Fox Knows What Genachowski Should

The week before Fox publicly announced at NATPE that it would launch a Spanish-language network this fall, Fox executives visited FCC officials in Washington to tell them all about MundoFox and ask for a needed waiver.*

I don't know what the folks in FCC Chairman Julius Genachowski's office said, but they might not have been completely thrilled.

That a company with the indisputable media acumen of Fox was investing millions of dollars into a broadcasting network makes hash out of  Genachowski's contention that broadcasting is an obsolete medium and that its continued use of spectrum is of a waste — or at least the underutilization — of a precious natural resource.

The rise of MundoFox also undermines the FCC's incentive auction for moving spectrum from TV to wireless broadband, a service that Genachowski sees as deserving of every hertz of spectrum it can get.

TV channels — spectrum — that might have gone onto the FCC auction block will now be used to carry MundoFox programming to the rapidly growing number of Hispanic TV homes.

Fox's decision to launch MundoFox as a broadcast network rather than a cable network was not made with the flip of a coin.

"The Spanish-language revenue opportunity is overwhelmingly tilted towards advertising," said Fox's Hernan Lopez, who is leading the effort. "That makes it essential to get broad distribution, which on cable is hard to do."

By "broad distribution," Lopez means broadcasting. Nearly a third of Hispanic viewers don't subscribe to either cable or satellite because in many cases they simply can't afford it. They rely on antennas and free over-the-air broadcasting.

Lopez is now trying to assemble affiliates to reach Fox's goal of covering 75% of Hispanic homes at startup in the fall. His strong preference is for full-power stations because their signals are more likely to cover every corner of a market.

He also likes full-power stations because they come with must carry-rights that guarantee carriage on the local cable systems, although Fox with all of its O&Os and cable networks probably has enough clout to get widespread carriage on its own.

In its hunt for affiliates, MundoFox is essentially competing with the FCC for spectrum.

The FCC spectrum reallocation plan is voluntary. The agency believes that some broadcasters may give up their spectrum for auction if they were cut in for a hefty share of the proceeds. And they might.

Indeed, a couple of companies have popped up over the past year to buy underperforming and bankrupt stations in top markets, where demand for wireless broadband services is greatest, and then to sell spectrum for a profit through the FCC's auction.

But one of these speculators, Bert Ellis, told me that affiliating with MundoFox is now an intriguing option, especially given all the uncertainty surrounding the incentive auction. His investment group, NRJ TV, has a deal to acquire the bankrupt WSAH New York, one of the few stations in the No. 2 Hispanic market that could affiliate with MundoFox.

I'm sure others tempted by the FCC incentive auction are now also considering MundoFox.

But the FCC can't squawk too much. What Fox is promising is what the FCC often says it wants: service to the underprivileged, minorities, those on the other side of the digital divide.

In addition to quality programming from its partner in the venture, Colombian broadcaster RCN, Fox says it will provide a national evening newscast and will encourage affiliates to produce local news. One Fox executive told me at NATPE that the Fox O&Os are prepared to work with MundoFox affiliates in their markets in producing local newscasts.

Broadcasting is not obsolete. As I've said here many, many times, its ability to reach all TV homes and every TV set in those homes is unique. And a TV station's inherent value is enhanced by those must-carry rights.

Fox has three specialty cable networks, all apparently doing well, but it realized that to compete against Univision and Telemundo as a general entertainment, get-the-biggest-audience-you-can network it needed to operate from the same platform as Univision and Telemundo.

Broadcasting is, after all, still the big leagues of TV in any language. It is still vital.

I think that Genachowski understands this on some level, but I wish he would take it to heart.

It's still not clear whether Congress will give the FCC authority to auction off broadcast spectrum. If it does, in a process incidental to the auction, the FCC will repack the TV band — move around channel assignments and tweak coverage areas.

Even if repacking safeguards are built into the congressional authorization as the NAB has been insisting, an FCC that does not recognize the value of broadcasting and its place in the modern mediascape could do real damage to the many, many broadcasters who do.

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* The Fox executives were seeking a waiver of the so-called network rep rules, which prohibit networks from selling national advertising on behalf of their affiliates. The long-standing rule is intended to protect affiliates from being coerced into rep deals with the networks. The FCC has granted waivers to the other Spanish-language networks.