Why Don’t Broadcasters Become “Spectrum Innovators?” Because They Like Being Broadcasters.

Can’t help but take a brief break from the Net Neutrality craziness to be mildly amused at Adam Thierer over at Tech Liberation Front. We have an increasing number of reports that Blair Levin wants to bribe broadcasters to get off their spectrum as part of the national broadband plan. Adam is very excited by this and, of course, brings up the usual Libertarian argument that because property solves all problems, we should just make the broadcast licenses property of the broadcasters and let the endless innovation begin.

The problem with argument is that broadcasters could already do this. Under 47 USC 336(b), broadcasters can use their digital spectrum to provide “ancillary and supplementary services.” In a series of orders, the FCC has said that as long as full-power broadcasters provide one free over the air digital channel, they can do whatever they want with the remaining spectrum — including lease it out in the secondary markets to someone else. Under the statute, broadcasters need to pay a fee for any such ancillary services that would be the functional equivalent of what the broadcasters would have paid for the spectrum at auction (47 USC 336(e)), which the FCC has fixed at 5% of any annual revenue from the ancillary services.

In other words, all the nasty bad bad “command and control” stuff Adam assumes in his post as the thing holding back broadcasters from innovating in spectrum (including the ability to lease the spectrum out to others) is already dealt with by existing law. Nothing stops broadcasters from doing whatever innovation — including leasing to wireless companies — their little broadcasting hearts desire. But has it happened? Not really. To the extent broadcasters are trying to do stuff with their excess spectrum, it’s mostly centered on multicast and mobile TV, with a smidge of datacasting and leasing. So why isn’t all the innovation this freedom should produce happening?

The answer is rather obvious. People who go into broadcasting do so because they like broadcasting. It’s not that they aren’t entrepreneurial or inventive or anything like that. They are — about broadcasting. Which also shapes their attitude about their spectrum licenses. By and large, they don’t lease them out because it goes against their irrational and human character of wanting to focus on broadcasting not “profit maximization.” For comparison, consider that I or anyone else on my block could rent out spare space in our homes for extra money. Some people do. But most of us don’t because we see ourselves as home owners not little rational profit maximizers trying to innovate by becoming a bed and breakfast or a storage shed or anything else I could do with my property if I wanted to. Indeed, if you read through the article Adam links to, you will find that most broadcasters were not terribly interested in being bribed to get off their spectrum (confirmed in this piece). They don’t think of it as waste because they expect to use it someday — for broadcasting.

This is, of course, the fun thing about private property. People like to use it inefficiently. This is why the FCC wants to bribe the broadcasters to get off the spectrum. Because more than five years after the FCC established both DTV ancillary service flexibility and a secondary markets regulation, broadcasters have been resolutely uninterested in either innovating in non-broadcast services themselves or leasing to others who want to use the spectrum for other things.

The other problem is a practical one. Innovation is not so easy, especially for services that need national-sized spectrum footprints. You either need an unlicensed/opportunistic sharing regime that makes spectrum access devices a form of consumer device, or a sufficient amount of licensed spectrum on one common set of frequencies to make it worthwhile for folks to invest. That’s the history of the 2.5 GHz band. Broken up into little licenses that needed to be aggregated, it was not terribly useful for anything other than close-circuit TV. Once Clearwire aggregated enough spectrum to make it interesting for WiMAX, things began to happen not just for Clearwire but other holders in the band.

Things might change once the wireless companies deploy in the 700 MHz band and there becomes a lot more equipment that can easily operate on broadcast bands. But I wouldn’t bet on it. Because broadcasters like being broadcasters. And for once, I am in sympathy with them. Treating all spectrum as if it were fungible is silly, and treating “property rights” like some magic pixie dust that suddenly transforms these poor regulatory serfs into dynamic engines of non-broadcast is even more silly. Let broadcasters be broadcasters, for goodness sake.

As for Blair’s supposed plan — I confess to a certain skepticism. For one thing, broadcasters generally don’t want to be bribed. They like being broadcasters. They think being broadcasters is innovative and exciting and a valuable public service to boot. While some of the cash strapped ones probably think being bribed to give up some excess spectrum is a good idea, most appear not very interested.

There is also a legal problem. Back in the Powell years, the property-school folks floated this idea of a “reverse auction” that would let the broadcasters keep the money from a spectrum auction. The problem is that the auction statute, Section 309(j), explicitly states that any auction revenues need to go into the Treasury. And, as noted above, anything short of actual transfer of the spectrum from broadcasters can already be done by leasing.

So all in all, I’m skeptical of any plan that shifts the broadcasters off their spectrum. We are unlikely to force them — given the pain in the neck the recent DTV transition was. We could already bribe them, but they aren’t interested. That might change down the line, but the rules already exist to make this happen. But if we all want to pretend we’re going to dig up 200 MHz of prime spectrum through this little charade, who am I to kill everyone else’s good time?

Stay tuned . . . .

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