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.
EXECUTIVE SESSION WITH MARK AITKEN
A Win-Win Alternative To Spectrum Auctions
Since Labor Day, Sinclair Broadcast Group has committed $585 million to buy 13 high-power TV stations in separate deals from Four Points Media and Freedom Communications.
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.
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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?
Comments (19)
Christina Perez says:
November 21, 2011 at 8:23 am
The broadast spectrum belongs to the American public. Stations are licensees of a public resource. Schemes like this are unconstitutional, an unlawful confiscation of public property, and will never pass legal muster.
Ellen Samrock says:
November 21, 2011 at 12:27 pm
Wrong, wrong and wrong. The government through FCC rules allows TV stations to broadcast auxiliary services in exchange for a percentage of the revenue. What Mr. Aitken and the Coalition is proposing expands on something that is already legal and could yield rich dividends to the US Treasury.
len Kubas says:
November 21, 2011 at 5:39 pm
air belongs to nobody, yet I can buy cans of it.
Christina Perez says:
November 22, 2011 at 10:46 am
Subleasing existing allocated spectrum under prevailing license, as opposed to spectrum auction sales, does appear to be reasonable and prudent and constitutional.
Christina Perez says:
November 22, 2011 at 10:46 am
Subleasing existing allocated spectrum under prevailing license, as opposed to spectrum auction sales, does appear to be reasonable and prudent and constitutional.
Sue Brake says:
November 21, 2011 at 9:48 am
The essence of Mr. Aitken’s concept is allowing American entrepreneurs, who long have been the genius driving our historic economic success, to do their thing instead of being smothered by government regulators. The end result will be a more efficient use of the scarce spectrum resource. Indeed, the wireless industry’s cry for heaps more spectrum to meet demand they have themselves generated by aggressive marketing threatens to squander our precious spectrum resource — a point that government policy-makers seem not to grasp.
Since video entertainment is a majority of Internet traffic, if video entertainment traffic were consolidated, including delivery by broadcasters with new technologies that permit conditionak and on-demand viewing, the claimed “spectrum crunch” would disappear in a wink. It would also ensure long-term availability of enough capacity for education, health, and work, which are the real public values of Internet but are not congesting anything.
It is disappointing that the FCC is taking strong sides and seems determined to get its way by hamstringing the ability of broadcasters to address the broadband video problem, forcing them to remain with an outdated technical standard (they won’t even allow one broadcaster to have an experimental license to prove what he can do with broadband). Why do we need more spectrum to watch movies and play games? A broader and more long-term perspective would look at the main cause of spectrum congestion, address the expectations that have created that problem, consider conservation measures as we do for so many other resources, and avoid what looks like an impending future spectrum resource train wreck for our children.
Why does the FCC think it knows better than anyone else what the public needs? Private innovators are strongly motivated to succeed, or else they lose their shirts. Why not “unleash” these people, and let wireless companies make their way in the marketplace instead of playing the Washington game with overwhelming lobbying resources that upstarts can never match?
tom denman says:
November 21, 2011 at 10:17 am
What Mark is suggesting makes too much sense, plus too complicated and why Congress won’t understand. If broadcasters aren’t 100% behind the plan and hiring appropriate amounts of lobbyists to push it up the ladder to Congress, it’s as dead as Mark’s plan to dump the ATSC standard and go COFDM. And no PhillyPhlash, the airwaves don’t belong to the American public anymore, but are being converted to corporate assets when sold at auction. I say let broadcasters go ahead and bid/own their spectrum at auction also, then as with “wireless carriers”, remove regulation since they would own the spectrum.
Matthew Castonguay says:
November 21, 2011 at 10:32 am
Howard, broadcasters don’t have the deep pockets that the carriers do. What we do have is about a 5-year headstart on the necessary infrastructure, free core content offerings, and a license requirement to serve the public interest, convenience and necessity. That all goes out the window when the carriers get their hands on the spectrum. So there is a policy decision here that has to be made; consciously and with eyes open, or blindly in a headlong rush, as seems to the current Administration/FCC approach.
Grace PARK says:
November 21, 2011 at 11:22 am
I have long advocated that broadcasters need to be in the broadband business, because they have a long and positive track record of local community service. The carriers, however, do not and will not. The handwriting is on the wall, and the justification for over-the-air television gets weaker as time goes by. The demand for broadband services is high and getting higher, so while I appreciate creative solutions like the one offered here, it doesn’t go far enough. Leasing that spectrum to the carrier industry doesn’t keep employees in the marketplace, those who pay taxes, contribute to charities and participate in local life. These are very big decisions for our culture.
Ellen Samrock says:
November 21, 2011 at 1:34 pm
And what is going to happen to the government’s precious plan of using white spaces for unlicensed devices? If broadcasters can expect more interference from a repacked band does anyone at the FCC or any other agency think that broadcasters, who are licensed, and the NAB are going to stand idly by and not object or sue if they have to suffer additional interference from unlicensed devices? The NBP is the kind of freaking mess only a room full of lawyers could envision.
Joanne McDonald says:
November 21, 2011 at 3:03 pm
I would take a bet that Daystar, Trinity, Ion and all the other religious and minor broadcast network plus all the diginets multicast networks would round up being regulated to cable only network that would be made available to customers with FTA systems and be made available on all cable systems as well as on both Directv and Dish Network and also be allowed to stream their programming online for internet users at no cost. I like the idea in which NBC stations share their channel with Telemundo, CBS stations sharing with CW, FOX stations sharing with MyNET, Univision and Telefutura share a channel together, and ABC would continue to not have to worry about sharing their stations with another network or another station. I would recommend that all the TV stations that are now on the UHF 14-51 band in digital that were on 7, 8, 9, 10, 11, 12, and 13 in analog be forced to move on 7, 8, 9, 10, 11, 12, and 13 in digital and all the TV stations that are now on the UHF 14-51 band in digital that were on 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, and 30 in analog be forced to move back to those channels in digital plus all the TV stations that are now on the VHF 7-13 high band with different RF physical channel numbers on the VHF high band in digital that were on 7, 8, 9, 10, 11, 12, and 13 in analog to be forced to move back to those channels in digital by 2015 or 2016. I like the idea of all the TV stations be allowed to transmit all HDTV and SDTV as well as mobile programming in the MPEG 4 format in the future. I like the idea of both IVI TV and FilmOn HDi be allowed to go in business again and be able to transmit all the local stations to the viewers on the net for free without any interference from the government for violating any copyright laws with benefits for online viewers that want to watch their favorite stations programming such as local news and shows even after the spectrum auction and plan becomes very mandated and very hard for TV stations to be able to stay on the air without being able to stream all their programming online to the viewers online. I’m afraid that my take of what channels the TV stations ought to be on with the planning of an spectrum auction. There would be lots of TV stations that would like to auction off their spectrum and see all of their programming that they have been airing on their own channel on their own frequency being broadcast on another TV station channel and frequency that has the most resources and the most money to survive into the real future. I’m actually posting the same post I commented from an earlier article related to this. Thank you for my understanding to this crisis in the TV business lately.
mike tomasino says:
November 21, 2011 at 3:51 pm
Yeah, yeah, yeah, we heard you the first three times you posted this anti-first amendment, anti-broadcasting, anti-consumer crud. It’s still just as misplaced and ignorant as it was the first three times you posted it. PLEASE STOP!!!
mike tomasino says:
November 21, 2011 at 4:12 pm
While I’m at it I feel that I need to point out that the multichannel video distribution industry is one of the largest distributors of hardcore pornography. By coming up with the idea that religious broadcasting should be restricted to cable you’re telling religious people that they should be forced to pay a hardcore pornography distributor to receive their religious programming. Do you see any problem with that?
len Kubas says:
November 21, 2011 at 5:42 pm
nobody reads your (this) drivel. it’s at least the 5th time you’ve posted it, and it made no sense the first time. You hate religion, right? And, religious broadcasting exposes you to that which you hate the most, right in the “inner sanctum” of your living room or tent?
Michael Werkmeister says:
November 21, 2011 at 4:27 pm
Mark Aitken’s flawless reasoning stands in sharp contrast to the illogical and irrational claims of the spectrum bandits and their corrupt supporters in Washington. Far too many members of Congress, having sold their votes to the wireless industry, have their minds made up and are unwilling to listen to the facts.
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November 21, 2011
See this:
http://tvnewscheck.com/article/2011/11/21/55559/a-winwin-alternative/page/1
Mark Aitken’s flawless reasoning stands in sharp contrast to the illogical and irrational claims of the spectrum bandits and their corrupt supporters in Washington. Far too many members of Congress, having sold their votes to the wireless industry, have their minds made up and are unwilling to listen to the facts.
Paul
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Paul J. Broyles, President
International Broadcasting Network
Houston, Texas 77269-1111
[email protected]
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.Mark Aitken’s flawless reasoning stands in sharp contrast to the illogical and irrational claims of the spectrum bandits and their corrupt supporters in Washington. Far too many members of Congress, having sold their votes to the wireless industry, have their minds made up and are unwilling to listen to the facts.
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Michael Werkmeister says:
November 21, 2011 at 4:35 pm
Mark Aitken’s flawless reasoning stands in sharp contrast to the illogical and irrational claims of the spectrum bandits and their corrupt supporters in Washington. Far too many members of Congress, having sold their votes to the wireless industry, have their minds made up and are unwilling to listen to the facts.
Todd Barkes says:
November 21, 2011 at 5:08 pm
Thanks! I wish we have a Congress that could think for itself. Not pointing to every member 🙂 Why is it that most everyone is incapable of seeing what local broadcasting does every day that is of benefit to all Americans? My hope is that the wireless folks will see every reason to have a dialog with us to make progress!
Todd Barkes says:
November 21, 2011 at 4:43 pm
So, just to be clear…
What is being proposed is that Broadcasters lease ‘data capacity’, not directly lease the spectrum. I was quoted as saying ‘effectively lease spectrum’, and the words were chosen to try to simplify what is a difficult concept to convey (“Broadcast Overlay”). I would suggest that you go to this site for the details…
http://coalitionforfreetvandbroadband.org/?page_id=504
Julie Caracciola says:
November 21, 2011 at 7:06 pm
Do not forget to call for the elimination of spectrum “repacking”. This totally unnecessary and foolish waste of money is the result of primitive thinking by folks who still can only think in terms of analog tuners and contiguous radio “bands”. There is no benefit to return to the 20th century concept of contiguous spectrum for any service. Existing television stations operating on their existing frequencies can provide the enormous hotspot “reach” needed for broadband without being lined up in a row like “ducks”. Wireless services can be supported by area stations which offer broadband service to the extent needed throughout the day. Such a dynamic system can expand and collapse to meet demand, and can co-exist with stations offering both alternative and traditional free services to the public. Nothing new needs to be done other than to utilize existing laws which permit ancillary services. Free OTA service, both large and small, can remain intact. Existing physical plants can remain intact. New receivers can be programmed to learn how to tune amidst a plethora of new and exciting wireless services. COFDM and vertical polarization are long overdue improvements in the broadcast arena and will again emerge. WHDT-TV