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Summary:

Time Warner Cable and News Corp.’s fight over retransmission fees for broadcast channels brings up hard questions on the business model of providing over-the-air television. Honest answers to those questions could lead the way for the FCC to repurpose broadcasters’ spectrum for mobile broadband.

The fight between Time Warner Cable and News Corp. over retransmission fees for Fox’s broadcast channels may make it hard for the broadcast industry to defend its precious spectrum from the cellular industry’s attempt to take it. Time Warner Cable and News Corp. are in a standoff over the fees the cable company will pay for access to Fox and Fox regional sports channels.

The fight over retransmission fees is a battle over the value of content and trying to ensure that News Corp. gets paid for broadcast and cable channels. That means broadcasters are seeking payment from the cable providers for over-the-air channels and sharing those fees among local affiliates. But a story from the Associated Press quotes an analyst who speculates that one of the big four broadcasters (ABC, CBS, NBC and Fox) could seek to become a cable channel and dump its local affiliates within the next two years.

If one of the big broadcasters suddenly sees more value in becoming a cable provider, where it can make money from selling advertising as well as selling access to its channel to cable providers, then its spectrum, and likely that of its affiliates, suddenly becomes vulnerable. After all, the broadcasters don’t pay for their 6 MHz of spectrum in markets — it’s given to them because they provide a public service.

Meanwhile, the cellular industry says it needs 800 MHz of spectrum (and would love to pay for it via a revenue-generating auction), while the FCC has floated some trial balloons to take some of that spectrum from broadcasters. If broadcasters can’t offer “The Simpsons” and the news for free over the air or are unwilling to, then why should the government provide broadcasters with the now-valuable spectrum?

After all, the spectrum in the 700 MHz auction went for a total of $19.59 billion. Could the broadcast spectrum be as valuable as that? Naysayers point out this is unlikely given that broadcasters only own 6 MHz in each market, and most markets are of no interest to carriers because carriers have enough spectrum capacity in small towns like San Marcos, Texas; and in places like San Francisco and New York City, where they’re dealing with shortages, a mere 6 MHz pales in comparison to the 80-100 MHz carriers already own.

The entire possibility of taking back broadcast spectrum because over-the-air television is a bad business is made terribly ironic by the apparent resurgence of people using antennas to get their television for free over the air because the transition to digital TV makes broadcast content clearer and folks are trying to watch their expenses. In the search for a dual business model by broadcasters and the need for better mobile broadband, those consumers may suddenly find their new HD rabbit ears a relic once again.

Image courtesy of TWC

  1. If over the air free TV should disappear, it would be a good time to own stock in tree service companies. They are going to do a bang up business in top cutting when the 20 million OTA households have to switch to satellite.

    One of the worst kept secrets in the broadcast world is that with a 4 foot dish, a modern satellite receiver with internet access, and the right south-southeast exposure, anyone can get all the “cable only” channels for free.

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  2. [...] other potential hurdle is the very airwaves the broadcasters plan to use. Each broadcast has about 6 megahertz in which to send out its signal, but much of the TV [...]

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