Soon smartphones, tablets and as-yet barely imagined gadgets will be as ubiquitous as MP3 players, opening the door to a wireless future in which everything from professional sports to MRI scans will be available on demand anytime, anywhere. Or maybe not: much turns on the outcome of a struggle between the FCC and the broadcast TV lobby.
The coming wireless revolution depends on a huge expansion of transmission capacity to support 4G wireless broadband service. And while technology and oodles of cash will make it possible to cram more data through the existing wireless telecom system, avoiding hopeless traffic jams will require access to a lot more of what used to be called the “airwaves.” That’s why we’re delighted that FCC Chairman Genachowski has called for repurposing a broad swath of prime, underutilized spectrum now controlled by local TV stations. The big question is whether the broadcasters have the will and political clout to stop him.
Until the rise of cable, phone-line and satellite TV transmission, terrestrial broadcasting using FCC-assigned spectrum frequencies was the only game in town. The FCC gave away local licenses to the “most qualified” applicants. And in the heyday of advertiser-supported broadcast television (before video games, the Internet and “narrowcast” cable channels were competing for eyeballs), stations with licenses for VHF channels in major markets traded for hundreds of millions of dollars more than their investments in broadcasting facilities.
By the 1990s, the explosive growth of digital cell phones was makinge spectrum far more valuable for mobile wireless, even as the gravy generated by broadcast TV was drying up. But thanks to a potent lobby (there’s a TV station or five in every Congressional district) and the promise of delivering “free” TV to everybody with a pair of rabbit ears, nobody seriously challenged the allocation of all that spectrum until the advent of over-the-air digital TV.
As part of the deal for switching to a spectrum-efficient digital system, the broadcasters gave up about one-quarter of their spectrum – what used to be UHF channels 52-69 – which was then auctioned to the wireless telecoms for close to $20 billion. But the broadcasters still control the rest, using it to deliver content to the 10 percent of households who don’t want (or can’t afford) TV delivered from satellites or through wires.
Now, all of this remaining spectrum could be sold to the highest bidders, which would almost certainly be wireless telecoms seeking to build capacious 4G networks. Washington, which needs every penny it can scrape up, would keep the tens of billions in revenue from the auctions. But the financial bonanza from repurposing the spectrum would be so large that one could, in theory, use a modest chunk of the auction proceeds to buy out the TV broadcasters licenses at a profit and endow everybody who was still watching on-air TV with a lifetime subscription to basic cable.
Chairman Genachowksi’s approach is less sweeping and more pragmatic. He would leave the broadcasters with enough spectrum to maintain over-the-air service, thereby finessing the populist argument that he was killing free TV. And to mollify the broadcasters (who, after all, appropriated the spectrum from the taxpayers, fair-and-square) he would share some of the proceeds of the auction with them. This is plainly a compromise, designed to build a winning political coalition. But it would also serve to mollify those who worry that challenging the de facto spectrum property rights of the broadcasters could make it more difficult to get private enterprise to invest everything from pollution emissions rights to private toll roads, where investors must have faith in the government’s long term commitment of resources.
The Genachowski solution sure beats the alternative of waiting until the political cost of denying 4G service to the multitudes is higher than the cost of standing up to the broadcasting lobby. But plenty of things could happen on the way to the forum. In particular, the broadcasters could play hard ball on the premise that they hold most of the political cards. The telecoms, which know a thing or two about getting their way in DC, and in some circumstances might be expected to offset the muscle of the broadcasters, don’t really have an interest in how the proceeds from the auctions are divided. All they care about is getting access to the spectrum – and sooner rather than later.
If and when a deal is reached, there’s going to be a lot of second-guessing about how much money is diverted from the Treasury to the broadcasters’ bank accounts. But it is important to remember that the prize here isn’t just the tens of billions that the spectrum would likely fetch at auction. It’s the value-added from 4G service that consumers and telecoms will share – a figure that could approach $1 trillion!
(A shorter version was first posted on Politico.com)