Trump Echoes Nixon in Targeting Twitter

WSJ – By Preston Padden………….

May 31, 2020 03:39 p.m. EDT

Pres­i­dent Trump signed an ex­ec­u­tive or­der Thurs­day that would have the Fed­eral Com­mu­ni­ca­tions Com­mis­sion judge de­ci­sions made by Twit­ter, Face­book and oth­ers to mod­er­ate speech. Un­der Mr. Trump’s or­der, the FCC could re­voke li­a­bil­ity pro­tec­tion if a so­cial-me­dia plat­form hasn’t acted “in good faith.” The or­der amounts to a con­tent re­view and is rem­i­nis­cent of past re­stric­tions on broad­cast net­works.

The Fair­ness Doc­trine, in­tro­duced in 1949, re­quired broad­cast­ers to air op­pos­ing views on is­sues of pub­lic in­ter­est. The FCC de­ter­mined whether broad­cast speech was fair to both po­lit­i­cal par­ties. In the 1980s, con­ser­v­a­tive FCC Chair­men Mark Fowler and Den­nis Patrick worked to re­peal the doc­trine, over­com-ing op­po­si­tion in both par­ties, and suc­ceeded in 1987.

White House staff, Mr. Fowler re­called in 2009, ar­gued to Pres­i­dent Rea­gan that “the only thing that re­ally pro­tects you from the sav­age-ness of the three net-works . . . is the Fair­ness Doc­trine, and Fowler is propos­ing to re­peal it.” But Messrs. Fowler and Patrick stood for prin­ci­ple, not pol­i-tics. In 1987 Mr. Patrick said, “We seek to ex­tend to the elec­tronic press the same First Amend­ment guar­an­tees that the print me­dia have en­joyed since our coun­try’s in­cep­tion.”

Pres­i­dent Nixon was ob­sessed with the net­works’ bias. In a 1972 White House memo, Nixon aide Pat Buchanan wrote: “Shall we ac­qui­esce for­ever in left-wing con­trol of com­mu­ni­ca­tions me­dia from which 50 per­cent to 70 per­cent of the Amer­i­can peo­ple de­rive their in­for­ma-tion and ideas about their na­tional gov­ern­ment? The in­ter­ests of this coun­try and the fur­ther­ance of the poli­cies and ideas in which we be­lieve de­mand that this mo­nopoly, this ide­o­log­i­cal car­tel, be bro­ken up.”

Nixon re­tal­i­ated against the net­works by sup­port­ing FCC rules to re­strict their air­time and own­er­ship of pro­gram­ming. He di­rected the Jus­tice De­part­ment to mir­ror the FCC rules, cre­at­ing a dou­ble layer of re­stric­tions.

Be­cause Nixon taped his White House con­ver­sa­tions, we don’t need to spec­u­late about his mo­tives. “Our gain is more im­por­tant than the eco­nomic gain,” he said in 1971, brush­ing aside the le­git­i­mate com­plaints of pro­gram pro­duc­ers. “Our game here is solely po­lit­i­cal. . . . As far as screw­ing [the net­works] is con­cerned, I’m very glad to do it.”

tIn Nixon’s rail­ing against the lib­eral bias of the net-works, one can al­most hear Mr. Trump rail­ing against so­cial-me­dia com­pa­nies. And the new ex­ec­u­tive or­der reads like the Buchanan memo. But what Nixon & Co. said be­hind closed doors, Mr. Trump says in pub­lic.

The bias was and is real. But the ques­tion is whether the First Amend­ment per­mits gov­ern­ment lead­ers to judge pri­vate speech that ir­ri­tates them. Mr. Trump’s de­fend­ers ar­gue that he is only con­di­tion-ing on­line plat­forms’ “unique” pro­tec­tions. But most me­dia en­joy some unique pro­tec­tion: copy­right li­censes for ca­ble sys­tems, “must carry” rights for broad­cast sta­tions. Con­di-tion­ing key pro­tec­tions on com­pli­ance with a gov­ern­ment con­tent re­view would be cen­sor­ship by a dif­fer­ent name.

Mr. Pad­den is a com­mu­ni­ca-tions con­sul­tant who held ex­ec­u­tive po­si­tions at the Fox and ABC broad­cast net­works.    

The Perversity of the FCC’s Ownership Limits

For decades, rules meant to promote diversity stood in the way of a fourth major television network.


By Preston Padden
November 13, 2017 06:19 p.m. EST


The FCC is re­con­sid­er­ing some of its rules on the own­er­ship of TV sta­tions. These reg­u­la­tions date back to a by­gone era of scarcity—pre­dat­ing ca­ble tele­vi­sion, the in­ter­net, video down­loads, stream­ing, so­cial me­dia and other in­no­va­tions that give con­sumers an ar­ray of com­pet­i­tive op­tions.
I have friends who be­lieve that the pub­lic in­ter­est re­quires the FCC to keep its TV own­er­ship rules. But my per­sonal ex­pe­ri­ence in the in­dus­try for over 40 years has shown me that TV own­er­ship lim­its in­tended to en­hance di­ver­sity of­ten sti­fle com­pe­ti-tion and in­hibit in­no­va­tion and growth in the in­dus­try.
My first job, in 1973, was at Metro­me­dia Inc., a com­pany that had emerged out of the ashes of the Du­Mont Tele­vi-sion Net­work. In the late 1940s, tele­vi­sion pi­o­neer Allen Du­Mont warned the FCC that it must as­sign at least four VHF sta­tions to each ma­jor mar­ket to en­sure the sur­vival of the four tele­vi­sion net­works. The FCC ig­nored his ad­vice and proved Du­Mont right—his net­work folded, leav­ing the na­tion for decades with only three com­mer­cial TV net-works. Read­ing this his­tory was my first les­son in how well-mean­ing FCC rules can have un­in­tended con­se­quences for com­pe­ti­tion and di­ver­sity.
As the Du­Mont Net­work was go­ing out of busi­ness, it spun off to share­hold­ers the TV sta­tions it owned in New York and in Wash­ing­ton. Busi­ness-man John Kluge ac­quired de facto con­trol of the new com­pany and named it Metro­me-dia. Kluge strug­gled to cre­ate a fourth net­work. He ag­gres­sively sought to ex­pand Metro­me­dia’s port­fo­lio of owned tele­vi­sion sta­tions—the in­dis­pens­able foun­da­tion of any net­work. But his ef­forts were thwarted by the FCC’s own rules lim­it­ing own­er-ship. One par­tic­u­larly prom­inent ob­sta­cle was the FCC’s “top 50” pol­icy, which re­quired a “com-pelling pub­lic in­ter­est show­ing” to own more than three sta­tions, or more than two VHF sta­tions, any­where in the top 50 mar­kets. Of course, the three en­trenched net­works owned more than that, but they were grand­fa­thered in.
The first decade of my life in the in­dus­try was con­sumed draft­ing and ad­vo­cat­ing for waivers of the FCC’s TV sta­tion own­er­ship lim­its and its top 50 pol­icy to ad­vance Metro­me­dia’s quest for a fourth net­work. De­spite spend­ing mil­lions of dol­lars on in­no­v­a­tive pro­gram-ming, Metro­me­dia could not over­come the hand­i­cap im­posed by the FCC’s TV sta­tion own­er­ship rules. Kluge failed to ful­fill his ob­jec­tive—and the FCC’s—of cre­at­ing a fourth net­work.
So in 1985, Kluge sold his TV sta­tions to Ru­pert Mur­doch, who also ac­quired the then-bank­rupt 20th Cen­tury Fox film stu­dio. To­gether with Barry Diller and Jamie Kell­ner, Mr. Mur­doch set out to cre­ate the long-sought fourth net­work. Again, FCC rules got in the way. On be­half of Fox, it fell to me to seek waivers of sta­tion own­er­ship lim­its and other rules in­tended to pro­mote di­ver­sity, such as the ban on cross-own­er­ship of news­pa­pers and the Fi­nan­cial In­ter­est and Syn­di­ca­tion Rules. The ef­fort to cre­ate mean­ing­ful di­ver­sity re­quired the FCC to waive its rules that were in­tended to cre­ate di­ver­sity. (Mr. Mur­doch is ex­ec­u­tive chair­man of News Corp, which pub­lishes this news­pa­per.)
Be­cause the ben­e­fits of grant­ing the Fox waiver re­quests were so ob­vi­ous, even sup­port­ers of TV own­er­ship reg­u­la­tion such as Sen. Ted Kennedy (D., Mass.), Gov. Mario Cuomo (D., N.Y.) and Sen. Dan In­ouye (D., Hawaii) sup­ported our waiver re-quests. Fox even­tu­ally suc-ceeded in be­com­ing the fourth ma­jor com­mer­cial net­work. But it is per­verse to keep in place rules in­tended to pro-mote com­pe­ti­tion and di­ver-sity if they have to be waived in or­der to achieve that ob­jec­tive.
I of­fer this his­tory be­cause I lived it. On many oc­ca­sions I thought: Why can’t the FCC see that these sta­tion-own­er­ship re­stric­tions are pre­vent­ing the cre­ation of mean­ing­ful en­ti­ties of scale that could bring to view­ers the ben­e­fits of greater com­pe­ti­tion and di­ver­sity? In to­day’s world—with hun­dreds of ca­ble and satel­lite net­works, the in­ter­net and myr­iad au­dio, video and other con­tent providers—that ques­tion is more com­pelling than ever. And at a time of es­ca­lat­ing TV costs and cord-cut­ting, en­abling the cre­ation of ad­di­tional free over-the-air pro­gram­ming would be a great pub­lic ser­vice.
Some op­pose re­peal of the TV sta­tion own­er­ship rules be­cause one ben­e­fi­ciary of re­peal might be Sin­clair Broad­cast­ing Co., which has con­ser­v­a­tive views. Those crit­ics would be the first to in­sist that fed­eral li­cens­ing de­ci­sions can­not—must not—be based on po­lit­i­cal views. And for all we know, the next ben­e­fi­ciary of dereg­u­la­tion could have lib­eral views. That is what free mar­kets, com­pe­ti-tion and di­ver­sity are all about. My ex­pe­ri­ence with the tele­vi­sion own­er­ship rules leaves no doubt that con-sumers will be well served by their re­peal.


Mr. Pad­den is a con­sul­tant and for­mer me­dia ex­ec­u­tive. This ar­ti­cle is adapted from an Aug. 28 blog post for Broad-cast­ing & Ca­ble. “

Consistent With A Long Line Of FCC Precedent, The C-Band Carriers Should Receive 100% Of The Proceeds From The Sale Of Their Spectrum Usage Rights

These are my views and do not implicate any former or current employer or client.  In particular, this blog has not been approved by CBA.  Rather the views below reflect my personal outrage that the government is changing the rules just because so many chose to “pile on” in the C-Band proceeding.

 Some have argued that the C-Band Satellite Carriers should not be allowed  to receive 100% of the proceeds of an FCC sale of a portion of their spectrum usage rights because they received their spectrum for free.  In the case of SES and Intelsat, this argument is factually incorrect.  And regarding all C-Band licensees, this argument is contrary to the history of secondary market sales of FCC authorized spectrum usage rights and 60 years of evolving Coasean theory of spectrum allocation.  Other than “bad actors”, all FCC licensees who sold their spectrum usage rights in secondary market sales have received 100% of the proceeds – not 10%, not 50% – 100%.

For decades the Federal Communications Commission awarded usage rights to bare spectrum (an ephemeral “asset” of no value to the public without massive investments in related infrastructure) for FREE.  If there was only one applicant for a specific spectrum band, she/he got it and paid nothing to the government.  If there were multiple applicants, the usage rights were divided among the applicants or awarded to one applicant based on comparative hearings or lotteries – but in any event, the party awarded the spectrum usage rights paid nothing to the government.

For example, America’s great over-the-air broadcast system was built this way by risk-taking visionaries.  The spectrum usage rights for every Radio and TV station in America were granted for FREE without payment to the government.  These private sector risk takers invested vast sums in transmitters, towers, personnel and programming to make the spectrum useful to the public. Later, as stations were bought and sold – with the spectrum usage rights being the most valuable asset transferred – 100% of the proceeds went to the seller, not to the government.  That continues to be the case for every broadcast station in America today – including transactions approved by the FCC as recently as a few weeks ago.  Broadcast spectrum sellers who paid nothing to the government receive 100% of the proceeds when they sell.

The same is true regarding early wireless spectrum usage rights.  In the early 1980’s the FCC granted the first cell phone usage rights in the 30 largest U.S. cities.  Two licenses were granted in each city – one to the local wireline telephone company for FREE and the second to another applicant, also for free.  Through a comparative hearing victory in Chicago and lottery outcomes in other big cities, my first employer, Metromedia, was granted a number of these non-wireline phone company licenses – paying nothing to the government.  I know because I filed the applications.  Metromedia’s principal, John Kluge, invested vast sums to build out the cellular systems for which demand at the time was thoroughly uncertain.  His risk-taking was rewarded when Metromedia sold those systems – including most importantly the spectrum usage rights– for $Billions to Southwestern Bell (now AT&T which uses those spectrum usage rights to this day).  Metromedia received 100% of the proceeds of that sale.

Eventually the FCC changed its policy and began to auction NEW wireless spectrum usage rights instead of giving them away for free.  But, except for “Bad Actors”, existing wireless spectrum usage rights holders (both those who initially received the rights for free and those who purchased the rights in private market transactions) universally were permitted to sell those rights and retain 100% of the proceeds. That continues to be the case today.  For example, when America’s Cable TV Companies sold their wireless spectrum to Verizon, they kept 100% of the proceeds.  When XO Communications sold their spectrum to Verizon, they kept 100% of the proceeds.

Which brings me to the current debate over the so-called C-Band spectrum.  Initially these spectrum usage rights were granted, for free, to companies such as GE Americom, Loral and PanAmSat that  invested vast sums to build satellite distribution systems primarily for radio and television programming.  In 2001 Intelsat paid $1 billion for Loral’s C-Band facilities and in 2006 Intelsat paid $3.2 billion (plus the assumption of over $3 Billion of debt) for PanAmSat’s C-Band assets – including in each case the spectrum usage rights.  SES paid $5 billion when it bought GE Americom’s C-Band business – including the spectrum usage rights – in 2001.  All of these private market sales of spectrum usage rights were approved by the FCC.  The sellers who had received their spectrum from the government for free received 100% of the sale proceeds.

Some have argued that the sale of a portion of the C-Band is different because the buyers of the spectrum would be using it for a purpose – wireless – that is different from the use for which it was originally licensed – satellite communications.  But, sound spectrum policy should encourage all spectrum holders – private and Federal – to be willing give up some of their spectrum for a use of higher value to society.  Therefore there is even more reason why the C-Band sellers should receive 100% of the proceeds.

The wireless industry has coveted the C-Band spectrum for years because it represents a “Goldilocks” balance between low band spectrum (great for distance) and high band spectrum (great for capacity).  Reallocating at least some of the C-Band for wireless is the key to keeping America competitive with China in the “Race To 5G”.

After years of fighting any reallocation, the C-Band satellite carriers have stepped forward with a voluntary plan to sell off 60% of their private spectrum usage rights – rights for which they paid $Billions and in which they have invested vast additional sums.  The response from commercial vested interests and other critics has been in the worst tradition of the Washington, D.C.  Despite the long tradition of private market sales of spectrum usage rights, the critics scream “four foreign companies want to sell spectrum that belongs to U.S. taxpayers”.  It is a great sound bite, but does not begin to fully and fairly inform the listener.

The “foreign operators” have made billions of dollars of contributions to the U.S. economy and treasury by employing over 1,500 U.S. staff, have bought dozens of satellites and launches from U.S suppliers and continue to provide mission critical services to the U.S. DoD and civilian agencies and U.S. media and telecom companies.  Over 70% of Intelsat shareholding is U.S. based.  And, the “National Treatment” clauses in all U.S. trade deals require each country to treat foreign nationals (including companies) the same as they treat their own citizens.

There are many public policy reasons to permit the C-Band carriers to receive 100% of the proceeds when their usage rights are sold – like all other spectrum usage rights holders have done.  First, the active cooperation of the C-Band carriers will enable the FCC to conduct the sale in 2020 – immediately sending the buyers to place equipment orders to keep pace with China.  Second, the value to the economy of getting 5G deployed quickly dwarfs the value of any U.S. Treasury proceeds from a government sale.  And, the sale of C-Band spectrum will serve as an incentive for other spectrum use rights holders to step forward and allow their spectrum to move to its highest and best use for American consumers.

The Coasean history is clear:  (1) radio and TV stations who sold their spectrum in secondary market transactions (whether they were the initial free recipient of the spectrum or bought that spectrum in FCC approved secondary market transactions) received 100% of the proceeds; (2) wireless companies who sold their spectrum in secondary market transactions received 100% of the proceeds; (3) companies like XO, originally licensed for services other than mobile wireless who sold their spectrum for mobile wireless and were not “bad actors” received 100% of the proceeds.

So the question posed is, if the FCC wishes to be consistent with a long, long line of Coasean precedent and wishes to encourage both private and government parties with spectrum usage rights to allow their spectrum to move to its highest and best use for our society, how in the world would the FCC justify allowing the C-Band carriers to receive less than 100% of the proceeds from the sale of their spectrum usage rights as all other sellers have received?  Why are the rules changing just for C-Band?

With not just China but other major players, including Japan and South Korea poised to overtake the significant early investments of the United States and lead the way on 5G, mid-band spectrum remains the elusive input U.S. carriers need to keep apace with Asia.  It is a dangerous time for the FCC to abandon history, precedents, and its principles that encourage investment, risk taking and facilitating the transfer of licenses for higher uses.

Renewal Expectancy In FCC Licenses

The views expressed here are mine and do not implicate current or former employers or clients.

Hundreds of Billions of Dollars have been invested in, and loaned to, commercial enterprises that operate pursuant to FCC spectrum licenses.  These include radio and TV stations, wireless carriers, satellite carriers and others.  It would come as quite a shock to these enterprises, and to their investors and lenders, to learn that, as some recently have asserted, the spectrum usage rights upon which their businesses depend are merely “a 30 day month-to-month lease” that can be yanked back at anytime by the FCC.  Fortunately for consumers and for our economy, that is not the case!

It is true that the Communications Act provides that licensees shall enjoy the use of, but not the ownership of, their licensed spectrum.  But as often is the case, recitation of this simple fact is the beginning, not the end, of the story.  Provisions of the Communications Act, FCC Regulations and FCC case law make crystal clear that absent bad conduct, FCC licensees are entitled to the legitimate expectation that their licenses will be renewed.  FCC licenses are not 30 day month-to-month leases.

For example, Section 309 (k)(1) of the Communications Act states that the FCC is required to grant a broadcast station’s application to renew its 8 year license if (A) the station has served the public interest convenience and necessity; and (B) the licensee has committed “no serious violations” of the Communications Act or FCC rules, or (C) no other violations that “taken together, would constitute a pattern of abuse”.  That is not a month-to-month lease.

Similarly, 47 CFR 1.949 specifies that wireless licenses shall be renewed if the licensee has met its build-out requirements by the deadline, continued service, and certified compliance with all FCC rules and policies and the Communications Act.

And, in a policy statement (In The Matter Of Assignment Of Orbital Locations To Space Stations In The Domestic Fixed Satellite Service, 3 FCC Rcd. 6972, n.31 (1988)) the FCC made it clear that satellite licensees also enjoy renewal expectancy (“given the capital-intensive nature of the domestic satellite industry, there should be some assurance that operators will be able to continue to serve their customers”).

The statutory, regulatory and case law provisions described above just scratch the surface of the very substantial legal and equitable rights of FCC licensees.  For example, Section 316 of the Communications Act, and case law under that section, severly restrict the FCC’s ability to modify or take back licenses.

The renewal expectancy afforded to all FCC licensees (except “bad actors”) is just common sense.  The essential services that the broadcast, wireless and satellite FCC licensees provide to consumers require substantial equity investment and debt financing.  That critical financial support would evaporate if, as some have asserted, the spectrum usage rights upon which these businesses depend could be yanked back by the FCC on 30 days notice.  In short, simply incanting the soundbite that “the airwaves belong to the public” does not begin to tell the whole story.

 

Scalise Exactly Right On TV Bill

As the former President of an association of local TV Stations, former President of Network Distribution for Fox, former President of the ABC Television Network, former Executive VP of The Walt Disney Company and a former Law Professor, I write to strongly support House Majority Whip Steve Scalise’s Bill, The Next Generation Television Act.  This Bill gets it exactly right.  His Bill would repeal a steaming pile of outdated, conflicting and unnecessary government interventions into the market for distributing television programming.  Of all the critical functions for which we need the Federal Government, managing and pricing the distribution of TV programs is not one of them!  The Scalise Bill would enable perfectly capable market forces to assure that consumers have access to the widest possible array of television programming from the widest possible array of distribution platforms.  And it would be fair to all industry segments.

 

History

 

In the late 1960’s several Court cases held that Cable retransmission of the programs broadcast by TV Stations did not constitute a “performance” of those programs under the then extant 1909 Copyright Act.  The Supreme Court urged the Congress to write a new law. And the Congress urged the Broadcasters, Cable companies and Programmers to agree on a framework for a new law. In 1972, at an historic meeting where I was present (as a young Law Student), the three industry segments reached the “Consensus Agreement”.  A copy of that Consensus Agreement can be found as Appendix B to a 1992 Report Of The Copyright Office. https://www.copyright.gov/reports/cable-sat-licenses1992.pdf

 

In 1976 Congress adopted a new Copyright Act that made Cable retransmission of broadcast TV shows a “performance”.  But, because it was thought that it would be burdensome for then fledgling Cable systems to negotiate with myriad program owners, Cable was given a government granted compulsory copyright license.  And the FCC adopted numerous Regulations (including Network Non-Duplication and Syndicated Exclusivity) designed to ameliorate the market disrupting effect of the compulsory license.  Later, compulsory licensing was extended to the Satellite TV industry segment.

 

Note that a key feature of this issue that has persisted since the early 1970’s is that it straddles Copyright and Communications Policy issues.  That means that it straddles the jurisdiction of the Judiciary and the Commerce Committees.  [In one meeting on Capitol Hill in the early 1970’s I (a young law student) opined that we should not let Committee jurisdiction get in the way of doing what was right.  In a stern rebuke that I will never forget, then House Commerce Chair John Dingell informed me “There is no issue more important than the scope of the jurisdiction of the Committee on Energy And Commerce”.]

 

Shortly after the 1976 Act, Cable systems began carrying both broadcast TV Stations and hundreds of non-broadcast channels – channels like Discovery, History Channel, HBO, Showtime, etc.  Because compulsory licensing does NOT cover the hundreds of non-broadcast channels, their carriage is proof that the Cable operators CAN secure performance rights without the need for a compulsory license.

 

By 1992 Congress found that Cable systems were paying carriage fees to the non-broadcast channels but not to the Broadcasters and that this was unfair to the Broadcasters.  The simple way to fix this would have been to repeal the compulsory licenses as then suggested by The Copyright Office and by Fox Broadcasting Company where I was employed.  But the legislative vehicle moving through Congress was a Commerce Committee Bill.  So, instead of repealing the Copyright Act compulsory licenses, Congress simple layered over them a Communications Act Retransmission Consent right requiring Cable/Satellite operators to negotiate and pay for the right to use the Broadcast “signal” carrying the compulsorily licensed programs.  In effect, Congress giveth with the right hand and then taketh with the left, creating a huge government bureaucracy.  Cable/Satellite operators get the program rights through the compulsory license but must negotiate and pay for the “signal”.  It is a ridiculous “legal fiction” that the Cable/Satellite operators (and consumers) desire the signal – they want the programs!  What we have today is a direct product of the jurisdictional straddle that has haunted this issue forever.

 

It Is Passed Time To Undue This Mess

 

As Majority Whip Scalise correctly perceives, it is passed time to repeal this whole mess and to defer to market forces.  His Bill does so in an even-handed and fair way that is certain to enhance consumer welfare.  Below are some of the questions I have heard raised about his Bill and my responses.

 

Will It Work?

 

Some continue to argue that the compulsory licenses are necessary for Cable and Satellite operators to retransmit broadcast programs.  Honestly, that is just silly.  For decades Cable and Satellite have been clearing the rights to programs on non-broadcast channels without a compulsory license. The channel owner clears all the rights and then sublicenses them to the Cable/Satellite operator.  Clearing the rights for programs on Broadcast channels could work the same way.

 

What About OTT Streaming Services?

 

In recent years some have argued that Congress should extend compulsory licensing to online streaming services.  But those services are multiplying and flourishing without compulsory licensing. Netflix has grown like a colossus over the industry.  And many streaming services like Hulu and Direct Now carry BOTH Broadcast and non-broadcast programs without the need for compulsory licenses.  In fact these streaming services are simply more proof that there is no need for the compulsory licenses.

 

Will The Broadcasters Have To Pay More To License Programs?

 

Some Broadcasters have expressed the fear that they will have to pay higher license fees for programs if they need to secure the right to sublicense those programs to Cable/Satellite retransmitters.  I do not believe that will be the case.  Many of the programs on TV Stations are Network shows secured as part of a Network Affiliation agreement.  The Networks already charge the local Stations as much as the market will bear – some argue they charge too much. And Retransmission Consent fees have been acting as a proxy for copyright and routinely are split between the Network and the Station.  There is no evidence that any of this would change if we get rid of the “legal fiction” that that Cable/Satellite operators are paying for the “signal” rather than the programs.

 

One of my last jobs was with a large producer and distributor of television programs including programs sold to local TV Stations on a market-by-market basis (“syndicated” programs).  I asked the executive in charge of those syndicated sales whether local Stations would be charged more if the boilerplate license agreement was amended to include the right to sub-license the programs to local cable/satellite operators. After polling the sales representatives the executive answered “no” because the sales representatives currently sell the show to the highest bidder in the market and that dynamic would not change.

 

Would Copyright Be A Stronger Foundation For Broadcaster Retransmission Fees?

 

There is one bedrock principle in all of this – Broadcasters, just like non-broadcast channels, deserve to be paid by any retransmitter.  In my opinion Broadcasters should favor repealing the compulsory licenses.  There is a strong argument that copyright actually would give local TV Stations a stronger foundation for their second revenue stream.  Currently some Cable/Satellite operators have mounted a non-stop attack on the Communications Act Retransmission Consent fees charged by Broadcasters for their “signal”.  By contrast, pure copyright is bedrock Constitutional principle that is harder to argue against.  Local TV Stations would have an entire army of fellow copyright owners to help them defeat any effort to undermine basic copyright rights.  Simply stated, pure copyright is simply a stronger foundation to assure a continued second revenue stream for Broadcasters.

 

What About The Rights Of Program Owners?

 

This might be the easiest of all.  When a programmer goes to bed at night its first prayer is for the right to direct and control the exploitation of the programs it has created unfettered by government intervention.  The Scalise Bill is the answer to that prayer.  In any rational world, this Bill will have the vigorous and unqualified support of program owners.

 

A Caveat On Must-Carry

 

I very strongly support all of Majority Whip Scalise’s Bill dealing with repeal of compulsory licenses and associated Statutes and Regulations.  And, I support his continuation of Must-Carry for public Stations.  I express no opinion regarding the future of Must-Carry Regulations for commercial Stations, leaving to others to determine whether there are public policy reasons to continue those Regulations, at least for certain categories of Stations.  Repeal of compulsory licenses does not require repeal of Must-Carry.  Must-Carry Stations would need only certify that they had secured the right to sub-license the performance rights in the programs on their schedule.

 

The One Truly Unthinkable Course Of Action

 

As noted I strongly favor repeal of the compulsory licenses and all of the Statutes and Regulations that exist to ameliorate the market disrupting effect of the compulsory licenses – Retransmission Consent, Syndicated Exclusivity, Network Non-duplication, etc.  The one truly unthinkable action would be to leave the Compulsory Licenses in place but repeal any of those ameliorating Statutes and Regulations.

 

I have testified before Congress on these issues multiple times.  Links to two recent examples are below:

 

Testimony before the House Judiciary Committee, September 2013 – https://judiciary.house.gov/wp-content/uploads/2016/02/Padden-testimony-091013.pdf

 

 

Testimony before the Senate Commerce Committee, July 2012 – https://www.gpo.gov/fdsys/pkg/CHRG-112shrg86916/html/CHRG-112shrg86916.htm

 

Preston Padden

 

 

 

 

 

 

Spectrum Welfare For Microsoft?

On July 10, 2017 Microsoft scored a public relations coup in The New York Times.  The headline read, “To Close Digital Divide, Microsoft to Harness Unused Television Channels”.  How perfect!  Microsoft would be the selfless servant of the noble goal of providing residents and businesses in rural communities with the same high-speed Internet access enjoyed by those in big cities.  

There was only one problem.  The Microsoft plan was, in the words of highly respected Harvard Law Professor Susan Crawford, a cynical “hustle”.  Wired, 7/26/17.  Microsoft’s real goal is to get for free the scarce electromagnetic spectrum it wants to be a major player in the coming Internet Of Things – a world where all the devices in our lives and in industry will be connected to each other.  Providing and managing those connections will be a huge business and Microsoft wants in.  Its rural “White Spaces” Proposal is a pretext to get free spectrum in the TV Band nationwide. Microsoft already has access to “White Spaces” channels in rural America. If Microsoft’s real objective was to serve these rural areas, why is it asking the FCC to create “White Space” channels in downtown New York, Los Angeles, Chicago and other urban areas?

Microsoft is a great American company whose current management is highly respected.  That management is trying to recover from the disastrous missteps of its predecessors in famously missing the mobile revolution.  While Apple, the wireless carriers and others were investing heavily in the future, former CEO Steve Ballmer kept Microsoft on the sidelines.  He stated, “There’s no chance that the iPhone is going to get any significant market share. No chance.”  TGAAP 7/11/14.  Current Microsoft CEO Satya Nadella has acknowledged, “We clearly missed the mobile phone, there’s no question.  Our goal now is to make sure we grow new categories.” V3.co.uk, 10/25/16. 

Among those new categories is the Internet Of Things.  But having missed the mobile revolution, Microsoft seems to not understand one of the central building blocks of a mobile business – investing in spectrum.  The recovery Microsoft seeks will not be found by trying to get for free the mobile spectrum resources for which other competitors pay dearly.  One can be sympathetic about Microsoft’s past missteps, and root for them to do better in the future, without believing that they deserve Spectrum Welfare.

There are at least four ways that Microsoft can acquire the spectrum it wants to be a player in the Internet Of Things without seeking a public hand out.  First, it can contract for capacity with one or more of the nation’s wireless carriers who paid for their spectrum in FCC auctions. Second, Microsoft could participate in upcoming FCC spectrum auctions.  Reminiscent of its mistakes in mobile, Microsoft sat on its hands and failed to participate in the most recent FCC auction where it could have bought the exact same 600 MHz spectrum it now wants for free.  Third, Microsoft could buy spectrum in a secondary market transaction – the kind of transaction routinely used by other companies seeking spectrum.  In fact, there are several investors who, with an eye toward future resale, did buy 600 MHz Spectrum in the auction (again, the exact same spectrum Microsoft wants) who would be only too happy to sell to Microsoft.  Finally, Microsoft could simply buy a business that already owns spectrum.

In the 600 MHz auction, I led a Coalition of TV Station owners who were interested in selling their channels.  The auction was a success. But because Microsoft sat on the sidelines, demand was below expectations.  As a result, many Stations that wanted to sell were not purchased and all of the 600 MHz Spectrum that was available was not reallocated.   Now those Stations, and the Stations that never wanted to sell, are being subjected to an involuntary “repacking” process in which they must move to new channels and erect new antennas and other transmitting equipment.  

The repack is a Herculean task for which there is not enough time or money. Worse yet, there are not enough channels for all the TV stations including translator stations that bring network programs and local news to rural areas and low power stations that provide important local programming.  The Microsoft “White Spaces” plan – its land grab for free nationwide 600 MHz Spectrum – would seriously exacerbate these difficulties. Granting Microsoft’s request would mean that more consumers would lose more of the TV programming that they rely on today.

Microsoft’s bet seems to be that it’s cheaper to hire slick PR muscle and to try to hoodwink regulators into handing out free spectrum than to buy spectrum like everyone else.  As someone whose 600 MHz auction battle scars are still healing, I sure hope they are wrong.

 

Preston Padden is the former President of the ABC Television Network and a senior executive at Fox and Disney.  Presently he is a consultant to broadcasters, to broadcast associations and to spectrum investors.

 

FCC TV Ownership Rules & Unintended Consequences

[Note: Regrettably, no one paid me to write this. The views and experiences are my own.]

 

I have longtime friends who believe that the public interest requires the FCC to strictly limit the ownership of multiple TV stations. I genuinely understand and respect their opinions. But, my personal experience over 40 years in the industry suggests that TV ownership limits intended to enhance diversity may, in fact, prevent the creation of meaningfully diverse competitors.

 

My first job out of law school in 1973 was at Metromedia, Inc. Metromedia had emerged out of the ashes of the Dumont Television Network. In the late 1940’s television pioneer Dr. Allen Dumont warned the FCC that it must assign at least four VHF stations to all the major markets to assure the survival of the then extant four television networks. But in it’s Sixth Report And Order On Television Allocations in 1952, the FCC did not listen and Dr. Dumont was proven “dead right” – his network folded. The FCC’s allocations decision condemned the nation to decades of service from only three commercial television networks. Reading this history was my first lesson in how well meaning FCC Rules can have unintended consequences for competition and diversity.

 

As the Dumont Network was going out of business, it spun off to shareholders its owned TV stations in New York, WABD (named for Dr. Dumont) and in Washington, D.C., WTTG (named for Dumont Chief Engineer Thomas T Goldsmith). Businessman John Kluge acquired de-facto control of the new company and adopted the name Metromedia. A passionate competitor and risk taker, Mr. Kluge struggled to fulfill the FCC’s continuing priority public interest objective to create a fourth free-over-the-air commercial television network.

 

Kluge aggressively sought to expand Metromedia’s portfolio of owned television stations – the indispensible foundation of any network. But his efforts were thwarted by the FCC’s own Rules limiting the ownership of multiple stations. One particularly prominent obstacle was the FCC’s “Top 50 Policy” that required a “compelling public interest showing” to own more than 3 TV stations, or more than 2 VHF stations, in the top 50 markets. Of course, the TV stations owned by the three entrenched networks were “grandfathered” and exempt from compliance with the FCC’s ownership Rules and policies. The first decade of my life in the industry was consumed drafting, and advocating for, waivers of the FCC’s TV station ownership limits and its Top 50 Policy in order to advance Metromedia’s quest to launch a fourth network.

 

Meanwhile, Kluge and his executives, including television legends Al Krivin and Robert Bennett, were hard at work investing in compelling programming. They developed a late night show entitled “Thicke Of The Night” launching the career of comedian Alan Thicke. They spent a fortune on a five night-a-week primetime variety show hosted by Jerry Lewis. And they developed first-run sitcoms like “Dusty’s Trail” (essentially “Gilligan’s Island” on a Western wagon train). At the same time, Metromedia set industry records for daily local public affairs programming including the programs “Midday” in New York, “Chronicles” in Boston and “Panorama” in Washington.

 

But, the greatest programming in the world could not overcome the handicap imposed on Metromedia by the FCC’s TV station ownership Rules and policies. Mr. Kluge was not able to fulfill his dream, and the FCC’s policy objective, of creating a fourth network.

 

So, in 1985, Kluge sold his TV stations to Rupert Murdoch who also acquired the then bankrupt 20th Century Fox film studio. Together with Barry Diller and Jamie Kellner, Murdoch set out to create the long sought fourth network. Again, FCC Rules got in the way. On behalf of Fox it fell to me to seek waivers of TV station ownership limits and other Rules intended to promote diversity like the TV/Newspaper cross-ownership Rule and the Financial Interest And Syndication Rule. In other words, the effort to create meaningful diversity required waivers of FCC Rules intended to create diversity!

 

The good news is that because the benefits of granting the Fox waiver requests were so strong – creation of a fourth free network and saving more than a hundred jobs at the New York Post – even strong supporters of TV ownership regulation like Senator Ted Kennedy, Governor Mario Cuomo and Senator Dan Inouye supported our waiver requests. But the point is that there is something fundamentally wrong when creating new competition and diversity requires waivers of Rules intended to promote competition and diversity.

 

I offer this history because I lived it. On many occasions I thought, “Why can’t the FCC see that these TV station ownership restrictions are preventing the creation of meaningful entities of scale that could bring to viewers the benefits of greater competition and diversity”? In today’s world of hundreds of cable/satellite networks, the Internet and OTT providers, that question is more compelling than ever.

 

Recent initiatives by the current FCC have given me some hope that the Commission’s well intentioned but counter productive and outdated TV ownership Rules finally may be repealed. If so, consumers almost surely will benefit from the emergence of additional free over-the-air networks. And at a time of escalating TV costs and cord cutting, enabling the creation of additional competitive and diverse free networks would be a great public service.

 

Some of my longtime friends seem to oppose repeal of the TV station ownership Rules because one beneficiary of repeal might be Sinclair Broadcasting Company, a company widely believed to have conservative views. But these same friends would be the first to insist that Federal licensing decisions cannot – must not – be based on political views.

 

I have not always been on the same page with Sinclair, particularly during a business dispute over the first round of Fox affiliation renewals. But, Sinclair has emerged as a genuine television industry leader, especially on technology issues. And, for all we know, the next beneficiary of deregulation could be Tegna, Scripps, George Soros or Tom Steyer. And that is what free markets, competition and diversity are all about. My real world experience with the television ownership Rules leaves no doubt that consumers will be well served by their repeal.

 

 

FCC Incentive Auction Post Mortem

Today, the FCC’s Incentive Auction reached its “Final Stage”.  This means that, for the first time, the prices at which participating broadcast stations were frozen are real.  I am happy for the winning broadcasters.  I am disappointed for the participating broadcasters who did not win.  And I am deeply grateful to the dedicated FCC staff who worked tirelessly for four years to turn a bare statute into an auction.

When this process began the carriers proclaimed their urgent need for 600 MHz spectrum.  But, there was great concern whether broadcasters could be brought to the auction.  In part through the work of the EOBC, the broadcasters showed up.  But, interest among the carriers declined.  In the end, the carriers left 42 MHz of 600 MHz spectrum on the table – spectrum broadcasters were willing to sell.

A full post mortem will take time.  But it appears that delay, complexity and shifting carrier priorities led to a result that was less than it could have been.

 

 

 

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.