Broadcasters' spectrum crisis could end up being cable's problem

Broadcast spectrum battleIt used to be said that air was free. Now gas stations charge you to fill your tires, oxygen bars charge you to breathe pure air, and broadcast television stations charge pay TV providers for their "free" over-the-air signals. And, of course, mobile phone companies charge for carrying your voice over the airwaves, and WiFi hotspots and hotzones charge for getting data over-the-air.

Charging for air is big business. Spectrum auctions that sold air, or the radio spectrum that travels through that air, have already poured billions of dollars into the federal treasury and, if the FCC and the Obama administration have their way, still more auctions will sell still more spectrum. To find that spectrum, the FCC has been casting looks at broadcasters and the spectrum they were given when the air was free.

As a first step in building a wireless-centric national broadband plan, the FCC reclaimed channels 52 through 69 from broadcasters and pushed that industry into a digital transition. For the most part, that transition went well and broadcast signals continued to be received by a new breed of digital antenna and set-top box. Broadcasters who elected to use low range VHF channels (anywhere from channel 2 to 6 were the worst) had much more difficulty delivering reliable signals.

Free over-the-air television, for some viewers, became a thing of the past when their broadcast stations tried delivering digital signals in low VHF bands. Both the broadcasters and the viewers were increasingly dependent on pay TV providers.

Now the government is again looking for a swath of about 120 MHz of broadcast spectrum to auction to wireless players. Broadcasters aren't happy. Wireless operators and consumer electronics companies, seeing a bonanza in new wireless spectrum, are happy. The cable industry, which bore part of the cost of the digital transition, is neutral but wary.

"This is a main event this year," said Thomas W. Cohen, a partner at Kelly Drye and Warren and a panelist at the recent American Cable Association (ACA) Summit in Washington, D.C.

In many ways it is a main event for the FCC, for broadcasters and for the wireless industry.

Spectrum crunch

"There is a looming spectrum crunch. Something has to be done," said Zac Katz, legal advisor for Wireline Communications, International and Internet Issues in the Office of FCC Chairman Julius Genachowski.

That something includes "dozens and dozens of agencies" within the federal government "going band by band" to determine what bandwidth can be vacated, according to Thomas Power, chief of staff of the NTIA.

It also means convincing the broadcasters that "voluntary, incentive auctions" where they would share the proceeds with the government are in their best interest and that someone will develop a way to better use the low VHF channels to deliver digital broadcast.

Hidden beneath all that is the understanding that even if broadcasters can deliver the potent over-the-air signals they have in the past, it doesn't matter. Nearly everyone in the U.S. has pay TV, so they'll still get the local signals. What's missing from that theory is that those local signals cost those cable, telco and satellite providers in retransmission fees, and cable is already burdened with must-carry requirements for local stations that could conceivably expand under the FCC's broadcast reallocation plan.

It could create a situation where cable operators are increasingly required to carry local stations that, in turn, are increasingly demanding more in the form of retransmission consent fees.

"My understanding, based on what the FCC has said--no one knows the details--is that broadcasters would also be compensated for the cost of their retuning and movement (of channels for digital broadcast). It's quite possible that the cost of getting the signal to the cable operators would be covered as well," said Fred Campbell, president-CEO of the Wireless Communications Association International (WCAI) and a former FCC wireless bureau chief.

Campbell, though, stopped there.

"I don't think those details have been worked out," he said.

Those details would, it seems, have to be worked out with a new set of retransmission consent rules but that, like a voluntary auction, seems unlikely.

"I don't expect Congress to be active in retransmission this year," Matt Polka, the ACA's president-CEO said. "Congress has gotten involved before; I can see that happening."

Spurring retransmission battles

Retransmission consent battles between cable operators--particularly smaller cable operators--and local and national broadcasters have become increasingly rancorous. When things break down, as they have in several recent instances, the broadcasters drop their signals from the cable systems and go over-the-air. The problem with taking away more spectrum is that they will no longer have that option; over-the-air will be pretty much potluck.

It is a little studied part of the battle between broadcasters and the government, but it is a potential big problem for a cable industry that is required to carry broadcast signals.

"The FCC maintains that they would still have their 6 MHz channels so they would actually not have less spectrum on a megahertz basis than they have now and therefore wouldn't be any worse off," said Campbell.

That, of course, is the argument. The broadcasters were given free air when others were told to pay. Now the government wants it back. The incentive is that this time, unlike with the digital transition, "they would actually receive compensation for giving up some of the spectrum that they never actually paid for in the first place," said Campbell.

The NCTA, in comments filed with the FCC on spectrum reallocation, waved aside costs and/or compensation for broadcasters because "whether or not broadcasters should be compensated for giving up their spectrum is an issue that does not directly affect the cable industry and we therefore take no position on it," the trade organization said.

Costs that might be incurred by cable operators reconfiguring equipment to receive and transmit broadcast signals are another matter.

"Cable operators should not be required to bear the costs of adapting to such changes," the NCTA comments continued. It should not, the organization added, be a repeat of the digital transition where "cable operators also expended significant resources to ensure that the transition went smoothly for their customers."

Those expenses included the purchase of new receive antennas and infrastructure to receive digital broadcast signals.

And besides, everyone watches broadcast TV on cable and telco TV and satellite where it's no longer free--to either the operator or the viewer.

"This is a consumer issue," said ACA Chairman Steve Friedman, whose day job is COO of Wave Broadband. "They're using the public airwaves where they've been given significant advantage."

As part of that advantage, service providers have operated under the onus of "must carry" regulations.

Doubling up on must-carry?

"'Must-carry' requirements are an intrusion on the First Amendment rights of cable operators and programmers, to the detriment of many of their customers," the NCTA told the FCC in comments replying to the spectrum reallocation proposal.

Of special concern is another part of the spectrum reclamation plan that would allow broadcasters to double up and share 6 MHz spectrum slots within their markets. That could be a problem, the NCTA reply said.

"If the rules permit multiple broadcast licenses to share a single station's multicast capabilities, the mandatory carriage obligation must remain limited to one video programming stream per existing licensee," the trade organization wrote.

The organization also reiterated that shared channels should not mean shared financial burden between broadcasters and cable operators.

"If operators are again required to purchase new equipment (e.g. antennas) to accommodate the changing of channels by broadcasters, they should not again be forced to bear those costs while broadcasters who agree to move to a shared channel are paid to do so. They should be compensated as well from whatever mechanism is established to compensate broadcasters," the NCTA said.

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