in the ether the only way to deal with universal access to “free TV”? Universal access could also be handled by providing Internet based distribution of “basic video” - the present “free TV” - on either a Universal Service Fund-like model or via a freemium pricing model where basic video is free over broadband and higher tier services are priced separately, either in packages or individually. You will not find any such discussion in the published NBP. It was too controversial and pressure from the Hill resulted in its deletion as a topic.
Recall the Justice Alito 2012 quote shown above in a dialogue with Fox’s lawyer at the Supreme Court. Elected officials, FCC staff, and even FCC commissioners can not be as candid as Justice Alito who has life tenure. Maybe OTA TV will be here forever, but shouldn’t FCC and the spectrum policy community consider other alternatives?
The spectrum held by TV broadcasters today has huge economic value. Without worrying about issues of “unjust enrichment” we should let the broadcasters recoup that market value by programs such as the incentive auction so that the spectrum goes to its best uses - not necessarily the CTIA membership. The present OTA broadcasters will thus be compensated and the political process will not have to deal with determining fair compensation or the nuances of § 304. But the main reason OTA broadcasters use spectrum and megawatts of RF is get “must carry” rights to demand compensation from MVPD operators. The vast majority of US household simply do not watch OTA signals directly, although NAB and CEA can’t agree on the details of the data. There must be a better way!
We also note that this year HBO and Game of Thrones dominated Emmy nominations. Here's how the broadcast networks stacked up:
- CBS – 47 nominations
- NBC – 46 nominations
- ABC – 37 nominations
- PBS – 34 nominations
- FOX – 18 nominations
And here's the list of non-OTA leaders
- HBO – 99 nominations
- FX Networks – 45 nominations
- Showtime – 24 nominations
- Comedy Central – 21 nominations
- Lifetime – 17 nominations
- FOX/NatGeo – 12 nominations
Notice a trend?
An Incorrect NerdAlert Prediction from 11/13
Yesterday, Chairman Wheeler gave a talk entitled The Facts and Future of Broadband Competition” in DC where the above diagram comes from. He introduced the speech as follows:
I want to discuss how the growing bandwidth demands of businesses and consumers are changing the competitive broadband landscape. My goal is not to criticize, but to recognize that meaningful competition for high-speed wired broadband is lacking and Americans need more competitive choices for faster and better Internet connections, both to take advantage of today’s new services, and to incentivize the development of tomorrow’s innovations.
He only uses the word “spectrum” 3 times, on p. 6, in the whole talk:
Second, where greater competition can exist, we will encourage it. Again, a good example comes from wireless broadband. The “reserve”spectrum in the Broadcast Incentive Auction will provide opportunities for wireless providers to gain access to important low-band spectrum that could enhance their ability to compete. Similarly, the entire Open Internet proceeding is about ensuring that the Internet remains free from barriers erected by last-mile providers.
Third, where meaningful competition is not available, the Commission will work to create it. For instance, our efforts to expand the amount of unlicensed spectrum creates alternative competitive pathways. And we understand the petitions from two communities asking us to pre-empt state laws against citizen-driven broadband expansion to be in the same category, which is why we are looking at that question so closely
We agree with everything he says, but what is telling is what is not said.
The text has the sentence “Today, a majority of American homes have access to 100 Mbps.” This compares well with the statement on p. 9 of the National Broadband Plan (NBP) that “As a milestone, by 2015, 100 million U.S. homes should have affordable access to actual download speeds of 50 Mbps and actual upload speeds of 20 Mbps.” (For reference, Census reports that there are 115,226,802 households in the USA.) Thus at least 57 million homes have access to 100 Mbps, although not necessarily affordable access.
NBP goes on to say
GOAL NO. 3: Every american should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose.
Today’s FCC definition of “broadband” is 4 Mbps which Wheeler calls appropriately “yesterday’s broadband”. He goes on to say, echoing NBP
“high-speed connections are crucial not only for the kind of innovation that will educate our children and deliver quality health care, but also improve energy efficiency, fill the employment ranks, and maintain the United States as the world’s innovation leader for the 21st Century.”
Inside sources tell us that early drafts of NBP mention the impact of this on spectrum: If everyone in the US had access to broadband, even 25 Mbps - already, according to the Chairman on p. 3, 80% have access at some price - why would we the need over the air (OTA) DTV in urbanized areas? The motive for introducing universal broadband is NOT to replace OTA DTV, but rather to move our economy and society forward.
Readers may recall our January 2012 piece on Justice Alito’s comment on OTA DTV during oral arguments:
Unfortunately FCC commissioners are not allowed to make such comments publicly for fear of offending NAB. They even stripped the topic out of the NBP after an early draft leaked to broadcast interests (apparently from 8th Floor sources) and they started getting calls from Congress.
Note that we are not necessarily advocating moving more spectrum from broadcasting to cellular, rather we are saying that the large broadcasting allocations will become more and more untenable as a matter of public policy as broadband penetration increases. This could be accelerated if “free TV” for lower income households could be replaced through freemium basic cable-like service over Internet. All household would be better off with effective broadband. Pumping hundreds of thousands of watts of RF power over several MHz from large transmitter towers in order to qualify for retransmission consent or must-carry could become “so 20th century”! We do not wish the financial demise of the NAB membership, the incentive auction gives them one way to monetize their long term investment.
Your blogger joined FCC spectrum management 35 years ago this month. The world of spectrum use has change considerably in those 35 years with cellular, impact of cellular frequency reuse permitting spectrum productivity that seemed impossible, the upper band of permitted spectrum at 95 GHz, spectrum efficiencies that exceed 1 bps/Hz, DTV, etc. The increasing concentration of spectrum in cellular companies may not be optimal for our society and economy with respect to new spectrum needs we do not understand today just as in 1979 FCC did not appreciate what was coming, e.g. Part 90 was seen as needing much more spectrum then.
While we think that the military needs to be more flexible about its spectrum needs and sharing with the private sector, the US has the largest and most information intensive military in the world and recent events show that for the foreseeable future we face more national security threats that most countries represented in 3GPP. Thus while we may be able to downside or eliminate the need for OTA DTV as broadband penetration reaches new goals, we should not necessarily hand over the spectrum in a way that can not be readily reversed to systems designed in 3GPP for other markets.
NAB should not be able to veto dialogue on the spectrum impacts of broadband penetration just as CTIA should not be able to demand every Hz that “isn’t nailed down”.
As if on cue, the day after this was posted, our home town newspaper had an article entitled “TV is increasingly for old people”. The beginning of the article stated:
The median age of a broadcast or cable television viewer during the 2013-2014 TV season was 44.4 years old, a 6 percent increase in age from four years earlier. Audiences for the major broadcast network shows are much older and aging even faster, with a median age of 53.9 years old, up 7 percent from four years ago.
These television viewers are aging faster than the U.S. population, Nathanson points out. The median age in the U.S. was 37.2, according to the U.S. Census, a figure that increased 1.9 percent over a decade. So to put that in context of television viewing, he said TV audiences aged 5 percent faster than the average American.
Of the networks, Fox has the youngest average viewer age at 47.8 years while CBS has the oldest at 58.7 years. Broadcasting & Cable, the industry’s cheerleader published a similar article on the new data.
They can’t both be right!
Remember a few years ago when CEA and NAB were cooperating in 2008-9 with each other to facilitate the DTV transition? Wasn’t that nice? Two industries sharing their toys like nice little children. Only a little earlier in 2005 they were accusing each other of things like “Perpetuating a Fraud on Consumers”. Well, they are back at each others’ throats again! The telecom bloggers of the USA thank both for this gift. Now that Jon Stewart is back, we hope he can benefit from it also.
On June 21, 2013 NAB announced that
New research from GfK Media & Entertainment shows that the estimated number of Americans now relying exclusively on over-the-air (OTA) television broadcasting increased to 59.7 million, up from 54 million just a year ago. The percentage of TV households currently OTA reliant has now grown from 14% in 2010 to 19.3% in the current survey, a 38% increase in just four years. The recently completed survey also found that the demographics of broadcast-only households continue to skew toward younger adults, minorities and lower-income families.
We're one of the world’s leading research companies. Every day, our 12,000+ experts discover new insights into the way people live, think and shop in over 100 countries. We use the latest technologies and smartest methodologies to help our clients deeply understand the most important people in the world: their customers.
Sounds a lot more credible than some blogger, doesn’t it?
But then only 9 days later, NAB’s former partner in DTV transition, CEA, announced
The CEA report was designed and formulated by CEA Market Research, “the most comprehensive source of sales data, forecasts, consumer research and historical trends for the consumer electronics industry” with “90+ years of research history” - GfK is only 79 years old, founded in Nuremberg, Germany in 1934. (Perhaps it isn’t fair to say so, but Leni Riefenstahl’s Triumph of the Will was filmed in Nuremberg in 1934 -- in case the date and location sound familiar. “By general consent [one] of the best documentaries ever made.” -- Roger Ebert)
New research released today from the Consumer Electronics Association (CEA) ® found that just seven percent of American TV households rely solely on an antenna for their television programming. The findings of the new study, U.S. Household Television Usage Update, are consistent with CEA’s 2010 research which found eight percent of TV households reported using an antenna only for television programming. According to historical CEA research, there has been a gradual decline in the percentage of TV households using antennas since 2005. The phone survey of 1,009 U.S. adults is comparable to a 2012 Nielsen study indicating nine percent of all U.S. TV households are broadcast TV/over-the-air only, a decrease from 16 percent in 2003.
The only publicly available details on the study cited by NAB in an entry in the GfK blog entitled “Confessions of a Cord Cutter Skeptic Revisited”. By contrast, CEA would be glad to sell you a copy of their whole study ($399 if costs matter, no cost to CEA members).
But the issue here is critical to the pending incentive auction and the whole question of the spectrum needs of TV broadcasting. So this is too important a question to leave to CEA/NAB finger pointing! So in the interest of closure on this issue here is:
A Suggestion to Resolve This Key Disagreement: For at least 2 decades FCC has been paying Census Bureau for quarterly telephone penetration surveys which have been noncontroversial since Census is viewed by all as unbiased on this issue. This data collection is now part of the he Current Population Survey (CPS), sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS). Just last Thursday, WSJ reported on the the latest survey and found that “more than a quarter of U.S. households have ditched landline phones”. Significant changes in consumer behavior result from pricing changes and technology changes.
Since the issue of OTA market share is critical for the incentive auction, why doesn’t FCC pay Census to track both OTA home penetration as well as telephone penetration? I suspect that the cost would be allowable as part of the expenditures to support the incentive auctions and thus need not come from the very limited FCC appropriated budget.
Panasonic says Japanese TV stations are refusing to air commercials for its new “smart” television, apparently because they feel threatened by its combined TV-Internet function.
Private broadcasters, in a rare case of turning down a major advertiser, have said they will not show commercials for the product, claiming the split screen simultaneously showing broadcast content and Web pages may confuse viewers, according to reports.
“IPTV, or smart television, is a new area of service, and we are in talks to create new rules for broadcasting,” Panasonic said Monday in a statement. “We refrain from making further comments.”
As TV viewership declines and a growing number of younger “zero TV” households don’t even have a TV, the US broadcast establishment must not be thrilled about TV sets that blur the line between broadcast video and IPTV. Would US broadcasters go as far as their Japanese counterparts did and refuse the ads? Would FCC permit such action?
It is a brave new world for broadcasters who don’t sell out to the incentive auction and take their money and run. Soon such TVs will come to the US in quantity.
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.