3/29/2010 6:00 AM
Over the past year, there’s probably been more coverage of the FCC’s proposed National Broadband Plan (NBP) than anything except healthcare. Now that the commission’s wide-ranging plan has been released, broadcasters are asking, “What does it mean to me?” Let’s examine that question.
A simple plan
The NBP proposes to shrink the OTA TV broadcast spectrum by 120MHz. This means 20 OTA TV channels will go away. Under today’s technical regulations, it is not possible to simply cram all of today’s stations into 180Mhz (300MHz-120MHz) of space. How does the FCC plan to solve this dilemma? The simple answer is fewer stations and smaller-bandwidth stations, and if even more cramming is needed, the FCC proposes to change technical regulations on power, location, spacing and more.
Step one is the FCC would hold a “voluntary, market-based reallocation.” This is where some TV stations choose to voluntarily give up all or part of their spectrum. A station could choose to return to the FCC, say half (3MHz), of its spectrum. This station would then combine OTA transmission with another “half-channel” station to continue broadcasting. Each station would then have limited bandwidth, providing one HD or SD signal, or perhaps an SD and mobile TV signal. Or, they might operate full-bandwidth, but on a shared-time basis.
A station also could choose to quit the broadcast business, relinquishing its 6MHz of spectrum.
Some stations will choose to remain full-power, full-bandwidth broadcasters. These stations would continue much the same as today. They could provide HD, SD, multichannel and mobile TV signals.
Once stations have made their choices, the FCC will attempt to repack the remaining broadcasters into the new TV band. If there are still too many stations for available spectrum, further adjustments will be made.
Some of the remaining stations might have to settle for lower protection ratios, lower operating power and other not-yet-named technical changes. The FCC has acknowledged that further technical rule changes may be needed to squeeze the remaining TV stations into the available spectrum.
Congress gets involved
In addition to the above, Congress must take several steps. The first is to authorize the commission to conduct another spectrum auction. That’s the easy part. The more difficult component of this action is the legislation to provide some legal mechanism whereby those stations that “voluntarily” relinquished either a portion or all of their spectrum can share in the proceeds of the TV band spectrum auction. Clearly, the cat fight will be over how much money might be apportioned from the spectrum auction to be divided with broadcasters who choose to quit or shrink.
A second component of this compensation to stations that voluntarily relinquish spectrum involves the “value” placed on the broadcast properties. The FCC has already drawn a line in the sand with earlier hints of station spectrum value. Previous statements by Blair Levin, executive director, Omnibus Broadband Initiative and FCC chairman Genachowski have placed the value of wireless spectrum at $1.28 per megahertz, per person. Television broadcasting, says the FCC, is worth only 11 to 15 cents per megahertz, per person. This is defined as the “opportunity value” of the spectrum.
In addition, the FCC has valued the broadcast industry at about $63 billion. Research says that about 15 percent of viewers actually rely exclusively on OTA broadcasts. The commission uses these figures to justify the cents per megahertz per person TV station spectrum value.
While broadcasters may want to argue such evaluations, Genachowski’s crew has cleverly seeded these numbers across a wide community of lawmakers and industries. Like spring crabgrass, once such “facts” have sprouted, they become difficult to eradicate.
The FCC’s hammer
As mentioned above, even after the voluntary return of spectrum takes place and technical rule changes, there could still be too many stations for remaining available spectrum. The FCC has another tool to encourage broadcasters’ cooperation — spectrum fees.
The FCC is proposing that both government and private users face a “yearly spectrum fee.” This fee would be based on the commission’s perceived opportunity value of the spectrum. This is when spectrum is used “in its best feasible alternative use ... ” From the FCC’s viewpoint this means wireless broadband. From the NBP:
“Fees may help to free spectrum for new uses such as broadband, since licensees who use spectrum inefficiently may reduce their holdings once they bear the opportunity cost of spectrum.” (Page 82 NBP)
“To be fully effective, fees should reflect the value of the spectrum in its best feasible alternative use, i.e., the opportunity cost.” (Page 82-83 NBP)
Wireless broadband operation has been determined to be more spectrum efficient (megahertz per person) than broadcasting. The FCC therefore decided that spectrum fees should be based not on any business model or recovering the FCC’s cost of service, but on what the FCC considers “the opportunity cost of spectrum.”
“One way to address these inefficiencies is to impose a fee on spectrum, so that licensees take the value of spectrum into account. Congress should grant the FCC and NTIA authority to impose spectrum fees, but only on spectrum that is not licensed for exclusive flexible use. (Page 82 NBP)
The FCC would not charge these yearly spectrum fees for applications licensed for “exclusive flexible use.” Television broadcasting is not classified as “flexible use” so it does not meet that criteria.
While broadcasters would be required to pay these new and presumably hefty yearly fees, a competitive wireless broadband company, perhaps using the same channel the station formerly occupied and providing competitive video services, would not.
The FCC has proposed a rapid timetable. It hopes to have rulemaking proceedings this year and begin reclaiming spectrum in 2012.
That may not happen for several reasons.
Congress previously asked the FCC and NTIA for a spectrum inventory. A bill is moving through Congress that would provide money to both the FCC and the NTIA to complete that inventory. Under the best of conditions, the inventory probably couldn’t be completed until 2015. Until Congress gets that inventory, the FCC may be limited in how much action it can really take. If so, that could delay any spectrum auction for several years.