An Open Letter to FCC Chairman Tom Wheeler

To: Federal Communications Commission Chair Tom Wheeler
CC: Other FCC commissioners, the United States Senate Commerce Subcommittee on Communications, Technology, and the Internet, the House Energy Subcommittee on Communications and Technology (and any other interested members of the House of Representatives), the National Association of Broadcasters, and all concerned citizens reading on MorganWick.com

I read with interest the chairman’s remarks last Thursday to the Computer History Museum in Mountain View, California. One thing in particular stood out to me:

Historically, the government allocated spectrum for specific uses or applications. The realities of analog transmission meant that each application, whether television broadcasting or a walkie-talkie, required its own assigned chunk of spectrum. As the IP revolution has meant that a voice call looks just like a television show – a collection of 0s and 1s – the analog-inspired spectrum silos have become an impediment to advancement. Put another way, one of the revolutions through which we are living is the reworking of analog spectrum concepts to the new digital realities.

Slavishly sticking to analog age concepts of spectrum allocation can become, in the digital age, a government-imposed chokepoint that burdens competition and innovation by creating unnecessary and artificial scarcity of this essential resource. The spectrum allocation chart is chock-full of allocation decisions made on analog concepts that are no longer valid today. We need to bring more spectrum capacity to market – and fast…

Change is difficult, especially when your business – in this case the broadcast business – provides a valuable national service, but does so in an environment in which increasingly over-the-air is only one of the platforms available to distribute video. When Congress created the Broadcast Incentive Auction in 2012, it was recognizing that spectrum allocated on analog technical principles for analog business models may no longer be preferable for businesses in the digital age. The wisdom of its decision (and I don’t use that word lightly – it was wise) was to let the market, rather than lawyers and Washington “Wise Men,” make spectrum allocation decisions through an incentive auction…

Broadcast licenses are 6 MHz of spectrum – the old amount necessary to transmit an analog waveform. A digital television channel, however, does not require the full 6MHz of spectrum. In the new digital environment that 6MHz of spectrum can deliver 19.4 mbps of throughput – far more than is necessary to transmit a standard definition or even a high definition TV channel. This means that the 6 MHz of spectrum once required for a single analog television channel now provides sufficient capacity for multiple television signals to coexist comfortably. The FCC is changing its rules to allow licensees to share capacity inside that 6 MHz, maintain their broadcast carriage rights on cable (which is 90 percent of their viewing homes anyway), and walk off with a big check from selling their old spectrum.

I cannot remember a point in history when it has been simpler, safer, or more profitable for an incumbent service provider to take advantage of new technology. Typically, new technology plows under the old business models; in this case, however, the FCC is overseeing a once-in-a-lifetime opportunity for profitable repurposing of an important business activity. That this is a once-in-a-lifetime opportunity is not hyperbole. The rebanding associated with this auction is hard enough; when it is done the ability to do it again will be virtually nil. There will not be another round of broadcast incentive auctions.

I fully agree with the chairman’s position that the 6 MHz channels each broadcast station is allocated is an outdated relic of the analog era, and would go further and say that the broadcast incentive auctions represent a chance to correct Congress’ error in the Telecommunications Act of 1996 in mostly maintaining the existing television spectrum framework, with each incumbent station owner receiving 6 MHz of spectrum to commence digital broadcasting, the only concession to the increased efficiency allowed by digital broadcasting being the ability to operate additional channels in the space. This amounted to a windfall for incumbent station owners, some of them local but many of them large national corporations, that was in part responsible for the decided underutilization of spectrum freed up by the digital transition, which the chairman’s predecessor likened to a set of “empty boxcars“. Many if not most stations have opened up second subchannels with which to air programming, but most of them have been uninspiring, many of them being nothing but endless cheap reruns of classic TV shows, and combined with the lack of must-carry the audiences have been correspondingly miniscule, with the possible exception of subchannels filling network affiliations there otherwise would not be enough stations in the market for.

I also agree with the broader point that government spectrum allocation policy should mirror the dissolving boundaries between different media and uses that characterized the pre-Internet era, and that the coming spectrum auctions represent a once-in-a-lifetime opportunity to optimize our use of spectrum, one it may be impossible to have again. It is therefore all the more imperative that we get it right.

It is easy to see, despite all the chairman’s claims, why broadcasters might perceive the spectrum auctions as a threat to their livelihoods, if not a potential death knell for their business. In many ways, America’s broadcast television industry is in a state of crisis, one caused in part by decades of neglect in the face of the rise of cable. An industry once prided on localism is now dominated by humongous conglomerates who exploit loopholes in the rules and merge with one another to become even more humongous. As the use of free, over-the-air television has shrunk, audiences have declined with it even with the continued presence of stations on cable, and cable networks have increasingly used their dual revenue streams of advertising and subscription revenue to produce a steady march of sports events away from broadcast and produce scripted programming of higher quality than it seems possible for broadcast stations, tasked to produce value for advertisers alone and subject to FCC rules not applied to cable networks, to provide. Many Americans may not even be aware that it is still possible to watch free broadcast television over-the-air, if it ever was, let alone that many of the issues many people associate with broadcasting in the analog era are a thing of the past if you live in the right area with the right antenna. Even as broadcasting survives despite all these challenges, they now must face the rise of the Internet and the competition it provides for viewing video, as well as the concurrent voracious demand for spectrum it has produced in the wireless companies with the rise of smartphones and tablets. Despite the chairman’s claims, we all know that the vast majority of the spectrum available in the incentive auction will wind up in the hands of the big wireless companies AT&T and Verizon, with most if not all of the scraps going to Sprint and T-Mobile. With the past twenty years seemingly consisting of one win over another for cable over broadcast, many in broadcasting feel that those making money in cable see them as a nuisance they’d love to destroy, and that the big wireless companies see them as spectrum hogs to be swept out of the way.

Yet despite all of this, in another sense things have never been better for broadcasting, certainly not since the rise of cable. The rise of the Internet, which has posed such a challenge for broadcasters, may be an even bigger threat to cable networks, as combined with outrage over rising cable prices it has fueled rising interest in “cord-cutting”, dropping cable subscriptions in favor of a combination of free over-the-air television and watching shows on-demand over the Internet. Although cord-cutting is much talked about, it has so far failed to catch on, in large part because cable companies are doing everything in their power to keep people tethered to their cable, but already cable subscriptions appear to have plateaued and begun to decrease. As cord-cutting catches on, cable networks will find their revenues drastically reduced, many of them going out of business, and broadcasters could find themselves in prime position to regain much of their lost audience and prestige.

But broadcast television seems to be rarely mentioned in discussions of cord-cutting, and the attitude of broadcasters towards it seems to be ambivalent at best. Judging by the headlines of broadcasters’ legal fights against the Aereo service, one might even come to the conclusion that broadcasters see cord-cutting as just another threat to their livelihoods. This seemingly counterintuitive outcome is the unintended result of something that may well be, at least on the surface, a vital reason why broadcasting has managed to survive to this point, but ultimately may turn out to be the most insidious threat of all, one threatening to unravel broadcasting from within, the retransmission consent program that has helped to level the playing field and allow broadcasters to collect their own cut of the subscriber fees that have proven so lucrative for cable networks. But as retransmission consent revenue has become an increasingly important part of broadcasters’ bottom line, they find their interests increasingly aligned with those of cable operators, with the result that not even broadcasters come off as very good guardians of America’s broadcast infrastructure. I am disappointed in the chairman’s advertising the ability to keep stations’ must-carry rights on cable, dismissing any concerns over broadcasters’ reduced spectrum since cable represents “90 percent of their viewing homes anyway”. Once broadcast stations are treated as just another sort of cable channel, once the broadcast infrastructure that distinguishes them from the cable networks is disregarded, the result is inevitable, and is already beginning to be seen in the threats of Fox and others to pull their most highly-rated programming off of over-the-air broadcast television and put it entirely on cable if they don’t get their way with Aereo. The informed consumer must infer that if a substantial number of people begin cord-cutting, the media companies would do the same thing.

Retransmission consent is, of course, not the only thing dampening broadcasters’ enthusiasm for cord-cutting. The somewhat muted role of broadcasting in discussions of cord-cutting is in part due to limited awareness of America’s broadcast infrastructure as mentioned before, but also because the Internet – what the chairman calls America’s “fourth network revolution” – potentially poses an existential threat to the very notion of traditional linear television, broadcast or cable. As, in the chairman’s language, the Internet becomes another “platform available to distribute video”, it renders superfluous and seemingly archaic traditional television’s requirement to tune in to a particular channel at a particular time on an immobile, fixed device to watch the program you want to watch. What, then, is the role of traditional linear television when the Internet offers the promise of watching what you want, when you want it, on any device you choose?

The answer may lie in the “when” part, and in particular some revealing aspects of the technical details of how the Internet works. Suppose you want to watch a recent episode of The Simpsons, so you go to hulu.com, find the episode you’re looking for, and click it. Your computer sends a request to Hulu for the episode, and begins downloading the episode from Hulu’s servers. If another user wants to watch the same episode, their computer goes through the same process. From Hulu’s perspective, the two computers represent two different connections and Hulu delivers the episode to them separately, even if they’re the exact same episode. If both computers are using the same ISP (or wireless provider), that ISP makes two different connections to Hulu and delivers the episode to the two computers separately. This works fairly well when anyone can watch any video they want at any time they want. But if both computers want to watch a live sporting event streaming on WatchESPN.com (or any other site), they go through the exact same process, their separate computers pulling up the stream separately and their ISP pulling it up and delivering it to them separately, even though they are watching the exact same thing at the same time. That doesn’t happen with an over-the-air broadcast signal, or even a cable channel. Broadcasters call this their “one-to-many” architecture; the way I would put it, the Internet is great at delivering a lot of programs to a few people, but broadcasting is better at delivering a few programs to a lot of people.

For years now video has made up the bulk of Internet traffic despite not making up that large of a proportion of Internet usage, due to the sheer levels of bandwidth it consumes. I would argue that a big reason for wireless companies’ voracious appetite for spectrum in the first place has to do with the strain video puts on their network. The wireless companies have come up with a number of short- and long-term solutions to the problem, with one approach being to effectively go into broadcasting themselves. But it’s also easy to see AT&T’s recently-announced plan to not count certain web sites against monthly data caps as aimed primarily at sites that offer video, much as Comcast has charged Netflix’s video carrier to stream Netflix content. It is easy to see that placing too much onus on the Internet to deliver video poses a serious threat to net neutrality, the cornerstone of the open internet. The wireless companies should see it in their interest to create a strong broadcasting industry if only to take some of the load off their own networks.

If, as the chairman claims, broadcasting (and linear television more generally) is one of many uses that are indistinguishable bunches of zeroes and ones in the digital age, it makes sense that broadcasting, if (as I suspect) it has a future, should be able to reach any device the consumer wants. Unfortunately, on this score our current broadcast standard falls woefully short. The FCC approved the ATSC standard in 1996, a time when no one could have imagined the ways in which our consumption of media would be revolutionized over the next decade, let alone the next two; it has only been iteratively modified since then. There are a number of shortcomings to the ATSC standard as a result, but one of the more serious ones is that it effectively closed off the portable TV market that had existed for most of the analog era, being designed primarily for traditional, fixed, stationary receivers. Perhaps there were sound technical reasons why portable television could not be accommodated by the same standard as fixed television (Europe’s DVB standard had and has separate standards for fixed and mobile television), but it proved to be precisely the wrong direction for television to move in once smartphones and tablets became ubiquitous. The television industry’s response has been to add a kludge to the existing standard to accommodate mobile devices, but it is poorly supported and has even poorer awareness – and more to the point, it’s an optional add-on, so stations like ABC’s O&Os are perfectly free to forego it and try to force people to sign up for cable to use their WatchABC app instead.

When the chairman justifies reducing the amount of spectrum allotted to each station by noting that 6 MHz is “far more spectrum than is necessary to transmit…a high definition channel” (though not quite enough to accommodate two HD signals without significant quality degradation, or even one HD and two SD signals), he overlooks that the television industry is already in the process of introducing 4K, which offers the promise of even higher definition than HD offers, to say nothing of broadcasters’ own efforts to capitalize on the digital revolution with their existing spectrum and infrastructure. And when the chairman declares this a “once-in-a-lifetime opportunity”, he is either ignoring or shutting out the industry’s efforts towards ATSC 3.0, an effort to fix the existing ATSC standard’s issues while achieving enough other gains to justify another transition on the scale of the digital transition. The commission would be wise to coordinate the incentive auction with any transition to ATSC 3.0, but that would require postponing it until the new standard is ready, which wouldn’t happen until 2016 at the earliest. The chairman should be applauded for postponing the auction of broadcast spectrum to 2015 to ensure the FCC has everything it needs to operate the unprecedented reverse auction, but it should strongly consider a further postponement and backing the industry’s efforts towards ATSC 3.0, which should include the flexibility to minimize future transitions and, if possible and desirable, a single standard for fixed and mobile devices.

The commission, along with Congress, should also reassess the business models of both the broadcast and cable television industries, including a serious reconsideration of the retransmission consent regime. The question should be asked: do we truly still believe in and wish to uphold and continue the notion of free, over-the-air television as the principle that was the cornerstone of the television industry for decades? If so, the commission should consider allowing broadcast television a revenue stream that will allow them to compete with cable without making them so dependent on it that they are willing to destroy the village in order to save it. Personally, I think we will decide we still believe in free over-the-air television as more than just welfare for the poor. Broadcasters will speak of disseminating emergency information and other news as the reason why; I prefer to look at something on one level more frivolous but on another level gets closer to the heart of the issue. One specific element of rising cable prices attracting increasing outrage is how cable networks have increasingly been paying more and more money for sports exactly the sort of live event where linear television still thrives – and then charging cable operators increased subscriber fees for them, capitalizing on live sports’ immunity to time-shifting to attract a captive audience that will demand the channel no matter what, while the fees are passed on to everybody, whether or not they actually watch sports (let alone are part of that captive audience). Whether because of consumer choice, cable operator desperation, Congressional action, or something the commission itself does, it seems like at some point something is going to happen to ensure that only those who want to watch the sports will have to pay for it. But that means a sporting event using that system will only attract those willing to pay for it, not a wide swath of the American public; the Super Bowl wouldn’t be nearly as popular as it is if you had to pay more than $50 to see it (or $10 a month to see the channel it’s on). Free over-the-air television is one of the last refuges of a unifying, mass American culture, a place where Americans can engage in a shared experience, something that, in the age of cable television and the Internet, is fast disappearing.

Multiple of the chairman’s predecessors recently testified to a Congressional subcommittee considering a reworking of America’s communications law advocating a “technology-neutral” approach to regulation that did away with “regulatory silos” and instead treated services performing equivalent functions equivalently. The thicket of rules establishing the relationship between broadcast stations and cable operators, many of them established by 1992 and fundamentally in place by 1996, is clearly outdated; that Aereo can effectively exploit a loophole in the retransmission consent rules shows that those rules are anything but “technology-neutral”, possibly unenforceable as a result, and a potential throttle on innovation. Congress should work to open the floodgates of innovation and allow as much freedom as possible for the distribution of video, regardless of the specific technology used or adherence to concepts derived from a 1990s worldview, while protecting the consumer and allowing free over-the-air broadcast television to continue to compete and innovate in a sustainable fashion. Allowing broadcast television to reach the consumer on whatever device they wish is clearly vital to that goal.

The commission should also reconsider how the structure of the broadcast spectrum will look after it has been repacked; dividing the broadcast spectrum into blocks and assigning each market a block with a centralized transmission site would serve to strengthen our broadcast TV infrastructure rather than potentially weaken it, undoing some damage done by the digital transition and making it easier for new and smaller stations to compete, but it would necessitate further coordination with Canada and Mexico and thus may require a further postponement of the auction in its own right. It would also effectively involve (as the incentive auctions might necessitate anyway) the FCC getting into the business of defining TV markets, and as such it should seriously reconsider its reliance on Nielsen’s market lists, which display an astounding lack of openness for something used by government agencies, forcing Wikipedia to stop using its rankings and, after Truckads.com became somewhat popular as a source for what counties were in what DMAs, suing them and apparently forcing them to make subtle changes so as not to match the actual DMA boundaries. More to the point, no new markets have been added or old markets removed since the mid-90s, and the spread of cable has fossilized many markets and left them unable to change; specifically, since any change in market boundaries is based on what stations the people in that market watch, the FCC’s requirement for satellite companies to determine what stations to deliver to what areas based on DMAs effectively makes them self-perpetuating. Ideally stations themselves, facilitated by the FCC, should determine where they want to set up and negotiate with one another to share sites, which should produce an organically-determined map the FCC and Nielsen would hold to that could allow submarkets within larger markets to split off, or allowing other markets to merge, if circumstances warrant.

This is a critical time in the history of America’s telecommunications industry, as government and the market struggles to adapt to a new reality with the potential to overturn every single assumption underlying the distribution of video for the past thirty years, if not the past fifty. It is my hope that the FCC and Congress eventually follows a course of action that results in the best outcome for America and America’s consumers, and that the American public will pay attention and pressure government to do the right thing, as they make decisions with the potential to impact America’s consumption of video for generations to come. As the FCC moves forward with its incentive auctions, I hope it recognizes that the impact they will have on America’s communications landscape puts the onus on them to ensure the best outcome for all parties involved, not just special interests.

Morgan Wick
Concerned Citizen and Blogger
Issaquah, WA

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