PFF has just released the transcript of an excellent panel discussion I moderated last week entitled, “Let’s Make a Deal: Broadcasters, Mobile Broadband, and a Market in Spectrum.”  As I’ve mentioned here before, one of the hottest issues in DC right now is the question of broadcast TV spectrum reallocation.  Blair Levin, who serves as the Executive Director of the Omnibus Broadband Initiative at the Federal Communications Commission, recently raised the possibility of reallocating a portion of broadcast television spectrum for alternative purposes, namely, mobile broadband. Such a “cash-for-spectrum” swap would give mobile broadband providers to spectrum they need to roll out next generation wireless broadband networks while making sure broadcaster receive compensation for any spectrum they hand over.  The FCC just recently released a public notice on “Data Sought on Users of Spectrum,” (NBP Public Notice # 26) that looks into the matter. “This inquiry,” the agency says,” takes into account the value that the United States puts on free, over-the-air television, while also exploring market-based mechanisms for television broadcasters to contribute to the broadband effort any spectrum in excess of that which they need to meet their public interest obligations and remain financially viable.” Meanwhile, the House Energy and Commerce Communications Subcommittee is set to hold a hearing on the issue next Tuesday.

PFF’s panel discussion on this issue featured an all-star cast of characters, including opening remarks by Blair Levin, and a terrific discussion ensued. [You can hear the full audio from the event here.]  Down below I have highlighted some of the major points each speaker made during the discussion and also embedded the complete transcript in a Scribd reader.  Also, just a reminder that my PFF colleague Barbara Esbin and I authored a short paper on this issue recently: “An Offer They Can’t Refuse: Spectrum Reallocation That Can Benefit Consumers, Broadcasters & the Mobile Broadband Sector.”

• Blair Levin, Executive Director of the FCC’s Omnibus Broadband Initiative, began the discussion by describing how additional spectrum will be needed to expand wireless broadband and why spectrum currently held by broadcasters would be a good option.  In addition to identifying spectrum that has the technical qualities to support broadband, he explained, “You also would look at things like where there’s an economic gap between the current use and potential wireless use.  You would want to look at bands where maybe there are regulations which constrain the market mechanism.  You also might want to look at bands where you can have a meaningful reallocation of spectrum while, nonetheless, preserving current uses.”
• Coleman Bazelon, Principal at The Brattle Group, presented findings from his recent paper on the value of spectrum currently held by broadcasters if it was reallocated to commercial mobile or wireless broadband uses. “This analysis shows that there are significant gains from reallocating the broadcast band, and I think the takeaway should be that there are significant gains, not that its $42 billion or $51 billion, but that its tens and tens of billions of dollars,” Bazelon stated.
• David Donovan, President of the Association for Maximum Service Television, Inc., questioned the estimates of the additional value of broadcast spectrum that could be gained if it was auctioned for other uses.  “If you are valuing over the air television broadcasting and its importance to the American public, using a snapshot based on an auction valuation at a particular point in time is really highly inappropriate,” he stated. “The business model of broadcasting is heavily regulated. … and that defines, of course, the value, just like heavy zoning defines the price of land.”
• Kostas Liopiros, Principal of The Sun Fire Group, discussed the technical feasibility of using various blocks of spectrum for wireless broadband use.  “Only additional spectrum can produce the required gains of capacity in the future, but if the gains capacities are oriented towards wireless broadband, for national wireless broadband capability, you need to focus on the right type of spectrum,” he explained.
• John Hane, Counsel in the Communications Practice Group of Pillsbury Winthrop Shaw Pittman LLP, warned of the legal difficulties of modifying broadcast licenses.  “Extinguishing licenses requires a hearing, potentially hundreds of them, each one affecting one or more Congressional districts.”  Although the FCC is able to modify a license without the licensee’s consent, he continued, “that is a very long and complicated process with an uncertain time frame.  If there really is a spectrum crisis, the stick approach …is not going to solve it very fast.”
• Paul Gallant, Senior Vice President of Concept Capital, discussed the possible effects of Congress involvement in auction of broadcast spectrum.  If broadcasters are reluctant to modifying their business model, Gallant explained, it might be beneficial for them to have Congress involved in such a deal.  However, he warned that Congressional involvement could also result in uncertainty for the broadcasters.  “It is not clear, if Congress does pass a bill, whether broadcasters come out better or worse than they would if they had worked something out with the FCC.  The main reason is there is tremendous budget pressure in Congress today.  They are looking for new sources of revenue,” Gallant explained.
• Andrew Jay Schwartzman, President and CEO of Media Access Project, expressed that he was resistant to the idea of auctioning spectrum.  “It isn’t property,” He stated.  “They favor incumbents.  They’re rigged.  They don’t generate the revenues that OMB and Congress seem to think they will.” He also warned of the possible impact of auctions on innovation. “Auctions lock in existing technology and near-term foreseeable technology. The people who are able and willing to bid are basing it on technology that they know they can generate and that does not allow the spectrum to be used in better ways coming down the road.”

Transcript of Dec 1 PFF Event on Broadcaster TV Spectrum Reallocation [PFF – Thierer] http://d1.scribdassets.com/ScribdViewer.swf?document_id=23980532&access_key=key-wdpoolnrm5gxq1xu7c6&page=1&version=1&viewMode=list

It’s truly amazing how fast mobile broadband demand is expanding. A couple of things caught my eye yesterday that really drove that home.  First, I was reading Bernstein Research’s weekly (subscription-only) newsletter and Craig Moffett, one of America’s top media and communications analysts, summarized the growing mobile bandwidth crunch as follows:

To fully grasp the challenge facing wireless providers as we make the transition from wireless voice to wireless data, it is helpful to put some ballpark numbers around current usage levels. Today, the average voice-only customer consumes something like 50 megabytes of data every month. For that, they pay about $40, or about $0.80 per megabyte. That’s 70% of wireless industry revenues. Text messaging generates another $10 per month for a minuscule amount of data (in fact, arguably no throughput at all, since text messaging travels in a signaling band rather than in the carrier band itself). Let’s call it $1,000 per megabyte. That’s another 15% of industry revenues. On a blended basis, then, that’s $1.00 per megabyte for 85% of industry revenues. And then there’s the iPhone. By some estimates, the average iPhone user consumes as much as 800 megabytes per month. Take out their 50 Mb for voice and you’re looking at 750 Mb of data… for an additional $30. For the mathematically challenged, that’s a princely sum of… wait for it… four cents per megabyte. Worse, we noted that the FCC’s wireless net neutrality policies posed the risk of “bandwidth arbitrage,” where low bandwidth services (at $1.00 per megabyte) would be replaced with free or almost free applications that ride on $0.04 per megabyte data plans, and where carriers’ hands would be tied to prevent it. Taking a business that is currently getting $1.00 per megabyte down to just $0.04 per megabyte is, well, hard. And lest anyone think that this threat is idle fear-mongering, Google’s acquisition last week of Gizmo5, a wireless VoIP specialist, should give one pause.

Those are stunning numbers. And then I saw this new filing by CTIA listing some other statistics about growing mobile broadband demand:

According to the FCC’s most recent data, there were over 59 million mobile wireless high speed lines.

In addition, mobile wireless broadband growth continues to outpace every other broadband platform, with net additions between December 2007 and June 2008 greater than those of DSL and cable modem combined.

Mobile data and Internet traffic will increase 66 times between 2008 and 2013;

By 2010, “mobile broadband penetration will surpass fixed penetration globally.”

The simple task of watching a YouTube video consumes 100 times the bandwidth of a voice call.

The mobile data traffic footprint of a single mobile subscriber in 2015 could very well be 450 times what it was in 2005.

These projections are consistent with mobile broadband providers’ experiences to date. For example, AT&T noted that its wireless data traffic has increased nearly 5,000 percent in the past quarters and other carriers have likewise reported dramatic increases. Similarly, since T-Mobile began offering its G1 smartphone, customers of that device use, on average, 50 times the data of the average T-Mobile customer.

For these reasons, CTIA and others are calling on the federal government to find more spectrum to meet these growing mobile broadband needs.  The question is: Where to find it?  The military is one answer, but good luck getting them to budge and return any of their current spectrum holdings for reallocation.  Thus, as Barbara Esbin and I noted in a recent PFF paper, a lot of people are turning to the broadcast TV sector and hoping to find a way to make a cash-for-spectrum deal with them to get some (or all) of their spectrum back. But it may be unlikely many broadcasters will be willing to hand back their spectrum for alternative uses, even if the cash offer was generous.  Plus, Congress would have to bless any such deal, which raises another set of sticky political issues.

PFF will be hosting a debate about these issues on Tuesday, December 1st at 9am at the National Press Club in Washington, D.C.  The event is called, “Let’s Make a Deal: Broadcasters, Mobile Broadband, and a Market in Spectrum.”  Seating is limited, so reserve your spot now by RSVPing here. We’ve got a terrific lineup for the event, including:

• Blair Levin, Executive Director, Omnibus Broadband Initiative, Federal Communications Commission
• Coleman Bazelon, Principal, The Brattle Group
• David Donovan, President, Association for Maximum Service Television, Inc.
• Paul Gallant, Senior Vice President, Washington Research Group
• John Hane, Counsel, Communications Practice Group, Pillsbury Winthrop Shaw Pittman LLP
• Kostas Liopiros, Principal, The Sun Fire Group

As I noted in a recent paper with my PFF colleague Barbara Esbin (“An Offer They Can’t Refuse: Spectrum Reallocation That Can Benefit Consumers, Broadcasters & the Mobile Broadband Sector“) an official at the Federal Communications Commission (Blair Levin) recently suggested that it might be possible to craft a grand bargain whereby television broadcasters get cash for some (or all) of their current spectrum if they return it to the FCC for reallocation and auction.  Such a deal could, eventually, open up significant amounts of prime spectrum for next-generation mobile broadband and data services.

Is such a deal feasible and in the best interests of broadcasters?  Is the arrangement necessary to encourage growth in broadband penetration consistent with the goals of the Recovery Act?  Will Congress go along with the deal, or would it be blocked as contrary to “the public interest?” Alternatively, would lawmakers back the deal but seek a significant cut of the auction proceeds, leaving less available for broadcasters?  These and other policy issues will be discussed at “ Let’s Make a Deal:  Broadcasters, Mobile Broadband, and a Market in Spectrum,” a congressional seminar hosted by The Progress & Freedom Foundation. The event will be held Tuesday, December 1st from 9:00am to 11:00am in the Holeman Lounge, 13th Floor, at the National Press Club, 529 14th Street, NW in Washington, DC.

Panelists confirmed so far for the event include:

• Blair Levin, Executive Director, Omnibus Broadband Initiative, Federal Communications Commission
• Coleman Bazelon, Principal, The Brattle Group
• David Donovan, President, Association for Maximum Service Television
• Kostas Liopiros, Principal, The Sun Fire Group
• John K. Hane, Counsel, Pillsbury Winthrop Shaw Pittman LLP
• and 1 or 2 more to come!

I will be moderating the event.  Those interested in attending can register here.  Should be a spirited debate.

Along with my colleague Barbara Esbin, the Director of PFF’s Center for Communications and Competition Policy, I have just released a new paper on discussing the possibility of reallocating a portion of broadcast television spectrum for alternative purposes, namely, mobile broadband. As I discussed here before, Blair Levin, the Executive Director of the FCC’s Omnibus Broadband Initiative, has been suggesting that it might be possible to craft a grand bargain whereby broadcasters get cash for some (or all) of their current spectrum allocations if they return spectrum to the FCC for reallocation and re-auction, likely to mobile broadband services.

In our paper, “An Offer They Can’t Refuse: Spectrum Reallocation That Can Benefit Consumers, Broadcasters & the Mobile Broadband Sector,” [PDF] Barbara and I argue that:

the benefits of such a deal could be enormous for wireless broadband providers, developers of digital technologies, and consumers.  Expanding the pool of spectrum available for next-generation wireless broadband offerings will ensure that innovative new networks, devices, and services are made available to the public on a timely basis.  Ultimately, that will mean more high-speed choices for consumers, especially those in rural areas harder to reach with high-speed wireline networks.  Finally, more generally, anything that moves us in the direction of a freer market in spectrum is a good thing. But fairness to broadcasters lies at the heart of this spectrum reallocation plan. If a deal can’t be structured that broadcasters would find acceptable, they should not be forced to come to the table. When we speak of an offer they can’t refuse, we mean one so attractive that no rational businessperson or investor would pass it up. It is essential broadcasters be willing partners in the deal, and be full participants in the process of shaping its contours.

Read the entire thing here, or below the fold as a Scribd document.

Broadcast TV Spectrum Reallocation (Thierer & Esbin – PFF) http://d1.scribdassets.com/ScribdViewer.swf?document_id=22365493&access_key=key-2cs1sry5qv9xd3x6d5bv&page=1&version=1&viewMode=list

Potentially huge FCC development here, and one they actually has some sense to it. According to Kim McAvoy over at TV News Check.com:

FCC broadband czar Blair Levin earlier this month met with leading TV broadcasters in Washington to discuss the nation’s urgent need for more spectrum for wireless broadband access to the Internet and the possibility of broadcasters’ relinquishing most of their spectrum to help meet that demand. According to sources familiar with the Oct. 8 meeting with the board of the Association for Maximum Service Television (MSTV), Levin suggested broadcasters might want to consider returning their spectrum in exchange for a share in the billions of dollars that would come from the auction of the spectrum to the wireless industry. Broadcasting would retain just enough spectrum so that each station could provide a lifeline standard-definition service to the millions of TV viewers who still rely on over-the-air reception. Broadcasters could no longer offer over-the-air HD and second channels and mobile video would be off the table, but they could continue to provide a single channel of TV to every home in their markets as they do today — in full-blown HD via cable and satellite carriage and SD via the over-the-air lifeline service.

Wow, this is a very big deal, folks, since we are talking about a mother lode of prime spectrum that could be put to any variety of excellent alternative uses.  The problem is, broadcasters will—rightly, in my opinion—protest that they have occupied that spectrum for a long, long time and they have something akin to a property right in their allocations. Of course, paying them to relocate might be a very sensible way to get them off that spectrum voluntarily. But the question is whether they should be forced off of it and whether that is even legal.  No doubt, any attempt to force them off would be held up in court for many years because of inevitable legal challenges.

There is another solution: Just give the broadcasters a full, unencumbered property right in their spectrum and let them sell it or use it however they wish. Some will protest that it’s not “fair” and that the broadcasters should never be given a property right in something they did not pay for to begin with. Yet, at some point we have to stop the endless search for what I have referred to as a “spectrum reparations policy” and just get on with life.

I think everyone can now agree that the old command-and-control regulatory regime for “zoning” spectrum has retarded innovation. Imagine if we told Apple back in the 1980s that, because they started in the PC business, they could never leave the PC business and offer other innovations.  That would have been nuts! We’d never have the iPhone today. But that’s U.S. spectrum policy for broadcasting in a nutshell.  As a broadcaster, it is illegal for you to repurpose your spectrum for alternative uses.  Stated different, spectrum innovation is a crime.  How pathetic.

It’s time to change the rules and move forward.  I applaud Blair Levin and the FCC for offering at least one solution, but if it doesn’t work, we should try the other: property rights and flexible use rights in spectrum. And here are 4 or 5 other ways to get the job done.