Spectrum Wars: The Bleak Outlook for Wireless

by Steve Wildstrom   |   September 2nd, 2011

In a post at TechCrunch, Frank Barbieri argues that the entire dispute over the AT&T’s acquisition of T-Mobile is really about the failure of spectrum allocation policies in the U.S. He’s right although AT&T’s short-term case would be stronger if it were moving faster to deploy the unused spectrum it already has. And Barbieri is right that the biggest roadblock to freeing that spectrum is local TV st ation owners, who in many cases, especially the most valuable big-city outlets, are CBS, Disney (ABC), NBC Universal (soon to be Comcast), and News Corp. (Fox.)

Cover Art: The Dark Side of the Moon, Pink Floyd

One reason for the transition to digital television in the  last decade is that digital TV uses spectrum a lot more efficiently than its analog predecessor. TV stations traded their old frequency assignments–the spectrum is now mostly owned by Verizon, which is using it for 4G LTE service, and AT&T, which will eventually do the same–for new assignments. But an HD broadcast channel only takes about a third of the bandwidth assigned. The hope was that stations would create second and third channels, but mostly they are filling them with endless loops of local weather radar or similarly uninspired programming, or leaving them idle altogether.

Unused or underused TV channels do seem to be the easiest part of the 500 MHz of bandwidth that Federal Communications Commission Chairman Julius Genachowski hopes to free for mobile wireless use. But legally and politically things get sticky very fast.

One problem is the question of who actually owns the spectrum. In recent years, users such as wireless phone carriers and satellite operators have been required to buy the rights to spectrum at auctions. Earlier, however, the bandwidth was licensed without charge, to be used by broadcasters “for the public convenience and necessity.” Ownership remains with the people of the U.S., that is, the federal government.

As a matter of law, that is indisputable, But as a matter of equity, broadcasters argue that hardly any current owners are the original licensees and that the spectrum has actually has actually been paid for many times over as the licenses have been bought and sold. Regardless of how the spectrum was originally assigned, current owners have an equity interest in it and, in fact, it is often their most valuable asset.

The FCC proposes that the unused frequencies be sold in  an “incentive auction,” in which current licensees will get an incentive to participate by being given a share of the proceeds. This will require congressional approval, and we all know how well that works. One big argument is over just how big that incentive payment will be. The broadcasters seems to think something like 90% of the proceeds would be appropriate, which the government would like to reverse the ratio. Then there are questions about just how voluntary participation in the sale would be and just how to handle the fact that some stations would have to move to new frequencies to allowed the freed-up spectrum to be consolidated into more usable blocks.

Barbieri is quite right that local broadcasters have tremendous power in Washington. Getting free media on the local station still matters a lot to every member of Congress.

The one  hope for anything happening in the near term may be Congress’ desperation to cut the budget deficit without cutting popular programs or raising taxes. In the end, it was congressional hunger for the revenues from reselling analog TV spectrum that put an end to years of successful foot-dragging by broadcasters in 2009. The same could happen this time, though not without an epic fight.

 

 

 

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.