Let TV Stations Lease Their Own Spectrum

The FCC National Broadband Plan envisions greatly expanded wireless broadband capability to promote economic growth. The problem with the plan is that it proposes to accomplish this by repurposing 120 MHz from television broadcasters, who understandably have reacted with shock and indignation.

However, broadcasters could turn this assault into potentially attractive new business models by becoming interactive, wireless broadband service providers. Simply put, if the broadcast spectrum is repurposed to broadband, broadcasters are best situated to make that transition. 

Nearly all of the proposals contemplate broadcasters either exiting the playing field and taking cash compensation or hanging on with a reduced role while paying more spectrum fees. 

The -lan’s analysis of spectrum auction proceeds signals that the revenue-generating value of the spectrum for mobile broadband is $1.28 per megahertz pop, while the current broadcast use is valued at an estimated 15¢ per megahertz pop. That great a differential suggests that a broadcaster must find a way to capitalize better on the use of its spectrum resource. 

While the plan has received favorable nods from the White House and some on Capitol Hill, its ultimate success is far from assured. Now would be an excellent time for broadcasters to bring their own proposal to the forefront, saying if it’s a good idea, we’ll do it ourselves. 

This solution could be implemented faster than any other. Although broadcasters, as mobile broadband providers, may present new competitive possibilities to existing mobile providers, they might also present themselves as potential business partners to providers in need of expanded spectrum. It would require rulemaking, but no legislation. This solution also provides an appropriate market mechanism that would signal the best economic use of the spectrum while also preserving over-the-air broadcasting services.

The television marketplace is evolving with or without regulatory change. Television has traditionally been a “one-sided” market, deriving nearly all of its revenue from advertising. That revenue model is changing as fast as changing technology can move it. BIA/Kelsey predicts that while by 2014 television revenues will return to $18.3 billion, that will still be $2.3 billion less than the 2008 level. Of that, it predicts that online/interactive will contribute $1.2 billion, up from $500 million in 2008. 

Moreover, local affiliates, who still depend on the advertiser model, are losing network compensation and increasingly must pay networks for their programs. While the networks are developing multisided markets, including cable distribution, proprietary streaming content sites and reverse compensation, for the most part local affiliates still rely on the one-sided, advertiser-supported model. Faced with marketplace and now possible regulatory changes, this evolution must pick up steam for a prosperous local broadcasting service. 

Strikingly, the plan is not very hopeful. Every one of the models discussed assumes that the broadcaster will exit the business or give up a large block of critically needed spectrum to make room for other convergence services providers, presumed to be the existing wireless broadband providers. 

But by utilizing the broadcasting channels already assigned, broadcasters could transition their service into a bi-directional broadband service, continuing their legacy broadcasting role while creating new revenue streams and adding services that would fulfill the goals of the plan. 

Some local broadcasters might choose to re-band, accept a single channel or even leave the business and take the FCC’s proposed buy-out. Others could choose to make the transition to broadband themselves or in partnership with other convergence partners. Local broadcasters could develop the repacking plan themselves and build out a broadband, possibly cellular, model infrastructure.

Given the incentive to remain competitive, broadcasters will find the way to accomplish the transition at a time when it truly makes sense. Taking advantage of those natural incentives will result in greater success than forced regulation. The FCC could pave this path by issuing technical rules that allow the industry itself to move to a broadband, cellularized infrastructure. There are problems, to be sure, but the television industry itself is the party best positioned to solve them.

Nothing in the plan forecloses broadcasters from developing — alone or in partnership with others — and providing flexible broadband services. The FCC should provide the means for broadcasters to make this change, rather than making the assumption that broadcasters are not up to the task.

Gregg P. Skall is a communications attorney in the Washington office of Womble Carlyle Sandridge & Rice.

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