Could TV Stations Lose Their Spectrum?

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Washington— It's a doomsday scenario too dark for broadcasters to ponder: After all, it would mean the death of free, over-the-air television as we have come to know it for the past 60 years.

Maybe not tomorrow, but perhaps within a decade, the federal government might try to force TV broadcasters to give back all of their spectrum, the beachfront frequencies used to provide television to millions of Americans who aren't connected to cable or direct-broadcast satellite.

U.S. TV stations control some of the best spectrum on the planet. Its propagation characteristics are among the finest, allowing TV signals to pierce concrete and travel over broken terrain to bounce off a pair of living room rabbit ears in farm country dozens of miles from urban transmitters.

But there's a trend working against broadcasters: A relatively small and constantly declining segment of the TV audience receives off-air signals via antenna. That marketplace reality could put a spectrum take-back policy into play sooner, rather than later.

The logic behind a spectrum-seizure policy goes something like this: 85 percent of TV households presently rely on cable or DBS. As that number inches toward 90 percent or higher, Congress and the Federal Communications Commission might decide that the broadcast spectrum is more valuable in the hands of mobile phone companies willing to pay billions of dollars for the privilege.

Whether he meant to or not, new FCC Chairman Michael Powell put the issue on the table at an April press conference, in which he addressed the implications for TV stations should cable and DBS attain near-universal penetration.

"If 100 percent of Americans don't get free, over-the-air TV, what are we protecting?" Powell asked.

FCC spokesman David Fiske cautioned that Powell was not referring to whether broadcasters should be allowed to retain their spectrum if the only way they reach their audience was through secondary cable and DBS transmissions.

Instead, Fiske said Powell was ruminating about whether certain FCC regulations designed to ensure the survival of free TV must be changed — such as mandatory cable carriage — when cable and DBS hit the 100-percent mark.

But the fact remains that the booming cell-phone industry could use the spectrum TV stations now occupy to introduce wireless Web services for those on the run. And that's something Washington policy makers are taking seriously.

"It's a reality of today for broadcasters that the vast majority of consumers receive those signals via cable or DBS," said Susan Eid, Powell's top cable and mass media adviser. "I think it's an issue that the [FCC] needs to look at, I think, in a much more thoughtful way … because the business model has changed."

Cable's ability to burrow deep into the local market has been abetted by FCC regulation, Eid noted. In 1993, the FCC prohibited cable operators from charging to connect and serve a home's second and third TV sets.

"That was zeroed out," she said. "So you have multiple sets in the home that are hooked to cable-ready sets that are still getting their broadcast services via cable, not over the air."

Veteran FCC Mass Media Bureau chief Roy Stewart said he has put TV station owners on notice that their claim on the spectrum is not a perpetual inheritance.

"I tell the broadcasters that you ought to start thinking about what you are going to do if that [cable-DBS] number gets higher, and what you can do to be more innovative," Stewart said last month in remarks before a Media Institute audience here, which included lawyers and lobbyists from the National Association of Broadcasters.

If the broadcasters don't make their service more useful to the public — especially with respect to their digital channels — they might lose their grip on the spectrum, warned Stewart.

"You want me to say that the future of broadcasting is to be programmers on a fiber-optic network someplace?" he said. "That may be possible, if we ever get to the 100 percent."

But Stewart dismissed the notion that cable and DBS could attain 100 percent penetration, "unless you have cable green stamps issued by the government."

Ironically, four years ago then-Sen. and now-Attorney General John Ashcroft articulated the "green stamps" approach that Stewart's comments suggested was implausible.

Ashcroft, a Missouri Republican, called for auctioning all TV spectrum to the highest bidder and using some of those proceeds to wire every TV set in the country to cable, which would be required to dedicate channel capacity to the former TV stations.

"My commitment is to maintain free television, but I do not have a commitment to maintain free broadcast television if that misallocates a valuable resource of the country — namely, spectrum," he said.

Then-NBC president and CEO Robert Wright, present when Ashcroft spoke in the Senate Commerce Committee meeting room, derided the plan as shopworn socialism.

"Isn't that what they did in Russia in the old days? Isn't that what Castro said? 'That's a nice sugar plantation. I think the government should operate this,' " Wright cracked.

HARD WIRE EXISTS

At least one broadcaster acknowledged that some TV stations are already hardwired into cable systems.

"We have wires right now that go to the cable headend and then they broadcast it on cable," said David J. Barrett, president and CEO of 33-station Hearst-Argyle Television, the No. 9 broadcast-TV owner.

But Barrett said broadcasters would resist any effort to take back the company's spectrum.

"One end game is that they could recapture all of the spectrum," he said. "That would ultimately preclude the ability of someone to watch it, absent a cable hookup. I think it would be shame on us if you sacrificed over-the-air service in this country."

Blair Levin, a media and telecommunications analyst with Legg Mason Wood Walker Inc., said TV stations were not in immediate danger of losing their spectrum. But political forces could shift if cable and DBS penetration climbs above 90 percent, if Japan and Europe race ahead of the U.S. in the advanced wireless-data market and if lawmakers need to patch big holes in the budget with spectrum-auction revenue.

"If you have those three things all come together at the same moment, that would be a danger for broadcasters," Levin said. "We are certainly not close in terms of this year or next year."

Washington policymakers admit they would be crazy to adopt policies that could turn millions of TV sets into doorstops. Although there are about 100 million TV households, there are about 250 million sets. Neither the FCC nor Nielsen Media Research knows precisely how many TVs are connected to cable or DBS.

"Here's an interesting statistic: More Americans in this country have television than indoor plumbing. That's an absolute truth. Now that's saying something. Now that's value," Powell said at April's NAB convention in Las Vegas.

David Goodfriend, a staff member to former FCC commissioner Susan Ness who will join EchoStar Communications Corp., said that it was incorrect to conclude from cable and DBS penetration figures that only a small segment of viewers relied on off-air broadcasting.

"I might have cable attached to my TV in the living room, but downstairs in the den, I still have a pair of rabbit ears on my TV," he said. "So this notion that 85 percent of the country simply does not avail themselves of wireless broadcasting, I think, is a mischaracterization of what consumers really do."

Before Washington politicians decide to take TV spectrum, they would likely need to have a firm handle on cable and DBS TV-set penetration to guard against angering millions of consumers.

"There is an enormous amount of television still being viewed over the air with the second- and third-set phenomenon," said Hearst-Argyle's Barrett.

Stewart pegged the off-air only audience at 40 million people.

Broadcast industry sources like to point that the distribution of local TV signals by cable and DBS operators has contributed to the success of cable and DBS. Even if the TV stations were to lose their spectrum, they would still have a product tied to local markets that cable and satellite providers would want to carry.

Powell effectively endorsed that view by saying broadcasting isn't necessarily going to be a victim of its success as measured by the penetration of cable and DBS.

"It shouldn't mean that it's dead, necessarily. It should mean that the enormous value that the broadcasters provide will find a place in that space as well," Powell said.

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