FCC plan to auction off bandwidth has TV broadcasters upset

TV bandwidth is extremely valuable in large media markets. (Photo: George Armstrong, FEMA)
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Julia Bergman

To clear the way for future mobile broadband traffic, the Federal Communications Commission (FCC) is asking TV broadcasters to give up their space on the airways in exchange for cash. But broadcasters aren’t planning to throw in the towel anytime soon –or at all.

Spectrum is a valuable asset for broadcasters especially with ultra high definition television only five years away, so they are reluctant to give up their rights even for payment.

Wireless network use has skyrocketed, increasing demand on both licensed and unlicensed spectrum – the airwaves over which signals are sent to cellphones, televisions, and radios. The FCC says wireless spectrum is of increasing importance as an economic building block, especially as more and more Americans use their phones for sports, news and entertainment. Demand is only expected to increase, and without sufficient space on the spectrum for signals, the FCC says consumers will experience more dropped calls, connection delays and slower downloads. But increasing bandwidth for mobile means squeezing out TV broadcasters.

Last year, Congress authorized the FCC to conduct an auction process where broadcasters voluntarily give up their spectrum licenses in exchange for a share of auction proceeds. This would allow for repurposing of spectrum. In 2010, the FCC had proposed these auctions as part of its National Broadband Plan.

The process sounds complicated, and it is, but the National Association of Broadcasters (NAB) explains how it will work in three parts.

1. A reverse auction will be held enabling TV stations to submit bids to voluntarily give up their spectrum in exchange for payment.
2. A repacking of the broadcast TV band known as UHF will take place to relocate stations in order to free up space on the airwaves for alternative uses.
3. There will be an auction in which bidding would take place on the newly available spectrum. The FCC says it intends to hold the incentive auction in 2014.

The proposed shift is angering broadcasters, particularly in major media markets like Philadelphia, home to the fourth-largest media market in the nation. Major advertising dollars are concentrated in these top markets where they can get the “maximum bang for their buck,” says Larry Epstein, Interim Head of the Department of Arts & Entertainment Enterprise at Drexel University.

“Broadcasters in Philadelphia for the most part are owned by the networks they carry and as such, major market distribution is really what carries them from an advertising point of view,” Epstein said. “They’re going to be very cautious about submitting licenses for voluntary auction even for a high price.” Since major market TV stations are corporately owned, Epstein said, they are very concerned about network distribution.

Penetration of the cable and satellite market has declined over the past two years, as more and more households are opting for lower cost alternatives such as over-the-air and Internet TV. This has resulted in a loss of viewers for broadcasters. Naturally, broadcasters see the auction as government meddling by the FCC.

The National Association of Broadcasters wants to see “this auction done right and then we can get on with the business of serving our local communities in our traditional as well as new and innovative ways,” that according to NAB Executive Vice President of Strategic Planning Rick Kaplan in a speech last month. Congress will also play a big role in ensuring that it is truly a voluntary and transparent process. According to NAB, Congress must also ensure that those who don’t take part in the auction are unharmed by the process.

No one is really certain what would happen if the auction doesn’t yield the results the FCC is hoping for. But Epstein thinks pressure could be put on cable and satellite companies to unbundle their services, “so it doesn’t cost $80-90 a month to get basic channels.”

“Cable and satellite companies are going to want to expand penetration so they might look at offering more, local low cost packages,” Epstein says.

What’s less clear is how the interests of viewers – citizens – are being accounted for. “Where is the public interest being represented in this massive auction?” asks Gretjen Clausing, executive director of PhillyCAM, Philadelphia’s community access channel. From a local perspective, Clausing is also concerned about the potential loss of media diversity in the area, “if we were to lose any particular channels that may be representing different areas or demographics.”

PhillyCAM uses wireless transmission, so this bandwidth auction is not of direct concern to them.  But Clausing says the organization “exists because of specific language protecting the public right to have access to airwaves. I want to see a similar provision for how this new spectrum distribution can have a similar benefit.”

This story was produced in cooperation with AxisPhilly, a leading Philadelphia-based news and information platform.