CEA chief: Broadcasters don't innovate (Q&A)

Gary Shapiro, the head of the Consumer Electronics Association, is frustrated by TV broadcasters' lack of innovation, and he isn't shy about voicing what he thinks they should do with spectrum licenses that have been give to them for free.

Shapiro and the CEA, which lobbies in Washington, D.C., on behalf of gadget makers and retailers, support a controversial proposal from the Federal Communications Commission, which calls for TV broadcasters to voluntarily give up some of their spectrum to be auctioned off.

FCC Chairman Julius Genachowski has proposed the incentive spectrum auctions as a way to free up more wireless spectrum that can be licensed to the highest bidder and used for wireless broadband services. While broadcasters say they support the idea of freeing more spectrum, their lobbying group the National Association of Broadcasters, has questioned why broadcasters are being asked to give up more of the valuable resource.

There's no question that the market for smartphones and tablets, like the iPad, are growing rapidly and so is the appetite for services that allow people to access the Internet from these gadgets. So most experts agree, that finding more spectrum to fuel this growth is important. But broadcasters and some consumer advocates worry the pursuit of additional spectrum will come at the expense of free over-the-air TV, possibly killing off free access to news and entertainment to a segment of the population that may not be able to afford pricey cable TV and broadband packages.

Shapiro and the CEA have been accused of ushering in the end of the free over-the-air TV. In a recent post on CNET's Crave blog, writer Geoffrey Morrison questioned whether the CEA was advocating to get rid of over-the-air TV broadcast altogether. Shapiro responded to the story. CNET recently discussed the issue further with Shapiro in a phone interview. Below is an edited excerpt of the conversation.

Q: Let's just get right into it. Do you or the CEA want to get rid of over-the-air TV?
Shapiro: No. Over-the-air TV will continue to be a very important part of television experience. What we have suggested and what the FCC and Congress have supported is that broadcasters, who are using a tremendous amount of spectrum, be allowed to sell their under-utilized spectrum in an auction, which would give the proceeds to the federal government. I don't think that anyone envisions that every broadcaster would provide spectrum for auction, but the ones that would like to can.

There is a lot that broadcasters can do with their current holdings now that they've moved to digital broadcast. They can pack in several channels, whereas before they would have to use one full channel. The question comes down to whether every market needs seven to 12 broadcasters. There will always be some broadcasters in every market. But is this the best use of spectrum? Is that serving the public? You have to remember that broadcasters don't own the spectrum. The public and the government own the spectrum.

The white paper that the CEA published along with the wireless industry association says that in the "majority" of Top 30 markets, some stations will have to give up/sell their licenses or channel-share with other stations. I think what a lot of people are concerned about is the fact that once the spectrum is sold, it can't be recovered and used again for a free service, such as over-the-air TV. Could you address this issue?
Shapiro: First of all, broadcasters never paid for these licenses. Meanwhile, satellite companies have paid for their spectrum licenses, and so have wireless operators. So if we had taken the attitude that we shouldn't ever allow companies to buy spectrum, then we'd be a lot poorer country in terms of the entertainment and other great advancements. Devices, such as the iPhone, wouldn't exist. Every country in the world takes this approach of selling spectrum. It requires investment. And that offers some sense of ownership.

Also, broadcasters only get eight-year licenses. So the licenses must be renewed every eight years. There used to be a lot of scrutiny every time their licenses were being renewed. But now it's become a rubber stamp relicensing proceeding. And if all a broadcaster is doing is bringing in 20-year reruns of syndicated sitcoms, and they're doing nothing for the local community, what value is there for the public to offer these free licenses?

Broadcasters may be getting the spectrum licenses for free, but they are also offering over-the-air TV for free. Satellite, cable, and the phone companies that offer TV charge high subscription fees for access. So by auctioning off this spectrum to other services that will charge hefty fees, doesn't it increase the cost for consumers?
Shapiro: I don't view broadcast TV as free. You have to suffer through a lot of advertising. Also, there are other places to get news and entertainment for free. Most of the video online is free. There are millions of Web sites with phenomenal video.

But cable TV requires a subscription, and yet viewers still have to sit through lots of advertisements. Also, broadband service isn't free. You have to subscribe to it. So I think people are upset about these potential changes, because the public will be losing access to a source of information and entertainment that, aside from commercials, is free.
Shapiro: There are free sources of broadband. Libraries offer free access to the Internet. There are lots of free Wi-Fi hot spots popping up all over the place. And literally billions of dollars has been poured into schools to provide broadband access and equipment.

There may be some places that offer free access to broadband, and there may be free content online. I'm not going to debate you on that. But a recent survey by Knowledge Networks found that 15 percent of people in the U.S. rely on over-the-air TV. And about 40 percent of those people are minorities, and roughly a quarter of them earn less than $30,000 a year. So by taking more of this resource away, it seems like minorities and low-income people will be the ones most affected.
Shapiro: No one is proposing that all over-the-air TV broadcast be eliminated. But the reality is that a lot of things that didn't used to cost us additional money, now do. For example, we now pay tolls on roads. That is the reality of the economy today and life in America. There are fewer resources and more demands for those resources. But is it more important for someone to offer remote monitoring of a health condition, so they don't have to travel to the doctor or for the eighth broadcast channel in a market to show reruns all day?

So you are saying that it's more important to have spectrum available for a wireless broadband service that requires a paid subscription rather than for over-the-air TV, which is free of charge?
Shapiro: We will hit a brick wall in major cities as large numbers of people use tablets and smartphones. And the frustration of the worldwide wait is unacceptable. More spectrum is necessary. The fact is that a smartphone uses 24 times the data rate as a regular cell phone. And a tablet uses 122 times the amount of spectrum. And these devices have the fastest adoption rate, and they are becoming ubiquitous. Today, one out of every three Americans has a smartphone. And that could be one out of every two by the end of next year. We are rapidly gearing up for this usage.

And it's not just a matter of entertainment. It's about providing capacity for home medical use. And being able to build a nationwide first responder network for getting information out whether in a emergency or a terrorism attack. It's an important public service. And some of the new spectrum that is reclaimed will go toward building such a network.

Look, broadcasters have faced a declining viewership for years. They have been left behind. And they're sitting on way too much spectrum. Whether it's 8 percent of the population, as our research indicates, that now relies on-over-the air TV or 15 percent as others claim, it's still a low percentage of people relying on broadcast TV compared to the demand for more spectrum to fuel growth in wireless broadband services.

Would you say that broadcasters have been slow to innovate technologically and to find more modern uses for the spectrum licenses they have?
Shapiro: I spent years pushing the broadcast industry over the digital high-definition TV transition. I thought they would see this as a competitive advantage over cable TV. For cable the transition to digital and HD required some equipment investment. But for broadcasters they just had to invest a little in transmission equipment. But they were reluctant to do it. Satellite saw the opportunity and they switched immediately. It took cable some time. But broadcasters had to be almost mandated by the government to make the switch.

If you look at the cable industry they have been very strategic in the opportunities that they've jumped on. They upgraded their infrastructure to be able to offer broadband. They saw an opportunity in telephony, and they invested in that infrastructure. They changed what they were doing. The telephone companies did the same thing getting into broadband and TV.

But broadcasters have basically gotten stuck and addicted to government regulations. So they have these crazy rules and they love them. I've asked broadcasters if they could push a button and get rid of all these regulations, would they do it. And they say no. They like the regulations.

For decades they haven't been creative, and they've been resistant to changes in technology. And they get a phenomenal amount of money from what they do. For years, they've basically controlled Congress. Congressional leaders live in fear that the local broadcaster won't cover them in the news. Even today, broadcasters have a full-time studio and they allow members of Congress to appear free in PSAs (public service announcements), so that they can look good. Add to that the fundraising they do and they have a lock on Congress.

For example, radio broadcasters are the only medium that doesn't have to pay copyright fees. That's a fight that has been going on with the music industry for years. But it hasn't changed because they are so powerful politically. But honestly, there has got to be better uses of the public airwaves than watching 40-year-old episodes of "I Love Lucy."

If broadcasters have to share frequencies, what would that do to picture quality? And would it reduce the number of channel options?
Shapiro: Well of course there would have to be a trade-off. But they are facing those trade-offs now when they decide to transmit in high-definition versus standard definition. High-definition uses more spectrum so they already have to reduce the number of channels or pack more into the channels.

So you may see a couple of the channels go away. But right now, I think you could argue there are too many broadcasters. You may see a couple of them go away in certain markets, as they should. I don't know about the quality. There are some people who can't receive over-the- air TV now because of high buildings. But I'm not aware of any other specific issues with this.

The Consumers Electronics Association and the National Broadcasting Association have each invested in the same start-up that takes a hybrid approach to TV. So at least there is something you can agree on. Can you tell me a bit more about this company and why you've each invested in it?
Shapiro: The NAB and CEA have each invested an equal amount in a company called SyncBak. Within a geographic area, it is authorized to get the broadcast signal and deliver it over broadband to your computer. So basically, you'd be able to get your local PBS station through your broadband connection. So this could solve the problem that many people face, which is that they can't even get their local TV signals, because of interference or attenuation issues. So it could give the broadcasters a way to extend their reach to more viewers.

Is there anything else you'd like to add regarding the issue of spectrum auctions?
Shapiro: I'll leave you with this parting thought. Broadcasters missed the boat with HDTV, despite our efforts to push them toward that. The CEA built a Web site to provide information about the switch to digital TV. It offered information about antennas and how to hook up converter boxes. Broadcasters didn't invest a penny toward educating the public on the transition. They didn't invest in the CEA Web site. They did nothing, even as we pleaded.

And now all of a sudden they've found out the value of the spectrum as they try to preserve less than 10 percent of the population that is watching their broadcasts. They've been cut the best deal they can get. But if they keep fighting against a proposal and if they lose any of the must-carry rights that forces cable, satellite and telephone companies to show their broadcasts, they will have no audience. The trend is against them. And Congress is looking for more money. This incentive auction proposal is promising to bring in $30 billion of revenue for the government. And it's spectrum they are barely using. They are facing a very difficult future. They didn't do things right in the past. So I say they are where they deserve to be.

Correction at 8:10 a.m. PT: The spelling and the Web link for the company SyncBak have been fixed.