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FCC Chairman to NAB: Mobile Crisis Looms in U.S.

Genachowski: ”Demand for spectrum for mobile Internet access will outstrip the supply“

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A day after the chairman of the National Association of Broadcasters opened the NAB Show in Las Vegas by ripping the FCC over its broadband plan, FCC chairman Julius Genachowski gave a keynote to broadcasters there, warning that demand for mobile Internet access will soon outstrip supply and that its plan to allow broadcasters to share "spectrum" is vital.

”On our current trajectory, the demand for spectrum for mobile Internet access will outstrip the supply,” Genachowski said. “By a lot.”

"We’re already seeing signs of the problems to come," he said. "Reports of consumer frustration with mobile are growing — and will only increase if we stand still."

"To deliver the mobile Internet future, we’ll need new spectrum-efficient technologies, and we’re asking at the FCC how can we best incentivize the development and deployment of such technologies."

"These strategies are necessary, but not sufficient," he said. "The record is clear: America needs more spectrum for mobile internet access."

Genachowski outlined the FCC’s plan — which proposes "voluntary incentive auctions" for broadcasters who choose to share or sell parts of their unused broadband spectrum — and blasted its critics.

"A lot has been said and written about this auction proposal, including at this conference, that just isn’t accurate," Genachowski said.

Here’s the key part of his speech:

Let me make four points about incentive auctions as applied to broadcasters, and dispel four myths.

1. These auctions are voluntary. Period. Participation is up to the licensee and no one else.

2. For the plan to work, we don’t need all, most, or even very many licensees to participate.

If a relatively small number of broadcasters in a relatively small number of markets share spectrum, our staff believes we can free up a very significant amount of bandwidth.

And rural markets would be largely unaffected by the recommendation in the broadband plan because the spectrum crunch will be most acute in our largest population centers.

3. We anticipate mechanisms to reduce or even eliminate risk, and maximize upside, for broadcasters that elect to participate in the auction.  For example, the plan could allow broadcasters to set a reserve auction price below which their licenses wouldn’t transfer.  The mechanism could lock in a payment for broadcasters, while allowing for participation in upside above that level.

4. Auction rules and mechanisms will be developed through an open and transparent process, with ongoing dialogue about the best design mechanisms for incentive auctions, focusing on what will actually work and meet the country’s needs.

In sum, the intention of the proposal is to provide broadcasters with more choice and flexibility, not less. More business model options, not fewer.  While at the same time helping address a vital national challenge.

Let me now address some myths about incentive auctions.

Myth #1: The plan is to confiscate broadcasters’ spectrum and drive broadcasters out of business.

Not so.  Again, the incentive auction plan is voluntary. No one will be forced to participate.  In fact, this is the opposite of a confiscation; it would be an economic boost to broadcasters that elect to participate.

Also it’s important to note that that the broadband plan anticipates that broadcast spectrum would be less than 25 percent of the 500 MHz target in the broadband plan.  No spectrum stone is being unturned.

Myth  #2: The plan will diminish voices and harm the values of broadcast diversity and localism.

To the contrary, giving broadcasters new options and an additional source of financing should strengthen the industry and bolster the public interest.

The plan could bring the greatest benefits to broadcasters that provide programming to underrepresented portions of a local community.

Because the advertising base is smaller, the traditional broadcast model has always been a challenge for such broadcasters, and digital fragmentation is putting more pressure on the business model.  It’s a particular challenge for these stations to invest in new streams of over-the-air digital programming where that programming isn’t subject to must carry.

The incentive auction plan would give local broadcasters serving minority or other underrepresented audiences a new choice: share spectrum, continue programming and carriage, reduce operating costs, and gain a capital infusion.   For some broadcasters, it could make the difference in having a business and staying on the air.

Myth #3: The Plan will prevent broadcasters from deploying Mobile DTV.

Another misperception.  I’m pleased that the DTV transition has enabled the development of standards and the launch of market trials for mobile DTV. Our job is not to predict innovation or business models, but to enable them.  Under the incentive auction plan, broadcasters will be able to provide mobile DTV, both licensees that choose to retain all 6 megahertz, and those that choose to share.

Myth #4: Consumers will need to purchase new equipment

Not the case. First, of course, the plan would have no effect at all on viewers who receive their broadcast signals from cable, telephone or satellite providers.  Viewers who receive their broadcast signals over-the-air would simply need to rescan their current TVs or converter boxes. And to the extent a transition would impose any new costs on broadcasters themselves, those costs could be covered by the auction proceeds.

[…]

I also believe that, whatever we might think or hope, this issue won’t go away, because the mobile web – and the opportunities it provides, and the data demand it will generate – won’t go away.

Earlier, Genachowski said that the Internet should remain free.

“I believe it’s vital that the Internet remain free and open for content creators like you to innovate and reach your audience,” Genachowski said. “And vital also that you can protect your content online against unlawful copyright infringement.”
 
On Monday, NAB CEO Gordon Smith criticized the FCC’s plan “the great spectrum grab."

“Our concern is that the broadband plan would yank away more than one third of the spectrum used for TV broadcasting so that wireless broadband companies can have more,” said Smith.

During his Tuesday keynote, Genachowski also touched on the recent battles between networks and cable companies over retransmission fees.

"I agree that the market is the preferred method to determine broadcast-cable arrangements," he said. "At the same time, these commercial negotiations between broadcasters and multichannel video providers affect third parties who aren’t at the table.

"I’m concerned about sudden program interruptions, and about the potential for rising cable rates."

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NAB Opens With a Bang: Gordon Smith Rips FCC