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A coalition of broadcasters is seeking not only to refuse to sell unused spectrum in a potential FCC voluntary auction, but to kill the auction altogether in a bid to disallow their peers to sell their spectrum.  (Source: Corbis)
U.S. FCC pleads Congress to overrule select objections and authorize a voluntary auction

The U.S. Federal Communications Commission and TV broadcasters may be on a collision course that can only be resolved by the U.S. Congress [FCC remarks; PDF].

On the one side you have the U.S. FCC led by Obama administration appointee, Chairman Julius Genachowski [profile], and on the other you have a coalition of powerful TV broadcasters.  Neither party sees eye to eye on "incentive auctions", though a handful of broadcaster support the auctions, with certain stipulations.

I.  Should Broadcasters Get to Veto Their Peers' Right to Freely Sell Spectrum?

The majority of FCC commissioners complain that TV broadcasters are squatting on large tracts of spectrum that could be used for other applications -- like voice and data traffic on mobile devices.

The broadcasters were given much of that spectrum at a time when spectrum was not formally auctioned.  Some of the spectrum was also sold to them at rates well below today's prices.  

But as the spectrum has become more valuable, the broadcasters have looked to hold it more tightly.  In theory this spectrum could be used for future development, but realistically, it's unlike that these broadcaster will significantly increase their usage.

So why are they holding on to it, then? Part of the reasoning is likely due to the appreciation factor.  But broadcasters also argue that their spectrum position is partly out of technical issues.  

Alan Frank, chief executive of Post-Newsweek Stations Inc., a division of the Washington Post Comp. (WPO), complains that even though the spectrum is "voluntary" it creates a situation of compulsory shifting of spectrum.  

He says that some stations may cooperate with the FCC, selling spectrum and shifting their remaining holdings to consolidated "TV" blocks.  As a result, the existing range of spectrum occupied by TV broadcasters would become interspersed with blocks of mobile usage.  Mr. Frank argues these blocks would increase interference on and degrade the strength of TV signals of those who stayed behind.  Thus he argues the proposal is in effect a mandate, not voluntary, due to technical issues.

He states in an interview with Reuters, "We're talking about putting the whole system at risk. We need to start defining not how the auction works, but what this is going to mean for the broadcasters who don't participate in the auction."

That's one perspective.  Chairman Genachowski argues that the technical concerns aren't as severe as some TV providers make them out to be.  Under his leadership, the FCC wants to implement a major spectrum auction that is ostensibly voluntary on the part of television broadcasters.

And he says that giving certain objecting TV broadcasters the ability to veto other broadcasters' rights to sell spectrum they own would run contrary to the principles of capitalism.

He comments, "I believe the single most important step that will drive our mobile economy and address consumer frustration is authorizing voluntary incentive auctions. However, voluntary can't mean undermining the potential effectiveness of an auction by giving every broadcaster a new and unprecedented right to keep their exact channel location."

II. You Can Not Change the Laws of Physics...

Modern mobile devices use over 100 times more data than older models.  As Scotty used to say on Star Trek, "You can not change the laws of physics!"

The problem is that wireless device makers are using up almost all the available spectrum that is capable of being used by lower power devices.  Given fundamental limitations of physics, the wireless device makers now can only turn to try to buy existing allocations.

The FCC wants to patch together 500 megahertz of spectrum to sell.  Much of that has been cobbled together already through repurposing of government holdings.  But the FCC needs 120 more megahertz to meet its objective.

States Chairman Genachowski, "This growing demand is not going away. The result is a spectrum crunch. The only thing that can address the growing overall demand for mobile is increasing the overall supply of spectrum and the efficiency of its use."

He made these remarks before representatives for broadcasting companies at an annual convention in Las Vegas.  His comments were met with mixed reactions.  To be clear some companies, particularly those who are strapped for cash, are thrilled with the idea as the government is doing all the hard work of lining up potential buyers and advertising the available spectrum.  But other broadcasters, in a more comfortable position, are quite upset about the idea.

Ultimately the issue will likely have to be resolved by Congress.  A voluntary auction is a major undertaking, and even were it not for the controversy, the FCC likely lacks the authority to execute such a plan.  Congress, however, could give that authority.

The question now becomes whether Congress will decide to support an auction, allowing interested broadcasters to sell their spectrum.  Alternatively, they could reject the proposal, safeguarding the holdouts from possible interference, allowing the value of their holdings to further increase as available spectrum gets scarcer and scarcer.

Note:
People often complain that parties like Verizon Communications Inc. (VZ) have failed to use all the spectrum they've been allocated thus far.  While this is valid, it's widely acknowledged that these chunks will soon be put to use.  Building cell phone infrastructure (towers, backlinks) is an expensive business that costs billions a year in the U.S. alone.  Thus the spectrum will certainly be put to use by wireless carriers, it might just take a little while.

 



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bad article
By invidious on 4/13/2011 12:57:37 PM , Rating: 2
This article doesn't mention why the cable companies want veto powers which is really the most important part of the issue.

The answer is obviously economics. If company A sells their spectrum to company B, the shares that company C decided not to sell are worth less based on simple supply and demand. In a balanced market company C's spectrum would only be devalued a small amount, but in this market where demand is huge and supply is near zero the devaluation would be very large.

Ideally company C would hold on to their spectrum and watch the prices soar and sell when the can get the most money. But if company A and companies X Y Z who are strapped for cash start selling off their spectrum the demand will significantly decrease. So company C is essentially forced to participate in the auction to maintain the value of their commodity.

The problem with the situation is that company C has no right to tell company A what to do with their spectrum. They are being anti-competative plain and simple. If company C doesn't want company B getting spectrum for cheap then they should step in and out bid them.




RE: bad article
By SigmundEXactos on 4/13/2011 1:11:07 PM , Rating: 3
It's company A's right to sell their property at whatever price and at whatever time they choose. The analogy is there are wheat farmers A and C. The current price of wheat is low. Farmer C wants everyone to wait so that the price rises before selling. Farmer A needs the cash so decides to sell now. There is no "right" for farmer C to sell at their desired price, only what the market will bear. Farmer C has no right to tell farmer A that they can't sell their wheat. The government role in this case is analogous to say, "hey farmer A, I see you want to sell your wheat to village B in the town over, but you don't have a large enough cart....I'll send one over, because I know the people in village B really need the food.".

If farmer C wants to pay farmer A not to sell, that's their business. Of course, then you probably have a cartel ala OPEC.


RE: bad article
By gamerk2 on 4/13/2011 1:21:36 PM , Rating: 2
Question:

Why not do the "smart" thing, take away all ownership over hte spectrums, and just divide up the usage for ALL carriers based on their number of suscribers?

IE: Rather then have the wealthiest organizations hoard the spectrum, open it up to everyone and divide it by need?


RE: bad article
By Iaiken on 4/13/2011 1:55:52 PM , Rating: 3
Better yet, auction off leases instead of ownership. If they want to keep it, they have first crack via renewal. If not, back on the block it goes.

This would serve as both a direct revenue stream towards FCC administration of the spectrum, etc, but also a disincentive that prevents corporations from holding on to blocks purely for their future worth.

MOST of the spectrum squatters received their current apportionment of the spectrum for free, or through cut-rate acquisition of others who had received their spectrum via assignment.

Spectrum: It's the government handout that keeps on giving.


RE: bad article
By ekv on 4/13/2011 2:42:33 PM , Rating: 2
quote:
auction off leases instead of ownership.
Similar to how offshore oil drilling is managed.

http://en.wikipedia.org/wiki/Offshore_oil_and_gas_...

Of course, then, do you confer enforcement powers upon the FCC? or do you hand over lease administration to Dept. of Interior? do you ultimately run into the political nightmare analogous to not being to drill WHILE gas going to $4 + per gal.? etc.


RE: bad article
By Solandri on 4/13/2011 4:06:50 PM , Rating: 2
Yup, that's the problem and solution right there in a nutshell. Those frequencies should never have been auctioned off for a one-time fee. They should've been leased for an annual fee, subject to renewals and increases reflecting inflation and the value of the spectrum.

A roundabout way to do it would be to start charging "property tax" on the spectrum. That's what keeps down land squatters. If you own a chunk of real estate in the middle of the city, the property taxes are going to be high enough you'll either start doing something with it to help pay for the taxes, or sell it.

quote:
He says that some stations may cooperate with the FCC, selling spectrum and shifting their remaining holdings to consolidated "TV" blocks. As a result, the existing range of spectrum occupied by TV broadcasters would become interspersed with blocks of mobile usage. Mr. Frank argues these blocks would increase interference on and degrade the strength of TV signals of those who stayed behind. Thus he argues the proposal is in effect a mandate, not voluntary, due to technical issues.

This too is a screwup in implementation. With the advent of HDTVs, we shouldn't have to be dealing with people tuning in to channel 7-1. HDTVs are by definition digital. They should be grabbing each station's callsign and displaying those instead of channels. So if you want to watch KABC, you change the channel to KABC, not 7-1. That way, if KABC ends up having their frequency reassigned from 7-1 to 3-1, nothing changes for the TV viewer. Their TV automatically detects the callsign change, and remaps KABC from 7-1 to 3-1. Tuning to a specific frequency should still be possible deep in the TV's menu, but the default interface presented to the typical viewer should be frequency-agnostic.


RE: bad article
By jwbarker on 4/16/2011 9:04:46 PM , Rating: 2
ATSC already works this way, there is no link between a digital channel number and the frequency it's on.

This is how they were able to free up the 700MHz spectrum without forcing TV stations to change channel numbers.


RE: bad article
By jordanclock on 4/13/2011 2:42:18 PM , Rating: 2
Wait... So you want to take away spectrum from the wealthiest organizations, and then give it to the ones with the most subscribers... Which would be the wealthiest ones?

Maybe it would be better to create penalties for the lack of or poor utilization of spectrum. Charge the ones sitting on spectrum for not doing anything with them.


RE: bad article
By JasonMick (blog) on 4/13/2011 1:22:10 PM , Rating: 2
quote:
The answer is obviously economics. If company A sells their spectrum to company B, the shares that company C decided not to sell are worth less based on simple supply and demand. In a balanced market company C's spectrum would only be devalued a small amount, but in this market where demand is huge and supply is near zero the devaluation would be very large.


True, there would be temporary devaluation due to a rise in supply, but ultimately the demand would continue to rise, while the extra supply would quickly be exhausted and drop back down. Thus overall the appreciation trend would continue in the long term, at least .

I didn't discuss this minor blip in the article, but in the long haul the appreciation scenario outlined in the article is accurate, I believe, from an economics perspective.


RE: bad article
By Iaiken on 4/13/2011 1:36:31 PM , Rating: 2
quote:
The problem with the situation is that company C has no right to tell company A what to do with their spectrum.


This is basically the key point that it all boils down to. If you are worried that the sale of a neighboring block will interfere with yours, either put up and buy it, or shut up.

One of the biggest reasons behind the switch to digital antenna/receivers was that it allows for a drastic reduction of both interference and bandwidth. This lower bandwidth also allowed channels to be shifted more towards the center of the spectrum segment so that interference was further reduced; while allowing for increased quality.

So either the reasoning given along the above line is completely bogus, or the reasons that digital antenna was sold on were bogus.


Suprised
By Ammohunt on 4/13/2011 3:01:20 PM , Rating: 2
I am just dumbfounded people still use over the air TV signals. The early 80ies was the last time i remember regularly using OTA TV signals....




RE: Suprised
By jordanclock on 4/13/2011 3:13:48 PM , Rating: 2
You mean you're dumbfounded people would receive free 1080p HD channels OTA? Really?


RE: Suprised
By Iaiken on 4/13/2011 3:53:35 PM , Rating: 2
Indeed... it's actually quite awesome.

Even my worst local channels are in 720p and are clear as day with 5.1 channel audio.


RE: Suprised
By seeker353 on 4/15/2011 9:00:01 AM , Rating: 2
Well, technically, there is no 1080p OTA, it is either 720p or 1080i. Just sayin'.


By Kary on 4/14/2011 5:56:38 PM , Rating: 2
I can kinda see where the TV industry might be hesitant. The change to digital made our strongest station in the area by far the weakest. I'm 15 miles from the station and really need an outside antenna to pickup reliably...it's sad. I actually talked to an engineer from the station who said the problem was that the government underestimated the broadcast power needed and limited them to broadcasting using that amount of power. Later the government agreed they needed a power increase, but it's still not enough to give good signal in the entire county (much less surrounding counties...rural Mississippi).
Wonder how much it costs to replace those amps (assuming they couldn't readjust the old one) just to find you still weren't allowed to produce enough power to reach your subscribers
And I'm thinking they JUST gave up spectrum to the government in exchange for this smaller piece of spectrum...which was supposed to only be large enough to support 4 standard channels or 1-1080 channel.
Now, imagine if one of your competitors agrees to sell spectrum that is close to your channels frequency. If you've ever worked on Wifi and had someone one on channel 3 and 9 then you probably know where I'm going here....that could be very anti competitive.

After being bit by the same snake twice I might be a little hesitant, too.




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