Sen. McCain criticizes delay in digital TV transition
Senator John McCain (R-AZ), the ranking Republican of the Committee on Commerce, Science and Transportation, issued a statement on March 21 about the Bush Administration’s spectrum proposal included in the fiscal year 2003 budget.
The senator’s statement focused on the value that the federal government receives in exchange for spectrum that it auctions. He expressed a renewed concern about how the contingent deadline for the relocation of incumbent TV broadcast stations from UHF-TV channels 60 to 69 (the 700MHz band) would reduce the amount of money that wireless telephone carriers would bid for 700MHz licenses.
The deadline for relocation is 2006, or until 85% of TV homes in a market could receive digital TV signals. The senator pointed out that some broadcasters estimate that it may take until 2015 to reach that level of penetration.
Sen. McCain’s statement didn’t mention commercial, business and industrial two-way radio users that might want to use 700MHz spectrum purchased by guard band managers. It didn’t mention public safety agencies that might want to use 700MHz spectrum reallocated for their use. In both instances, incumbent TV stations block access to the spectrum in some geographic regions. Many of those regions include metropolitan areas with the greatest need for additional radio communications spectrum.
Despite the statement’s silence with respect to radio communications, if the senator were to succeed in motivating Congress to remove the TV station relocation deadline’s contingency, it would lift the uncertainty about access to 700MHz spectrum by commercial, private and public safety radio communications service providers and users that has been allocated for their use.
Here is the text of the senator’s statement:
“As Ranking Member of the Senate Committee on Commerce, Science and Transportation, I would like to discuss an issue I have discussed before — an issue that was addressed by the Administration’s recent proposal in the 2003 Budget to delay the auction dates for spectrum being used by broadcasters.
“In 1997, Congress ventured down a path that we hoped would lead to a revolution for the American consumer — digital television. Congress took action to support the transition to digital television, specifically high definition digital television, because of its potential to give Americans sharp movie-quality pictures and CD-quality sound, and took the extraordinary step of giving the broadcast industry a huge amount of spectrum for free – a $70 billion dollar gift.
“During consideration of the Balanced Budget Act of 1997, broadcasters touted DTV technology as a competitive necessity that would preserve free over-the-air television in the new digital millennium. They sought legislation intended to speed and facilitate a transition from analog to digital television broadcasting. Their requests for special treatment were fulfilled.
“At the time, The Wall Street Journal described Congress’ action as a ‘planned multibillion dollar handout for wealthy TV-station owners.’ While other industries must purchase their spectrum in competitive auctions, in the case of digital TV, Congress decided to give away the spectrum. At the same time, Congress also decided that broadcasters could keep their old analog spectrum until 2006, or until 85% of TV homes in a market could receive digital signals.
“During the debate on the Balanced Budget Act, I expressed my serious reservations with the spectrum provision. At the time I stated, ‘…when it comes to the bill’s provisions on the analog turnback date, I fear that we have inadvisedly undercut the value this spectrum might otherwise bring at auction by including a waiver standard in this bill that unnecessarily signals to bidders in 2002 that the spectrum they’re bidding on may not become available on any definitive date.’
“I was not alone in my concern. In October 2000, The New York Times wrote, ‘By giving the new spectrum away instead of auctioning it off to the highest bidders, Congress deprived the Treasury, and thus taxpayers, of tens of billions of dollars. The giveaway also kept the new spectrum out of the hands of bidders eager to sell digital services. The new spectrum went instead to incumbent broadcasters, who have dawdled.’
“It has been almost 5 years since the spectrum giveaway and the transition to digital television has barely materialized. The American taxpayers first lost the auction value of the spectrum. Now, they have no real certainty of what they’re likely to get in return, or when they’re likely to get it. The situation is a mess, characterized by more finger pointing than progress. Regardless of who is to blame, this much is clear: By 2006, this country will not have the transmission facilities, the digital content, nor the reception equipment necessary to ensure that 85% of the population will be able to receive digital television.
“In fact, recent statistics show that consumers have yet to embrace digital television. The Consumer Electronics Association reports that 1.4 million DTV sets were sold last year, of which 97,000 were integrated units containing digital tuners. However, we received testimony before the Senate Commerce Committee last year that over 33 million analog sets had been sold in 2000 alone. While DTV sales have been increasing each year, an overwhelming majority of Americans are still purchasing analog sets.
“Given the uncertainty surrounding the return of the spectrum currently occupied by broadcasters, the Administration has proposed shifting the auction for TV Channels 60-69 from the elapsed 2000 deadline to 2004. Additionally, the proposal would shift the auction of TV Channels 52-59 from 2002 to 2006. According to OMB projections, shifting the auctions to later dates would increase expected revenues by $6.7 billion. The Administration has concluded that if legislative action is not taken to shift the auction dates, potential auction participants may hesitate to bid for this spectrum without certainty of when the broadcasters may actually vacate it.
“At the same time, however, even if we act to change the dates, I also believe that years from now Congress is likely to again find itself attempting to shift the auction dates because the broadcasters will still occupy the spectrum. I hold this view because last year, the Commerce Committee held hearings on the transition to digital television. During that hearing I asked the National Association of Broadcasters (NAB) whether or not they believed they were going to reach 85% of the homes in America by 2006. The NAB’s response, ‘Originally, the expectations and the projections that [we] looked at, was for that transition to take as long as possibly 2015.’
“I believe that there’s not a snowball’s chance in Gila Bend, Arizona, that the broadcasters will vacate this spectrum by 2006, or that, despite my best efforts, that broadcasters will be penalized for squatting, as the President has proposed, if they occupy this spectrum after 2006. Some broadcasters have suggested that they may use their digital spectrum to multicast standard definition signals and provide other ‘ancillary’ services, competing against companies and technologies that had to pay for the spectrum they use. I worry that if broadcasters provide ‘ancillary’ services using the spectrum they received for free, they will have a distinct competitive advantage over wireless companies who pay the public for the use of its spectrum.
“Moreover, if the broadcasters begin to use their digital spectrum primarily to broadcast multiple channels of standard definition, perhaps on a subscription basis, I believe that they will never relinquish the spectrum. This scenario was never mentioned by the broadcasters while they were lobbying Congress for the free spectrum they eventually received.
“In 1997, Congress mandated that future FCC spectrum licensing should be performed through auctions, ensuring that the spectrum is allocated to parties that value most highly the opportunity to provide wireless products and services, and that compensate the public for the use of its resources. Yet at the same time, Congress gave away billions of dollars in public assets at the broadcasters’ urging and on the promise that the public would get it back, and get superior, free over-the-air service in the bargain. As the President’s budget acknowledges, however, this is not happening.
“The Administration is also proposing that beginning in 2007, the broadcasters would be assessed a $500 million annual lease fee for their use of the analog spectrum. If they return their analog spectrum by the 2006 deadline, they will be exempt from the fee. While this proposal has merits and may be justified, I believe that in all likelihood, the broadcasters will never pay. Be assured that a few years from now, the NAB will be marching up to Capitol Hill asking Congress for more time to complete the DTV transition.
“We should not let this happen. I believe that Congress must address this issue legislatively to protect the American taxpayer and ensure that the DTV transition will become a reality. Congress devoted valuable public assets to the DTV transition and ultimately has the responsibility for finding responsible solutions. The proposal before the FCC that enables broadcasters to further capitalize on the spectrum give-away by allowing the broadcasters to negotiate to vacate the spectrum by 2006 for a price, is not, I note, a responsible solution.
“In closing, I’d like to read a quote from an article that appeared in Business Week last year. ‘Congress should also make broadcasters pay for their valuable real estate by attaching a price tag to the spectrum they now occupy. When they approached Congress hat-in-hand, broadcasters promised something they have yet to deliver. Now that this has become abundantly clear, they shouldn’t get a free ride on taxpayers’ backs. What they should do is fork over the going rate for whatever airspace they occupy. That’s what cellphone companies are doing.'”
