Sinclair’s Mark Aitken believes there’s a better option to the government’s spectrum auction proposal that would benefit both broadcasters and the U.S. Treasury. If broadcasters were granted permission to lease their excess spectrum to wireless carriers — to become the big bulk carriers of video and other bandwidth-intensive content — they could generate over $1 trillion in revenues over the next 15 years. In addition, under current law, they would be required to pay 5% of that revenue to the government, which Aiken says could be $62 billion for Treasury’s coffers.
What prompted Sinclair to make higher bids than its peers? It could be because it thinks it can run the stations more efficiently. Or, it could be because it sees more value in the broadcast spectrum.
In the middle of Sinclair’s buying spree, its VP of advanced technology, Mark Aitken, in league with low-power TV stations owners, publicly proposed an alternative to the FCC’s spectrum auction plan now being considered by Congress.
Rather than induce broadcasters to auction off their spectrum by giving them a share of the proceeds, Aitken believes that Congress and the FCC should give broadcasters the flexibility to lease surplus spectrum to wireless carriers.
Such a business could generate more than $1 trillion for broadcasters over 15 years and a hefty annuity for the federal government since, under current law, it is entitled to 5% of whatever broadcasters get from non-business uses of their spectrum. That’s a much better deal than the feds will get from a one-time auction of spectrum.
In this interview with TVNewsCheck Editor Harry A. Jessell, Aitken elaborates on the plan and what has to happen to bring it to fruition.
An edited transcript:
How would you describe your plan?
It’s very simple. Broadcasters are on the trajectory of developing a new broadcast standard. The [Advanced Television Systems Committee] has got its next-generation broadcast television activity under way with the formation of the new technical group under the leadership of Jim Kutzner [of the Public Broadcasting Service]. You’ve got global support for harmonizing standards within the broadcast environment.
Here in the United States, you’ve got a bandwidth shortage being projected by many parties, which is driving the need for spectrum. When you put these things together, it’s easy to see that there’s the possibility for broadcasters to retain their spectrum and provide a tremendous amount of bandwidth for the downlink side of wireless carriers.
When you say “the downlink side,” what do you mean?
In a unicast environment, which is your one-to-one wireless cellular environment, you’ve got the uplink and the downlink. And it’s really unsymmetrical. More spectrum is needed on the download side than the upload. Your request is a very small amount of data, but the result of that request can be this huge video file. So broadcasters with a new standard could set aside a part of their bandwidth and tie that into the wireless carrier network and supply downlink capacity.
So how does this generate money for the government?
It generates money for the government by allowing broadcasters effectively to become a white label provider of downlink spectrum to carriers. Currently, broadcasters are obliged to pay 5% of their revenue from supplying auxiliary data services. When you look at the immense capacity that broadcasters could make available to carriers, it adds up to big dollars in revenues for broadcasters and, as a result, big dollars for the U.S. Treasury.
The numbers you’ve thrown out there for the government are $80 billion over 10 years and $125 billion over 15 years.
Those were preliminary numbers from a couple months ago. In the report that was just issued, we made the decision to take an additional 50% reduction in the value of bits. So, we’re now thinking of $62 billion over a period of 15 years, really 12 years since it will take three years to develop the new standard and begin rolling it out.
So that $62 billion represents 5% of what you believe broadcasters can take in from leasing spectrum to carriers?
That’s correct. You’re looking at total revenues that exceed a trillion dollars over 15 years for the broadcast industry.
So why did you cut your projections by half?
Because the feedback that we got from Republican members of Congress was that while they couldn’t point to the numbers being wrong, they simply felt that the numbers were too big. So we decided that for the sake of eliminating arguments, we’d cut them by 50%.
And you believe that that is more than the federal government will get from a one-time auction of broadcast spectrum?
I’m saying certainly that $62 billion over the next 15 years is a better deal than the net of less than $20 billion to the Treasury in an auction. And in addition, not only are we talking about that value, but we’re talking about the future value as well. When spectrum is auctioned, it is placed into the hands of another party. All future value of that spectrum to taxpayers is eliminated. Broadcasters can provide an annuity to the government.
So what needs to be done to make this happen?
We want Congress to instruct the FCC to give broadcasters the flexibility to be competitive and to be a provider of broadband downlink capacity that is compatible with the wireless carriers. We want the FCC to create a regulatory environment that would allow broadcasters the freedom to innovate in a way that other spectrum users are capable of innovating.
We also want broadcasters to agree to adopt a new standard in the near future. And that standard should be one that is capable of supporting over-the-air television — broadcasting as we know it today — as well as of being harmonized with the needs of the wireless industry so broadcasters can become the big bulk carriers of video and other bandwidth-intensive content.
Of course, you can’t evolve any industry by further reducing and reducing its available footprint. In the case of broadcasting, that footprint is spectrum. So we’re saying, there’s no reason for a spectrum auction. The driving reason for an auction is to solve a future problem for the carriers. Well, we will make bandwidth available at a reasonable price so the carriers have all the spectrum they need.
We are not going to solve the future problem of congestion in wireless networks as long as wireless networks are based upon a one-to-one unicast relationship with every single consumer. You end up with a revolving door policy in which they will be coming back for more and more spectrum. There is not enough spectrum in the universe to provide the unicast-delivered needs of the wireless industry.
Why not just auction the broadcast spectrum off to the broadband guys, and let them develop their own broadcast broadband service? Why do they have to go through broadcasters?
Well, it’s not a matter of having to go through broadcasters. It’s a matter of what consumers are demanding in terms of video content. The demand for video content largely emanates from broadcasters, not the wireless guys. The wireless guys are simply carriers. They carry other folks’ content. There’s no reason for broadcasters who are creating content to be forced to give that content up to somebody else to carry it for them, when they are perfectly capable of doing a better job of that.
Tell me about this coalition you put together, The Coalition For Free TV and Broadband. Who is in it?
Well, it isn’t a coalition that we put together. It’s a coalition that we joined. It is a coalition started by a number of low-power broadcasters. It was joined by several high-power broadcasters. And when I look across our needs as a broadcaster, and look across our industry, I look at the low-power guys as being sort of the canary in the mine if you will.
Why aren’t you working through the NAB? Rather than opposing the spectrum auction, it is arguing for safeguards for the stations that will be left after the auction and repacking of the band to make sure that they are not subject to increased interference. Your interest is with fellow high-power broadcasters, isn’t it?
We certainly have an interest with all broadcasters. Most of our economic value is derived from high-power broadcasting. There’s no doubt about that. But our view of the world is that auctions are sort of a backstop.
The NAB, I’m certain, feels as though they got forced into saying something other than no, precisely at the time they should have been saying no. I certainly can’t speak for NAB, but it would appear from the outside that they felt that they had to take a halfway step. And so we simply have a slightly different view of the world. And our view of the world is that we shouldn’t take that half step because we believe we need every bit of spectrum that we’ve got today if we’re going to evolve as an industry.
So, you would just say no spectrum auctions.
Based on the report I just read from the Department of Commerce that flat out says, in any future repacking scheme, broadcasters can expect new interference. Expect; not maybe. They’re saying expect it. It seems to me that the natural reaction of everybody in this industry ought to be, if we can expect future interference, then there’s no reason to proceed.
The NAB has made it very clear that what they support is truly voluntary incentive auction. And then there’s a set of four principles that they ascribe to the terms upon which they would support that single auction. And one of the primary tenets is being broken from the onset — that being that no broadcaster shall receive additional interference as a result of repacking and reallocation. So, if we’re being told upfront by the government that in a repacking, reallocation future, that we are going to expect interference, then there is no reason to play the game that we support the idea of auctions.
What kind of reaction have you gotten to your alternative plan?
We’ve actually gotten a good play among a lot of the Wall Street folks. They looked at our economics and I have not had any negative feedback on the numbers. Nobody is saying that what we’re talking about is not plausible. There certainly are technical hurdles that have to be jumped across. But in a series of papers to the IEEE and the SMPTE, I detailed 99% of what would have to happen to make this broadcast overlay a possibility.
The real question is, what’s going on in the Congressional supercommittee, and does anybody really care about the future value that broadcasting can bring in the environment? Or is Washington already putting the stake through the heart of broadcasting and, once again, playing the role of picking the winner?