A new experimental broadcast license for WKAR-TV opens the door for broadcast innovation and research at the MSU College of Communication Arts & Sciences. Michael O’Rielly, commissioner of the U.S. Federal Communications Commission (FCC), recently visited Comm Arts and WKAR studios to show support for the deployment of ATSC 3.0 technology and announce the new license. The FCC issued license for WKAR studios allows for the creation of a Next Gen Media Innovation Lab.
As part of this announcement, Quello Center Director Bill Dutton highlighted some unique opportunities for research and innovation using ATSC 3.0. Dutton’s presentation followed an overview of the capabilities of ATSC 3.0 by WKAR’s Technical Services Manager Gary Blievernicht. See an overview here.
Some call it ATSC 3.0, Dutton calls it Next Generation Broadcasting. ATSC 3.0 may have an unfortunate name, according to Dutton, but the potential of this broadcast innovation is generating excitement among public broadcasters, policy makers, College of Communication Arts & Sciences administrators and faculty. Dutton explained the hype and history behind this ambitious initiative to help welcome Commissioner O’Rielly and catch faculty and staff up to speed on ATSC 3.0.
ATSC 3.0 is the merging of broadcasting and the Internet. This new broadcast platform offers the affordances of the Internet, such as customized content and more viewing options (e.g. choosing from various camera angles during a live game), while using a broadcast signal. This allows flexible, adaptable and future focused programming for broadcast television, including public stations like WKAR.
O’Rielly toured WKAR studios and the College of Communication Arts & Sciences before joining the presentations. During his visit, O’Reilly announced that WKAR-TV is the first public broadcasting station awarded an experimental license to use ATSC 3.0 over the airways. Only a handful of broadcasters across the nation will have this unique opportunity, he explained, and WKAR is the only broadcasting station to explore and develop this next generation broadcasting for public television.
With the experimental license, WKAR studios and College of Com Arts will continue to build a state of the art ATSC 3.0 Media Innovation Lab. Dutton, who was part of a strong group that advocated to save MSU’s broadcast spectrum and establish a center at MSU to experiment with ATSC 3.0, explained the potential behind this cutting-edge broadcast system and reflected on how the university considered auctioning off WKAR-TV spectrum at the FCC Incentive Auction in 2016.
“There was financial incentive, potentially over $206 million” Dutton explained. However, the potential loss of WKAR was met with public backlash when hundreds of people gathered for a forum on the issue in January of 2016. Ultimately, the university decided that the end of over-the-air public television in Lansing, the deepening divides in access to broadcasting and the lost potential for broadcast innovations was not worth the money. With the decision to keep WKAR on the airwaves, thought leaders and advocates like Prabu David, Dean of the College of Communication Arts & Sciences, decided that a partnership between the college and WKAR could help shape the future of broadcast.
The potential crisis was averted when MSU pulled out of the auction, Dutton said, now we have decisions to make about the potential for research and policy. Among other things, ATSC 3.0 will require policy considerations surrounding issues of localism, diversity, privacy and security. Research is required to determine best practices and inform policy decisions.
The potential for the Media Innovation Lab is immense, Dutton continued, “we can do technical experiments to improve reception in rural areas and distressed areas of Lansing, and we can figure out different approaches to providing two way interactive digital content as well as targeted content.”
Dutton listed other capabilities and considerations for the lab as a testbed for personalization and new applications and services including alerts and information related to health, medical, emergency or public service announcements. The Next Gen Media Innovation lab can serve as a platform for user behavior research related to user adoption of ATSC 3.0, patterns of use and impacts of the technology. Dutton believes that such a lab can help improve public broadcasting in Lansing and attract students to the college who value being at the cutting edge of broadcast innovations.
Commissioner O’Rielly expressed his gratitude to WKAR and other public broadcasters for leading the way in television and broadcast research, saying “commercial broadcasters are not very good at doing research, because public broadcasters are so good at it.” He explained, how commercial entities are able to use the research of public media broadcasters, such as WKAR, and modify approaches for commercial use. O’Reilly expressed excitement and awe of WKAR studios and Com Arts, admitting that in his 25-years of public service he had never visited a public broadcasting station.
We are delighted to announce that Vincent Curren, principal of Breakthrough Public Media Consulting, Inc., has accepted our invitation to join the Quello Center’s Advisory Board. Given his experience in public broadcasting and his current focus on the future of broadcasting standards and their implications for the industry, his appointment helps reinforce the Center’s broadcast legacy tied to James H. Quello.
Recently, Vinnie visited the Quello Center and provided his perspective on the future of public broadcasting. He focused on the new IP-based standard created by the Advanced Television Systems Committee (ATSC), called ATSC 3.0. As he argues, this new standard is likely to enable real synergies between the Internet and broadcasting, and much much more, even helping to usher in the next generation of television.
As principal of his firm, Breakthrough Public Media Consulting, Vinnie is helping public media companies navigate today’s dynamic and competitive media world. More concretely, he is working with the Public Media Company to help public television stations leverage the power of ATSC 3.0, the next generation, broadcast television standard.
Before leaving to start his own firm, Vinnie served as Chief Operating Officer of the Corporation for Public Broadcasting (CPB), a position that he held for nearly a decade. While at CPB, Vincent Curren had overall responsibility for managing station policy, grant-making and station support activities, ensuring that all Americans receive robust public media services for free and commercial-free. Prior to being named Chief Operating Officer, Vinnie was the Senior Vice President for Radio at CPB.
Vinnie has been a major market station general manager (WXPN, Philadelphia), has held programming, fundraising, and engineering positions in radio, been a commercial television producer/director, and has served on the boards of the Development Exchange (now Greater Public) and the Station Resource Group.
Vinnie holds a BA from SUNY Buffalo (Psychology) and an MS from the University of Pennsylvania in Organizational Dynamics. After Vinnie was invited to accept our invitation to join the Board, and had a chance to review its members, he spoke of the quality of the Board. He added that, coincidentally, he happened to have been a fellow graduate student at the University of Wisconsin-Madison in the 1970s, with another member of our Board, Bob Pepper, now at Facebook, but formerly at Cisco, and who was a major figure at the FCC. Vinnie said Bob was the ‘star Larry Lichty student’, referring to Professor Lawrence W. Lichty, one of the foremost scholars of the history of broadcasting. In fact, when I first met Dr Pepper, he was a professor at the University of Iowa, and focused on the history of public broadcasting.
So it is wonderful to have Vinnie Curren, one of the nation’s leading thinkers about the future of public broadcasting, as well as his former colleague at the University of Wisconsin-Madison, Bob Pepper, along with all the other prominent figures on the Quello Center’s Advisory Board. We are honored.
Director and Professor of Media and Information Policy
October 6th, 2017
Vincent Curren, Principal at Breakthrough Public Media Consulting, Inc., provided his perspective on the future of public broadcasting, focusing on the new IP-based standard created by the Advanced Television Systems Committee (ATSC), called ATSC 3.0. This new standard will enable real synergies between the Internet and broadcasting, and much much more. So join us to learn about the future of public broadcasting, and the next generation of television, as well as developments on the ground here in East Lansing at WKAR.
Biographical Sketch of Speaker
Vincent Curren is principal of Breakthrough Public Media Consulting, a firm that helps public media companies navigate today’s dynamic and competitive media world. Vinnie is working with the Public Media Company to help public television stations leverage the power of ATSC 3.0, the next generation, broadcast television standard.
Before leaving to start his own firm, Vinnie served as Chief Operating Officer of the Corporation for Public Broadcasting, a position that he held for nearly a decade. While at CPB, Vinnie had overall responsibility for managing station policy, grant-making and station support activities, ensuring that all Americans receive robust public media services for free and commercial-free. Prior to being named COO, Vinnie was the Senior Vice President for Radio at CPB.
Vinnie has been a major market station general manager (WXPN, Philadelphia), has held programming, fundraising, and engineering positions in radio, been a commercial television producer/director, and has served on the boards of the Development Exchange (now Greater Public) and the Station Resource Group. Vinnie holds a BA from SUNY Buffalo (Psychology) and an MS from the University of Pennsylvania (Organizational Dynamics)
Last week, Vincent (Vinnie) Curren, Principal at Breakthrough Public Media Consulting, Inc., gave an insightful Quello Center presentation about the technological and market potential of ATSC 3.0, an IP-based standard created by the Advanced Television Systems Committee (ATSC). As CNET put it, this standard was created with the idea that most devices would be Internet-connected, enabling a hybrid system whereby the main content (audio and video) would be sent over the air, but other content (advertisements) would be sent over broadband and integrated into the program. This creates some very interesting opportunities for individualized marketing, though as ATSC touts in a somewhat cutesy promotional video, ATSC 3.0 is capable of a lot more.
The conversation with Vinnie took an interesting turn (to me anyhow), when he contrasted the state of public broadcasting in Michigan with that in Arkansas. According to Vinnie, public broadcast station management in Michigan is highly balkanized, whereas in Arkansas, it is largely centralized. This implied far fewer individual station engineers and managers in Arkansas, where budget savings from having a smaller bureaucracy are instead applied toward better local news coverage. Effectively, Vinnie was touting the benefits of merger to (state level) monopoly.
This statement immediately set off my antitrust alarm (which sounds like this). After all, even if a merger between two firms that preserves both firms’ products (e.g., broadcast stations) can reduce costs, monopolistic ownership could still raise prices above that in a duopoly by internalizing competition between the firms. More specifically, when one firm in a duopoly raises its price, some of its customers will switch to its competitor’s product and vice versa. This competitive threat puts downward pressure on prices relative to what happens under a monopoly. When a monopolist sells both products, a rise in the price of one positively impacts demand for the other, inducing the monopolist to set higher prices unless a merger to monopoly lowers costs sufficiently to offset this anti-competitive effect. The fact that antitrust practitioners seldom consent to a merger to monopoly suggests that the anti-competitive effect usually dominates.
However, the broadcasting market is different! Broadcasters operate in a multi-sided market that is likely to become even more complicated by the spread of ATSC 3.0. First, consumers of content do not pay broadcasters to watch television. Instead, broadcasters subsidize consumers, but charge advertisers for airing commercials (though in the case of public broadcasting, this is largely supplemented by contributions from viewers like you). Broadcasters may also charge retransmission fees to cable operators who carry broadcasting content and do charge consumers for content generally. Moreover, with ATS 3.0, Internet service providers will have to be involved in this market if advertisements are to be integrated via broadband. This means that the effect of merger operates through a mechanism that is far more complex than the “internalization of competition.”
After Vinnie’s presentation I considered whether economists have attempted to tackle the issue of merger in a multi-sided market. The issue is relatively understudied, but two papers stood out in my literature search:
Chandra and Collard‐Wexler (2009) theoretically explore a two-sided merger from duopoly to monopoly and then use difference-in-differences approaches to empirically investigate mergers by newspaper publishers. As in many other two-sided markets, newspaper publishers offer one side (consumers) a subsidy by charging below cost. This is because newspapers not only value readers’ circulation revenue, but also the value that advertisers place on consumers. In the model of Chandra and Collard‐Wexler (2009), the key factor that determines how newspaper mergers affect prices is how newspapers value the marginal consumer who is indifferent between two competing newspapers.
If the revenue that this consumer indirectly brings in through advertisement consumption is lower than the loss to the newspaper of subsidizing the consumer’s newspaper purchase, then competing duopolists will set higher circulation prices in equilibrium than a monopoly owner of the two papers (even absent any cost reduction by the monopolist). This result is driven in large part by the authors’ assumption that consumers who are indifferent between the two papers will turn out to be less valuable to advertisers, and hence will bring in advertising revenues that are lower than the subsidy they enjoy on the paper. The assumption is well motivated in the paper, but may not necessarily apply in broadcasting. Moreover, if the reader provides a positive value to the newspaper, then mergers can still increase prices (unless cost reduction is sufficient to counteract market power).
Tremblay (2017) sets up a relatively general multi-sided platform model that he uses to measure platform market power and to assess the effect of platform mergers. In this model, multiple platforms that facilitate interactions between distinct groups (e.g., broadcasters might serve consumers of content and advertisers) compete by pricing for each interaction facilitated by the platform.
The model highlights the complexity of analyzing multi-sided markets by recognizing that demand for any interaction is a function of not only the vector of prices involved in that interaction—as in a “one-sided” market—but also of the vector of all other interaction types! Thus, not only must we consider the demand response to a change in price for that interaction, but also the demand response to the numerous potential externalities that might exist (e.g., a negative network externality can occur on media platforms where greater consumer advertisements diminish consumer usage on the platform).
As such, in addition to consisting of the usual marginal cost and demand elasticity contingent markup, the equilibrium price for a specific interaction is also dictated by what Tremblay refers to as “marginal profit elsewhere,” which consists of the marginal changes that the interaction in question engenders on all other interactions. Moreover, in the case of a multi-platform seller (e.g., broadcaster that owns multiple stations), as might follow post-merger, the equilibrium price is impacted not only by the standard diversion term that gauges the extent to which a merger can internalize competition, but also by “diversion elsewhere,” which results from multi-sidedness. This “diversion elsewhere” means that some platform prices may decrease post-merger, suggesting that even without cost-reduction benefits, a horizontal platform merger may be efficient.
Certain factors complicate matters even further in broadcasting. As Vinnie pointed out, a significant part of a local television station’s advertising revenue comes from national advertisers, especially in the larger markets. In many cases, prices are not set unilaterally, but are determined through negotiations with advertisers. A larger multiple-market footprint gives larger broadcast groups leverage when they negotiate pricing for national clients. The effect of a broadcasting merger surely depends on this countervailing bargaining power as well as on whether content consumers view advertising as a good or a bad.
Additionally, a significant part of local station revenue comes from “retransmission consent fees.” If it opts for retransmission consent, a cable service provider is not required to carry the broadcaster’s channel, but if the cable operator chooses to do so, the broadcaster can demand “retransmission” or rights fees. A large station owner like Sinclair, which operates hundreds of stations, has additional leverage when negotiating retransmission consent fees with a large cable operator like Comcast. Of course, cable companies may pass these fees down in the form of higher prices to consumers. The additional revenue on the broadcaster side may lead to better content, but that will probably come at a higher price for cable service.
After reading this post, a former colleague who is very knowledgeable in this area pointed out that there has been some research on the trade-offs of consolidation in two-sided markets and related issues that predates the modern multi-sided market literature.
An early two-sided market analysis by Robert Masson, Ram Mudambi, and Robert Reynolds (1990) shows that competition can sometimes lead to a price increase. Moreover, in the model, competition either makes advertisers better off while making media-consumers worse off or the other way around. An even older related piece by James Rosse (1970) seeks to estimate cost functions in the newspaper industry without cost data. Yet another article concerning the newspaper industry by Roger Blair and Richard Romano (1993), looks at newspaper monopolists, which as the authors point out, nevertheless frequently sold newspapers at below cost. I suspect that the two-sided logic for this to occur is a lot more clear to economists today than it was in 1993.
 ATSC is an international, non-profit organization developing voluntary standards for digital television. Member organizations represent the broadcast, broadcast equipment, motion picture, consumer electronics, computer, cable, satellite, and semiconductor industries. See https://www.atsc.org/about-us/about-atsc/.
 Other related work includes Filistrucchi et al. (2012) and Song (2013). See Filistrucchi, L., Klein, T. J., & Michielsen, T. O. (2012). Assessing unilateral merger effects in a two-sided market: an application to the Dutch daily newspaper market. Journal of Competition Law and Economics, 8(2), 297-329; Song, M. (2013). Estimating platform market power in two-sided markets with an application to magazine advertising. Available at https://ssrn.com/abstract=1908621.
 Note that I have not discussed the impact of merger on the price of advertising. The authors find that the effect on advertising price is indirect: if there is an increase in a newspaper’s circulation price, this will increase the average value to advertisers of that newspaper.
 In the words of Tremblay, demand contains an infinite feedback loop because demand for an interaction by platform X is a function of demand for an interaction Y and vice versa.
 Commercial stations have a choice between two options with respect to making their programming available to cable and satellite systems. They can exercise “must carry.” If they do this, the cable service provider is required to carry the broadcaster’s primary channel but does not have to pay the broadcaster any rights fees for carrying the channel. Alternatively, cable service providers can exercise “retransmission consent.”