Harry Jessell

[Commentary] If you want real insight on where the broadcast television industry is heading -- on its long-term viability -- you have to go to Washington. There, the Advanced Television Systems Committee is working on the next-generation TV system -- 3.0 -- that will, it is hoped, allow broadcasters to keep pace in the evolution of video quality and become a truly mobile medium.

There, too, the FCC is marching forward with its plans to reallocate a huge swatch of spectrum from broadcasting to wireless broadband through an incentive auction. The plans involve a repacking or a reorganization of the TV band that could severely hobble broadcasting if not done right. For broadcasters, the latest news from the two Washington venues is not good.

National Association of Broadcasters President Gordon Smith encouraged television engineers to get on with the task of developing a new broadcast TV standard that can provide truly ubiquitous service.

“As broadcasters, it is our job to make sure our signals are available on every device and everywhere -- smartphones, laptops, tablets -- and of course, multiple channels of digital TV,” Smith said at the opening of the annual conference of the Advanced Television Systems Committee, which is working on the standard.

“In order for TV to succeed, we must continue to move quickly to increase the number of distribution channels and platforms for our valuable local content, and we must respond to the needs of an ever-more mobile audience.” While ATSC works on the so-called ATSC 3.0 standard, Smith said, NAB will work to preserve TV spectrum.

It's unusual for a trade association to send a cease-and-desist letter to a federal regulatory agency, but that's just what National Association of Broadcasters did.

It told the Federal Communications Commission to back off on its transaction-based regulation of shared services agreement by May 8 or else. The NAB didn't specify the or-else, but we can presume that it is a court challenge. Either that or the NAB intends to send a single-combat champion to duke it out with FCC Chairman Tom Wheeler right there on 12th Street SW.

The NAB contends that even though the FCC acknowledged in its March 31 order banning joint sales agreements that it has yet to build enough of a record to regulate shared service agreements (SSAs), it has already begun to do so in the context of the station sales reviews based on a March 12 public notice. In that notice, the FCC said it would "closely scrutinize" all deals that appear to circumvent local ownership limits through joint sales agreements (JSAs), SSAs, local marketing agreements and financial entanglements. By encompassing SSAs, the notice is "fatally premature," the NAB says in its threatening letter.

The notice "cannot be squared with the March 31 decision, reflects unreasoned action and sends conflicting signals to broadcasters as to the rules of the game for sharing arrangements."

The NAB's action reflects mounting frustration among broadcasters who are seeking FCC approval of deals that involve the alphabet soup of ownership rule work-arounds. The deals were done in good faith and based on FCC precedent.

In his National Association of Broadcasters’ Show keynote, NAB President Gordon Smith wondered why the Federal Communications Commission hadn’t developed a National Broadcast Plan to keep broadcasting strong.

"Why is there no focus to foster innovation and investment in broadcasting to ensure our business continues to be a world leader alongside our broadband industries?"

Why indeed? Smith wasn't really calling for a National Broadcast Plan. He was just pointing out that FCC Chairman Tom Wheeler and his predecessor Julius Genachowski seem to have taken sides, promoting broadband and ignoring -- or worse, hobbling -- broadcasting.

In addition to the millions spent on the National Broadband Plan, he said, the FCC has also opened separate inquiries on how to foster investment in broadband. "All the while, the FCC has continued to regulate broadcasters as if the world is stuck in the 1970s."

The Advanced Television Systems Committee’s work on the next-generation broadcast standard — ATSC 3.0 -- is progressing well and should yield a proposal or “candidate” by early 2015 and a final standard by late 2015, according to the technology experts.

As described by Madeleine Noland of LG Electronics, ATSC 3.0 represents a giant leap forward in the kinds of services that broadcasters will be able to provide and in how they can generate money from them. The standard will allow broadcasters to present 4K ultra HD and possibly 3D programming to big sets with fixed antennas in the home and HD programming to mobile devices in the hand or in the car with some degree of interactivity. Such services are made possible by the combination of a “fatter pipe” and “skinnier content, said Rich Chernock of Triveni Digital, who chairs the top ATSC 3.0 committee.

[Commentary] After nearly four decades of gradually and carefully loosening the rules governing how many TV stations a broadcaster may own and where it may own them, FCC Chairman Tom Wheeler and his two Democratic colleagues decided to more strictly enforce the local ownership rule, which forbids broadcasters from owning two stations in small and medium markets or from owning two top four stations in large markets.

They did that by reversing the FCC's 10-year-old policy of allowing broadcasters to operate (or at least enjoy the economies of) second stations through joint sales and shared services agreements in markets where they could not own them outright. They threw out 10 years of precedents, and they did so in a punitive way. No existing deals would be grandfathered and no pending deals would be approved. Broadcasters with joint sales agreements (JSAs) would have two years to unwind them.

I agree with FCC Commissioner Pai that in reneging on all its JSA approvals to date, the FCC is discouraging investment in broadcasting and, perhaps more important to Chairman Wheeler, undermining his planned incentive auction, through which he hopes to reallocate spectrum from TV to wireless broadband.

Unless overturned by the courts, the crackdown on JSAs is going to disrupt a lot of businesses. It's already caused a lot of financial damage. Chairman Wheeler says it's going to create more opportunities in broadcasting for small businesses, especially those owned by minorities and women, but he makes no good case for it. He offers no evidence that it will.

[Commentary] The Dish-Disney deal got a lot of media play, but none of the coverage I saw considered the impact on network affiliates.

With the various Disney programming services as charter tenants, Dish plans to launch an online video service that would be the functional equivalent of cable TV circa 1989. It will comprise a bunch a cable networks and the local broadcast signals and sell for $20-$30 a month.

Dish believes such a service will appeal to young people. “We think there is a group of individuals, 18-to-34-year-olds, who would love to have a lower-cost product with some of the top content out there,” David Shull, Dish's chief commercial officer told Bloomberg.

“That’s who we’ll be targeting.” Its deal with Disney includes ESPN, the Disney Channel, ABC Family and the ABC O&Os. But as good as those channels are, they are far from sufficient. Dish will have to cut similar multichannel deals with the likes of CBS, Fox, NBCUniversal, Viacom and Turner.

[Commentary] The Federal Communications Commission rule barring common ownership of two TV stations in the same market is 40 years old. Now, disregarding all the extraordinary changes that have roiled the television industry over those four decades, from HBO to Netflix, FCC Chairman Tom Wheeler believes that it is absolutely imperative that the FCC buck up the old local ownership rule by closing loopholes that broadcasters have been using to get around it.

In essence, he is saying that the ban against duopolies in small markets is as vital to the nation today as it was in 1974 when most Americans had a choice of just four or five channels. That's quite a position for a man who is supposed to be focused on the future of telecommunications in this country. Chairman Wheeler intends to bring his proposal to a vote on March 31 and he apparently has the two other Democratic votes lined up to win approval. The vote will be a real blow to broadcasters who have been building businesses around the sharing agreements. Just the prospect of the FCC action has battered broadcast stocks.

Since the beginning of 2014, Nexstar is down 26%, Sinclair is down 21% and LIN is down 19%. I understand Wheeler's desire to tidy up FCC's rules and regulations. But in this case he could just as easily do that by getting rid of the underlying 40-year-old ownership rule. The sharing agreements have been a boon to the broadcasters that have taken advantage of them. The efficiencies of running two stations in a market are obvious.

But I cannot sit here and tell you whether they have been a net positive or net negative for the American public. And neither can the FCC. It hasn't investigated the sidecar deals to see if they, on the whole, have increased the level of service to the public and advertisers or diminished it. Right now, I'm inclined to believe that Chairman Wheeler is working primarily for the wireless companies by devaluing TV stations. As President of the National Association of Broadcasters President Gordon Smith suggests, the tougher the broadcasting business becomes, the more likely broadcasters will be to participate in the incentive auction, by which the FCC intends to buy broadcast spectrum and sell it to wireless companies.

[March 7]