If All Else Fails, Spectrum Remains
“Linear TV is … marching towards a great precipice and is going to be be pushed off,” Bob Iger said at a Los Angeles conference last September. “I can’t tell you when, but it goes away.”
Not exactly what you want to hear about broadcasting and its enablers, cable and satellite, from the once and again Disney CEO who has deep roots in broadcasting and who, among much else, still oversees ABC and its string of fine TV stations.
Let’s face it. Bob has a point. Somewhere out there is a cliff and streaming TV is pushing broadcasting toward it, although I think it is farther away that Bob implied.
But I come today not to alarm, but to reassure.
Should the business of producing news and selling spots go over the edge, all will not be lost. Broadcasters have something that will soften the fall — their spectrum.
Like concrete, steel and plastic, spectrum is one of the fundamental ingredients of modern civilization. Demand for it from wireless carriers and others only grows and, consequently, so does its value.
If broadcasting as a TV medium falters, broadcasters should be able monetize their spectrum and tap that value in at least two non-broadcasting ways. They can repurpose it for datacasting or they can auction it off to the highest bidder.
Datacasting got off to a rough start back in the early oughts when the broadcasters began making the switch to digital and discovered they would have extra capacity to distribute data along with HDTV.
For a moment, datacasting was the rage. Top station groups aligned with one of two startup companies, iBlast or Geocast. Both had the same basic idea: Use broadcasters’ excess capacity to deliver digitized music, games, videos, news clips, sports highlights and matter to desktops and laptops. Broadcasters would share in the subscription revenue.
It all came to naught as the internet soon proved that it could provide rich media in any form with much less cost and fuss than the broadcast-based services could.
But with the FCC’s authorization of a new, much more capable digital standard, ATSC 3.0, in 2017, interest in datacasting has spiked once again.
Broadcast proponents led by Nexstar and Sinclair believe that they will now be able to lease spectrum to third parties for GPS-like location services; traffic and electrical grid management; public safety; emergency warnings; education; updating of software; in-vehicle entertainment; digital billboards and a host of other IoT applications where the data receivers are widely scattered or mobile.
Entering this market requires a big investment. Not only do broadcasters have to upgrade their transmission facilities for 3.0, but they will have to build and maintain single frequency networks — well-placed repeater stations around their towns — to ensure reliable and uniform signal coverage.
The BIA research firm says that datacasting could yield $10 billion in revenue by 2030 if broadcasters can lease just 20% of their digital capacity.
I’m a bit skeptical that the demand for datacasting is as great as proponents say it is. If it were, I figure at least one eager client with a killer application would have emerged by now to drive the pace of 3.0 rollout that has been, to date, lethargic.
But I could be wrong. Datacasting might prove just the thing to revive the fortunes of broadcasters. Let’s hope.
In any case, I believe broadcasters, if they’re smart, will have that other option of just selling the spectrum, bit by bit or all at once.
Technically, they have nothing to sell. They don’t own the broadcast spectrum; the American public does. Broadcasters use it under terms of a license in which they promise to broadcast in the “public interest” and obey all the FCC rules. They only have to remember to renew the license every eight years.
But we are not talking technically. In practice, broadcasters enjoy pretty much all the rights and privileges of ownership. If and when they decide they want out, they should be able to put the spectrum on the block and expect to share in the proceeds.
A precedent for doing just that was set in during the Obama administration. The FCC badly wanted to reallocate some of the broadcast spectrum to wireless communications, figuring that it would put it to better use.
The FCC could have demanded that broadcasters give up spectrum, but if it had it would have faced lawsuits and years of litigation from broadcasters who would not have given up their spectrum without a fight. And they might have won.
Just about every station owner obtained their spectrum by buying it from some other broadcasters, not by going to the FCC and asking for a license. And they paid a lot of money for it. They aren’t going to make it easy for anybody to take it away.
Because the FCC rarely revoked or declined to renew a license over the decades, the license started looking more and more like a deed.
The quasi-ownership was more or less locked in by the Telecommunications Act of 1996. NAB President Eddie Fritts persuaded friendly lawmakers to slip language into the law that makes it extremely difficult to take away a broadcast license.
The provision looks innocuous. It essentially codifies the idea that the FCC must renew licenses of stations that meet the low public interest bar and otherwise behave themselves. With the provision, lawyers tell me that the only way a station can lose its license nowadays is to [insert graphic description here of a horrible crime].
Knowing that it couldn’t yank away spectrum without pain and delay, the FCC opted for what it called an incentive auction, the incentive being a piece of the action. Broadcasters who volunteered to give up their spectrum would share in the auction proceeds.
Many did and many got rich. The auction yielded $20 billion in 2017. Owners of 175 stations divvied up $10 billion of that and many other broadcasters would have sold had the wireless buyers been more aggressive in their bidding.
The 2017 auction should give all broadcasters some comfort. Should broadcasting go off the rails and datacasting never get on track, they should be able to cash out.
The great unknown, of course, is how much an incentive auction five or 10 years hence would yield for broadcasters, keeping in mind that proceeds have to be shared with the feds. With demand for wireless always rising and demand for linear TV lessening, it could be that the broadcast spectrum will be worth more to Verizon or AT&T than it is to Sinclair and Nexstar for broadcasting or datacasting.
In any event, it’s vital that broadcasters keep the auction option open.
The FCC’s current authority to auction spectrum of any kind expires in March, but there is plenty of interest among lawmakers in renewing it. Since 1993, FCC auctions have raised $230 billion for the federal treasury.
If renewal legislation begins to move later this year as expected, it’s imperative that the NAB be at the table to ensure that the FCC has the ability to resurrect the incentive auction — a voluntary auction of broadcast spectrum — on terms at least as favorable to broadcasters as the 2017 auction was.
A soft broadcasting landing may one day depend on it.