Jessell | Do Broadcasters Deserve A Bit Of C-Band Gold?

Harry Jessell

For most broadcasters, the great incentive auction of TV spectrum was a bust. The timing was bad. When it got started 2016, the wireless carriers were still trying to digest big heaps of megahertz they had bought in the AWS-3 auction in 2015. So, demand was nowhere near as great as it might have been if the auction had been earlier — or much later — than the AWS-3 auction.

When the auction closed in 2017, lucky broadcasters and speculators had sold 175 stations totaling 84 MHz of primo broadcast spectrum. But, as we have just learned, nearly 700 more stations were willing sellers and would have been sold, too, if the demand was greater and the prices higher.

But disappointed broadcasters need not fret.

They may yet have an opportunity to cash in on some spectrum that is being readied for sale to wireless carriers eager to jump into 5G, which I understand will solve all the world’s problems.

Let me explain.

Over the past couple of years, the big satellite carriers led by Intelsat have been trying to persuade the FCC to give permission to sell 200 MHz of the 500 MHz C-band that they share in providing satellite services in the U.S. They’ve acknowledged that the C-band is currently underutilized and, it seems, the band is ideal for 5G.

Their proposed market approach — a private sale — would expedite the reallocation, they say. It would get the 200 MHz into the hands of the wireless carriers in less than three years following FCC approval.

A green light from the FCC would be a big windfall for the satellite operators. Experts are saying that the 200 MHz could fetch anywhere from $10 billion to $30 billion on the wireless market.

After Wall Street got wind of the reallocation plan in April 2018, Intelsat stock, which had been bumping along at two or three bucks for a couple of years, took off, hitting a high of $35 that October. It has lost much of that gain in the months since as complications have arisen, but it is still trading relatively high. Last Friday, it closed at $18.39.

Yanking 200 MHz out of service would be disruptive to TV networks, cable systems and TV stations, all operators of earth stations that transmit and receive programming to the satellites.

But not to worry, the satellite carriers say. They will, they promise, make sure the service is not degraded by interference, and will compensate earth station owners for any costs they incur as a result of the reallocation — moving dishes, installing filters and changing frequencies.

It would work just like the federal government is now covering the cost of moving nearly 1,000 TV stations in the wake of the broadcast incentive auction, using some of the proceeds from the auction.

Last July, the FCC launched a rulemaking to consider the spectrum sale and mechanisms for doing it. To make sure that are being heard in the proceeding, the four big satellite players in the U.S. — Intelsat, SES, Eutelsat and Telesat — banded together as the C-Band Alliance last October.

Unfortunately for the CBA members, others have taken notice of its intentions and the big dollars at stake. The FCC docket has filled up with all kinds of complaints, concerns and, if you believe the CBA, outright money grabs.

Smaller C-band satellite companies think they deserve some of the loot, even though they don’t currently operate in the United States. Earth station owners want iron-clad guarantees that their costs will be covered, and some of them believe they are entitled to more than costs because of all the trouble the reallocation will cause.

CBA also believes some of the cable companies are working to slow the reallocation because they fear the competition to their lucrative broadband businesses from 5G.

For the most part, the squabbling has occurred within the polite confines of the comments and ex parte notices in the rulemaking. But last February, it burst briefly into the public at a panel session about the C-band reallocation organized by the New America think tank.

CBA was not invited to sit on the panel, but, speaking from the audience, CBA advocate Preston Padden blasted America’s Communications Association for making excessive demands on the satellite operators. ACA Connects cable members rely heavily on C-band and their earth stations.

“We have told you 100 times we are going to cover all of your members’ costs,” Padden said, according to an account in SpaceNews. “We put it in writing. We are putting it in contracts, but you came to see us and said you’d go away for $200,000 per cable system. There’s a word for that: it’s shakedown.”

ACA lobbyist Ron Lieberman, who was on the panel, denied that ACA Connects was making any such demands.

The latest player to emerge is LPN Spectrum, headed by Ravi Potharlanka. You should remember him. By his own reckoning, his LocusPoint Network made $325 million for himself and others speculating in the broadcast incentive auction.

LPN is now trying to entice another class of C-band earth station owners to join him in going after C-band reallocation dollars — TV stations. Like ACA’s cable members, TV stations are major owners of earth stations. LPN calculates that the sale of the 200 MHz could yield $26 billion.

LPN’s charter member is Trinity Broadcasting, which operates 57 transmit and receive earth stations at its 35 TV stations. In addition, it distributes programming to 600 cable systems with more than 1,000 earth stations.

LPN laid staked its claim in a May 16 ex parte notice. “Repurposing any part of the C-band spectrum will require coordination among satellite operators, C-band users and earth station operators,” the notice says.

And it’s not enough to be “simply ‘made whole’ with respect to their relocation expenses while the satellite operators walk away with the excess economic value created,” it said. The reallocation plan “must provide financial incentives to all stakeholders.”

LPN sweetens its argument by saying with the right “financial incentives,” the broadcasters would cooperate to such as extent that the satellite operators could clear and sell off 300 MHz rather than a mere 200 MHz.

“So, it is kind of a very simple decision,” Potharlanka told me in a phone interview. “If broadcasters are interested in actually claiming some of the value, they can be part of the process by joining us and Trinity,” he said. “Or satellite operators will come and tell them how it is going to be and that will be the end of the story.”

Thus, there you have it — the aforementioned opportunity for broadcasters who feel they missed out on their own incentive auction.

Working together under the LPN banner or some other one, they might be able to enjoy a C-band windfall by chipping in on some lawyer/lobbying fees.

But I have to tell you, this whole thing makes me a little uneasy.

When you get right down to it, this is a battle among big companies over — let’s use LPN’s number — $26 billion in spectrum that is owned by the American public.

It is unfortunate that the FCC has to pay incumbent licensees to buy their cooperation when it deems it in the public interest that their spectrum is underutilized and some of it would be better used elsewhere. Without that cooperation, the FCC knows the incumbents will throw up all kinds of regulatory and legal obstacles and cause endless delays. But that seems to be the case these days.

That said, the CBA satellite operators make a strong case for keeping proceeds. Like most broadcasters, they say, they paid for the spectrum when they bought the companies that got it for free in the days when the FCC routinely gave it away.

And like broadcasters, they say, they have a hold on their licenses that legally cannot be pried loose unless they commit some egregious infraction of FCC rules.

What’s more, it was their idea to reallocate the spectrum and set in motion the FCC proceeding to make it happen. They should be rewarded for that.

So, I will concede that they should get a share of the spectrum proceeds, but not necessarily the biggest share. In retrospect, the public came up short on the broadcast incentive auction. While broadcasters got $10 billion, the U.S Treasury is netting just around $7 billion. Let’s hope the FCC can do better this time around.

Among the commenters in the FCC proceeding are consumer advocates who think the satellite operators should get zip. Organized as the Public Interest Spectrum Coalition, they told the FCC that just because the satellite companies are “lucky enough to be the only cars parked in a half-empty public lot does not mean that they should receive a massive giveaway that needlessly denies the public any return on the spectrum.”

And to all the broadcasters and other earth station owners who feel they should be able to dip into the spectrum money well in exchange for their whole-hearted cooperation and tacit promise not to make trouble, I simply say: I will be rooting for the taxpayers.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here.