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  • Rick Kaplan 11:27 am on August 16, 2016 Permalink  

    Time To Put Up 

    It will be important to watch closely how the forward auction unfolds, as this is the golden opportunity for which the wireless industry has lobbied intensely. CTIA and CCA, the leading wireless trade associations, have wholeheartedly supported the Federal Communications Commission (FCC)’s hard work throughout the auction rulemaking process and have approved the agency’s ultimate auction design. These associations have claimed there is “tremendous need for additional spectrum” and that “the spectrum crisis facing the wireless industry continues to grow.” Thus, this auction has now opened for the wireless industry a long-awaited window to put its money where its mouth is, and for those who promised the incentive auction “will play a vital role in addressing the spectrum crunch,” the time to back that claim up is now.

    Although we hear a lot less these days about a so-called “spectrum crunch,” that was the rallying cry that encouraged Congress to provide the FCC with the ability to conduct this unique auction. We’ll find out soon enough whether that lobbying was simply an empty slogan or if the wireless industry is indeed desperate for more licensed spectrum.

    If the wireless industry’s demand doesn’t meet the broadcast industry’s supply, the wireless industry need only look in the mirror. Again, FCC staff worked day and night over the course of years to develop this particular auction design, and the wireless industry has been its biggest cheerleader in that regard. Broadcasters did their part in the first phase of the auction; we now look forward to the wireless industry showing up and demonstrating how accurate its countless comments, tweets and blogs about the incredible demand for spectrum really are.

     

     
  • Rick Kaplan 10:30 am on July 13, 2016 Permalink  

    One Year From Now: Full Speed Ahead With Innovation 

    At its monthly open meeting tomorrow, the Federal Communications Commission (FCC) will vote on an order setting the stage for the next generation of wireless services. The order – part of the “Spectrum Frontiers” proceeding – will make expansive amounts of high band spectrum available for wireless services, including next-generation 5G service. This vote will come just nine months after the FCC issued its Notice of Proposed Rulemaking (NPRM) seeking comment on this matter.

    That’s an admirably fast track, particularly given the scope of the proceeding. To get here, the FCC had to evaluate numerous new spectrum bands for expanded wireless operations – a total of more than 10 GHz of new spectrum – and consider appropriate service rules authorizing mobile operations in those bands. These rules include a combination of licensed use, a commercial-to-commercial shared access regime, and unlicensed use, as well as provisions to protect incumbent federal government uses in some bands.

    NAB commends the Commission for moving with such speed to lay the groundwork for the next generation of wireless services. We hope the Commission will move at least as quickly when it comes to the next generation of television service. In fact, the Next Generation TV proceeding should be much easier; the Commission does not need to authorize new spectrum sharing regimes or provide broadcasters with additional spectrum.

    The key lesson from the Spectrum Frontiers proceeding that should guide the Commission in the Next Gen TV proceeding is that flexibility is key. The Commission’s approach has been to “promote a flexible regulatory environment for the next generation of wireless services.”[1] The FCC stated that its goal was “to develop flexible rules that will accommodate a wide variety of current and future technologies.”[2] The FCC should take a similar approach towards Next Gen TV service.

    The Next Gen TV proposal before the Commission asks it to approve only a new transmission standard. This will ensure that broadcast television licensees have the flexibility to offer services and features the market demands, and will avoid bogging the Commission down while additional layers of the service are defined. In the Spectrum Frontiers proceeding, the Commission noted that it did “not intend to define what qualifies as ‘5G’,” and that standards bodies were still developing requirements.[3]

    5G’s nascent status has not prevented the Commission from moving forward in the Spectrum Frontiers proceeding, and it shouldn’t stop the Commission from moving forward with authorizing Next Gen TV. In fact, the Commission emphatically rejected calls for delay until more was known about how or whether mobile services would develop in higher bands, stating that such “delays could affect the United States’ leadership in mobile communications and hurt consumers.”[4] Similarly, delays in approving voluntary use of a new television transmission standard could affect U.S. leadership in broadcast television and deprive consumers of new features and services.

    NAB and individual broadcasters have asked the FCC to issue an NPRM by October 1 proposing rules for the voluntary use of the Next Gen TV transmission standard. If the Commission can meet that goal, and there is no reason it would be unable to do so, a nine-month benchmark would have the Commission issuing final rules allowing broadcasters to transmit using the new standard no later than July 2017 – a fitting anniversary of the 5G action the FCC will take tomorrow. Just one year from now, the Commission should be in the admirable position of having laid the foundation for the future of both the wireless and television industries.

    [1] Use of Spectrum Bands Above 24 GHz For Mobile Radio Services, Notice of Proposed Rulemaking, FCC 15-138, ¶ 1 (Oct. 23, 2015).

    [2] Id. at ¶ 3.

    [3] Id. at ¶ 1, n.1.

    [4] Id. at ¶ 24.

     
  • Rick Kaplan 2:18 pm on June 30, 2016 Permalink  

    Auction 101: Setting Prices in the Reverse Auction 

    On Wednesday, bidding in the reverse component of the first stage of the broadcast spectrum incentive auction came to a close. As promised, the Federal Communications Commission (FCC) promptly released the total clearing costs needed to close the auction at the initial clearing target. While we wait for the beginning of the forward auction, we thought this might be a good time for a refresher on how the FCC is conducting the auction and what role broadcasters play.

    The FCC enthusiastically marketed the auction to broadcasters throughout the country. It made the application process as straightforward as reasonably possible for interested stations. And it set opening bid prices – the maximum amount stations could ever get for participating in the auction – at very attractive levels to encourage broadcasters to enter the auction. As the FCC has acknowledged, robust broadcaster participation in the auction allowed the FCC to set a high spectrum clearing target of 126 MHz.

    Broadcasters currently operate on ultra-high frequency (UHF) channels 14-51. Clearing 126 MHz will require the FCC to buy enough stations to fit remaining UHF broadcasters in channels 14-29.[1] During the reverse auction, prices offered to broadcasters dropped each round by a predetermined percentage set by the FCC. Stations merely decided whether they were still interested in the auction at the new – lower – price the FCC presented to them, or if they wished to drop out of the auction entirely. At no point could broadcasters manipulate the price they were offered or control which stations the FCC would select as winners.

    Prior to each new round, the FCC ran a simulation to see if they could repack those broadcasters remaining in the auction to new channels in the reduced television band. If a station could be repacked to a new channel, its price continued to drop. If a station could not be repacked – there was nowhere to put it while still clearing 126 MHz – then the FCC froze that station at its current price. Prices for other stations continued to drop until those stations too were needed by the FCC, the stations dropped out of the auction or prices reached zero in the final round of the auction.

    To be clear, then, if a station dropped out of the auction, it received no money. And that station can’t come back and try again. It will not be eligible to participate in a subsequent stage of the auction, if one is needed. Meanwhile, a station that was frozen and is a provisional winner didn’t set its price, it’s simply in line to receive what the FCC was offering when the FCC determined that it didn’t have anywhere left to put the station in the new television band. Broadcasters didn’t have price leverage; they couldn’t “demand” a certain price or “hold out” for a certain price. Nor did they set the opening price, as noted above. Rather, the price they were offered dropped every round unless the FCC needed them to achieve the 126 MHz band plan. In short, the FCC set opening prices, set the level by which those prices would drop and selected which stations would be winners.

    Because there seems to be some confusion on this point, we’ll repeat it. Broadcasters had no levers to drive up prices in the auction. They could not “hold out.” They had no ability to force the FCC to pay a higher price than the FCC was offering. The only options available were stay in or drop out, and the only way a station could win (provisionally) is if the FCC determined it needed that station to meet its current clearing target. At that point the station’s price was frozen.

    We understand the incentive auction is quite complex given all of the moving pieces. That is hardly an excuse, however, for parties to be so far off the mark as to claim that broadcasters somehow held out or drove up the price of spectrum. That view represents a fundamental misunderstanding of the auction and maligns the work of the Commission staff as well as the positive role broadcasters have played in this process.

    Now the wireless industry is on the clock and we’ll see what kind of demand they truly have for spectrum.

    [1] This is an oversimplification, as the FCC can put a limited number of stations in the new wireless portion of the band, from channels 30-51.

     

     
  • Scott Goodwin 1:28 pm on June 29, 2016 Permalink  

    The Art of Duplicity, as Perfected by DISH Network 

    Regulatory profiteer DISH Network is faithfully executing its apparent campaign to use carriage impasses to induce the Federal Communications Commission (FCC) to tip its retransmission consent rules in DISH’s favor. DISH has become the market leader in creating impasses, harnessing the resulting consumer frustration, and through its proxy the American Television Alliance, driving its customers to the Commission to demand a regulatory “fix.”

    While clever, DISH’s plan has one glaring blind spot: DISH itself.

    Those who have seen DISH in action over the years know that the company cannot be trusted. DISH will bend – and sometimes break – the rules to achieve its bottom line ends. The company has absolutely no problem jumping up and down about the behavior of others while it engages in tactics that go far beyond what it is complaining about. This no-shame playbook has become a DISH trademark.

    DISH’s dispute with Tribune is yet another excellent example of DISH’s tactics. Earlier this week, DISH filed a lawsuit against Tribune, alleging, among other things, that Tribune is interfering with “contractual relations” and DISH’s “prospective economic advantage.” Its primary complaint is that Tribune has run ads and operates websites that explain to viewers why they aren’t receiving Tribune programming on DISH and how it can access those stations if the impasse continues (use an over-the-air antenna or switch providers). DISH grouses that Tribune shouldn’t be encouraging consumers to switch providers and that Tribune cannot inform the public that a Consumer Reports survey found that DISH customers gave the company the worst rating for value (even though, as DISH acknowledges in its complaint, the allegation is completely true).

    The problem for DISH – in addition to the fact that Tribune’s actions are lawful – is that it doesn’t want the FCC to look behind the curtain. If it did, then the FCC would learn that not only is DISH informing viewers much like Tribune, but it also is going even further. DISH is of course running a rotating loop of videos on the channels typically occupied by Tribune stations complaining that the retrans impasse is exclusively the fault of greedy broadcasters. It also pushes viewers to its propaganda website DISHPromise.com (unrelated to DISHfingerscrossedbehindourbacks.com).

    But beyond the traditional exchange, DISH’s playbook includes a darker, more dastardly set of tactics. Even as DISH complains that broadcasters are damaging its “prospective economic advantage” by suggesting consumers switch providers, DISH routinely sets out to damage the relationship between local stations and their advertisers (which also could be DISH advertisers). DISH has sent, and continues to send, letters to advertisers of stations experiencing an impasse with DISH (see letter below) telling them that the value of their advertising has been reduced because of the impasse and encouraging those advertisers to contact that station and demand “the full value of [their] advertising dollars.” It even provides the direct contact number of the station’s manager.

    dishletter_062916(Click to enlarge.)

    The intended effect of this campaign is clear – punish stations for not acceding to DISH’s demands. As NAB has noted repeatedly, impasses already hurt local stations far more than they do pay-TV providers, especially major national pay-TV providers like DISH. When a station experiences an impasse with a pay-TV distributor, it can immediately lose up to 20-30 percent of its viewing audience (sometimes even more). Those lost eyeballs are lost dollars, and the toll adds up with each passing day, putting enormous pressure on stations to reach a deal. These DISH letters are designed to amplify that pain and force stations into submission.

    With these facts apparent, DISH can be seen for what it really is: villain and not victim. Its lawsuit against Tribune is nothing more than a publicity stunt – and a weak one at that. Indeed, the only thing that’s still confusing about this whole sordid affair is how DISH thinks it can continue to get away with it. With its well-known history as a regulatory schemer, you might think DISH would lay low and not take on such a public role as the poster child for pay TV’s attempt to change the retrans rules. But that’s not the DISH way. The DISH way is to push forward at any cost and hope that no one notices its hypocrisy. Well DISH, we’ve noticed and it won’t be long before the FCC does too.

     
  • Patrick McFadden 12:50 pm on June 24, 2016 Permalink
    Tags: DISH,   

    Dishceptive Advertising 

    It’s not at all uncommon for us to find ourselves marveling at DISH’s signature cocktail of chutzpah and hypocrisy. DISH is the common denominator in roughly three out of four service disruptions resulting from retransmission consent impasses, yet, when its customers lose access to programming they value because of DISH’s intransigence, DISH brazenly rolls out a carefully orchestrated campaign to blame broadcasters in an effort to secure regulatory favors from the FCC. In DISH’s latest broadcaster hold-up – this time with Tribune Broadcasting – it has taken things one step further and publicly announced it is suing its negotiating partner in federal district court. And, upon reading the complaint, we have to admit that DISH has really outdone itself this time.

    DISH’s suit concerns advertisements and websites Tribune has used to educate viewers as to why they can’t view Tribune’s programming on DISH. DISH accuses Tribune of tarnishing and diluting the value of DISH’s trademarks by using words like “dishgusting” and “dishturbing” to describe DISH’s conduct. So, from the outset, it’s clear that DISH’s suit is a very serious, credible attempt to enforce its rights and is totally worth a court’s time (and absolutely should not have been filed in Comic Sans font).

    DISH is also outraged that Tribune would suggest that DISH customers who are frustrated by their inability to receive Tribune programming consider switching to another service provider. According to DISH, urging customers to switch service providers causes real harm because, when customers do switch, DISH cannot get them back. Given how sensitive the company appears to be about dishparagement, someone should alert DISH that it just admitted that customers who try another service provider are a bit like Taylor Swift – they are never, ever, ever getting back together with DISH.

    Besides, isn’t trying to get customers to choose your service offerings instead of your competitors’ sort of the whole point of advertising? DISH itself uses advertising to try to convince customers of other service providers – including DirecTV, Comcast, Time Warner Cable, Charter and Verizon – to switch to DISH. The complaint seems dishingenuous, at best.

    But it’s not just that customers may leave. DISH is also extremely frustrated that customers call DISH to complain, or get more information. DISH is clearly dishappointed at the prospect of having to spend more time talking to dishgruntled customers who are frustrated by the dishruption in their service.

    DISH’s super serious, thoughtful complaint that you definitely should not take lightly or make fun of in any way also accuses Tribune of making dishceptive claims by asserting that customers gave DISH the lowest rating for value in a 2015 customer service survey. According to DISH, it didn’t really finish last for value in that survey; rather, the company finished tied for last. In effect, DISH is claiming that Tribune is off base because even though DISH received the lowest rating, it shared that honor with other companies. Put differently, DISH’s lawsuit is premised in part on the notion that, while its customers think DISH provides terrible value, they don’t think it provides uniquely terrible value. It’s more a run of the mill terrible value. This is such an important dishtinction that DISH adds in a footnote that the company again finished tied for last for value in a 2016 survey. Just so everyone knows this wasn’t an anomaly.

    At bottom, of course, this suit is nothing more than a dishtraction. DISH’s subscribers currently can’t access programming they value through DISH because DISH would rather pay below-market rates for programming. That’s what this dishpute boils down to. If the company really wanted to provide a dishincentive for customers to leave, it might consider engineering fewer service dishruptions that deprive customers of their desired programming.

     
  • Scott Goodwin 12:30 pm on June 15, 2016 Permalink  

    Despicable DISH Is At It Again 

    Is anyone surprised that consumers are yet again faced with another conveniently timed retransmission consent dispute involving DISH Network, the communication industry’s ultimate regulatory profiteer? Sunday night, despite being offered an extension, DISH Network ceased carrying local TV stations owned by Tribune Broadcasting in markets across the country. Don’t feel sorry for our friends at DISH; the company – and its front group the American Television Alliance – couldn’t be happier. A high-profile impasse feeds the image of a retransmission consent “crisis” that DISH and the rest of the pay-TV industry have worked tirelessly to cultivate.

    In reality, there was little chance that DISH was going to reach an agreement with Tribune before its existing contract expired and forego this opportunity to garner headlines, just as the Federal Communications Commission (FCC) is actively considering new retransmission consent “good faith” rules. Although Tribune reports it is offering DISH carriage terms similar to those it has with other pay TV operators, DISH balked, no doubt salivating when it saw a chance to create a big splashy dispute. As an actor in roughly half of all retransmission consent impasses, DISH’s playbook is now routine: allow an existing contract to expire; release statements that paint the broadcaster as greedy; call for FCC “reform”; let the dispute fester for a few days; agree to terms similar to those offered before the dispute; claim the hero role.

    Rinse and repeat.

    These kinds of very public disputes involving DISH have become so commonplace, it is impossible to ignore the obvious: DISH is trying to manipulate the regulatory process, as it has time and time again. Just look at the statements DISH executives had ready for the press. They complain about prices and bundled offers, and suggest the solution is to allow interim (i.e., forced) carriage – even as it rejected Tribune’s offer for an extension. These just happen to be exactly the same rule changes DISH and its pay-TV brethren have been pushing for at the FCC, rule changes that DISH hopes will effectively eviscerate any broadcaster leverage in retrans negotiations.

    If you accept DISH’s claims, and believe that it is merely standing up against greedy broadcasters, ask yourself: who has more to gain from a short dispute? With an open proceeding at the FCC on new retransmission consent rules and its national footprint (which broadcasters are forbidden by rule to have), DISH can easily withstand a short dispute in exchange for more “this is a crisis” fodder. Its customers – facing draconian early termination fees and equipment costs – are unlikely to go through the hassle of switching to a different provider. Meanwhile, the broadcaster immediately loses access to eyeballs forcing them to rework compensation with its advertisers. DISH has claimed that broadcasters are using customers as “sacrificial pawns” in these disputes, but its customers are “pawns” only so much as DISH makes them so.

    Enough is enough. The Commission cannot be a patsy for DISH’s regulatory arbitrage plans any longer. As long as the FCC has an open proceeding on retransmission consent, DISH will continue to create short, high-profile disputes. And if you think creating new good faith rules will quell DISH’s demands for regulatory advantages, think again. If the Commission demonizes certain substantive proposals broadcasters offer in retransmission consent negotiations – something it has avoided doing thus far – it will open the door to a flood of good faith complaints by DISH and others. By far the most sensible path – and the most likely to end disputes – is for the Commission to make clear once-and-for-all that retransmission consent negotiations are governed by the marketplace, that parties should hammer out deals the same way businesses do in every other industry, and that creating faux disputes will not be rewarded with regulatory spoils.

    Only then will DISH recognize that its bargaining should be done with broadcasters, not with the FCC at consumers’ expense.

     
  • Rick Kaplan 10:21 am on March 29, 2016 Permalink  

    It Begins 

    Today is an exciting day at the Federal Communications Commission (FCC), with the official start of the broadcast spectrum incentive auction. And much is at stake – a successful auction means that spectrum will be repurposed, a huge amount of money will change hands and technology and spectrum policy will be shaped for the future. All of these things hang on the outcome of a brave and untested idea dreamed up by economists and enabled by engineers.

    The FCC staff deserves considerable credit for getting us to this point. As the idea of an incentive auction was explored in detail, challenges arose and the Commission’s staff grappled with them in earnest. To be sure, not every solution can be elegant and there remains disagreement about whether each one will prove successful, but the FCC staff is now able to push the “start” button and the initial spectrum clearing target will be revealed.

    A good deal of credit also goes to former FCC Chairman Julius Genachowski, who first presented the incentive auction concept as part of the National Broadband Plan, to Chairman Tom Wheeler, who has led the charge to dot the auction’s i’s and cross its t’s, and to all of the commissioners who have engaged in a difficult process to bring to light the key policy decisions at stake along the way.

    Even on this momentous occasion, we should be mindful that our work is only partially complete. The dedicated FCC staff is now turning its attention to one of the most complex processes of relocating incumbent spectrum users in its history. We must also recognize that the auction will harm low power television and translator services. This will affect many viewers across the country who rely on those services for critical public safety news and information. Broadcasters will continue to work with the Commission to ensure that damage to these and other critical broadcasting operations is minimized.

    What happens next is anyone’s guess, but the FCC staff can certainly be proud that they worked incredibly hard under tight timelines to bring us to the doorstep of this exciting auction.

     
  • Patrick McFadden 1:20 pm on March 23, 2016 Permalink
    Tags: , ,   

    Time to Stick to the Facts and Find the Right Answer 

    These are exciting times. The long-anticipated broadcast television spectrum incentive auction is scheduled to begin in less than one week. Designing the reverse and forward auctions has been a herculean task, and the Federal Communications Commission (FCC) staff deserves a great deal of credit for bringing the auction to this point in a timely fashion. But, unfortunately for the Commission, once the auction is complete, its work is only half done. That’s because the end of the auction brings perhaps the most challenging phase of all: repacking many hundreds – if not more than a thousand – broadcasters to new frequencies in the television band.

    As NAB has repeatedly documented, broadcasters have serious concerns about the arduous repacking process ahead. After all, it took the better part of a decade and three extensions of time to complete the digital television (DTV) transition, which involved relocating far fewer broadcasters, did not rely on flash cuts and was buttressed by tens of millions of dollars designed to help consumers make the switch to digital. Above all, however, the greatest worry with respect to the upcoming 600 MHz transition is the Commission’s current rule requiring every broadcaster to complete its involuntary relocation within only 39 months following the auction. If the FCC is serious about repacking as many as 1,300 broadcasters, anyone who has any understanding of the broadcast industry knows that it is impossible to accomplish that task in such a short period of time.

    Fortunately, the FCC commissioners have uniformly recognized the challenges associated with the repack and have indicated in testimony before Congress that – despite the current rules – they in no way want to see any broadcaster forced off the air for reasons beyond their control.

    On the other hand, the FCC’s chairman has continued to insist that the 39-month timeline is sound. When pressed by Congress to defend that deadline given that the FCC has not done any serious analysis of what it would actually take to conduct a nationwide repack, the chairman explained that 39 months was a reasonable timeline, because, after all, even NAB had originally suggested that 30 months would be sufficient. This answer is disingenuous, and given that it has been repeated on several occasions by Commission staff, it’s time to address and bury it once and for all.

    More than three years ago, NAB submitted its initial comments in the incentive auction proceeding (then under Chairman Julius Genachowski) recommending that the FCC extend its proposed timeline for moving stations to new channels following the upcoming broadcast spectrum incentive auction. The FCC had proposed a minuscule 18-month timeline, to which NAB responded, “[t]he 18-month construction time frame proposed in the Notice for relocating stations is unrealistically short.”[1] At the time, NAB assumed, as many did, that the Commission was considering relocating “approximately 400 to 500 stations.”[2] Thus, NAB recommended that the FCC extend the deadline to 30 months, which should be enough time to “allow most stations to complete” the transition.[3] In addition, to stretch that 30 months as long as possible, NAB also proposed that “the forward auction should not be deemed completed until, or after, the time at which stations file their construction permit applications,”[4] which the Commission did not adopt. And finally, NAB made clear that “based on television stations’ experiences in the DTV transition, stations in certain metropolitan areas (such as New York City and Denver) and stations in border areas requiring international coordination could require substantially longer than even three years to construct new facilities.”[5]

    Thus, not only did NAB rely on information at the time that suggested only 400 to 500 stations would move, and seek to push back the starting point for the timetable until after construction permits were issued, we also asserted that even repacking all of 400 to 500 of stations would require more than 30 months.

    Beyond those inconvenient details, there have been three important developments in the intervening three-plus years. First, the FCC released a set of sample repacking scenarios in the summer of 2014, suggesting that the Commission is likely to repack far more stations than NAB anticipated in our 2013 comments. Instead of moving perhaps 400 stations to new channels, the FCC’s publicly released simulations suggested that the FCC could require more than 1,300 stations to relocate. Second, once the FCC released this data, NAB commissioned a study – the first of its kind – to examine each of the challenging elements that make up a nationwide repack of many hundreds or more than 1,000 stations. Third, in May 2014, the FCC surprised everyone by adopting a “death penalty” repacking rule that would require stations unable to complete their transitions within 39 months – no matter what the reason – to go off the air. The rule did not contemplate any exceptions or extensions – a rigid and inflexible deadline that no one anticipated.

    Faced with this new information, NAB re-evaluated the timeline for the upcoming broadcaster transition. It became immediately clear that 39 months would not provide sufficient time to repack the number of stations the Commission was anticipating. As a result, NAB has asked the Commission to establish aggressive, but achievable, deadlines for repacked television stations after the auction, when more is known about many stations will move, where they are located and to which channels they will be moved.

    This evolution is certainly reasonable. New facts and circumstances demand new solutions. While it is concerning that some continue to hide behind comments NAB submitted more than three years ago under different circumstances, it’s frightening that these same officials are hiding at all. The point of the repacking conversation is not to prove who is right; rather it’s to get it right. As the FCC pivots to thinking about repacking – which is now likely less than a year away – rather than being cute about past comments, it should actually engage and wrestle with the enormously complex repacking problem ahead. Only that course will give the broadcasting and wireless industries confidence that the post-auction transition will be a success.

    [1] Comments of the National Association of Broadcasters at 50, GN Docket No. 12-268 (Jan. 25, 2013).

    [2] Id. at 50.

    [3] Id. (emphasis added).

    [4] Id.

    [5] Id. (emphasis added).

     
  • Bruce Franca 11:03 am on February 17, 2016 Permalink  

    Despite Not Knowing Where to Aim, CCA Thinks FCC Hit the Mark 

    Last week, the Competitive Carrier Association (CCA) released a paper arguing that the Federal Communications Commission’s (FCC) randomly selected timeline for completion of broadcaster relocation following the auction is right on the mark. Determining how to develop a timeline for a nationwide repack of broadcasters involves complex engineering challenges, so of course CCA hired . . . an economist(!) to conduct its assessment. At least with this approach, CCA could simply assume the repack will be just fine.

    Despite it being in their members’ interest to fully come to grips with how long it will take to clear broadcasters from their 600 MHz channels across the country, CCA’s approach is lackluster and misleading. Following the broadcast spectrum incentive auction, the FCC will require hundreds, if not more than a thousand, stations to move to new channels. No one knows, however, exactly how many stations will be forced to move or even the scope of what those moves will require. Very little preparation can occur in advance, as no station knows if and to where it will move, and in what order it may be required to change channels. While these questions should give any engineer or economist pause, CCA’s paper guarantees us all that it should be no problem to repack an entire nation in just 39 months.

    But in the real world, this is more than an academic exercise. Understanding this complex process is essential because, under the FCC’s current rules, every station assigned to a new channel must vacate that frequency within 39 months after the auction. The FCC’s rules provide no exceptions to this, other than the Commission’s general waiver authority. If the FCC forces more stations to change channels than can possibly be repacked in that timeframe, the FCC’s current rules require stations to go dark and viewers to lose television service.

    Rather than assume the outcome, NAB approached this problem with rigor. We worked with an engineering consultant, Digital Tech Consulting, Inc. (DTC), which has a staff with decades of experience in broadcasting and that conducted numerous interviews with service and equipment suppliers to determine what was and was not possible. DTC’s report remains the only analysis in the record of the time and resources needed to complete a nationwide repack of television stations, as safely and as quickly as possible.

    Given that NAB is most interested in the right, rather than the expedient, answer, we shared that information with stakeholders in the wireless industry, including CCA, long before it was made public. NAB and DTC spent time addressing any and all questions concerning the analysis in an effort to advance a conversation about how the FCC, broadcasters and winning forward auction bidders can accomplish an efficient, rational transition after the auction. NAB even offered to fund a second study overseen in part by the wireless industry to ensure that everyone was working with a diverse set of expert opinions.

    Rather than engage in a discussion regarding DTC’s work, CCA instead bought a seven-page paper shopped by an economics professor that contained the answer CCA wanted. The economics professor they hired is perhaps best known to auction followers as the $85 billion dollar man – a nod to his enthusiastic forward auction projections. What he is not known for is his engineering expertise. That helps explain why CCA’s paper contains a number of critical flaws. Here are just a few of the most obvious errors, for starters:

    First, CCA asserts that DTC’s estimate of the number of stations that might be repacked is substantially overstated. This is curious, because DTC’s estimate of 860-1,164 stations overlaps with CCA’s estimate of 756-888(sic)* stations. At a minimum, then, CCA’s study confirms that the lower end of the DTC estimate is a reasonable projection. Moreover, DTC based its numbers on publicly available information the FCC has released. CCA based its numbers on an optimization scheme its economics professor invented.

    *Note: CCA states “in all cases the total number of stations that must change channels ranges from 756 to 888.” However, the actual values shown in the CCA paper range from 766 to 921 and contain arithmetic errors. Maybe they should have assumed a better calculator.

    Second, CCA asserts that the DTC study fails to account for “sources of efficiency found in the field,” such as the deployment of broadband antennas that can operate on a broad range of channels in the UHF band. Unfortunately, CCA did not consult an economics professor with any broadcast engineering experience. Had it found one (or simply hired a broadcast engineer), it would have learned that broadband antennas cannot realistically be used for broadcast TV station repacking in most cases. That is because the FCC is repacking stations specifically to preserve their coverage area and population served, which will necessitate antenna patterns that are specific to each station. A broadband antenna is usually limited to one single antenna pattern across all channels. Thus, a single broadband antenna usually cannot simultaneously replicate the coverage of multiple stations. Instead, most repacked broadcasters will need to rely on specifically manufactured directional antennas.

    Third, CCA asserts that DTC significantly understates the number of qualified tower crews available for repacking work. It claims that there are 41 qualified tower crews available right now. That’s interesting, because the FCC’s own Widelity Report concludes that no more than 14 qualified tower crews are available to work on complex and tall towers, and that “there is likely to be more work than these crews can handle in a timely fashion.” The Widelity Report also states that it would take 41 months to complete repacking at a complex site, under ideal conditions – with no unforeseen delays due to weather or zoning issues. As an engineer, I can confirm that 41 months is longer than 39 months. In fairness, CCA’s ivory tower exercise does reference an unpublished “engineering study” that will perhaps attempt to substantiate its claim that 41 qualified tower crews are available. I guess we’ll have to wait for that paper, because CCA apparently hasn’t finished cooking the numbers yet.

    Fourth, CCA claims that the repacking task is “modest relative to the DTV transition.” No one who has seriously studied this issue – or was even around during the DTV transition – could possibly come to that conclusion. During the DTV transition, most stations were not required to flash cut to a new channel for their primary signal within a tight timeframe. Nor did broadcasters have to worry whether other stations made the switch to their new channels at exactly the same time to avoid interference to their viewers. Rather, most stations operated simultaneously on two channels, one with a digital signal and one with an analog signal, sometimes for a decade or more. At the transition date, most stations simply turned their analog transmitters off – there was no tower work and little engineering required. That was a vastly simpler transition, yet it was conducted with significantly greater resources than are available now. This flaw could have been avoided by consulting anyone in the broadcasting industry, even economists who are familiar with it.

    Finally, the underlying premise of CCA’s “Don’t Worry, Be Happy” analysis is that the supply of necessary resources will simply rise to meet the demand during the FCC’s short repacking window. Apparently loads of new vendors, whom broadcasters are expected to trust despite their total lack of experience, will enter the tower rigging or equipment manufacturing business, drawn like moths to a flame by a business opportunity that will last no more than 39 months. This also begs the question – does CCA’s economics professor believe that supply will necessarily always rise to meet demand? If, instead of 756-888 (sic) stations, the FCC was repacking 1,500 stations, would 39 months still be enough? What if there were 3,000 stations that needed to be repacked? Or 5,000? Would supply just adapt to meet demand? CCA’s economics professor must have been lucky enough to never have ordered a product that had a wait list.

    Broadcasters have no desire to delay the post-auction transition. It will be painful and expensive for stations, as well as disruptive for their viewers. But we do not have the luxury of assuming away the problem (or shopping a paper for a hefty price with no consequences if we are completely wrong). The FCC’s policy decisions on this matter should be driven by facts and serious analysis – not by crossing our fingers.

     
  • Patrick McFadden 12:09 pm on February 16, 2016 Permalink  

    The Best Things in Life Are Free (Even When You’re Worth More Than Half a Trillion Dollars) 

    “I don’t care how much money you have, free stuff is always a good thing.”
    – Queen Latifah

    While I don’t believe that Queen Latifah had Google in mind when she uttered this well-known line, she might as well have.

    Google has a lot of money. Not just a lot of money, but A LOT of money. Sporting a market capitalization of $548 billion, Google has passed Apple as the most valuable company on the planet.

    Thus, it’s safe to assume that, if Google wanted or needed something, it could afford to buy it. For example, Google has expressed an interest in “low band” spectrum. Given its interest in spectrum, one would assume that Google would be a major player heading into the Federal Communications Commission’s (FCC) upcoming broadcast spectrum incentive auction. This auction will feature as much as 100 megahertz of prime low band spectrum. It would be a perfect opportunity for Google to acquire spectrum usage rights, and Google’s participation would have the added benefits of raising billions in auction revenues for the government and helping to ensure the auction’s success.

    However, despite its interest in using spectrum, Google isn’t going to play in the auction. Sorry, Congress. Sorry, FCC. No dice.

    Why did Google decide to sit out yet another spectrum auction? The smart money is on Google recognizing Queen Latifah was really on to something. Even if you’re worth well more than half a trillion dollars, free stuff is still a good thing.

    Rather than bid in the auction, Google believes it has found access to free spectrum it can monetize. For the past year, Google has helped lead the charge behind the scenes to push the FCC to simply reallocate spectrum during the auction process for Googley purposes. Reallocation has no price tag. It’s just a gift. In this instance, Google has managed to convince the FCC to consider taking even more channels away from free, over-the-air television after the auction, and designating them for companies like Google. Never mind that this would kill off more free, diverse and rural television service across the country. Never mind that it will hamper innovation by companies not named Google. And never mind that it will crush any hopes of new and diverse entrants into the broadcast industry. If Google sees an opportunity to throw its $548 billion weight around and wind up with some spectrum schwag, why not do it?

    It’s also not for Google to care whether or not this is the right outcome for the country. Let’s face it, Google and its interest-group contractors can’t articulate any tangible benefits for the government’s gift. If the FCC moves forward with its Google Channel proposal it would be asking us to simply give Google the benefit of the doubt. The FCC isn’t attaching any specific public interest obligations to users of this spectrum, or heck, even requiring the spectrum be used at all. It’s really all up to Google.

    I suppose we can’t really blame Google, though. It’s our fault, not Google’s. If Google can keep pulling favors from the government to add to its $548 billion bottom line, more power to it. It’s up to all of us – most of all the FCC – to not keep giving things to Google for free. It seems we’ve made a habit of it. The Commission should recognize that it created a disincentive for Google to participate in the auction and will continue to dissuade Google from investing in all kinds of things if it keeps handing over the keys to the kingdom.

    For as Google well knows, it doesn’t matter how much money you have, it’s still much better to get something for free.

     
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