In 2009, Blair Levin was hired by the FCC to help the agency craft a national broadband plan. Way back then, it was clear that FCC chairman Julius Genachowski intended to reclaim a significant amount of television spectrum and repurpose it for broadband.
A telling Craig Moffet quote (usually cited as a Julius Genachowski quote) is often paraphrased thus: "By 2020, do you want America to be known as the country with the best broadcast TV in the world, or the country with the best broadband?" Implying that America cannot be both.
This week, the worst-kept secret in the telecommunications business became public knowledge. Comcast has made a bid to acquire Time Warner Cable in an all-stock deal worth approximately US$45.2 billion. An official statement from both organizations opines that this deal will "create a leading technology and innovation company, differentiated by its ability to deliver ground-breaking products on a superior network while leveraging a national platform to create operating efficiencies and economies of scale."
Meanwhile, down on the Beltway...
Current FCC chairman Tom Wheeler is seriously considering a new rule that would restrict and regulate the terms of JSAs (joint sales agreements) and SSAs (shared services agreements) that local broadcast television stations have heretofore exploited to circumvent the FCC's local ownership rules.
The specter of the new regulation has slammed the brakes on local TV M&A and done a pretty good job of decimating shareholder value in local station groups of late. But sad and unfortunate as this is, it may be only a symptom of the aging 20th century business model.
20th-Century Network vs. 21st-Century Network
Back in the 20th century, if you wanted to cover the country, one solution was to "network" a bunch of local stations. This network of affiliated local television stations is still a key consumer value proposition for American broadcast television networks. That said, according to the Consumer Electronics Association , more than 93 percent of local television viewership takes place via the retransmission of local television signals over local cable television systems or (via a waiver) over satellite television systems or (tellingly) over broadband connections.
In the 21st century, as evidenced by the aforementioned CEA study (and countless others), there is little or no need for this 20th -century technology to be chewing up valuable broadband spectrum -- or so the story goes.
What Does the Future Hold?
The tea leaves at the bottom of my vintage "Tonight Show with Johnny Carson" mug tell me, as resident tasseographer, that the FCC wants its spectrum back—oh, wait, the FCC told me that.
OK, let me pour out some more tea... ah... here we go. The FCC and other federal agencies will let Comcast–Time Warner breeze through any antitrust issues with minor divestiture of assets. The first truly national cable television provider will be born and the tea leaves prophesy that it will grow to be bigger and way worse for consumers and competition than the Sprint–T-Mobile merger could ever have been. This new, more powerful, national cabler will hammer a new nail deeply into the coffin of local television station owners.
The FCC's thirst for bandwidth is going to hurt local TV so much that selling back spectrum is going to look better than selling stations and way, way better than peddling airtime. This will be a metaphoric 2.5 to 3.0 seismic event (not an actual earthquake), but the future is clear. America is well on its way to becoming a better broadband country (it will never be the best broadband country in the world). As for broadcast... I wonder: Is it too late to purchase long-term care insurance?
Shelly Palmer is Fox 5 New York's On-air Tech Expert (WNYW-TV) and the host of Fox Television's monthly show Shelly Palmer Digital Living. He also hosts United Stations Radio Network's, ShellyPalmer Digital Living Daily, a daily syndicated radio report that features insightful commentary and a unique insiders take on the biggest stories in technology, media, and entertainment. He is Managing Director of Advanced Media Ventures Group, LLC an industry-leading advisory and business development firm and a member of the Executive Committee of the National Academy of Television Arts & Sciences (the organization that bestows the coveted Emmy® Awards). Palmer is the author of Television Disrupted: The Transition from Network to Networked TV 2nd Edition (York House Press, 2008) the seminal book about the technological, economic, and sociological forces that are changing everything, Overcoming The Digital Divide: How to use Social Media and Digital Tools to Reinvent Yourself and Your Career; (York House Press, 2011) and Digital Wisdom: Thought Leadership for a Connected World (York House Press, 2013). For more information, visit shellypalmer.com.
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