Shapiro Challenges Smith To Declare NAB Plans Seeking No ‘Further Delays’ in Incentive Auction

Shapiro requested permission of panel moderator Richard Wiley, chairman of Wiley Rein and the former FCC chairman, to ask a question of one of his fellow panelists in a discussion that also included NCTA President Michael Powell, also a former FCC chairman. When Wiley said “no,” prompting audience laughter, Shapiro, reading from notes, asked Smith his question anyway, whether NAB was “on board” with the commission’s auction and repacking schedule “targets.” Smith responded that NAB was on board and reminded Shapiro that NAB had sought an “expedited” judicial ruling of its court challenge to FCC auction rules.

When Shapiro again pressed Smith on the issue of further NAB “delays,” Smith replied: “That really depends on how this goes.” Said Smith: “This is so much larger than the last transition. The repack is going to disrupt hundreds or thousands of TV stations, whether they participate in the auction or not.” NAB therefore is “hopeful” that the commission comes forward with auction rules “that allow things to go quickly as possible,” Smith said. “We want to know what our space is,” and with ATSC 3.0, “we hope to be able to do everything that we do now, and more,” he said.

Shapiro said he was prompted to question Smith on NAB's intentions when he heard a low-power TV executive, whom he didn’t name, during a conference lunch break vow that he wanted broadcasters to do everything “legally possible” to stop the auction from taking place. “I react to that, and I ask, is this a healthy way to address a national problem? Just delay, delay, delay?” Shapiro asked in reference to the spectrum shortage. Smith replied there are many “open questions” about the auction “that I don’t have answers for right now.”

When it comes to disruptions in the form of technological or policy changes, it’s difficult to build consensus in a diverse association membership base like NAB's, Smith said. “We’re all just herding cats here,” he said. “We’re trying to keep all the bullfrogs in the wheelbarrow. It’s easier said than done, and part of our jobs as association heads is to look beyond the quarterly report, and say, ‘What about the future?’ It does require, as it did in HD, a leap of faith, as it will do again with 3.0.” Shapiro responded that he must have “an easier job” than Smith because CEA member companies don’t make money on products that “preserve the past.”

Asked by Wiley how the rise of over-the-top services will affect the future of TV, NCTA’s Powell replied he thinks it will affect it “profoundly.” The innovators that “harness” OTT well will thrive, Powell said. Those “who put their hands in front of their eyes wishing it will go away, I think will get run over by it.” Society tends to get overly “techno-ecstatic” over new TV content delivery platforms, he said. “Television is still watching a great story,” Powell said. “And I sometimes think, so it’s over this distribution platform or that distribution platform, I’m still at home watching Mad Men. I think we get sometimes, when something comes at you in a new way, we can get a little bit over-hyperbolic.”

The tech industry is in a period of “explosive innovation” that also involves “explosive experimentation,” Powell said when Wiley asked how government can help or hinder technological change. The FCC and Congress need to be “committed to incentives that align with that experimentation paradigm,” Powell said.

Smith said "the elephant in our room is our heavy regulatory burden.” NAB wants the FCC to run a “successful forward and reverse auction that protects our contours and is mindful of interference,” he said. There are “so many things that could go wrong,” he said. Smith fears the level of “disruption” and “complexity” the auction could cause, in combination with the transition to ATSC 3.0, would make the disruptions of the last DTV transition look like a “kindergarten recess,” he said.

Shapiro thinks ATSC 3.0 is “a very elegant standard that does a lot of great things,” he said. CE makers are enthused about building products for the next-gen broadcast standard, but without broadcaster support for ATSC 3.0, that enthusiasm will “dry up,” he said. Broadcasters have tended to become less relevant amid other competitive forms of content delivery, but with ATSC 3.0, broadcasters’ relevance “can come back,” much as he thinks the Blu-ray Disc Association’s approval of Ultra HD Blu-ray specs will revive physical media, he said. “Americans love good-looking pictures,” he said.

Smith chuckled when he said that to the "consternation" of some of his members, “it might surprise you that I agree with everything Gary just said.” Broadcasters view ATSC 3.0 as important for “great new pictures,” but also for “mobility” and other attributes, Smith said. Broadcasters also need to be “IP-interoperable,” he said. ATSC 3.0 “opens up the future so broadcasters can continue to play their vital role,” he said. A national analog cutoff “deadline worked very well” in the last DTV transition, and ATSC 3.0 may well “require that again,” Smith said. “This will be just as big,” he said. Addressing the audience of ATSC 3.0 framers, Smith said: “My hope is you all will finish this job.”

Powell, who helped preside over the DTV transition as FCC chairman, said he thinks the transition to ATSC 3.0 will be “likely more challenging.” For one thing, broadcasters, unlike in the last transition, won’t have “a second channel to jump to,” Powell said. He also thinks government has an “infatuation” with OTT video that will be apparent when it tries to “galvanize change in traditional television,” he said.

On Wiley’s question whether the FCC needs to play a regulatory role in ATSC 3.0, Smith said yes, ATSC 3.0 “does require the FCC to be our partner in this.” He would “hope for their approval,” he said. Shapiro agreed there definitely is “a role because it involves transmission and it involves spectrum.” But he foresees a different transition to ATSC 3.0 because the “environment” is different “in so many ways,” he said. Recalling the last DTV transition, Shapiro said, “I remember the fear-mongering” that consumers would rebel if they lost their TV signal. As a result, “we wasted $2 billion on a coupon program that we didn’t have to spend,” only to see the DTV transition come and go with barely a “whimper” from the average consumer, he said.

Powell spent much of the hourlong session pooh-poohing technology for technology’s sake and cautioning that excellence in technology is no guarantee it will sell. He cited the example of smartphones, which became a huge success story even though their sound quality never has come close to that of landline phones. Seeing flat-panel HD for the first time, Powell remembers “having my socks knocked off,” he said. Ultra HD, by comparison, doesn’t do that “for me,” he said. Smith chimed in to say he took in a demo at NAB Show of native 4K content shown on a 4K TV. “I see the wow, but that’s my eyes,” he said.

Jimmy Goodmon, who heads Capitol Broadcasting’s New Media Group, is dead-set “against” the incentive auction, he said on a conference panel on the business issues for the auction and the future of TV. Goodmon doesn’t oppose the “concept” of the auction per se, so much as the concept of the auction “happening so quickly,” and not being “mapped” with the transition to ATSC 3.0, he said.

Goodmon thinks the “real losers” in the auction “at the end of the day are those of us” in broadcasting “who want to remain in business” and want ATSC 3.0 to become a successful commercial reality, he said. One of Goodmon’s worries is that broadcasters will emerge from the auction with a lot fewer “frequencies,” he said. With fewer frequencies, “how do we do this transition” to ATSC 3.0? he asked. Goodmon fears the auction and the post-auction repack will harm broadcasters’ ability to get the ATSC 3.0 transition “in place,” particularly if the repack process stretches into 2019, as he fears it will, he said.

At Fox TV Networks, “our view for better or worse is we’ll play the hand that is dealt us” on the incentive auction, said Erik Moreno, senior vice president-corporate development. He sees the auction as a “conundrum” because he thinks the best strategy for broadcasters is to “lean into” what the government is trying to do on spectrum policy, and that’s counterintuitive for many broadcasters, he said. That’s because the best scenario for broadcasters is for the voluntary auction to succeed, he said. If it fails, he fears the government will impose mandatory rules and solutions, he said. “We all win if we all participate.”

Like all broadcasters, “we need to understand more” about how the auction works, Moreno said. Fox isn’t so concerned about whether the auction is going to happen, but worries more about “the nuances around the rules,” he said. “We still have lots of questions how it even works.” Issues and rules surrounding the auction “need to be understandable, need to be transparent,” he said. As a “trained economist,” Moreno looks with skepticism on others among broadcasters he has talked to who claim to understand FCC rules on dynamic reserve pricing, he said. Fox views its spectrum as a “valuable asset,” and “we’re not going to sell it on the cheap,” Moreno said. The sooner the auction happens, the better, he said.

Projected growth in average Internet connectivity throughput speeds in the U.S. bodes well for the future of over-the-top delivery of Ultra HD video services, said Will Law, Akamai chief architect. He described Akamai as the world’s “dominant” Internet traffic cop, saying it globally processes 2.9 billion HTTP requests a second. Akamai estimates the average connection speed in the U.S. is 11 Mbps, though peak speeds are fast moving to 50 Mbps, Law said.

With over-the-top delivery of 4K content requiring average throughput speeds of 10-20 Mbps, there’s “a lot of people who fall out of that threshold,” said Law. OTT services with 15 Mbps or better stand a “reasonable chance” of delivering Ultra HD today, he said. Though only 15 percent of broadband homes are capable of throughput speeds of 15 Mbps, 15 percent of 240 million people is “a good sample,” as OTT services like Netflix will attest, he said. By the end of 2017, Akamai predicts the average U.S. connection speed will jump to 23 Mbps, Law said. If that prediction holds true, the national sample for Ultra HD delivery over OTT services will be “large,” he said.