JESSELL AT LARGE

Repack To Take Longer As Well As Cost More

With estimates on the post-auction repack now running as high as $2.6 billion, the NAB is trying to increase the government reimbursemend fund, now capped at $1.75 billion. But NAB also needs to get to work on increasing the time broadcasters will have to move their channels during the repack. The current 39 months just isn't enough, given the capacities of tower and transmission companies.

Moving to new channels in the repack of the TV band that will follow the incentive auction will cost broadcasters a lot more than the $1.75 billion the government is setting aside from auction proceeds for reimbursing them, the NAB says.

By its calculations, the mass migration of stations will cost anywhere from $2 billion to $2.6 billion.

But that ain’t the half of it.

It’s also going to take a lot longer than the FCC says, according to my discussions with broadcast engineers and vendors of transmission gear and services at the NAB Show this week.

How much longer, none can say, but certainly more than what the FCC is currently proposing — 39 months from the time broadcasters get their new channel assignments. (According to a timeline prepared by Wiley Rein’s Ari Meltzer for the Expanding Opportunities for Broadcasters Coalition, those assignments will come in the third quarter of 2016, assuming the auction gets rolling on time in the first quarter.)

The principal problem is one of capacity.

BRAND CONNECTIONS

To move from one channel to another within the UHF band is a major undertaking. It requires a new broadcast antenna, a new transmitter and other transmission gear. It also involves precise engineering and highly skilled and specialized crews to mount the antenna and, in many cases, shoring up the tower. According to one consulting engineer, three-quarters of the towers need significant structural work.

In the repacking, 1,000 stations may have to move. But I’m told there are only two companies making antennas and other transmission gear, perhaps a half dozen able to do the engineering and tower work and just a just a dozen or so crews.

All the transmission and tower companies have downsized considerably since 2009 when they scrambled to upgrade stations from the analog-to-digital transition. Dielectric, the leading maker of TV antennas, had to be rescued from bankruptcy in 2013 by the Sinclair Broadcast Group.

The antenna and tower companies I spoke with at NAB are excited by financial prospects of the repacking, but they are reluctant to begin tooling and staffing up until the FCC actually makes the new post-auction channel assignments and the threat of delaying lawsuits has passed. Those suits could come from any of several directions.

At NAB, broadcasters weren’t close to signing any contracts, they said. “They were thinking about the repack, they were talking about it, but they weren’t pulling any triggers,” Gregg Fehrman, president of Stainless, a big tower company, told me.

Only when the orders start coming in will they feel confident making big investments in tools, people and parts. In fact, they can’t even start making antennas and until they get the orders. Antennas are built to work on specific channels.

The solution is to buy more time. Again, I don’t know how much more. A Dielectic white paper by Daniel Fallon concludes that the transition period should be stretched to five or six years, given the “case-by-case nature of upgrades and changes” to retransmission facilities.

“The realistic timetable is probably 60 months,” agreed Bill Harland of Electronics Research Inc., the other big antenna manufacturer.

Stretching the 39-month transition period won’t be easy. It’s derived from the law that says that broadcasters’ claims for repacking reimbursements have to be in within that period. Plus, any attempt would probably be met with considerable push-back from the wireless carriers. Once they spend their billions to buy spectrum, they won’t want to wait five years to take control of it and start putting it to work.

The industry’s parallel effort to introduce ATSC 3.0 may help.

From what I understand, the broadcasters who are gung ho about the next-generation broadcast standard are talking about community towers in each market — that is, co-locating their antennas on common towers.

Community towers, which already exist in some markets, are would cut capital costs and dovetail with plans to boost the coverage of next-gen signals with single frequency networks.

SFNs comprise multiple repeater stations operating, as the name suggest, on a single frequency. That the repeaters can broadcast on the same frequency without interfering with each other is one of the neat tricks of 3.0.

Strategically located around a market, the repeaters will insure that the 3.0 programming and data services reach all mobile devices as well as TVs with simple indoor antennas.

Here’s my point: The community antenna approach will lessen the pressure on the transmission and tower vendors. They would have to upgrade fewer towers and, in many cases, they could use broadband antennas capable to broadcasting multiple signals.

The SFN repeaters could be brought on line gradually after the repack and all the channel switching it entails has run its course.

It almost goes without saying now that the repack and the conversion to 3.0 has to be synced up. And I think it will be if the ATSC continues to make steady progress on the standard and adopts it next year, and the FCC promptly mandates it as the national standard. (It was a bit disappointing that FCC Chairman Tom Wheeler didn’t give 3.0 a plug in his NAB speech Wednesday as he did last year.)

So, 3.0 may mitigate the problem of repacking the band in 39 months, but it will not solve it.

Last week in an interview with TVNewsCheck, NAB President Gordon Smith said he had a plan to get more money out of the auction proceeds to reimburse broadcasters. Now, he needs a plan to get more time.

Addendum: Did you see the headline in the New York Times yesterday: “Jackpots for Local Stations in FCC Auction of Airwaves.”

It was straight-forward account of the incentive auction and FCC Chairman Tom Wheeler’s campaign to encourage broadcasters to sell. There was nothing in the story that broadcasters and wireless carriers auction don’t know.

But that headline was blunt and really did get to the nub of the matter. I wonder how long it will take before some lawmaker or citizen watchdog group starts raising hell about the sell-off of what still is technically public property and giving a large, but unknown share of the proceeds to the current users of the property — the broadcasters.

The way the auction has been set up, broadcasters that sell will receive more — perhaps many, many times more — than the spectrum is worth in the service of broadcasting, the service the seller had pledged to provide when it obtained the license to use the spectrum.

The FCC has a duty to put spectrum to work where it believes it will do the most good and the incentive auction is a mechanism for doing that. I can think of no better way to accommodate the interests of all the parties involved. It works for the policymakers eager to shift spectrum to broadband use, broadcasters eager to cash out and the wireless carriers hungry for more spectrum. And the U.S. Treasury gets a big (the biggest?) share of the proceeds.

So far, there have been no howls of protest. But they could come at any time between now and when the FCC starts awarding those “jackpots” to broadcaster for their spectrum. If they are loud enough, they could inject another large variable into the already complex incentive auction equation.

Just what the industry needs.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.


Comments (22)

Leave a Reply

Gregg Palermo says:

April 17, 2015 at 3:54 pm

Given how few people actually receive their signals over an antenna, it might be cheaper to give each house a barebones “lifeline” cable or satellite subscription instead of over-the-air and just leave one OTA channel per market for dire emergencies. Broadcasting is so last century.

    Bill Evans says:

    April 20, 2015 at 1:52 pm

    Many cable and satellite companies receive their signals OTA. I have no fiber links to several cable companies and to neither DirecTV or Dish. So, essentially everyone in my market gets my .1 and .2 OTA.

Blair Faulstich says:

April 17, 2015 at 4:26 pm

OTA numbers are roughly 20 percent (study by GfK) link to information–http://blog.gfk.com/2013/06/confessions-of-a-cord-cutter-skeptic-revisited/
OTA numbers will increase as OTT numbers increase. Broadcasting relevancy is not the issue here, the issue is that TV operators could have supplied the necessary bandwidth to wireless carriers while transitioning to ATSC 3.0. By the time the spectrum is available to the wireless carriers new efficiencies, etc., will be in place, what may not be in place, regretfully, is a free OTA service.
Broadcasting is not so last century, the technology is. Broadcasting is only a victim of its own shortsightedness and FCC inequality.

    Wagner Pereira says:

    April 17, 2015 at 6:38 pm

    You and DB P need to quit posting years OLD GFK data. Last year D BP quoted 2012 numbers and you are quoting 2013 numbers. In 2014, GfK only showed 15% OTA…..and that was from a sample fielded early last year. By all reliable numbers, Nielsen included, OTA is somewhere between 8% to 12.5%. No other sample is ever as high as GfK, which is clearly reducing their estimates.

    Wagner Pereira says:

    April 17, 2015 at 6:44 pm

    Sorry, fat fingers. GfK only showed 14% OTA (Not 15%) in their 2014 Study, dropping down to the reality of what the other major samples reflect.

    Ellen Samrock says:

    April 17, 2015 at 7:38 pm

    NScreen Media shows a 10% growth in OTA households in 2014 over 2013. In fact, their chart shows steady growth since the beginning of 2013. Approximately 12.2 million HH are antenna users and the fastest growing segment are those who use both antenna and broadband–a winning combination. This is the highest number of OTA HH since 2010. By contrast, pay-TV subscribers declined by 1.1 million HH (cue the sad trombone). Heres’ a little bedside reading: http://www.nscreenmedia.com/air-tv-households-grow-10-last-year/

    Wagner Pereira says:

    April 18, 2015 at 2:51 am

    And your precious GfK that you quoted over and over last year shows OTA falling….from 20% to 14%. Still think GfK is “God” when it comes to these numbers as you insisted last year?

    Wagner Pereira says:

    April 18, 2015 at 3:02 am

    BTW, if you check the Nielsen DMA Rank off the homepage, there are 113.8M TV HH this season according to Nielsen. At your 12.2M HH on antenna, that is less than 10% – a far cry from the 18% you and were touting last year from the outdated 2012 GfK study. Furthermore, that is DOWN just under 2 Million from the 2013-2014 Season numbers from Nielsen. So according to your figures, Pay TV subs declined by 1.1M HH, yet TV HH’s fell 2M. That’s actually a HUGE WIN for MVPDs – only losing 1.1M HH while HH declined by 2M. The biggest loser (900k) had to be OTA viewers. No wonder OTA viewers are falling in GfK and other studies.

    Ellen Samrock says:

    April 18, 2015 at 11:17 am

    This is old news, Insider. David Tice of GfK stated that the percentage of OTA households varies based upon the metric used. It can be as low as 13% or as high as 19% depending on what gets factored in. As he said; “The bottom line is that savvy researchers understand that there is no “truth” in research, only estimates of truth, thus estimates can be at odds without necessarily being wrong–just different.” What is an unmistakable trend, according to Tice and the NScreen Media survey, is that OTA TV households are growing while pay-TV subscribers are shrinking. I don’t see how negative growth can ever be seen as a “huge win” for MVPDs–and they wouldn’t bother with trying to win over cord-cutters with cut-rate packages if this downward trend wasn’t a concern to them.

    Ellen Samrock says:

    April 20, 2015 at 9:16 pm

    I should add, that one factor which is an unknown is determining how many pay-TV households have 2nd TVs (in a kitchen or bedroom) that use an antenna. Some have put the figure as high as 35%.

    Dante Betteo says:

    May 5, 2015 at 1:18 pm

    I was never asked in those studies.

Ellen Samrock says:

April 17, 2015 at 4:38 pm

Community towers will allow broadcasters to be spaced closer together in terms of channel assignments. The problem is that the majority of favored tower sites are full with a combination of both TV and FM. Many of us had to move to other sites simply because there was no more room. There’s nothing in this proposal that will change that. And while SFNs offer a great deal of promise in terms of coverage, we are dealing with the problem of additional expense (leasing/build out) and finding available site locations. To be sure, the rollout of 3.0 will need to coincide with the repack. But the standard must first be vetted by the FCC. That could take two or three years right there. Tom Wheeler and Congress may have the runs for glory and cash but it’s clear that the entire auction/repack scheme as currently planned is half-baked and harmful to the industry. Congress is going to have to revisit the Spectrum Act and make needed revisions ASAP if they want to avert a disaster. Right now it is inevitable.

    Blair Faulstich says:

    April 17, 2015 at 4:48 pm

    I think D BP should be a FCC commissioner, his/her comments always make sense to me.

    Ellen Samrock says:

    April 17, 2015 at 5:35 pm

    Ha! If I were a commissioner I would be suffering the same fate as others before me: attending industry luncheons and spouting off on ideas that will never come to pass (like O’Rielly and his crazy radio broadcasters suing pirates idea). Or getting out-voted on important issues because of partisanship (which both O’Rielly and Pai are experiencing). No, I have enough frustrations as it is as a station GM. Besides, I love the FCC like I love the IRS. (And I’m a he. Not exactly an alpha-male, more alpha-beta in all the wrong areas).

    Wagner Pereira says:

    April 17, 2015 at 6:40 pm

    The auction is happening. Get over it.

    Ellen Samrock says:

    April 17, 2015 at 7:00 pm

    You’re just jealous because NOBODY likes you.

    Blair Faulstich says:

    April 17, 2015 at 8:04 pm

    Insider, you are such an industry tool. I’ll bet you dinner that if the auction does occur it will be under different circumstances than those present today. Harry makes a very good point when he says challenges may come from those special interest groups, appalled that our good ole guvmint would take a precious public resource and auction to the highest bidder. What’s more, it would really tick you off if the whole thing fell apart and the spectrum stayed where it is today–with broadcasters.
    If this happens the FCC can collect a fee every time a broadcaster leases spectrum to a wireless carrier.
    Better, quicker, faster could save the day.

    Wagner Pereira says:

    April 18, 2015 at 3:12 am

    The Spectrum sale will be good for the remaining true Broadcasters. Less Inventory means higher rates. As for people not liking the Government giving Broadcasters money, perhaps the Government should take the land back from the Oklahoma Land Runs of the 1890s. There’s oil in Oklahoma now. And there was plenty of Government land given away in all 50 states over the years. Perhaps the Government should find relatives of those who found Gold on Government land out west a 100 years ago and take it back as gold is worth more now. Perhaps the Government should break the leases of oil and drilling leases offshore and on Government land – they might be worth more than years ago. Ditto Forest Rights. But none of that will happen. Because there were incentives to develop where nothing existed. Now the Governments wants the Spectrum back that many dollars were lost on for years. It’s the public’s, so yes, they can take it back. But they do have to compensate those early adopters that spent their time and money to develop what the Government wanted developed around 70 years ago.

Amneris Vargas says:

April 18, 2015 at 6:27 am

Integrated antennas etched on the back of STBs and/or smart TVs would bring OTA a huge lift. We can improve living room asthetics and bring low priced OTA back to the people throuh better design.

Dante Betteo says:

April 21, 2015 at 10:40 am

I don’t care what the Antenna looks like as long as it works. I thought the auction was an option for TV Stations.

    Ellen Samrock says:

    April 21, 2015 at 11:10 am

    Bingo! The man wins an imaginary antenna. The auction is voluntary for stations eligible to participate. And contrary to Insider’s arrogant statement, If not enough stations participate no auction occurs. That’s the law. The FCC says it needs 200 stations to sign on. So far, only about 80 have committed their spectrum to the auction.

Dante Betteo says:

April 21, 2015 at 6:08 pm

Thank you very much D BP.


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