Thursday, April 11, 2013 6:17 pm
TV stations feel 'squeezed' by airwave auction
By RYAN NAKASHIMAAP Business Writer
Broadcasters own a valuable swath of invisible real estate on the airwaves and just like farmers, their livelihoods depend on cultivating that fertile space. But the FCC believes clearing new lanes of over-the-air bandwidth will ease mobile network congestion, which leads to dropped calls, stuttering video and hanging emails.
Broadcasters say they are already feeling the pinch after giving up precious airwaves in the transition to digital TV in 2009. They are worried that their businesses may be in jeopardy as the government embarks on an unprecedented auction. They fret they'll be short-changed in a complex process that is expected to rake billions of dollars into federal coffers.
"We've already been squeezed once," said Gordon Smith, president of the National Association of Broadcasters, on the sidelines of the industry's annual gathering, NAB Show, which wrapped up Thursday. "We're being squeezed twice now. There's no more juice in that squeeze."
Dozens of stations nationwide are expected to sell voluntarily - and go out of business - to make way for these new mobile data highways. The process relies on a complicated "reverse auction" that involves multiple steps, each fraught with the potential for confusion.
The government wants to clear 500 megaHertz of spectrum by 2020, with 120 mHz coming from TV stations. That's the equivalent of 20 TV stations in each market across the country. Not every market has that many TV stations, so the FCC will likely clear the path it needs merely by shuffling broadcasters around.
In February, the FCC outlined how its plan would work. Starting in late 2014, TV stations will submit bids detailing how much they would accept for either going off the air, moving to a lower channel number, or sharing a channel with another station.
Mobile phone carriers will then submit bids for how much they would pay to use potential new airwaves. The FCC hopes to match buyers to sellers, and "repack" the airwaves as much as possible to give wireless companies the use of singular bands across the country.
The repacking could result in some TV stations being forced to relocate their broadcast towers and change channel numbers on the dial. As the auction gets closer, TV station owners' anxiety is growing.
"You could get bamboozled here," said Mark Fehlig, an industry consultant in Lawrenceville, Ga.
Station owners don't know which stations might sell - the process will remain anonymous until the last minute - and sellers don't know if their bids will be accepted and for how much. Moving TV stations along the U.S. borders will require cooperation from Canada and Mexico so any changes don't interfere with signals in those countries.
Meredith Corp., which owns 13 TV stations, is concerned about its CBS affiliate WNEM in Flint, Mich. The FCC's repacking could have an effect on its signal in its own market and in nearby Detroit. Meredith also has to consider that it competes with signals coming from the Canadian city of Sarnia, Ontario, just 70 miles east. Most people receive local TV stations feeds through pay TV providers like cable and satellite companies, but if any homes that rely on antennas lose service, it could result in some angry phone calls.
"There's so much uncertainty about how that might work," said Paul Karpowicz, president of Meredith's local media group, who added that the company has no intention of selling out. "Our issue is simply the collateral damage as it relates to repacking."
Fears aside, the entire process could result in a big windfall for the U.S. government.
In the nationwide transition from analog to digital over-the-air TV signals in 2009, the government created new space on the airwaves by packing broadcasters closer together, and it raised $20 billion by selling off about 50 mHz to wireless carriers. The goal of this auction, to sell more than double that, could raise even more.
The government expects to profit handsomely from the difference between what wireless carriers are willing to pay and what struggling TV stations would accept for closing up shop.
Some industry players believe the government is meddling in what would better be left to the private market.
Preston Padden, executive director of a group of interested TV station sellers called the Expanding Opportunities for Broadcasters Coalition, is worried that the government's profit motive could result in the sellers receiving less money than they could by negotiating the sale of their broadcast licenses on their own.
He represents more than 40 TV stations in major markets like New York, Los Angeles, Chicago, Detroit and Philadelphia, that would sell if the price is right. None are affiliates of major networks such as ABC, CBS, NBC or Fox. But their cooperation could be essential if the auction is to succeed in cities where mobile data traffic is the most clogged.
Padden complains that the process is "only as messy as it is because the government's in the middle."
"If the FCC tries to administer the prices to keep them low, they have alternatives and there are other things they can do with the spectrum," he said.
Some broadcasters also worry that the auction could harm diversity of programming, since the TV stations most likely to sell are barely profitable, serving small niche markets such as foreign-language speakers. The FCC has stressed that no TV station that wants to stay in business will be forced off the air.
Outgoing FCC Chairman Julius Genachowski told the conference on Wednesday that the development of the market for mobile video would help, not hurt, TV stations, especially those trying to reach their viewers on tablets and smartphones.
"What's the biggest threat to mobile being a major opportunity for broadcasters? It's the spectrum crunch," Genachowski said. "If we don't solve that, the ability to take full advantage of interactive video on the mobile platform won't be there."
Anika Evans, a board member of Gila River Telecommunications Inc., said she is worried that the repacking of the airwaves could jeopardize a two-year effort to set up a network of seven TV stations to broadcast council meetings and other programming to her low-income Native American community in Arizona.
The tribe hasn't built its stations yet and there are only two years left on its license to get them up and running. A forced channel change could endanger an expected $1 million-plus investment in technology.
"If come August 2014, they say, `Oh you know what, we're going to reposition you,' then we would have to re-invest in potentially a different technology," she said. "That's where the danger lies for us."
Having less bandwidth devoted to TV also means it'll be harder for ambitious TV station networks to grow.
Jeff Dineen, president and majority owner of the operator of the Bold TV Network, invested in a TV channel in Los Angeles that reaches 2.5 million homes in 2010 and is expanding to Alabama, North Carolina, Texas and elsewhere. His strategy is to buy smaller channels for as little as $50,000 apiece and program them with documentaries, reality TV and family-friendly shows for antenna-only homes. With fewer channels devoted to TV, it'll be tougher to expand.
"If there's 20 fewer stations in each market, then that severely impacts my business plan," he said. "It'll ultimately stunt our growth and could theoretically put us out of business."