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

by

January 6th, 2016

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.

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12 thoughts on “The FCC Spectrum Auction and the Future of Public Broadcasting: The Case at MSU and Greater Lansing”

  1. jeanie says:

    Thank you, Bill Dutton, for a spot-on, well-written and thorough analysis of the spectrum issue. You make some excellent points, particularly in regard to the potential value of spectrum in the future along with key issues of public trust and service.

    1. Ken Merley says:

      Thank you sir, this is a great article. To the education point, we give more information and opportunity to the students than any class could. As the Production Manager I spend almost every day with different groups of our student staff teaching them new ways and expanding on what the classroom provides. As a result our WKAR alumni are spread out all over the nation working in major production facilities and they all accredit it to their time and what they learned at WKAR. We have been a major part of the education of MSU media students for a long time and hope to continue giving them the opportunity to work on high quality, award winning local and nationally aired programs thus helping them build a solid resume reel and foundation to find good work.

      1. William Dutton says:

        Thank you for this comment. A number of points were made at the forum about the educational and career opportunities opened up by involvement with WKAR broadcasting.

    2. William Dutton says:

      Much appreciated. Thank you for your comment and involvement in this issue.

    3. Steve Simonson says:

      Dear Mr. Dutton (and all): My apologies if my reply is misplaced (reply to “Jeanie? Really the general post…), but I MUST respond!

      I was astounded when I read this well researched and superbly written piece. You must be a clairvoyant, as I was composing a letter that covered almost all of these points, although I was going to state them as opinion, because I haven’t the means (read: time and skill) to do the research. It is very validating to know that my “gut instincts” are not only my own, and shared by a well informed and articulate community. If you and I can see and understand these issues, there must be more of us out there. I only hope that those (President Simon!) in the position to make this decision take these factors into consideration and act for the long range good of our community and public broadcasting as a whole. If MSU has the temerity to resist short term gain for the good of the community, perhaps others will follow our example and strengthen public broadcasting nationally.

      You mention that public broadcasting is a public trust, a point I passionately agree with! It is my opinion that relinquishing our scarce resource (the spectrum) puts us (the general public) in a position of dependence on for-profit, private interests, thereby weakening public broadcasting’s role as an independent voice and a member of the Fourth Estate. As an example from our market, the locally produced (and distributed statewide!) program ‘Off The Record’ provides an invaluable public service by focusing some “Sunshine” on our legislators and our state government.

      I concede that a great many social and economic forces have changed tradition print journalism, as well as local and national broadcast news. These factors are complex and far reaching, but they are largely restricted to the private sector, where they belong. Commercial journalism has been weakened in it’s role as a watchdog, and our politics have become muddied with greed and corruption (my opinion of the “Citizen’s United” ruling). I would argue that the true “check and balance” function of journalism has been weakened to near extinction at worst, and general irrelevance at best.

      This is precisely why public broadcasting, with integrity bought by independence from the pressures of commercialism and excessive, corporate style profits, needs to remain free. Local public stations form the backbone of a national network that serves, represents and informs the people, by broadcasting what they (the local stations) decide is in the best interests of their local community. With no access to OTA services, we lose first as a community, and then as a nation, and those that would manipulate, obscure or deliberately misinform gain control over public opinion, and with it, the power to restrict the true freedom of the press.

      1. William Dutton says:

        Your comment is most appreciated. I too am pleased that there are others who share some of my concerns.

  2. Bill, this was a pretty interesting read that raises several important issues. The one point I might contest is regarding spectrum valuation. Because secondary markets for spectrum are not very liquid and primary market issues not particularly common (with sometimes years before new spectrum is put up for auction), spectrum valuation is perhaps more art than science. Thus, it is pretty difficult to validate a claim that sold five-ten years from now, the gain in valuation of this spectrum is likely to outpace the return from a diversified investment portfolio. Here is an article that restates that point in a different way: http://www.fiercewireless.com/story/analyst-no-discernable-patterns-long-term-value-spectrum/2015-04-30.

    That said, I do feel like many of your other points are quite valid, and it would be interesting to look at the FCC docket to see if many parties to the proceedings have raised points similar to yours. Some resources for those interested: https://wireless.fcc.gov/auctions/incentive-auctions/broadcast-incentive-auction.html?fontsize= for an overview and http://apps.fcc.gov/ecfs/proceeding/view?name=14-252 and http://apps.fcc.gov/ecfs/proceeding/view?name=12-268 for comments and pleadings related to the proceeding. Lots of comments to go through for anyone with the time and inclination.

    1. William Dutton says:

      Thanks for you comments and references, Aleks. I completely accept that there is controversy over the future prices of spectrum. At the forum, it was clear that no one even feels confident in predicting the eventual price that might result from the reverse auction, in the space of weeks, not years. Yet it seems safe to say that the reverse auction, should we join, is likely to move below the top estimate of $206M, given that the FCC needs only around 200 of 1700 TV stations to sign on the dotted line. Long-term, agree, is anyone’s guess. Some investment analysts disagree with Craig Moffett’s analysis, for example.

      That said, while there might be a conventional wisdom among economists about the advantages of diversification, I would question this wisdom in this particular case. When you are holding a valuable scare resource (spectrum) that is poised to have a dramatically greater range of applications, I would say that its future value has very strong prospects of increasing. In the same spirit that I wouldn’t sell my lake front house (if I had one) and invest it in a diverse portfolio of stocks, I would not sell this spectrum now. I’m sure people are hearing your message about the unpredictable long-range, but I remain convinced that the true value of spectrum is going to increase dramatically. In due course, I have some faith that the marketplace will recognize this.

      That said, if you agree with my other points, it is arguably not good to sell at any price.

      1. Aleksandr Yankelevich says:

        I must contest both points.

        1) I have fairly little doubt that you are correct in your assertion that spectrum will remain a valuable scarce resource that will, given the direction of current technology, increase in value in the near and long term future. However, it is far from clear to me whether the value of spectrum will outpace the economy in general. I am not siding with Craig Moffett here, but rather making an assertion that on average, investment analysts do not beat the market. In other words, lacking insider information, I would choose diversification over speculation any day of the week.

        2) Whereas I continue to agree with your other points, as I’ve said a number of times in person, by holding this auction, the FCC has implicitly made a determination that this spectrum is more valuable to society as a whole in the hands of (mobile) wireless service providers than in the hands of broadcasters. Naturally, there will be constituents who are likely to be left worse off for this auction (especially in the short run), and my reasoning in providing some of the links above stemmed from my concern as to whether the FCC has rigorously considered some of the adverse consequences of the auction in relation to the presumed potential benefits. However, my concern should not be interpreted as a belief that the benefits (not counting proceeds earned by sellers in the reverse auction) are likely to be smaller than the costs.

        1. William Dutton says:

          Good to have a loyal opposition represented on this blog – thanks for your input.

  3. Amy McCormick says:

    Anyone with concerns about the future of WKAR-TV should submit comments to the university so they can measure the level of public opposition to the proposal. The email for submitting comments is: spectrum@wkar.org.

    I submitted the following this evening. It doesn’t cover all the issues, but does express my concern.

    Dear Trustees and President Simon,

    As a long-term resident of East Lansing, I write to express my sincere hope that MSU will NOT auction off the portion of the broadcast spectrum WKAR-TV currently uses for its over-the-air (OTA) signal.

    I am concerned about those who currently receive the broadcast signal over the air and who do not have other means to obtain it, either because they cannot afford cable or satellite access or because they cannot get it for technical reasons. Eliminating OTA broadcasts will disproportionately impact those who cannot afford “pay TV” as well as those who live in rural or wooded areas for whom cable and satellite television are not options.

    I am also concerned about my own access and that of everyone in mid-Michigan. Even though I obtain WKAR-TV through cable, not OTA, I am not convinced that my cable company will continue to provide any public television because (1) WKAR will lose its “must-carry status” for cable and satellite providers and (2) there is no guarantee that those providers, which generally view public television as unprofitable, will provide access to alternative stations from Detroit or Grand Rapids.

    Streaming is not adequate as a replacement. Many of the same mid-Michiganians who cannot afford cable or satellite television cannot afford internet access either, especially high-speed internet which would be required to stream video. Moreover, if the auction is held, many public television stations could participate in the auction and thus go “out of business,” thereby putting all of public television at financial risk. A reduction in the number of stations means content producers will receive revenue from fewer sources. Content will, unfortunately, disappear. As I understand it, streaming is simply not an adequate solution even for those who can afford it because of the danger that in short order there will no longer be much content to stream. I am not the first person to suggest that public broadcasting is under threat at a national level because of these developments. For this reason, I am concerned about everyone’s access to public broadcasting.

    Even if public broadcasting could somehow survive this assault on a national level, I am still concerned about Michigan State University’s reputation and ability to recruit top minds should it opt to participate in the spectrum auction. Without public television, a huge and easily accessible source of creativity, enlightenment, and intellectual stimulation in mid-Michigan would simply disappear. Why would any top professor move to mid-Michigan where public television is either difficult or impossible to access for her or her family? Eliminating WKAR-TV, would send a clear message to prospective academics and others that MSU does not hold these values central to its mission. That would be a shame and would, I fear, damage the university greatly both immediately and over time.

    I do not wish to sound melodramatic, but I am truly concerned about the implications of the auction on a societal level. Should this auction take place and ultimately cripple public broadcasting (a likely outcome should too many stations opt in), the truth about many issues will remain concealed. Private interests already control most of the media. Thoughtful, fact-based, neutral journalism – journalism independent from the pressures of commercial interests – is essential to counterbalance these forces. Otherwise, private interests will have the unfettered ability to control and manipulate public opinion in the furtherance of their own narrow agendas. Public broadcasting is an essential component of the Fourth Estate and of true freedom.

    I realize MSU could make good use of an extra $10 million annually, the amount that could be generated from an additional $200,000,000 of endowment. However, I am not sure what would prevent a future state legislature from cutting MSU’s annual appropriations by the same amount as a way to finance further tax cuts. Legislators could simply argue that MSU does not need the appropriation because of its windfall from monetizing the spectrum license. If that were to occur, we would have lost an irreplaceable asset without getting anything lasting of value for it.

    There are many reasons for MSU to retain its broadcasting spectrum for WKAR-TV. I sincerely hope you resist the temptation for short term gain at the expense of losing an irreplaceable public good.

    Sincerely,
    Amy McCormick, writing as a private citizen
    Professor Emerita
    Michigan State University College of Law

    1. William Dutton says:

      Many thanks for your comments and suggestions for others concerned about this issue.

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