Thoughts On ATSC-3/SFN’s And On Ansin/NBC

ATSC-3 And Single Frequency Networks
ATSC-3 and SFN’s may be the just what broadcasting needs to prosper in the future.  Certainly there are smart and dedicated women and men working hard to make these technologies a reality.  I would offer a few cautions – (1) acquiring sites, building multiple towers in each market and enabling consumer reception of a not-backwards-compatible new standard won’t be cheap, (2) enabling better and “hassle-free” over-the air reception inadvertantly could could undermine Retrans revenues from cable, satellite and telcos and (3) it is by no means certain that smartphones and tablets ever will be engineered to receive frequencies in the broadcast band.
The first point needs no explanation.  The ATSC-3/SFN vision comes with major costs.  Of course, those costs may be worth it – if they enable significant new revenues.
The second point (the danger of undermining Retrans revenues) hit me when I read this quote from Sinclair’s Mark Aitken (for whom I have enormous respect) describing the ATSC-3/SFN consumer experience in Communication Daily on March 23 :
“Imagine how simple it becomes for a consumer to go on Amazon, order a TV, the drone drops it off on your porch two hours later, and you grab it and take it out of the box and plug it into the wall and you’ve got television. There’s no climbing up on the peak of the roof or into the attic, but you’ve elevated the power in a market in simple embedded antennas, and suddenly you allow broadcast television hassle-free.”
My own view is that broadcasters would be better off if their second revenue stream from cable, satellite and telcos was based on pure copyright.  But there is no question that broadcasters need and deserve a second revenue stream to support their programming services.  If ATSC-3/SFN “hassle-free” over-the-air reception causes the consumer in Mark’s example (and other consumers) to “cut the cord”, the station would lose Retrans fees.  Maybe that loss could be offset by other new revenues, but the potential loss should be a part of every station’s due diligence about ATSC-3/SFN.
Finally, the vision of offering programming and data services to mobile devices needs to be tempered by the realities of smartphone and tablet technology.  In the upcoming Incentive Auction, there is a reason why the FCC needs to create a compact contiguous band for the new wireless frequencies – a reason why the FCC needs to “repack” broadcasters.
Mobile devices are built to receive specific frequency bands pursuant to standards developed by the 3rd Generation Partnership Project – a worldwide consortium of carriers, chip makers and device manufacturers.  The physical limit of antenna size in smartphones constrains the size of the receivable frequency bands.  It is expected that mobile devices will be built to receive the frequencies in the new wireless band.  Absent a prolonged and uncertain effort to lobby carriers, chip makers, device manufacturers and 3GPP, those mobile devices will not receive transmissions from broadcasters operating in the new broadcast band.
I look forward to watching the progress of the ATSC-3/SFN initiative and I hope that it results in great new opportunities for broadcasters.  At the same time, broadcasters need to be fully informed about the challenges that lie down this road.  Since the deadline for broadcasters to register for the Incentive Auction has long passed, and the window to register preferred options has closed, I thought it safe to offer my thoughts without anyone thinking that they are related to the auction.
The Ansin/NBC Dispute
The dispute between NBC and Ed Ansin is unfortunate on many levels.  In the early, struggling, days of the Fox Network, there was no more supportive and constructive Affiliate than Ed Ansin.  As head of Fox Network Distribution I worked closely with Ed and his colleague Bob Leider at WSVN, Miami.  In those early Fox days, the older Networks ridiculed us, we burned through money like confetti and many doubted that we would succeed.  But Ed and Bob never wavered.  They carried our shows in pattern (not all Affiliates did), they generously promoted our shows, they offered valuable and constructive advice and they delivered big numbers to our fledgling Network when we needed them.
Because of differing self-interest, Networks/Affiliate conflict is a fact of life and always has been.  But those same self-interests are what keep Networks and Affiliates together.  The Networks provide Affiliates with the best programs and a strong identity.  The Affiliates provide the Networks with the best distribution in television – no other distribution platform is even close.  When I was at ABC there was no broadcast station available to us in the Salinas/Monterey market.  So, we “affiliated” with a local cable channel created by Time Warner Cable complete with a local newscast.  The ABC ratings in that market were about 1/3 of the national average.  Later ABC affiliated with the D2 signal of the local Hearst broadcast station and the ratings came back up.
Today, Ed Ansin’s WHDH in Boston is a ratings powerhouse for NBC and those ratings cannot be taken for granted.  It is not my place to second guess NBC’s business decisions.  The people running the NBC Network and the NBC Owned Stations are as talented, experienced and decent as anyone in the industry.  This is just a note to say from my own personal experience (1) broadcast Affiliates are the best distribution, (2) Ed Ansin in particular knows how to generate big ratings and (3) if I was running a Network today, I would want him as a part of my distribution platform.

600 MHz $$$ Will Exceed AWS 3

Some commentators have predicted that the revenues generated in the FCC’s 600 MHz auction will be lower than the $44.9 Billion in the AWS 3 auction.  I believe that those projections are very wrong and here’s why.
The AWS auction involved 65 MHz of spectrum, only 50 MHz of which was paired spectrum.  There were 70 qualified bidders.  The pricing was driven primarily by four bidders – AT&T, Verizon, T-Mobile and Dish.
Based on detailed auction simulations in the FCC record, the 600 MHz auction is likely to include a net of 90 or 100 MHz of paired spectrum – twice as much as in AWS 3.  That fact alone strongly suggests higher – not lower auction revenues.  And, demand is greater in this auction.  104 bidders have filed in the 600 MHz auction – more than the 70 in AWS 3.
All the key bidders who drove the pricing in AWS 3 (AT&T, VZ, T-Mo and Dish) are back bidding in the 600 MHz auction.  And, they have the same capacity and the same incentives to bid as they did in AWS 3.  Spectrum is still the life-blood of the carriers.  There is no more spectrum in the pipeline after this auction.
600 MHz is uniquely valuable spectrum – it travels long distances and goes through walls.  Even advanced 5G systems will need low band spectrum for signaling channels.  As would be expected in their “posturing” before the auction, the carrier/bidders have tried to downplay the value of this spectrum.  But just a few weeks ago, Bill Smith, President of AT&T Network Operations, gave a speech in which he candidly admitted the continuing need for more spectrum.  And with AT&T and VZ launching spectrum hogging new video services and T-Mo inviting their customers to “Binge-On”, the suggestion that they might not bid aggressively is just silly.
In terms of financial capacity, the major carriers are among the most credit worthy enterprises on the planet.  And, at the moment, money is free!  With no other auctions looming, the carriers will have plenty of time to de-lever after the 600 MHz auction.
As for Dish, they continue to have the same interest in protecting the value of their spectrum portfolio as they had in AWS 3.  And, Dish knows that mid-band spectrum alone cannot get the job done as evidenced by T-Mo’s voluminous filings at the FCC begging for a low-band reserve.
So, the four bidders who drove the pricing in AWS 3 will drive the value of twice as much spectrum being offered in the 600 MHz auction.  But wait, there’s more – much more!
In addition to those four bidders, data just released by the FCC reveals additional deep pocketed potential disrupters who have filed to participate in the 600 MHz auction.  Any one of these disrupters – any one of them –  could seriously raise the auction stakes for every bidder.  They include:
– Billionaire Technology Executive Raj Singh bidding with Columbia Capital (Senator Mark Warner).  Columbia just hired former FCC Wireless Bureau Deputy Chief Jon Liebovitz who helped to design the auction.
– Comcast.
– Billionaire Tech and Media Investor Mario Gabelli.
– Billionaire Silicon Valley Executive Chamath Palihapitiya who already has built a wireless business in Sri Lanka that he runs from San Francisco.  Palihapitiya has publicly stated his intention to bid up to $10 Billion in this auction and reportedly has recruited an extremely wealthy Asian investor.
 – Sinclair Broadcasting which has publicly stated their intention to sell $2 Billion in broadcast spectrum in the first part of the auction.  In the second half of the auction, they can bid that $2 Billion, in a tax advantaged manner, before they even begin to impact their balance sheet.
 – Liberty Global.  After filing to participate in the auction, a spokesperson for Dr. Malone’s organization stated that they have changed their minds.  Whether that is true, or a typical bidder’s pre-auction misdirection, remains to be seen.
 – Former Verizon Executive John Dirkson and as yet undisclosed investors.
None of these potential disrupters was a factor in driving the pricing in the AWS 3 auction.  But one or more almost certainly will play a role in driving up the 600 MHz prices.
So, for anyone to believe that the 600 MHz auction will yield less revenue than the AWS auction, they MUST believe:
(1) that AT&T, VZ, T-Mo and Dish will bid less than half of what they bid in the AWS auction (recall that the 600 MHz auction will involve twice as much spectrum); and
(2) that none – not a single one – of the new disrupters actually will bid in the auction.
For example, the analysts would have to believe that Columbia Capital recruited Raj Singh and lured Jon Liebovitz from the FCC without any intention of bidding in the auction.  And, they would have to believe that Chamath Palihapitiya recruited his Asian investor and boasted about bidding $10 Billion without any intention of actually bidding.  Reductio ad absurdum!
Any objective review of the facts – the doubling of the amount of spectrum likely for sale, the unique and essential quality of the spectrum, the increased number of bidders, the financial capacity and the business incentives of the returning major bidders, AND the existence of many deep pocketed potential disrupters – compels only one conclusion.  The revenues in the 600 MHz auction will be greater than the revenues in AWS 3.