Attorney David Oxenford of Davis Wright Tremaine LLP has a good overview of what procedures broadcasters might expect from the FCC in the matter of repacking and auctioning of television broadcast spectrum. Link: Broadcast Law Blog. Trackback (posted 20 Feb. 2012).
Updated 22 Feb. 2012: Attorney Stephen Coran of Rini Coran PC also has a good overview of provisions of this legislation. It goes in somewhat different directions than the Oxenford post from yesterday. Link: TelecomMediaTech Law Blog (posted 21 Feb. 2012).
And Attorney Rob Schill of Fletcher, Heald & Hildreth also has a useful analysis of the provisions of this legislation. Link: CommLawBlog (posted 18 Feb. 2012).
There has been some talk within the television industry of giving up part of one’s spectrum for remuneration. It appears that the only way to accomplish that would be to forgo reimbursements for repacking costs or to consolidate operations with another station or stations on a single channel.
Updated 24 Feb. 2012: The legislation which created this spectrum auction authority is contained in H.R. 3630, the “Middle Class Tax Relief and Job Creation Act of 2012,” now signed by the president. Link: Library of Congress [pdf].
Here’s Kim McAvoy’s in-depth report on the legislation. Link: TVNewsCheck (posted 17 Feb. 2012).
Updated 25 Feb. 2012: VP Technology for NBC Stations, Doug Lung, takes up some engineering aspects of this in his regular column. Link: TVTechnology.
Updated 28 Feb. 2012: Here is another good legal analysis of provisions in this legislation in the form of Harry Jessell’s interview with attorney John Hane of Pullsbury Winthrop Shaw Pittman. Link: TVNewsCheck.
The title says it all about this helpful overview of DCMA fair use provisions by Ashkan Karbasfrooshan in MediaPost’s Online Video Insider blog. Thanks to Patricia Torres-Burd of Houston PBS for the tip.
When I was managing public radio and television stations in the Pacific Northwest, I used as a decision-making tool what might be the effect on the imaginary equity value of our organization of this or that significant decision. It tended to move me in a “build” or new product direction, sometimes to the patient consternation of my excellent team. I found it helpful as one of multiple indicators.
Equity values are determined by a lot of things, including market forces largely outside the control of management. We’ve all been concerned about declining television audiences while public radio audiences have continued strong, so I suppose it was inevitable that station equity values in the two media would meet at some point. There is now evidence we’re there and it has significant implications for the FCC’s effort to free up spectrum for wireless services.
Yesterday, it was announced that Nashville Public Radio has purchased a second station in Nashville for $3.35 million plus full time access to one of its HD Radio channels (congratulations to Rob Gordon, his board and team). Reports say it will be a classical music station. Link: Nashville Scene. In television terms, Nashville is the 29th market with just over 1 million TV households. It therefore paid $3.22 per household for Vanderbilt’s student-managed station.
In the recent past, we’ve seen the sales of public television stations for $3 million each in Pittsburgh (the 24th market with 1.16M TVHH) and Orlando (the 19th market with 1.45M TVHH). Pittsburgh’s was not the primary PBS station, but Orlando’s was – and that market had two secondary stations. So, the Pittsburgh station brought $2.58 per household while, more recently, Orlando’s brought only $2.06.
All of this may lead a gloomy television station exec to look at the possibility of a whole or partial sale to the wireless industry as a good thing. Perhaps that’s so if you’re sitting on a pile of debt you need to quickly liquidate, but these valuations wouldn’t produce much as an endowment investment. The median of 864 college and university endowment investment returns was –18.1% in 2009 (source: NACUBO). Things are up from there, of course, but even a long term average of +5% seems optimistic these days. So, if that $3M spectrum sale produces only $150,000 per year and you can’t net better than that with more traditional revenue sources from that spectrum, you’ve got some pretty serious problems.
There are other factors, too, that make a sale to wireless problematic. It’s likely, said the CTIA and CEA in an FCC filling, that they can get all the spectrum they need through repacking and will need to resort to auctioned spectrum only in the top 30 markets (full disclosure: I’m executive director of the Public Television Major Market Group, but the usual disclaimer about these being my own opinions applies). Further, one presumes that the marketability of your spectrum will vary by where you are in the UHF TV band, with a preference for spectrum that can be contiguously aggregated.
Yesterday’s surprising (maybe) announcement of AT&T’s acquisition (pending regulatory approval) of T-Mobile is being billed as a spectrum play for 4G, a move in response to the U.S. Administration’s goal of covering America with wireless broadband. See the Wall Street Journal’s interview with Kevin Werbach for a perspective on this.
However, one analyst says that 70%-90% of AT&T’s current spectrum currently sits unused. AT&T acquired two nationwide aggregations of spectrum that lie mostly unused for roughly one-twentieth of the price they paid for T-Mobile. Interestingly, this (the 1/20th figure) is what the NTIA and CEA said in a recent white paper that broadcasters would need to be paid to clear enough spectrum to meet FCC goals.
You pay a 20-fold premium over bare spectrum because this spectrum – all of which they won’t use – comes with customers and this new customer base will make them the largest wireless provider (they and Verizon will control 70%). So this is really about that market share and the control over pricing this will give them.
Doug Lung found the following in the FCC’s FY 2012 budget proposal, seemingly aimed at television broadcasters that do not “voluntarily” give up spectrum for wireless broadband:
…the Administration proposes to provide the FCC with new authority to use other economic mechanisms, such as fees, as a spectrum management tool. FCC would be authorized to set user fees on unauctioned spectrum licenses and could be used in instances where incentive auctions are not appropriate. …
Last Tuesday, the FCC adopted a Notice of Proposed Rulemaking (Link: FCC 10-196) with the title above. Here is the Introduction, with some highlighting and a link added.
1. In this Notice, we initiate a process to further our ongoing commitment to addressing America’s growing demand for wireless broadband services, spur ongoing innovation and investment in mobile and ensure that America keeps pace with the global wireless revolution, by making a significant amount of new spectrum available for broadband. Through this Notice, we take preliminary steps to enable the repurposing of a portion of the UHF and VHF frequency bands that are currently used by the broadcast television service, which in later actions we expect to make available for flexible use by fixed and mobile wireless communications services, including mobile broadband. At the same time, we recognize that over-the-air TV serves important public interests, and our approach will help preserve this service as a healthy, viable medium. The approach we are proposing is consistent with the goal set forth in the National Broadband Plan (the “Plan”)to repurpose up to 120 megahertz from the broadcast television bands for new wireless broadband uses through, in part, voluntary contributions of spectrum to an incentive auction. Reallocation of this spectrum as proposed will provide the necessary flexibility for meeting the requirements of these new applications.
2. The specific bands under consideration are the low VHF spectrum at 54-72 MHz (TV channels 2-4) and 76-88 MHz (TV channels 5 and 6), the high VHF spectrum at 174-216 MHz (TV channels 7-13), and the UHF bands at 470-608 MHz (TV channels 14-36) and 614-698 MHz (TV channels 38-51); for purposes of this Notice, we will refer to this spectrum as the “U/V Bands.” This Notice proposes three actions that will establish the underlying regulatory framework to facilitate wireless broadband uses of the U/V Bands, while maintaining current license assignments in the band. First, we are proposing to add new allocations for fixed and mobile services in the U/V Bands to be co-primary with the existing broadcasting allocation in those bands. The additional allocations would provide the maximum flexibility for planning efforts to increase spectrum available for flexible use, including the possibility of assigning portions of the U/V Bands for new mobile broadband services in the future. Second, we are proposing to establish a framework that, for the first time, permits two or more television stations to share a single six-megahertz channel, thereby fostering efficient use of the U/V Bands. Third, we intend to consider approaches to improve service for television viewers and create additional value for broadcasters by increasing the utility of the VHF bands for the operation of television services.
3. By taking these important steps to facilitate wireless broadband uses in the U/V Bands, this Notice is the first in a series of actions that will allow us to make progress toward our goal of improving efficient use of the bands and enable ongoing innovation and investment through flexible use. We intend to propose further actions consistent with other of the Plan’s recommendations for the U/V Bands, including, but not limited to, the process of voluntarily returning broadcast licenses to the Commission and the licensing process and service rules for new fixed and mobile wireless communications services. As part of that process, the Commission will address the Plan’s proposal for channel re-packing, the band plan for recovered spectrum and other related issues and will provide full opportunity for public comment on those issues at that time.
Antony Bruno has a good article outlining Pandora’s economics and economic strategies. Of note to radio broadcasters is Pandora’s support of the Performance Royalty Act. Bruno writes:
The $30 million in performance royalties paid by Pandora last year represents 60 percent of its revenue. Compare that with satellite radio, which pays 15 percent of royalties for the same content, and terrestrial radio, which pays nothing. …¶… [the RPA] would force terrestrial radio broadcasters to pay performance royalties for the first time. While beneficial for labels and artists, such a requirement would also help put Pandora and traditional radio on more equal footing. ¶ To achieve the kind of scale that [Pandora founder] Westergren envisions would require expansion to new platforms, particularly to TV and the automobile. Most of Pandora's daily traffic -- about 60 percent -- still comes from computers, …
Link: Reuters. Thanks to tweet from @markramseymedia. --Dennis
The Radio Survivor blog (“News, views and tough love for radio”) has a series of posts on the decade’s most important radio trends. Nothing earth-shaking, and a few are strange choices, but interesting to see the amount of change the industry has undergone in the past ten years. I just passed 40 years in the business last month and the pace of change has certainly accelerated in that time. --Dennis
The Center for Social Media at American University has a video and related report, Code of Best Practicies in Fair Use for Online Video. In spite of the "tv-ist" title, it all applies to audio also, of course. Also check out the video, Remix Culture: Fair Use Is Your Friend. --Dennis