In his address earlier in the day, FCC chairman Tom Wheeler urged broadcasters to support the FCC’s net neutrality rules, likening the proposed Open Internet/net neutrality rules to the must-carry rules supported by broadcasters. Of the comparison with must-carry, Smith said, “I think his point is well taken,” and added, “I think chairman Wheeler gave us food for thought.”
The NAB has not taken a stand on net neutrality, and Smith said there are NAB members on both sides of the issue. Wheeler’s argument is that broadcasters should favor net neutrality, as it would keep broadcasters old enemy, the pay-TV providers, from restricting or throttling broadcasters’ own Web services.
Smith suggested broadcasters now opposed to net neutrality may reconsider when they study the issue further. “It’s not aimed at us directly, and I think a lot of broadcasters are thankful to be out of the bull’s eye,” said Smith. “It takes some of the heat we’ve felt over the last five years and moves it to another place. I just think (broadcasters) have so much energy expended on other things, they just haven’t focused on it the way the chairman gave us reason to focus on it moving forward.”
Smith explained his own vote against net neutrality rules when he was a U.S. senator and net neutrality came before the Senate Commerce Committee as the solons attempted to rewrite the telecom rules.
“We were all, like, ‘Help me understand this,'” recalled Smith. “In the end, it sort of went along party lines, for and against.” Smith’s own vote, he said, was influenced by a book he was reading at the time: Stephen Ambrose’s “Nothing Like It in the World,” about the building of the transcontinental railroad.
“Lincoln and the Congress of that day said, ‘We’ll give you easements and rights of fee-simple-sales on either side of the trackage, so you can raise capital.’ And it was built in record time, to the great benefit of the westward expansion of the country. Had they also then said, ‘After you build it, you can’t give any price break for lots of freight, or a little freight, first class versus steerage,’ that kind of thing, I have a feeling it would have slowed the development.
“That sort of informed my thinking at the time, which was ‘Right now no gatekeeper’s trying to keep customers out, so it’s a solution looking for a problem that may have collateral consequences down the road, and it will discourage investment.’ So I voted no. But it wasn’t with a lot of conviction.” Smith agreed that some of the problems predicted at the time have appeared.
If broadcasters have been too distracted to ponder the issue in depth, it is likely because they’ve been focused on the upcoming spectrum incentive auction. Wheeler touted the auction as a “once in a lifetime opportunity” for broadcasters, but it has met considerable pushback from the NAB and its members until recently. This year, Smith’s rhetoric about next year’s incentive auction was much more conciliatory.
“I think it can be summed up in ‘$45 billion,’ said Smith, citing the figure raised in the recent AWS spectrum auction. Smith called that “an outcome far more generous than anyone had predicted.” Even the FCC, said Smith, was “stunned” by the figure.
Smith added, “That means many of my members, being public companies, have now an obligation to look at it, as they didn’t before, or didn’t feel they had before.”
“Yet I think there remains among broadcasters a clear-eyed understanding that once spectrum is gone, it’s not coming back. Spectrum isn’t becoming less valuable, it’s becoming more valuable. And I think they’re looking at ways to continue what they’re doing, and participate (in the auction) to some degree. Which probably results in their hitting a target of 120Mhz, somewhere between there and 86 is likely.
“So the challenge is to represent the evolving interest of our members. But that does not absolve us of our responsibility to make sure the details get right, which is why the chairman spoke of the elephant in the room, our lawsuit which is now being decided by the D.C. circuit court.”
The lawsuit challenges elements of the procedures the FCC put in place for the auction. Since it was filed, both sides have been sounding conciliatory notes in public, in contrast to past years.
“I think we’ve been testing each other all year long and finding areas of agreement,” said Smith, “but where there isn’t agreement, that obviously is resulting in litigation. And our instructions are to help on the forward end and the reverse on the auction, to facilitate our members having the options that serve them best. And so our attitude has evolved, as has the FCC’s.”
Asked whether he felt the FCC was showing more sensitivity to business interests, Smith said: “I think I’m seeing an increased mindfulness on their part. That, I think, is evidenced by a substantially different tone this year versus last. Stylistically I thought the chairman felt much more comfortable this year than last.”
With spectrum proving so valuable, some broadcasters may choose not to sell, but instead to provide broadband services themselves. Smith was open to the idea. “What I’m pushing broadcasters to do, as best I’m able from my perch, is to look at the future and try to figure out what the new opportunities are, the revenue streams, and maybe that’s one of them. I’m interested in my members not just surviving but thriving.”
For two straight years, Smith’s opening keynote has urged broadcasters to embrace next-generation technology, especially a new TV standard. This is a significant shift from the digital transition, which broadcasters accepted grudgingly.
“My job is not to preside over the liquidation of the broadcast industry, but to help it to go into the future with more flexibility, more opportunity,” said Smith. “And to be, while reduced in size, more important in its mission and in its delivery.”
Smith said the current TV standard “is a limitation on things like ultra high-definition, particularly if you’re channel-sharing; multicasting; mobility reception; IP interoperability. Those are all things (on) which I’m pushing the question. And frankly I’m quite amazed at how that is being answered in the affirmative by more and more broadcasters, even the majority of broadcasters, who recognize the complexity of yet another transition, and the cost, but also the opportunity that it may hold to keep broadcasting as important in the future as it has been in the past.”
He acknowledged that while the transition to the Internet puts local stations in jeopardy similar to that which has crashed the local newspaper business: Instead of being protected from competition because signals only go so far, every station will compete with every other station on the Web.
“Well, I think that it represents more competition,” said Smith, “and also more opportunity to distribute our content, to sell it, to rent it, on more and more platforms. And I think that is more possible with a more flexible platform than we’re currently on.”
Smith also hailed the success of this year’s NAB Show, which attracted over 100,000 attendees. The NAB Show has long been one of the biggest tradeshows in Las Vegas, but dipped significantly after the 2008 financial crisis and the Great Recession that followed.
“I think we’re back,” said Smith, noting the proliferation of NAB-branded events worldwide, including a new event announced today, the NAB Show Global Innovation Exchange, to take place Dec. 3-4 in Shanghai. Smith conceded he is “hugely concerned” about diluting the NAB brand but said: “Our experience is… that these other events are additive, not dilutive, of the NAB Show. And if it ever changes, we may change our direction, but at this point, it seems that this is becoming such an international show, that to get our brand out in South America, as we’re doing, in Asia, as we’re doing, the Middle East and Dubai, as we’re doing, and in Europe as we’re doing in Barcelona, I think the evidence is, it’s not subtractive, it’s additive.
“I’m a big believer in promoting your brand, and the NAB brand is a good one.”