February 27, 2014
If you want to see the future of both the broadcast television and wireless industries, look to two TV channels in Los Angeles. That's where KJLA and KLCS are launching a pilot project to put both broadcast stations on a single channel, thereby freeing up spectrum for wireless broadband use.
Broadband usage-with the ever escalating use of smartphones, laptops, tablets and other devices-has severely strained the capacity of the airwaves and that's why the project comes with the vocal support of the wireless industry. But on Tuesday The Wall Street Journal reported that the FCC is poised to restrict current agreements that broadcasters use to share resources-making it less likely that broadcasters will adopt channel sharing in the future.
The new Federal Communications Commission chairman, Tom Wheeler, is focused on implementing an ambitious plan to provide incentives for broadcasters to voluntarily auction their licensed spectrum for future use by wireless carriers. If the FCC is to bring broadcasters to this voluntary "incentive auction," stations will need to see it as a win-win in which broadcasting survives-and even thrives-while spectrum is reallocated for new purposes. The collaboration of TV stations and the wireless industry in Los Angeles could show the way forward.
Channel sharing is crucial to the success of the spectrum auction. It shifts the auction dynamic from a binary choice for broadcasters in which participating in the auction equals closing a station and sitting it out means staying in business. By contrast, channel sharing would create a middle path that allows broadcasters to partially monetize spectrum, thereby freeing up spectrum for new uses, while also providing a mechanism for stations to continue to operate-delivering programming and serving the public-with new efficiencies on a shared swath of spectrum.
This middle path best serves the FCC's dual interests: ensuring the most efficient use of spectrum while also preserving stations and promoting programming choices in the market. Neither the FCC nor the public are served by an auction that becomes a zero-sum game. That may be why, in a Feb. 11 blog post on the FCC's website, Chairman Wheeler endorsed channel sharing as a potential "game changer." Broadcasters have developed and the FCC has regularly approved shared services arrangements in which independent broadcast stations contract to share certain resources and operations. The arrangements vary by market and range from shared back-office and engineering services to sales and other business functions.
Sharing arrangements that have created new synergies-maximizing operating efficiencies while maintaining station independence-have been essential to the survival of stations in smaller and rural markets. They've breathed new life into stations by expanding news and other programming offerings and have also facilitated new entrants into the broadcast market. Sharing arrangements have also been the cornerstone for a future of channel sharing-and, ultimately, a dynamic spectrum market. While pilot programs like the one in Los Angeles are good exhibitions, existing sharing arrangements offer real-world models easily adapted to include channel sharing. Broadcasters who already share some operations are more likely to use that existing framework to share channels and promote participation in the FCC's incentive auction.
Yet just when existing arrangements could become a foundation for future channel sharing, the FCC appears to be planning to restrict them. The Journal reported on Tuesday that the FCC is planning to amend media-ownership rules to make it more difficult for two stations to work together. A reversal on sharing arrangements would create new uncertainty around the ability and potential to create innovative operating efficiencies. A change in policy would take broadcasting backward and turn a building block for a successful incentive auction into a barrier to auction participation. Instead, the FCC and the wireless industry should see sharing arrangements as a foundation for future channel sharing and a successful incentive auction. Wall Street Journal
Cablevision Systems Corp. posted a bigger-than-expected increase in fourth-quarter revenue, helped by higher data rates and video sales. Its profit for the quarter, however, dropped 56% as the year-earlier period included a net $200 million gain related to a legal settlement with Dish Network Corp. Cable operators generally have been losing video subscribers for several years to satellite TV and phone rivals, but most have been able to offset those losses with gains in broadband and phone.
In addition to challenges from promotions and discounts to attract customers, the pay-TV sector also is in the midst of a consolidation trend. ComcastCorp. recently made a $45 billion bid for Time Warner Cable Inc., a deal that would combine the two largest cable operators. In the latest period, Cablevision's total customers declined by roughly 7,000 to 3.2 million from the third quarter as declines in video customers offset growth in high-speed data customers. Cablevision reported a profit of $51.8 million, or 19 cents a share, down from $116.5 million, or 45 cents a share, a year earlier.
The year-earlier period included a contribution of 74 cents a share from discontinued operations, reflecting the settlement gain, which was partly offset by losses related to cable operator Bresnan Broadband Holdings LLC and movie theater chain Clearview Cinemas that were sold last year. Revenue increased 4.5% to $1.58 billion. Analysts polled by Thomson Reuters expected per-share profit of nine cents and revenue of $1.57 billion.
Average monthly cable revenue per customer rose 4.6% after adjustments from year-earlier storm credits. Cable net revenue increased 5.2% to $1.41 billion, mostly reflecting the higher data rates and video revenue, as well as the impact of Superstorm Sandy in 2012. Wall Street Journal
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