Broadcasters pounce on ‘mobile myth’ and ‘digital dividend’

Michael Hedges February 27, 2008

Markets may fail, says a report commissioned by broadcasters groups, if TV spectrum continues to be sold-off to the highest bidders. Broadcasters providing ‘ public value’ are at a disadvantage against rich telecoms selling the ‘mobile myth,’ it says.

The report, titled The Effects of a Market-Based Approach to Spectrum Management of UHF and the Impact on Digital Terrestrial Broadcasting, was commissioned by a broad consortium of European broadcasters, public and private, and produced by Oliver & Ohlbaum Associates and DotEcon. It was released at a briefing in Brussels (Wednesday February 27). The clear intention was getting the attention of the European Commission, specifically the Directorate General for Info Society and Media and Commissioner Viviane Reding, as well as national regulators.

Terrestrial broadcasting, says the report, is threatened by a “market contest for UHF spectrum (that) would result in under-provision of spectrum for terrestrial television.” Rich mobile telecoms “able to directly monetize the customer relationship”, it says, might out-bid broadcasters surviving on public funding and advertising. “Broadcasting’s broader contribution to society dwarfs its size in simple business terms, generating high levels of positive externalities – or ‘public value’ – for society as a whole.”

Classical economics holds that free markets – buying and selling freely – allocates resources most efficiently.  Supply and demand creates a price. Market failure results when the price does not reflect the true costs of producing or consuming.

Public broadcasters have long argued that their services must not be left to the insecurities of the free market. Indeed, public services are subject to ‘externalities’ as effects are not market bourn. Think about traffic congestion and air pollution.

“One is not allowed to forget cultural and media policy objectives,” said Sveriges Radio (SR) General Director Kerstin Brunnberg summarizing the report presentation (Wednesday February 27). “If the Commission’s proposals are not handled with care - it is the audience, that is -  the consumers and the citizens of the European Union who will suffer in the end.”

“The Commissions proposals will have a direct impact on the future role of cultural diversity and media pluralism within the European Union. They threaten to disrupt Europe’s well functioning dual broadcasting system, investment in original European content and its basis of constructive competition between public service and commercial broadcasters.”

Much of the report focuses directly on the specter of mobile operators overtaking the current UHF band used for analogue television. Since more efficient digital TV (DTT) is replacing fat and slow analogue TV transmission a ‘digital benefit’ supposedly accrues to one and all when new services can take up that leftover space. Anybody can bid but the mobile telecoms can raise a lot more money.

Those proposed new services have, so far, been limited to mobile phones and mobile broadband. Technical studies conducted in Europe and North America fairly conclusively show that terrestrial TV transmission is at high risk from interference if the UHF band is shared with other services. Your TV will go black. (Read previous article on the EBU’s technical study here)

More broadly, the ‘mobile myth’ suggests benefits, dubious at best. The lower UHF frequencies where terrestrial television resides would solve for mobile operators certain coverage and bandwidth problems. But as the report points out, business models for mobile TV are “unproven.” 

Commissioner Reding and several national regulators favor ‘spectrum-neutrality’ – allowing mobile telecoms to invade broadcasters’ spectrum space. “If too much emphasis is placed on making spectrum available for hypothetical new uses, there is a real risk that policymakers could lose sight of the need to provide a critical mass of spectrum to support DTT, even though this is an existing service with proven value,” says the report.

Commissioner Reding has championed mobile TV development, saying it would create a half million jobs. The report notes that European broadcasting employs 2.2 million people, jobs at risk if broadcasters are required to bid against mobile telecoms for spectrum. If accurate, that’s more than twice the number employed in broadcasting in the United States. Also at risk would be financing for European production. Note the number of motion picture Academy Awards won this year by European actors, directors and producers.

The report also mentions the potential problem of ‘spectrum hogging,’ buying a chunk and not using it. “…it would be politically unacceptable for operators to acquire spectrum and to then not make full and efficient use of it, given the demand for the spectrum for broadcasting services.”

By coincidence, and underscoring the looming reality, UK regulator OFCOM informed mobile operator O2 that unless it rolls out 3G services to 80% of the country by this summer the license – which cost about €5 billion – will be shortened. The spectrum O2 bought at auction is not UHF TV spectrum but the point is clear. Ambitious new technology investments sometimes go sour.

The reports arguments are best when limited to near and mid-term causes and effects. There’s little doubt that pure market forces would have a deleterious and, likely, permanent effect on broadcasters, broadcasting and the television viewer. But media consumers are, without question, turning to more personalized distribution, anywhere, anytime. This is a long-term trend that neither broadcasters nor regulators will derail.