Cablevision (s cvc), the nation’s fifth-largest cable provider, has been fighting the rules that require it to carry certain local broadcast stations in areas it serves, and hopes to get the Supreme Court to hear its lawsuit regarding those rules. These so-called “must-carry” rules ensure that the local access channels are watchable on cable in addition to the larger broadcasters like Fox (s nws) or NBC (s ge). However, if the Supreme Court hears the case and sides with Cablevision, then cable providers could dump those less popular stations, and the rejects, finding it hard to stay alive, could end up relinquishing their valuable broadcasting spectrum.
That’s a lot of ifs, but analysts at Stifel Nicolaus believe that if the Supreme Court hears the case it’s likely to overturn aspects of the must-carry rules, setting off a chain of events that could benefit the cable companies and the wireless business, while hurting smaller, local broadcasters. From a note the firm released today on the topic:
We understand that roughly 40% of full-power stations are must-carry, and many of the stations that rely on must-carry for their MVPD/multichannel carriage would probably not survive without it. Those stations tend to be in larger cities, where wireless spectrum needs are greatest. Given the FCC’s search for additional spectrum for wireless broadband, a cable victory could present an important opportunity to reallocate spectrum from broadcasters seeking an exit strategy. In effect, rather than recovering some spectrum from all (or many) broadcasters, it could recover all spectrum from some broadcasters.
Each broadcaster has a 6 MHz chunk of spectrum in each locale that’s generally within a range that’s good for providing mobile broadband. Now 6MHz of spectrum isn’t a lot when compared to the 100 MHz or so that wireless carriers tend to have in large cities, but given the capacity crunch carriers like AT&T (s T) are obviously experiencing in places like New York City and San Francisco, getting that broadcast spectrum looks appealing.
However, in order to ensure your iPhone (s aapl) stops dropping calls, a lot of spectrum trading would have to occur because it would be difficult for a wireless carrier to offer devices that work in too many disparate bands of spectrum. For more on this, check out why Google’s (s goog) Nexus One doesn’t work on the AT&T 3G network. So if a broadcaster goes under in Long Island it may give up spectrum in a band that’s different from a failed station in New York, creating an environment where third-party investors may have to come in and aggregate the spectrum in order to sell it to an interested carrier.
In other words, any benefits to the wireless industry would likely be a long time coming. However, cable providers would benefit immediately as they could dump the stations and free up capacity for more high-definition channels on their network. Consumers would happily trade “Wayne’s World”-type programs for Comedy Central in HD and the possibility of better mobile broadband. For certain stations, that may be a fair trade, too.
Image courtesy of Flickr user adamsofen