Washington – The US’s entire mobile future rests on the industry that gave them Milton Berle and Edward R. Murrow.
Broadcasting may be an industry that many associate with the golden age of free television or radio. But even as Americans flock to popular pay TV shows such as Game of Thrones, venerable local television stations will soon have the most say in how people get their content wirelessly. And that makes them a tremendously powerful group. Here’s how:
Coming next year is an important auction to sell spectrum – the airwaves that carry voices, pictures and data over the air and into the home.
Spectrum is behind WiFi and satellite communications. It’s also what makes broadcast television possible. “Twenty-first century consumers … have a seemingly insatiable appetite for wireless services, and thus, for spectrum,” Federal Communications Commission Chairman Tom Wheeler wrote in a blog post last year.
With more people taking their video consumption on the road with tablets and phones, mobile wireless networks predict they will need a lot more capacity if they’re going to keep up. That’s where TV stations come in. Under this auction, they would sell their airwaves to wireless carriers. But it’s a complicated process. Nobody can predict for sure how it will turn out – or if it will even work.
Some broadcasters might choose not to bring their spectrum to the table. If that happens, the whole auction could fall apart.
But if the broadcasters, lured by the prospect of cashing huge checks from the wireless industry, all decide to get in the game, it could herald a historic nationwide transfer of public airwaves.
To get an idea of how big a deal this is, consider a similar spectrum auction that the federal government wrapped up in January. A lot of people predicted that the auction would raise around $18 billion for the U.S. Treasury. In the end, the actual figure was about 2½ times that. Financial analysts had massively underestimated how much the wireless carriers would shell out for airwaves. Turns out they were willing to pay a lot – $45 billion.
Some say the 2016 broadcast spectrum auction could fetch nearly twice as much.
“Write this down: This auction will raise at least $84 billion,” Preston Padden, a former ABC executive who represents a coalition of 84 TV stations interested in participating in the auction, said recently at an industry conference in Las Vegas. In addition, he said, that $84 billion would result in 100 megahertz of spectrum going to the wireless industry – a very large swath of radio waves.
It’s “very doable,” Padden added.
Not everyone is so optimistic. That’s because there’s controversy surrounding the way the broadcast auction will be run. For example, federal regulators responsible for designing the auction have decided to set aside a portion of the broadcast spectrum for smaller wireless carriers to compete over, for fear that the big companies – AT&T and Verizon – will outbid everyone else and take all the spectrum for themselves.
This is a life-or-death decision, according to some wireless industry executives who point out that the most recent spectrum auction saw three companies gobbling up 94 percent of the purchased airwaves.
“This whole thing should scare the hell out of you and every other wireless consumer in the U.S.,” T-Mobile chief executive John Legere wrote in a recent blog post. “This playfield isn’t going to level itself.”
If relatively cash-strapped companies such as T-Mobile and Sprint are effectively shut out of the auction, that could limit their long-term ability to compete with the big carriers. If they struggle, that would be bad in the eyes of the FCC, which has sought to preserve competition by maintaining four national wireless carriers in the United States.
Senior officials from dominant wireless companies, such as AT&T’s Joan Marsh, argue it would be simple for T-Mobile and Sprint’s foreign backers – Germany’s Deutsche Telekom and Japan’s Softbank, respectively – to pony up the funds needed to compete in an auction without a special set-aside.
“AT&T has never sat out a major auction, and we won’t sit out of this one,” Marsh said.
In Las Vegas this past week, officials from the broadcast industry said the best thing that can happen is for the auction rules to be as simple as possible – which would convince TV stations that they stand to make top dollar from selling their spectrum, even if it means denying some airwaves to the likes of Sprint and T-Mobile.
“This participation is contingent on the FCC getting the auction rules right,” said Gordon Smith, chief executive of the National Association of Broadcasters. “If the commission can stay out of the way, I believe we can have a successful incentive auction.”
Washington Post-Bloomberg