Negotiations between TV broadcasters and Sprint Nextel over the wireless provider’s plan to pay for the broadcasters’ digital ENG upgrade and share their 2 GHz spectrum have hit a snag and it doesn’t appear likely a Sept. 7 deadline will be met.
With a Sept. 7 deadline approaching, TV stations and Sprint Nextel appear bogged down in their efforts to allow the wireless phone provider to coexist with local news operations in the 2 GHz (BAS) band. At issue are potentially big tax bills stations could incur by accepting a free digital upgrade of their ENG gear from Sprint Nextel, and a cumbersome process of getting each station signed up for the change.
“Put me in the dubious column. At the pace it’s going right now, it’s going to be five more years,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â said Sterling Davis, vice president of engineering for Cox Broadcasting.
Others don’t believe the situation is that bad. While they concede fast approaching Sept. 7 deadline for beginning the switchover is iffy, they believe they can meet the hard deadline 14 months from now for completing the process.
“I still think the September 2007 deadline is possible,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says Sprint Nextel representative Tim O’Regan. “It is a requirement that the FCC has placed on, not only us, but on the BAS licensees as well. So the correct way to look at this is all of us need to be collaborating to meet that deadline of September of next year.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
Under the deal worked out with Sprint Nextel and the FCC, broadcasters are giving up 35 MHz of the 120 MHz that they now have in the BAS band and use primarily for sending video back to the studio from their roving microwave news trucks.
But, in theory the broadcasters are really not giving up anything. That’s because Nextel has agreed to pay for upgrading the broadcasters’ ENG to digital. Since the digital gear makes more efficient use of spectrum, the broadcaster will end up with just as many ENG channels in the band (seven) as they have now.
The whole deal is driven by the FCC’s desire to clean up the 800 MHz band for the fire fighters and other first responders who use it for emergency communications. Part of the clean-up plan calls from moving Sprint Nextel out of the band and giving it 10 MHz of spectrum elsewhere, half of it in the broadcasters’ BAS band.
In exchange for the 10 MHz of spectrum, which the FCC valued at $4.8 billion, Sprint Nextel is obliged to pay the costs of relocating other users in the 800 MHz band as well at the cost of the broadcasters’ digital update in the 2 GHz band.
For every dollar Sprint Nextel spends for the 800 MHz relocations or the BAS digital upgrade, it gets a credit against the $4.8 billion it owes the government for its new 10 MHz of spectrum.
Sprint Nextel has estimated that it will spend $512 million for the broadcasters’ digital update.
For nearly two years now, Sprint Nextel has been working hard to reach reimbursement agreements with the owners of the 1,055 TV stations that now use the BAS band. It claims to have hired 33 people and 11 outside consultants and spent more than $72 million in the effort.
Yet, Sprint Nextel’s O’Regan reports that the company has Frequency Relocation Agreements (FRAs) covering only 33 of the 1,055 stations.
Sprint Nextel warned the FCC last March that this September’s deadline for beginning the switcher might be missed if it didn’t start seeing a flood of signed FRAs, and accused broadcasters of making “supportable demands.” Two years ago,
Sprint Nextel had hoped that many markets would make the switch from analog to digital by the Stage 1 deadline of Sept. 7, 2006. But, it told the FCC, unless “substantial and immediateÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â progress is made in the negotiations with broadcasters, few if any market will make the switch by that date.
One of the issues that has been holding things up is the possibility that the IRS might view the hardware giveaway as a taxable gain for broadcasters. In other words, if broadcasters accept the gear, they could be stuck with a big tax bill.
“The commission requires Sprint Nextel, under its order, to pay for all relocation costs. Now the question is whether any taxable gain that could occur from this relocation is a cost. Broadcasters believe it is and Nextel believes absolutely not,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says David Donovan, president of the Association for Maximum Service Television (MSTV).
The IRS has been asked to rule on how the transaction will be treated and broadcasters are hoping for a ruling this summer.
“Independent of whether broadcasters have signed an FRA, I know the broadcast industry is spending a lot of time and effort in inventorying their existing equipment to get the process moving,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â Donovan says.
In April, MSTV announced that it had negotiated a revised FRA template that stations can adapt to their unique market requirements; however, some complain that it was a little late in the game to be revising the basic contract.
“I think [Sprint Nextel] thought that they could just use stock legal documents, but everybody involved in the broadcast industry, obviously wants their own legal counsel to look these over, and every single time there have been substantial edits to the basic document,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says Chris Imlay, general counsel of the Society of Broadcast Engineers.
Imlay says the revised FRA was actually a setback for a number of stations that had been negotiating based on a previous template agreement.
ABC announced in April that it had reached its own agreement with Sprint Nextel on an FRA template for its owned stations. But each individual station will still have to go through the process of taking inventory, getting price quotes and estimates, validating the estimates and negotiating an agreement with Nextel, and so far, none have signed a deal.
“It’s moving, but it’s moving at a snail’s pace,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â says David Converse, vice president and director of engineering, ABC Owned Television Stations. “It’s not an issue of disagreement; it’s an issue of process.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
Asked if the September deadline was achievable, Converse says, “It’s going to be really hard. I don’t want to say it’s not achievable, but it’s going to be very difficult to make that happen.
“The process is extremely complex and complicated and the timelines, even at the beginning of the process, were extremely aggressive,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â Converse says. “As time goes on, that gets harder and harder to achieve. Nextel is working very diligently, but it’s a Herculean task at bestÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
ABC declined to comment on how it was handling the tax liability issue.
Cox’s Davis says that his company has submitted its inventory lists to Sprint Nextel, and has been waiting for an offer. “We haven’t negotiated anything yet. They haven’t given us anything to look at.
“It’s very frustrating,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â he adds. “Plus, you can’t just do it one station at a time. All stations in a market have to switch on the same day, so you’re stuck with the lowest common denominator. Whoever takes the longest in a market is the controlling factor.”
Davis is one of the few broadcasters willing to talk to TVNewsCheck and other media, having refused to sign a non-disclosure agreement that Sprint Nextel was pushing on broadcasters.
Imlay says that another key flaw in the process is that when negotiations get bogged down, broadcasters have no recourse. In the 800 MHz process, the FCC-authorized Transition Administrator has the power to force both parties into binding mediation, but in the 2 GHz process, both parties have to agree to mediation, and, so far, Sprint Nextel has been reluctant to consent to that.
“That’s not a process that Sprint Nextel, apparently, likes very much, because they’re forced to tow the line just like the licensees are,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â he says. “I think that if the [mediation] process involving mandatory mediation on a timetable had been made applicable to 2 GHz from the start, we wouldn’t be in this position right now.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
And while some station groups, like Clear Channel Broadcasting, report that they are close to a deal, a number of stations have gotten bogged down in negotiations over inventory lists and price quotes, and that’s where the process tends to stall.
“I think it’s going very poorly and I think a principal reason that it’s going so poorly is that the [mediation] process is not available at 2 GHz,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â Imlay says.
“I’ve participated in a few of those on behalf of clients in 800 MHz band and it works great. They’re relentless in making these deals happen during the voluntary and mandatory mediation processes,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â he adds. “It’s a mystery to me why that process, which was set up so elaborately for 800 MHz, is not available at 2 GHz.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â
Meanwhile, the clock is ticking, and at this point nobody has asked the FCC for an extension.
“The FCC has placed a requirement on all licensees, including Sprint Nextel, that we all need to collaborate to get this done, and we’re doing that,ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â O’Regan says. “We intend to see both projects done on time, and according to the FCC’s guidelines.ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â