Michael Grotticelli /
06.21.2010 09:42 AM
FCC’s spectrum plan gives broadcasters food for thought

Last week’s FCC report, titled “Spectrum Analysis: Options for Broadcast Spectrum,” cuts through many of the standard arguments for and against the reclamation of broadcast spectrum and offers food for thought for many broadcast station owners considering the government’s offer.

The FCC wants to reclaim broadcast spectrum in order to make it available for broadband services — a fast growing phenomenon is today’s mobile-hungry culture. Since 2005, the report notes, subscribers to mobile services have grown 42 percent in total, revenues have grown 39 percent, and industry employment has grown 16 percent. Growth in demand for mobile broadband services bolsters the expectation of future scarcity in spectrum allocated for its use and sustains high valuations for that spectrum.

The FCC is trying to reclaim technological dominance for the United States and admits it is difficult. “Spectrum policy is not easy. Technology changes. Consumer preferences and habits change. Business models change. Allocation priorities change. And this change can be daunting,” the report said. The document is from the point of view of the government, though the arguments the FCC makes are no less compelling.

Not only has technology changed, but also so has the state of the economy. This is why the FCC is confident that many stations will give up their spectrum voluntarily in exchange for a portion of the money generated from a spectrum auction. Blair Levin, the former FCC broadband advisor, put it this way: “Some stations may realize that their spectrum license holds more value in an auction than they can achieve under their current business model and future broadcast opportunities.”

Over-the-air (OTA) broadcast television, notes the report, faces challenging long-term trends, which reduce the market value of broadcast spectrum in its current use. The percentage of households viewing television solely through OTA broadcasts has steadily declined over the past decade, from 24 percent in 1999 to 10 percent in 2010. The average percentage of U.S. households viewing broadcast TV content has also fallen, and the proliferation of programming options — such as cable networks and on-demand content — has fragmented broadcast TV viewership.

There’s a 25 percent to 30 percent decline in the average prime-time ratings of all broadcast TV networks over the past decade, driven primarily by the proliferation of cable networks.

The 57-page report is sweeping in its detail and arguments. Its frank analysis of the business plans and future opportunities for broadcast stations is interesting, if not chilling. Two areas discussed are mobile television, a new technology that broadcasters argue is essential to them holding onto spectrum, and must carry, which the FCC notes could easily be lost in a court decision.

The FCC takes much of the hype out of mobile TV, calling the broadcaster’s business model “nascent.” In the United States, many entities are pursuing the delivery of television content to mobile devices, including Qualcomm with its MediaFLO service, the FCC said, but the method of delivery and business model that will be favored by consumers and successful in the market has yet to be determined

Mobile DTV broadcast businesses are most advanced in Japan and South Korea, where nine out of 10 mobile TV users worldwide reside. Despite combined viewers of more than 69 million, neither country’s services have succeeded financially yet, the report noted. High build-out and maintenance commitments have driven significant costs, and broadcasters in those countries have yet to leverage their millions of viewers into sustainable, incremental ad revenue to support a free-to-air mobile service.

Broadcasters, the FCC continued, have stated that they need approximately 2Mb/s to broadcast each mobile DTV stream to mobile or small-screen portable devices. Stations voluntarily choosing to share channels would either not be able to launch mobile DTV on their channel, if they choose to broadcast their primary video stream in HD, or would be constrained in the number of mobile streams they could broadcast if they air their primary video stream in SD.

The report also reminds broadcasters that in 1997, by a one-vote margin, the U.S. Supreme Court upheld as constitutional the must-carry rules created as part of the 1992 Cable Act. Cable operators now argue, however, that the facts underlying the Supreme Court’s 1997 ruling have changed. A successful legal challenge to the must-carry regime would negatively impact the stations that continue to rely on must-carry rights. With the loss of guaranteed must-carry carriage, stations would lose roughly 81 percent to 85 percent of their viewership.

“This paper represents the start of the process — not the conclusion,” said Julius Knapp, chief of the FCC Office of Engineering and Technology, on his blog. “It offers provocative ideas that deserve to be fully vetted and considered.”

The NAB, the broadcaster lobbying group, has been actively campaigning against the FCC’s reclamation proposal, concerned that it might wind up being less voluntary than advertised. But at the end of the day, it will be the station owners who decide whether to sell out now or face an uncertain future.

You can download the full FCC report online.<</p>



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Thursday 10:05 AM
NAB Requests Expedited Review of Spectrum Auction Lawsuit
“Broadcasters assigned to new channels following the auction could be forced to accept reductions in their coverage area and population served, with no practical remedy.” ~NAB


 
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