This post is meant to be a primer on the FCC’s National Broadband Plan (NBP) and how it may affect broadcasters. We’ll provide some background on key parts of the commission’s NBP chapter 5, Spectrum, and how it may affect the future of the broadcast industry. You are encouraged to read the entire plan, or at least chapter 5, because it will affect your future.
With all that said, remember this is a plan; it will change, and many, if not most, of the details are not yet specified. Now is not the time to panic. It is the time to be informed.
The NBP begins by quoting President Roosevelt, who in 1938 spoke at the dedication of a local electrical utility. “Electricity is a modern necessity of life, not a luxury,” the president told the audience, “That necessity ought to be found in every village, in every home and on every farm in every part of the wide United States.”
Using that as a premise, the government bureaucrats move on claiming, “Broadband, too, is a modern necessity of life, not a luxury. It ought to be found in every village, in every home and on every farm in every part of the United States.” With that statement, the FCC has laid down a gauntlet calling both broadband and free TV a “right.” Woe to anyone who stands in the way of building out what these officials now perceive as “rights.”
You may want to consider reading an earlier post, “Broadband may become a civil right.” With the NBP, the FCC has changed the definition of a goods and service (broadband and television) into a U.S. Government-mandated low-cost or free service. That’s about as close to a government entitlement as one can get. We’ll save this discussion for later. For now let’s focus on how the FCC’s plan might affect your station.
The FCC proposes to take back 120MHz from the current TV band. That clawback will come in two forms: voluntary and involuntary — the carrot and stick approach. The goal is to create a large swatch of spectrum reaching across the United States for broadband and wireless uses.
First the carrot. Broadcasters will be encouraged to voluntarily give up spectrum in return for a portion of the proceeds created by auctioning off that spectrum. These will be called “incentive auctions.” In return for a piece of the money pie, stations must move to half-channel (or smaller) operation or leave the air entirely.
The FCC could act as the auctioneer, working as a third party between the seller stations, and the buyer, mobile broadband companies. Or, the FCC could directly sell the spectrum given up by stations and split the proceeds between the Treasury and the stations. Once you read the plan, it becomes obvious this is the commission’s preferred plan.
Some stations may choose to sell their entire spectrum and go out of business. Others may choose to give up only a portion of their spectrum. The stations that choose half-channel (or less) operation will join with other stations who have done likewise and share facilities. That would include transmitters, antennas and towers. The sharing might also include studios and production capability. These stations would be protected with carriage rights for the primary signal of each station using a modified FCC license.
The FCC hints at what broadcast spectrum may be worth in an auction in footnote number 87. It’s too long and complex to be included here. Armed with your population served, you can guestimate what your payment might be. Don’t spend the money yet; there are many bridges to cross before any money changes hands.
Stations may receive out-of-pocket compensation for moving facilities and changing channels. So, if it costs you $1 million to move, presumably the FCC would reimburse your station for the move. This cost reimbursement applies to both voluntary and involuntary moves.
Once stations agree to the voluntary part, the FCC will repack all stations into a smaller portion of the TV band. If the number of stations who have voluntarily moved does not provide sufficient spectrum (120MHz), out comes the stick approach.
What if broadcasters don’t cooperate?
To increase the pressure on stations to participate in the “incentive auction” any stations refusing to remain full-channel, full-power will be faced with higher “spectrum fees.” Those fees will be based on the spectrum’s “opportunistic value.” The FCC claims, “licensees who use spectrum inefficiently may reduce their holdings once they bear the opportunity cost of spectrum.” This represents the FCC’s “stick,” and if this tool isn’t sufficient, it has others.
If the commission determines it still needs spectrum after the incentive auction, stations can even be forced to move and/or share channels. These involuntary moves would not result in spectrum revenue sharing. In other words, while the FCC may help pay out-of-pocket costs to change channels, these stations would not receive any proceeds from a spectrum auction.
As predicted in a previous Broadcast Engineering editorial, the FCC proposes that spectrum proceeds be used to provide “free television service for those consumers who meet the criteria established.” Viewers would be eligible for a “lifeline” video service from MVPDs consisting of all OTA channels in their market. Looks like not only will free broadband become a “right,” so too will television reception.
The bureaucrats have calculated that all the modifications of TV stations and channels “could have a negative impact on reach for some stations … but would most likely affect reach in a neutral to positive way overall." (My emphasis added.).
“… Market-based reallocation on current revenue streams for stations that continue broadcasting over-the-air could be minimal.”
The NBP also states that “all stations that broadcast a primary video signal would continue to serve existing public interest requirements.” This means stations will still have to provide local news, children’s programming — and of course — ensure that political candidates are afforded lowest commercial rates.
The FCC’s backup plans
The FCC says that if the incentive auctions and involuntary channel moves do not produce sufficient spectrum for its plans, stations could be forced to move to a cellular architecture on a “voluntary or involuntary” basis. The plan admits that this approach would be time-consuming.
If that idea doesn’t work, the FCC could issue “overlay licenses.” The plan would allow the FCC to auction licenses that cover broadcast spectrum. The spectrum winners would then negotiate individually with TV stations and other users for clearance to those bands. The problem with this approach is that less money would be transferred to the Treasury because the winners would likely pay less because of the uncertainty in outcome.
And, the FCC could mandate additional channel sharing. If insufficient stations volunteer to share channels, the FCC can require channel sharing in markets where it deems necessary.
Another diversity program
In a never-ending government effort to favor select groups, the FCC suggests that all these changes could affect the diversity of local community voices. The NBP says the FCC should support competition, localism and diversity with a “public interest media trust fund." More on this later.
FCC rulemaking proceedings for which it already has authority will be completed by 2011. The first auctions should be conducted in 2012. “All reallocated spectrum should be cleared by 2015."
Hang on; it’s going to be a bumpy ride.