ATSC 3.0 Can Help Keep Broadcasters Competitive, FCC Chief Tells NAB
LAS VEGAS -- Broadcasting is at “an inflection point” where it can move from “being disrupted to the disruptor,” said FCC Chairman Tom Wheeler in a highly anticipated speech to a packed room at the NAB Show Tuesday. In the speech and a subsequent chat with NAB CEO Gordon Smith, Wheeler offered up a list of “opportunities where the FCC could help broadcasters remain competitive.”
Wheeler suggested broadcasters should offer local news using over-the-top services, use channel sharing to make money in the incentive auction, and shift toward adopting the Advanced Television Systems Committee’s 3.0 standard (CED April 8 p1). He also expressed support for Smith’s “National Broadcast Plan,” though he cautioned that Congress would need to release funds for it, and that it would happen after the incentive auction.
Broadcasters shouldn’t be afraid to transition to new ways of doing business in the wake of technological change, Wheeler said. “Broadcasters aren’t in the TV business,” he said. “Your horizons are better than your current product."
Anticipation for Wheeler’s speech was high at the convention, coming after recent FCC decisions limiting some TV station sharing arrangements and banning joint negotiation of retransmission consent contracts. Some convention attendees told us they thought it was possible the chairman could get booed, or that some broadcasters might boycott the speech. There wasn’t evidence that either occurred during Wheeler’s talk. Several broadcast attorneys told us it was unusual for the FCC chairman to pass rules opposed by broadcasters right before their convention. It’s more usual for chairmen to pass something especially favorable to a given constituency just before its trade shows, several attorneys told us.
"I understand that a good enemy is a priceless asset,” said Wheeler. “That tactic sure feels different if I'm the enemy -- especially when I'm not,” he said. “Trust me. I get the skepticism."
Broadcasters should use their existing resources to begin delivering expanded OTT services with an emphasis on local news, Wheeler said. Licensees could use their content to become “the source for local news down to the neighborhood,” he said. The Internet has a gap where local news is concerned, Wheeler said. The local news service could be promoted using stations’ unsold ad slots, Wheeler said. In focusing more on the Internet, broadcasters should support an open Internet, Wheeler said. “This is where our policy activities become relevant to creating a new expansive era for broadcast licensees.” Net neutrality rules are an “open sesame” for stations to move from the “television” business to the “information” business, Wheeler said.
'Pivot’ to OTT
To fund the “pivot” to focusing on OTT, broadcasters should participate in the incentive auction to generate capital, Wheeler said. Broadcasters who sell their spectrum and use channel sharing to continue offering their content will get to keep their businesses “while taking home an auction check,” Wheeler said. “It is a once-in-a-lifetime, virtually risk-free opportunity to expand your business model on somebody else’s dime.” Those opportunities for broadcasters have expiration dates, Wheeler said. Recent reports indicate Yahoo is trying to move into the OTT local news business, he said, and the upcoming spectrum auction is likely to come around only once, he said. “While legally we could hold another auction, realistically I'm not as sure."
On a separate panel Monday at the NAB Show, Howard Symons of the FCC Incentive Auction Task Force said broadcasters who participate in the auction will go through an extensive process to minimize repacking costs. The process includes checking the feasibility of their destination stations, “optimization” in which the FCC will determine what the best destination channel is and a third phase in which a broadcaster not satisfied with a newly assigned channel can ask the FCC for a different one, he said. The FCC is “optimistic” that the $1.75 billion allotted for reimbursing the repacking costs of the incentive auction will cover the bill, Symons said.
Symons, House and Senate Commerce committee staff, and Courtney Reinhard, aide to FCC Commissioner Mike O'Rielly, all said recent commission rule changes seen as unfavorable to broadcasters were not intended to force them into the auction. The commission would not “create a stick” to force broadcasters into the auction, Symons said. Wheeler echoed this during his speech Tuesday, when he promised broadcasters that “there is no conspiracy” to force them into the auction.
Expanding to OTT and channel sharing are opportunities that will work only for certain broadcasters, several broadcast attorneys said. Most stations see OTT as a complement to their broadcast news offerings rather than the focus of their businesses, said Fletcher Heald’s Dan Kirkpatrick in an interview. Wheeler also didn’t address any of the problems that stations that move to sharing will face, such as the inability to offer more than one channel in HD, said Fletcher Heald’s Frank Jazzo.
'Heart-to-Heart’ Meeting
Wheeler credited a “heart-to-heart” meeting with Smith last week for inspiring the third prong of his plan for broadcasters: Using the new ATSC 3.0 standard as “the entry point to the broadband economy for broadcasting.” Smith urged broadcasters to support the new standard, in a speech Monday. The FCC will be ready and responsive when the standard is completed, said Wheeler. Though ATSC 3 isn’t backwards-compatible with existing TVs, “it is compatible with the incentive auction,” Wheeler said. “If it is possible to get a multiple of throughput on spectrum with OFDM, we, as stewards of the spectrum, need to be supportive."
Wheeler’s statement that he supports broadcasters using the new standard to participate in the broadband market is “terrific,” said Sinclair Vice President Mark Aitken. He said it’s important that any efforts to transition broadcasters to ATSC 3.0 be coordinated with the repacking, to spare expense to licensees. “We have maintained from the beginning that we believe there is a responsibility by the FCC to allow broadcasters to advance,” Aitken said. “If we're going to do a repack, we should allow broadcasters to do so using a next generation standard."
"If it is possible to expand competition by offering wireless throughput at or better than the level that will be commonly available at the time of its rollout, we need to welcome the competition,” Wheeler said. He cautioned that ATSC 3.0 transition would be “a heavy lift” on the order of the DTV transition. “We should neither shrink from it, nor underestimate its magnitude,” he said. Smith suggested the effort could be part of a National Broadcast Plan, which Wheeler said should be considered, if the funds are approved by Congress and the effort begins after the auction. A National Broadcast Plan should be compared to other congressionally funded FCC efforts, like the auction, Wheeler said.
In Q-and-A with Wheeler, Smith tried to pin him down on what sort of arrangements would be acceptable under the new waiver rules, coming very close to outright asking about a request for a waiver entered Friday by Armstrong Williams. His company, Howard Stirk Holdings, is in sharing arrangement with Sinclair. Wheeler avoided opining on Williams’s application, but said arrangements that encourage minority ownership and don’t “impair competition” shouldn’t have a problem getting a waiver. The “exchange” with Wheeler was good, Smith told us after the speech, praising it for “breaking the ice.”
Wheeler turned the tables when he asked Smith why broadcasters want the commission to use 2000 Census data instead of data from 2010 and OET-69 software instead of the newer TVStudy in the repacking effort. “I'm scratching my head,” Wheeler said. The “2010 data is more current than 2000 data, and we ought to be using the most recent data,” he said. “I know we're nearly running out of time,” Smith responded, shifting to the next question.