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Bill Cosby once asked, “Why is there air?”
Over-the-air TV broadcasters are posing the same question nowadays, only to them, it’s no laughing matter. Rather, them’s fighting words, as broadcasters worldwide try to fend off incursions by the deep-pocketed likes of Google, Microsoft and Vodafone into precious airwaves that broadcasters regard as rightfully theirs.
At stake is the future of tele-vision and video airborne delivery and reception, with spectrum auctions — such as those likely to occur in the U.S. next year and in the U.K. in 2009 — threatening to reorder broadcasting’s value chain.
Online and wireless giants want access to broadcasts’ traditional VHF and UHF spectrum because they could use the frequencies to transmit video and other bits of data wirelessly to PCs, phones, other devices and even to TVs.
Google and company wants to tap what they call the “white spaces” of unused spectrum within the frequencies of TV channels 2-51 that the FCC has set aside for traditional broadcasters once the digital switchover is complete in February 2009. Google and company then would transmit to a plethora of devices.
The television industry is crying foul in the U.S., where broadcasters protest that broadband transmission could interfere with Americans’ television reception.
“They call them ‘white spaces’; we call them interference zones,” says Dennis Wharton, vp for the National Association of Broadcasters, which is one of several organizations lobbying hard to protect the broadcast spectrum.
Last week, top executives representing the Big Four in the U.S. — Leslie Moonves, Jeff Zucker, Peter Chernin and Robert Iger — wrote FCC chairman Kevin Martin, complaining that TV viewers “have a right to expect their equipment will work.”
The Information Technology Industry Council shot back, accusing them of waging a “misinformation campaign.”
In September, NAB launched an advertising campaign alerting consumers to the potential threat of spectrum interference. One spot features a woman struggling with her television as the voice-over reads, “If high-tech companies like Microsoft get their way, your picture could freeze and become unwatchable.”
Wharton warns of a consumer revolt should Americans, who are accustomed to nearly fault-free TV reception, find that Google-triggered interference crashes their TV during a big game.
“There would be a whole lot of people storming Capitol Hill, calling broadcasters and calling the FCC,” Wharton says.
Hyperbole, perhaps, but Wharton’s point is clear: With the analog switch-off, the IT crowd should be happy with the spectrum that the FCC already is planning to auction to them and others next year in channels 52-69.
In Europe, broadcasters are worried the tech companies will bid the price of the spectrum out of reach for traditional broadcasters, if regulators like Ofcom in the U.K. release portions of the traditional broadcast spectrum into auctions.
Ofcom is strongly considering auctioning about a third of the traditional broadcast spectrum to the highest bidders, as spectrum frees up with the analog switch-off scheduled for completion by 2012.
The early trickle of switch-over started this week in 25,000 homes, as the BBC turned off the analog signal to its BBC2 channel in the remote region of Cumbria.
The U.K. TV industry, already reeling from advertising downturns from the Internet’s pull on eyeballs — and in the BBC’s case, a $4 billion budget gap — simply can’t afford to spend Google-like sums on the spectrum.
“That would be suicide,” says Michael Grade, executive chairman of ITV, Britain’s leading commercial broadcaster.
Having in September mapped out nonprogramming cost cuts to help fund “a content-led recovery” in which ITV hopes to double its content revenue to $2.4 billion by 2012, the broadcaster simply “couldn’t afford” a spectrum bidding war, Grade adds.
The specter of the cellular 3G auctions of the early 2000s haunts Grade and other broadcasters, who recall how mobile carriers including Vodafone, Orange and T-Mobile collectively spent more than $100 billion on licenses to provide 3G mobile phone services that are still behind schedule.
“The 3G process demonstrated that in auctions of scarce resources such as spectrum, bidders may bid more than is rational — in the case of 3G up to four times what could have been justified rationally in the auction,” Grade said in a speech this year to the Royal Television Society.
Short of breaking the bank, broadcasters worry that regulators simply won’t allocate them enough spectrum to provide HD services, which by definition require more bandwidth than lower-resolution programs because it carries more data bits.
Free-to-air broadcasters’ desire for HD dedicated spectrum has ignited some old rivalries. Last month, James Murdoch, CEO of News Corp.-controlled British pay TV giant and BBC foe British Sky Broadcasting, lashed out at broadcaster’s request for more spectrum.
“You have people paying for this, and to suddenly say it has crossed the threshold of public necessity is preposterous,” Murdoch said at the RTS convention in Cambridge. BSkyB charges viewers a subscription fee for services that include HD programming.
Murdoch’s worries might be for naught, as Ofcom does not look inclined to grant more spectrum to broadcasters, for whom it already has set aside about 70% of the spectrum that will become available in the analog switchover. It is leaning toward auctioning off the rest, in early 2009. It plans to decide exactly how to proceed by year’s end.
“We have not been persuaded of the argument that the best way to maximize the social and economic benefit of the released spectrum is simply to gift some or all of the released spectrum to broadcasters,” OFCOM CEO Ed Richards said Tuesday in the annual Ofcom lecture.
Ofcom’s premise is “that a market-led approach is the best way of ensuring the efficient use of spectrum,” he says, pointing out that in age of mobility, the 30% of spectrum not set aside for broadcasting “is suitable for an enormous range of services.”
Philip Rutnam, a partner in Ofcom’s spectrum policy group, says that broadcasters should have plenty of amplitude to deploy HD and other digital services, especially if they use new digital compression like MPEG-4 and an emerging transmitting technology called DVB-T2.
While Ofcom would probably make special allocations for current small-time users of UHF frequency — like theaters that tap it for wireless microphones — it will be less inclined to intervene on behalf of big-time broadcasters.
Rutnam scoffs at critics who say that Ofcom’s motivation is a money grab for the U.K. government, which could potentially pocket billions from a bidding frenzy.
“We’re not here to manage the spectrum in a way to raise revenue for the government,” he says. Rather, he notes, “Our primary duty is to make sure spectrum is used in the best way for the country.”
Rutnam further argues that opening it up encourages efficient use of the spectrum, because winning bidders will want to make the most of their investment in the spectrum. By comparison, he says, “a beauty contest,” in which regulators listen to arguments and allocate frequency based on merit and special consideration, prioritizes “how to influence regulators.”
Besides, Rutnam notes, Ofcom can’t predict technology’s evolution well enough to allocate frequencies to particular technologies. “Technology is moving too fast — we’re likely in the long run to get it wrong,” he says.
One technology that could take hold is “mobile broadcasting,” which uses broadcast airwaves to reach cell phones outfitted with broadcast receivers.
U.K. research firm Juniper Research predicts that 120 million cell phone users will watch broadcast-delivered mobile TV by 2012, up from fewer than 12 million today.
One group of companies that could potentially benefit from the spectrum free-for-all is the consumer electronics industry.
Such gadget and phonemakers as Samsung, Nokia, Philips and Apple know that a liberalization of spectrum rules could open the possibility of getting more devices into the hands of consumers who would have more sources of entertainment delivered via wireless Internet and other means.
Gary Shapiro, CEO of the Consumer Electronics Assn., calls Google’s interest in spectrum “terrific” and says he looks forward to new spectrum owners putting airwaves to good use.
“That spectrum is like divine waterfront property, but broadcasting for decades hasn’t been the most efficient usage,” he says.
Meanwhile, as broadcasters try to protect their decades of investments in the airwaves, ironically they’ll have to also figure out how to best use the wired broadband connections that feed so many PCs, and increasingly TVs, with content.
Indeed, why is there air when there’s wired broadband? The fact is that both will prevail as delivery vehicles. The battle for control of them in the Google era will be one worth watching.
And that’s no laughing matter.
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