roundtable: MAP memo re: "spectrum flexibility"
roundtable: MAP memo re: "spectrum flexibility"
MAP memo re: "spectrum flexibility"
Andy Schwartzman (andys@Essential.ORG)
Wed, 17 May 1995 15:54:38 -0400
Date: Wed, 17 May 1995 15:54:38 -0400
From: Andy Schwartzman <andys@Essential.ORG>
Message-Id: <199505171954.PAA12032@essential.essential.org>
To: roundtable@cni.org
Subject: MAP memo re: "spectrum flexibility"
THE GREAT SPECTRUM GIVEAWAY OF 1995:
ISSUES AND OPTIONS
Prepared by Gigi B. Sohn and Andrew Jay Schwartzman
Media Access Project
May 17, 1995
Congress and the Federal Communications Commission are engaged in
a policy debate that will change the face of broadcast television
as we have known it. Television station owners are asking the FCC
and the Congress to give them vast quantities of additional space
on the valuable public airwaves without having to make any
significant corresponding financial or public interest
contributions in exchange. This "spectrum grab" would limit
diversity in the marketplace of ideas and permit broadcasters to
use publicly-owned spectrum for their own exclusive political and
pecuniary gain.
SUMMARY
The broadcasting industry is asking Congress for a huge gift -
enormous amounts of additional, valuable, publicly-owned spectrum.
However, unlike spectrum allocated to broadcasters under the
Communications Act of 1934, the public is to receive nothing in
return. This "spectrum giveaway" must be stopped, and broadcasters
made to compensate the public for use of its airwaves.
In the early 1990's, the FCC reserved an extra chunk of public
spectrum for the exclusive use of each existing television station
owner to convert from "analog" to "digital" television technology.
The express purpose of this action was to enable broadcasters to
provide High Definition Television (HDTV), which doubles the clarity
of today's television picture. The understanding was that once this
conversion was made, the broadcasters would return their original
channel to the FCC.
As technology changed, however, so did broadcasters' business
plans. They determined that it would be far more lucrative to
provide non-HDTV pay-TV, paging and data services over the new
spectrum. Thus, they are demanding what they euphemistically call
"spectrum flexibility," a scheme which permit TV stations to provide
one "advanced" television channel to the public, while leaving
broadcasters latitude to use the remainder of their transmissions
for other program and non-program services as they wish. This
version of "spectrum flexibility" contemplates that no significant
financial or public interest contribution would be expected in
exchange. Pending legislation would essentially require the FCC to
award the spectrum to existing television licensees, and would deny
it the discretion to allow any other applicants to compete or bid
for these rights. The Senate version, S.652, would permit the
licensees to keep both the old and the new spectrum, and would
impose public interest obligations (e.g., equal time, lowest unit
rate, children's educational and informational programming) on only
one channel. The House bill, H.R. 1555, requires that broadcasters
give back the old spectrum at an undefined point in the future, and
requires that any fees paid by broadcasters for the right to deliver
non-program services be designated for the U.S. Treasury, and not
for any public interest purpose. With or without legislation, the
FCC will take up the issue this summer. FCC Chairman Hundt has
wavered a bit in formulating his position. He has alternated
between advocating enhanced public interest obligations (e.g., free
time for candidates, increased children's programming) as a quid pro
quo for the new spectrum and being receptive to broadcasters' wishes
to avoid incurring such new responsibilities.
The public interest community intends to participate in the FCC
proceedings. There are several options for action that could be
proposed to the Commission, and they depend largely on whether
legislation is passed and the degree of discretion left to the FCC.
However, consideration of these options should begin without further
delay. The options are:
o Permit broadcasters to program one or two channels on the new
spectrum, and require them to lease the remaining channels to
unaffiliated programmers and services.
o Allocate the spectrum to broadcasters in exchange for increased
public interest obligations, including, but not limited to, free time
for candidates, children's programming or community interest
programming. A one or two channel reservation for public, educational
and governmental could be included in this option.
o Require that any fees paid by broadcasters to provide non-program
services be put in a trust fund for public broadcasting and/or the
production of children's informational and educational programming.
o Adopt the FCC's prior decisions in this area, and allocate the
spectrum to broadcasters only to provide HDTV. This option gives
little back to the public.
o Allocate the new spectrum in the same manner that the FCC has
allocated all available broadcast spectrum in the past, by comparative
hearing. This option is perhaps the most unlikely to be adopted.
INTRODUCTION
Between 1987 and 1992, the FCC held a series of proceedings to
determine whether and how broadcasters might convert from "analog"
to "digital" television technology. The original expectation was
that broadcasters would use new digital systems to provide High
Definition Television (HDTV). HDTV provides a television picture
that is twice as clear as ordinary analog systems. HDTV picture
quality approaches that of 35mm film and its audio quality is equal
to that of compact disks. To implement the proposed conversion,
the FCC set aside a huge chunk of extra broadcast spectrum (six
megahertz or 6 MHz) for each licensee, enough to carry literally
thousands of voice conversations. [Endnote 1] The spectrum was
set aside with the understanding that it would be used for the
sole purpose of converting to HDTV. The FCC also concluded that
broadcasters would have to return their existing channels 15 years
after the FCC adopted a standard for HDTV. This time period was
chosen to ensure that broadcasters had fully completed their
conversion to digital and that members of the public were not left
without televisions that could receive the new HDTV service. Since
then, video technologies have progressed far more quickly, and beyond
the expectations of the FCC and most experts. Digital compression
technology now makes it possible to transmit many more voice, video
and data messages using much less spectrum. [Endnote 2] Where at one
time it was thought that broadcasters could only provide HDTV over
the extra spectrum, it is now possible to do much more. Indeed,
broadcasters could split up the bit stream into six or seven different
"channels," which could be used to provide, among other things,
multiple TV channels, as well as non-program services like paging
and data transmission. As the technology changed, so did the
broadcasters' business plans. Their zeal for HDTV lessened as it
became increasingly obvious that consumer interest in HDTV would not
reach expected levels, and as the cost of providing HDTV
programming became more clearly understood. Thus, in early 1994,
the National Association of Broadcasters (NAB) began to demand what
it euphemistically calls "spectrum flexibility." "Spectrum
flexibility" would not limit broadcasters to using the extra
spectrum solely for HDTV. Under this scheme, broadcasters would
provide one "advanced" television service [Endnote 3] to the public,
while using the rest of the transmission space for other program
and non-program services as they saw fit. Just as the Commission
had originally contemplated, the broadcasters, at first, promised
to return their existing channel once the conversion was completed.
THE SENATE LEGISLATION
S. 652, the "Telecommunications Competition and Deregulation Act of
1995," was reported out of the Senate Committee on Commerce, Science
and Transportation on March 30, 1995. It is expected that the bill
will go to the floor of the Senate sometime in May. Section 207 is
the spectrum flexibility provision of the bill.
Section 207 (a)(1) gives the Federal Communications Commission
discretion as to whether it should give the new spectrum to existing
broadcast licensees. If it does so, however, it is required to adopt
regulations that allow licensees to make use of the extra spectrum
for the transmission of "ancillary and supplementary services"
(i.e., non-program services), if the licensee provides at least one
free advanced television program service. Importantly, Section 207
commands the Commission that it "shall apply similar rules to use of
existing television spectrum." This is a clear indication that the
broadcasters would not have to give up their existing channel, as
was originally contemplated by the FCC. In other words, this Section
permits a broadcaster to keep both its original and its new spectrum,
permits it to provide digital service on both the old and the new
spectrum, and requires only that it provide one free program service
on each. Section 207(a)(2) states that if a broadcaster charges a
subscription fee for any of its services over existing or extra
spectrum, the Commission may collect a fee from the broadcaster.
The section instructs the Commission, in setting these fees, to take
into account the portion of the spectrum which is used for such
services and the amount of time such services are provided. In any
event, the fee amount cannot exceed the amount paid by bidders in the
recent auctions for cellular telephone-like personal communications
services (PCS) licenses. [Endnote 4]
Finally, Section 207(a)(3) requires that new and existing spectrum
be operated in the "public interest, convenience and necessity."
However, the section imposes the public interest standard only upon
the one advanced television program service (on the existing and/or
new spectrum) that is provided for free to the general public. This
means that any other program service, whether or not it is a
subscription service, would be exempt from public interest obligations.
These obligations include, but are not limited to, equal time, lowest
unit rate, children's television and community programming obligations.
[Endnote 5]. The section states further that the Commission may
consider, at license renewal time, any violation of the Commission
rules "applicable to ancillary or supplementary services." This
could be read to mean that any violation of the Commission's
broadcasting rules, or any violation of a law of the United States,
would be irrelevant to obtaining or keeping a license. [Endnote 6]
Ironically, the NAB is not satisfied with Section 207. They are
unhappy that it gives the FCC discretion whether or not to grant
them the extra spectrum. They want to be assured that they will
automatically get the spectrum. Senate Majority Whip Trent Lott
(R-MS) is expected to introduce an amendment on the Senate floor on
behalf of the broadcasters to change this language. This amendment
must be defeated on the floor if there is to be any possibility of
obtaining public benefits from the allocation of this new spectrum.
THE HOUSE LEGISLATION H.R. 1555, the "Communications Act of 1995,"
was introduced on May 2, 1995. The Subcommittee on Telecommunications
and Finance is expected to vote on the bill on May 17. Section 301
is the spectrum flexibility provision of the bill. Section 301
compels the FCC to give the extra spectrum to incumbent broadcasters.
The Section requires the Commission to set certain standards to
ensure that some minimum amount of advanced television service is
provided on the new spectrum. It also permits the Commission
discretion to "prescribe such other regulations as may be necessary
for the protection of the public interest, convenience and necessity."
Unlike the Senate legislation, H.R. 1555 requires broadcasters to
surrender one of the two licenses in the future. The Commission is
tasked with determining the surrender date on a market-to-market
basis, and must consider whether 1) "the substantial majority of the
public" have television sets that are capable of receiving digital
transmissions and 2) whether the cessation of analog broadcasting
would "render the television receivers of a substantial potion of
the public useless or otherwise cause undue burdens on the owners
of such television receivers...." H.R. 1555 sets fees for
subscription services in the same manner as S. 652. However, the
House bill requires these fees to be deposited in the U.S. Treasury
after the costs to the FCC of implementing these policies have been
recovered.
THE FCC
The FCC's role in this debate depends largely on whether
telecommunications legislation is passed in this Congress, and if
it is, how much discretion the legislation gives the agency to
allocate this new spectrum. In any event, the Commission is expected
to begin a series of proceedings this summer to determine how the new
spectrum should be allocated. FCC Chairman Hundt has spoken a great
deal on this issue, and believes it to be among the most important
the agency will face in the near future. As he has formulated his
position on the issue, the Chairman has changed direction on several
occasions. Earlier this year, he told broadcasters that they
shouldn't automatically expect to receive this spectrum, and has also
talked about broadcasters giving a quid pro quo for the spectrum in
the form of free time for candidates and increased children's
educational and informational programming. Then, in an April speech
at the NAB convention, Mr. Hundt appeared to backtrack from his
earlier statements - he promised to "help" the broadcasters, and
backed off from the suggestion that there should be any increased
responsibilities attendant to the new spectrum. Instead, he said
that he was "wary of the wisdom of government mandating how
[broadcasters] should take advantage of the business opportunities
that the digital revolution creates,..." In more recent public
statements, however, the Chairman appears to embrace his original
expectation that the public would receive enhanced public interest
obligations in return for broadcasters' use of the new spectrum.
ISSUES RAISED
The bottom line is that the broadcasters are seeking an extra channel
of scarce public spectrum without accepting any significant financial
or public interest obligations in exchange. This raises a number of
important issues:
o Should the broadcasters simply be given this extra spectrum for
free? Should somebody else get it, or at least get to use some of it?
o If the broadcasters do get the spectrum for free, should there
be some quid pro quo, i.e., freetime for candidates, a quantifiable
amount of educational and informational children's programming?
o Should program services provided over the extra (and existing)
spectrum be free from public interest obligations such as equal time,
lowest unit rate, children's educational and informational programming?
o Once broadcasters have made the conversion to digital, should
they be required to return their original channel?
o If fees for subscription services are collected, should those
monies go towards public television, children's television or some
other public interest goal?
OPTIONS
The broadcasters' proposal is unacceptable. It is nothing more than
a "spectrum grab" by the broadcasters that leaves nothing but crumbs
for the public. There are opportunities here to increase diversity
in the marketplace of ideas; increase public discourse; and finance
educational, informational and children's programming. They should
not be squandered. There are several alternative options, not all
of which are mutually exclusive. The options depend, in part, upon
whether legislation restricts the FCC's discretion.
Option 1: "Condominium"
As mentioned previously, digital compression technology permits a
broadcaster to split up a stream of bits into five, six or more
"channels." It is not necessary, however, for a broadcaster to
use every one of those channels.
Under this option, a broadcaster would be given new spectrum to
convert to digital. Once the conversion is completed, however, the
broadcaster would be able to program one or two of the channels, at
least one of which would be devoted to free program service. The
broadcaster would then lease the remaining channels to other
unaffiliated program and service providers. This is similar to
the "leased access" concept of cable television. Of course, the
broadcaster would have to return its original channel to the FCC.
The difficulty in this option lies in the details. Who would be
eligible for carriage? Would carriage on a digital channel count
for purposes of the multiple ownership rules? Would there be
preferential rates for nonprofits and other noncommercial information
providers?
Option 2: Allocate Spectrum in Exchange for Enhanced Public Interest
Obligations.
This option would give broadcasters new spectrum, but would impose,
as a quid pro quo, special public interest obligations. For example,
broadcasters could be required, on their free channel, to give one
hour of time every day for the sixty days prior to a federal election
for use by candidates. The Commission could set quantitative
guidelines for news, public affairs and/or children's programming,
or it could reserve one entire channel for the provision of that
programming. Another possibility might be a channel or two set aside
for public use, similar to PEG access channels provided by cable
operators.
Option 3: Require that Fees to Engage in Non-Program Services be
Placed in a Trust Fund for Public Broadcasting and/or the Production
of Children's Informational and Educational Programming.
If spectrum fees are imposed on broadcasters for providing
subscription services, some of the money could be set aside to
provide funding for public broadcasting and/or noncommercial
children's television. The public broadcasters have made a similar
suggestion in their report to Congress on alternative funding for
public broadcasting.
This option is not exclusive of the others listed here. For example,
the Commission could require enhanced public interest obligations
on a number of the digital channels, and still permit broadcasters
to engage in subscription services on others. In such a case, some
or all of the fees could still be set aside for public interest
purposes.
This option will raise opposition from a number of competing
interests. First, as reflected in the House bill, there are many
in Congress who simply want to apply this money to pay down the
national debt. Also, many Congressional Republicans will be
disinclined to give the money to public broadcasting, which they
are trying to defund. Another factor is the FCC, which might want
the money to fund itself.
Option 4: Adopt the FCC's Prior Decisions and Allocate the Spectrum
to Broadcasters to Provide HDTV Only.
One option is for the FCC to adopt its prior decisions giving
broadcasters new spectrum, but only for the purpose of providing
HDTV. These decisions also mandate that the broadcasters give back
the existing spectrum within 15 years. This option is being promoted
by the creators of the current HDTV standard, as well as the
Association for Maximum Service Television. This option gives little
back to the public, and ignores the fact that even if the broadcasters
are required to provide HDTV, there will still be room on the spectrum
to provide other services. This raises the question of whether
broadcasters should only get as much spectrum as they need to provide
digital HDTV. Or whether, if they do get the full 6 MHz, others should
be entitled to use the extra space.
Option 5: Allocate Spectrum to Others via Comparative Hearing
Perhaps the most unlikely option is for the Commission to decide to
allocate the new spectrum to parties other than existing broadcast
licensees much as they would any other broadcast license, i.e., by
comparative hearing. This option would, like the "condominium" option,
promote diversity, provided that the multiple ownership rules remain
somewhat intact. Some would argue that the Commission is bound to
this option by the Supreme Court's decision in Ashbacker Radio Corp.
v. FCC, 326 U.S. 327 (1945). Ashbacker held that the Communications
Act requires the Commission to hold a comparative hearing for new
broadcast licenses if there are two or more applicants for that
license. However, legislation mandating the Commission to give the
new spectrum to the broadcasters would effectively overrule Ashbacker.
CONCLUSION
Led by the NAB, broadcasters are trying to obtain large amounts of a
scarce, extremely valuable public resource in exchange for absolutely
nothing. Unfortunately, Congress, and perhaps even the FCC, appear
ready to comply. The allocation of this new spectrum could lead to
increased diversity, true public access and/or increased funding for
noncommercial public interest programming. Those who still care
deeply about these goals must act now to see that this golden
opportunity is not wasted.
ENDNOTES
1. Broadcasters' existing channels are also 6 MHz.
2. Digital compression converts voice, video and data into ones and
zeros, commonly known as "bits." The bits are delivered, in a stream,
to a converter box inside the television. The converter box sorts out
the bits and presents them as pictures to the viewer. The 6 MHz of
spectrum can hold 20 million bits per second of any kind of voice,
video and data. In comparison, a digital signal with the quality of
today's analog television signal requires just 4 million bits per
second. HDTV requires between 6-18 million bits, depending upon how
much action is in the picture.
3. "Advanced" television service is commonly recognized as one that
provides a clearer television picture than the current analog system,
but not as clear as HDTV.
4. Some have argued that this fee is equivalent to an auction of the
spectrum, because it permits the amount of fees to be, at a maximum,
the equivalent of what was paid for spectrum that will be used to
provide PCS services. However, under Section 207(a)(2), the FCC is
tasked with apportioning the fees according to the amount of spectrum
and amount of time that is devoted only to subscription services.
Therefore, the less time and space a broadcaster provides for
subscription services, the lower the fees. Moreover, setting the fee
limit at the auction value for non-broadcast spectrum automatically
undervalues the broadcast spectrum. It is commonly understood that
broadcast spectrum, which heretofore has been exempt from auctions,
is far more valuable than non-broadcast spectrum.
5. For example, officials at the Rupert Murdoch-owned Fox television
network have proposed providing an all news channel on the extra
spectrum. Under the broadcasters' plan, this station could promote
candidates for public office without having any corresponding duty
to give access or the lowest rate to opposing candidates. Another
possibility would be a continuous infomercial channel, featuring
products intended primarily for children. The scheme contemplated
by the broadcasters would have no limits on commercialization,
program length commercials or "host selling."
6. For example, FCC rules that require broadcast licensees to be of
good character would not be relevant under this section.
Andy Schwartzman
<andys@essential.org>
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