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.

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.