The FCC Spectrum Auction and the Future of Public Broadcasting: The Case at MSU and Greater Lansing

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Michigan State University (MSU) held a lively forum on 4 January 2016 to discuss the pending decision by the university on whether or not to participate in the FCC’s spectrum incentive auction. A second forum will be held on the 11th of January at 7pm in the College of Communication Arts & Sciences.

What might sound like a technically and financially arcane set of issues came to life for many in the questions of the 300 some participants who packed the auditorium on the 4th of January. It appeared as if every-other person attending the forum had their hand up at some point to comment or ask a question. Credit to MSU for holding these forums, and to the University’s President, Lou Anna Simon (2015), for being interviewed on WKAR’s ‘Current State’ in December about the pending decision.

If MSU were to auction off its broadcasting spectrum, as explained at the forum, this would spell the end of over-the-air (OTA) broadcasting of WKAR public television. Not being over the air, it will lose its financial support from the Corporation for Public Broadcasting, and its must carry status for cable and satellite providers. While it will not affect WKAR radio, it would threaten the existence of public broadcasting in the greater Lansing community, and similar communities, as well as the vitality of public broadcasting nationally (CPB 2014: chapter 3). Not surprisingly, the audience on 4 January was ‘overwhelmingly negative’ (Wolcott 2016). imgres

Why do this?

As the auction suggests, the ‘incentive’ is financial. Potentially hundreds of millions of dollars for the University, with no strings attached on how it is spent. However, there are seriously hard questions that need to be addressed before deciding whether such eye-watering payoffs for the University would really be a windfall or even justified at this point in time.

First, the same spectrum is likely to increase in value in the near future. Wireless is the most dynamic, fastest growing infrastructure for the development of innovative approaches to connectivity generally, but also mobile Internet, the Internet of Things, and future sensor networks associated with intelligent cities and transportation (Dutton et al 2014). There is little question that wireless spectrum is poised to become far more valuable than it is now, and within a short space of time. There is almost no question that any price MSU receives now will be short of what it will be worth in the space of 5-10 years. So is this too soon to auction it off, even if viewed on purely financial terms?

Secondly, those in the community who depend on OTA television will lose access to public television, and WKAR in particular. Only about three-fourths of Michiganians are online. In central Lansing, this could be closer to fifty percent. And many residents of the greater Lansing community are dependent on over-the-air broadcasting. The elderly, minorities, rural residents, and the less well to do, are among the most dependent on OTA broadcasting, and most in need of good high-quality programming, educational, and public-oriented programming (Lawson 2015).

Many believe that the Internet and related digital media will compensate for this loss. The idea is that digital media, such as the Internet, can be used to replace lost spectrum. In the short-term (for the next 5-10 years at least) this is a false hope. There are a growing number of ‘cord-nevers’ (never subscribing to cable or satellite services) and cord-cutters (those who stop subscribing) because they rely more on Internet access and streaming video services. This will reduce the likelihood of cable and satellite providers carrying public broadcasting.

Moreover, the fact that more people are moving to view television and film content over the Internet is not to say that everyone is. The reality is far from this imagined future. Digital divides in access to the Internet have been persistent in developed nations, such as the United States, and will not be closed in the next five to ten years. Michigan is about average among states across the US in access to the Internet, but that covers up major variations across socioeconomic groups, where access is dramatically variable.

Nor will the divide be fixed by other technical innovations. A digital switchover could provide better OTA broadcasting and more capacity, but that will not happen for years. New standards, such as ATSC 3.0 (Advanced Television Standards Committee 3.0), could diffuse as early as 2017. This new standard would improve the quality, spectrum efficiency, interactivity and mobile access, compared with current 1.0 standards, enabling a station like WKAR to broadcast content simultaneously receivable on phones, tablets, computers and home TV displays of standard, high definition and the ultra high def 4K video. ATSC 3.0 would be a ‘game changer’, but WKAR could not seize these opportunities if it lost this spectrum a year before they become active (Reid 2006). Moreover, the use of other platforms (e.g., Internet streaming, cable) comes with additional costs both for the content producer (should MSU continue to be) and the audience. An Internet provision of Lansing’s public television content would need huge funding to be competitive to viewers when TV remains the dominant media for news and entertainment. So again, with patterns of use still lagging far behind developments in new technology, is it too soon to cut off many in the community from over-the-air public broadcasting?

Thirdly, the spectrum was loaned to MSU for the purpose of providing public service broadcasting and information. All scenarios of this auction suggest that the funds received would be repurposed for other activities that might merit support on their own terms, but will not fulfill the public broadcasting purposes that formed the basis for MSU obtaining this spectrum. For example, the President of MSU suggested the proceeds could be placed into MSU’s endowment as a means to ensure its longevity, even though it is not a gift per se to the university (Simon 2015).

This is not a legal issue so much as one of public and community trust in the University fulfilling the spirit of public broadcasting or any other purpose for which money is given. The idea that the same content will be provided via other channels – meeting its obligation – is not plausible with the loss of PBS support and must carry status.

Finally, a number from the audience of the forum raised concerns over MSU losing a major platform for teaching. Many students are drawn to MSU to study broadcast production, and media production, generally. It is true that there are good universities, with strong schools of communication and media studies that do not have a public television studio and station. But why surrender one of MSU’s differentiating, strategic advantages in attracting and training its undergraduate students? It may be that more of a role in teaching could, and should, be made of WKAR’s presence at MSU, but auctioning off its OTA broadcast channel would undermine these opportunities.

In short, there are real issues revolving around the financial wisdom, public service obligations, the regional community, inequities, and educational opportunities tied to this decision. From my perspective, it is not simply an issue of either/or, but also of timing. I hope I am not seen as one of those so-called ‘naysayers’, to use Mark Bashore’s term in his interview with President Simon. Five to ten years from now, it is most likely that the spectrum will be far, far more valuable, and more people will be digitally connected, even if not online. Whether based on a matter of principle, or sound financial management, it might well be best to relinquish at this time.

So I am delighted that MSU is continuing to explore these issues. Perhaps there is good evidence to challenge each of these reservations I’ve outlined. In that spirit, I am looking forward to the second forum, and the potential to follow the Lansing case as a concrete, real world example of the opportunities, threats, and prospects for public broadcasting in the United States.

Bill Dutton
A personal perspective that does not necessarily represent the views of the Quello Center or any other organization.

References

CPB (2014), Corporation for Public Broadcasting, White Paper on Spectrum Auction and Repacking. 7 August. http://www.cpb.org/spectrum/reports/CPB-White-Paper-on-Spectrum-Auction-and-Repacking-Process.pdf?pdf=CPB-White-Paper

Dutton, William H. and Law, Ginette and Groselj, Darja and Hangler, Frank and Vidan, Gili and Cheng, Lin and Lu, Xiaobin and Zhi, Hui and Zhao, Qiyong and Wang, Bin, Mobile Communication Today and Tomorrow (December 4, 2014). A Quello Policy Research Paper, Quello Center, Michigan State University. Available at SSRN: http://ssrn.com/abstract=2534236 or http://dx.doi.org/10.2139/ssrn.2534236

Lawson, J. (2015), ‘Minority, public TV viewers face greatest threat in FCC auction’, 31 August: http://current.org/2015/08/minority-public-tv-viewers-face-greatest-threat-in-fcc-auction/

Reid, G. (2016), Comments at the MSU Forum, 4 January.

Simon, L.A. (2015), President Lou Anna Simon speaking on the future of WKAR-TV signal ‘to be determined in 2016’. Interview with Mark Bashore, 21 December 2015: http://wkar.org/post/pres-simon-future-wkar-tv-signal-be-determined-2016#stream/0

Wolcott, R.J. (2016), ‘Residents Concerned About Potential WKAR-TV Sale’, Lansing State Journal, January 5: 3A, 5A.

Notes

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I got my Gig!

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After thinking and writing about the benefits of fiber-to-the-premise (FTTP) networks for a number of years, I’m happy to report that I’ve finally joined the small but growing population of U.S. households connected to the Internet via fiber networks delivering symmetrical gigabit speeds. I’m getting service from LightSpeed, a Lansing-based company deploying its network on a neighborhood-by-neighborhood basis (see this map for more details on the status of its network and service rollout).

The installation happened yesterday (the fiber drop was installed the day before). It went smoothly, with Jeremy and Chris connecting the drop to a fiber network interface in our basement and from there running CAT-5 cable to a router in our living room.  As they worked, they patiently fielded the many questions I had and my long-winded comments about competitive dynamics, policy, etc.

Though my wife and I won’t be accessing the network on a regular basis until we move into our new house next week, I did have the pleasure of watching the Speedtest.net meter zoom up to the 1 Gbps range for both download and upload speeds at the end of the installation process. I also learned that while our fairly old laptops can reach this range when connected to the router via CAT-5 cable, their fairly ancient Network Interface Cards maxed out at around 100 Mbps in both directions when relying on Wi-Fi.  But this was still by far the fastest speeds I’ve ever had in my home, especially in the upstream direction (the photo below shows Jeremy and Chris demonstrating speeds in the 500 Mbps range via a Wi-Fi connection on their newer-generation laptop, after hitting gigabit speeds via a hardwire connection to the router).

PhotoOfLightSpeedInstallers

LightSpeed’s monthly price for symmetrical gigabit service is normally $70 (which I believe is also what Google charges in its Google Fiber cities). As an “early adopter,” however, I’m paying only $49 a month, a price that’s guaranteed for two years. Though this price no doubt takes a bite out of LightSpeed’s margin for its “early adopter” customers, it’s likely to help them capture market share as they build out their network. And in a high-fixed cost business like this, penetration is key to both short-term and long-term financial health.

One of the things that strikes me about LightSpeed is that it is not offering the “triple-play” bundle that has been the focus of cable/telco competition for many years. Instead, their value proposition is pretty simple: you get attractively-priced access to the Internet at blazingly fast symmetrical gigabit speeds (hopefully with the kind of reliability fiber can deliver but is much harder to match with the fiber-copper hybrid networks still mainly used by incumbent telcos and cablecos). You then have free rein to make (and change) the online services and devices you use to access the “voice” and “video” applications we once knew as “telephone” and “television.”

I’d love to do a survey of homes in areas served by LightSpeed to get a sense of who (and why and how many) are signing up for the company’s service, and what their experience is like. The obvious (and probably true) speculation would be that it’s mainly younger cohorts (e.g., Millennials), which research has shown account for a disproportionate share of the (cable and wireline telephone) cord-cutter population. That being said, I wonder how many older households, like my own, will jump at the chance to forego bundles loaded with things we don’t want (including extra fees for set-top rentals, etc.) and, instead, to simply get connected to a fast reliable network and then decide—-independent of the business arrangement we have with our network access provider—how best to use that network to support our needs and desires for communication, information, entertainment, commerce, etc.

I also wonder the extent to which the availability in a community of these “simple but super-fast” connectivity offerings will push incumbent providers away from their increasingly artificial “siloing-then-bundling” of services.  There are already signs that this is taking place, though still on a modest and incremental scale.

My own view is that the longstanding focus on multiservice network operator-controlled bundles will continue to erode, especially to the extent that “simply super-fast access” options like LightSpeed expand their footprint.  Among the other factors I see as supporting this shift are: the proliferation and increased penetration of online content and services, including Netflix, Hulu, YouTube and online-only options from longtime cable TV anchor service HBO;  the increasing penetration and capabilities of smartphones, tablets and other access devices not (or at least less) controlled by network operators and; the ongoing shift in demographics favoring “fast affordable connectivity + apps of my choosing” vs. “a limited selection of bundled options offered by my network operator.”

Though not much can be predicted based on a sample of one, what I can say at this point is that I look forward to my own household’s transition down this road, which combines much faster and more reliable, symmetrical and affordable network access with expanded freedom of choice.  And, as both a customer and industry observer, I hope that the increasingly healthy competitive environment emerging in the Lansing area remains so, and breeds increased innovation, investment and consumer choice.

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