Earlier we reported what NAB President/CEO Gordon Smith said from the podium of the NAB Show in his state of the industry remarks. Now here is the speech of FCC
Chairman Tom Wheeler at the convention as prepared for delivery.
It was Wheeler’s first appearance at a spring show since taking over the chair. In the photo, Wheeler sits at right, talking with Smith on stage.
Thank you, Senator Smith,
for inviting me to be here. I look forward to our one-on-one.
Now, I know what some of you are thinking: Gordon Smith and
Tom Wheeler mano-y-mano in Las Vegas…that sounds like an awesome UFC
Obviously, that’s ridiculous. If Gordon
and I were to fight it would be broadcast free, over-the-air.
It’s no secret that NAB has been critical of some of my actions as FCC
Chairman. The Broadcasting & Cable
cover feature on Gordon entitled “No More Mr. Nice Guy” says it all. Gordon
Smith “has his sleeves rolled up for a brawl.” Because of me?!?! Say it ain’t
As a former association head, I have a unique
appreciation for the job Gordon is doing. I understand that a good enemy is a
priceless asset. Although that tactic sure feels different if I’m the enemy – especially when I’m not.
Trust me. I get the skepticism.
the former head of the cable AND the wireless industry at the NAB Show telling
you he’s your friend. That’s as crazy as the former head of the cable and the
wireless industry at the NAB Show telling you he’s your friend. There is no
more ridiculous metaphor.
Yes, in a previous life, I
advocated for cable, and I advocated for wireless, back in the days when both
were pretty much in startup mode.
What most people don’t
know is that I’ve also advocated for broadcast licensees.
I led the charge during the Obama Transition to delay the DTV transition
so that would go as smoothly as it ultimately did. And while spending almost a
decade as a VC, I invested in the efforts to bring mobile DTV to life. In other
words, I put my money on the future of broadcasting.
of those previous activities are, however, irrelevant to my responsibilities
Today, I have the American people as my client,
and the actions we take at the FCC are built around the interests of that
I strongly believe that the interests of the
American people are served by a vibrant broadcasting industry and include the
continuation of broadcasting’s historic role as a principal conveyor of news
and entertainment, and especially of its invaluable role as “first informer.”
My purpose today is optimism, not opposition.
I’d like to focus on the opportunity for broadcast licensees
in the 21st century and what the FCC can do to facilitate that
In particular, I want to focus on three
opportunities: the opportunities to provide over-the-top services built around
news and information; the opportunities inherent in the Incentive Auction; and
the opportunities created as we contemplate a transition to new TV sets using
Our mantra at the FCC is “competition, competition, competition.”
We believe that competition
is better than regulation at stimulating innovation and protecting consumers. I
recognize that the broadcasting industry is subject to competition – more, in
fact, today than ever before. And I recognize that more is coming.
But I also believe that broadcasting is positioned to be not
only the reluctant object of competition, but the instigator as well. We are at
an inflection point where broadcast licensees can move from being the
disrupted, to being the disruptor.
I love history and
like to think in historical metaphors. Broadcast licensees are no more in the “television”
business than a canal company was in the barge business. Your business horizons
are greater than your current product.
companies succumbed to the railroads because they failed to define themselves
beyond “barges” to see they were in the “transportation” business. (Instead, in
fact, they expended their resources trying to get the government to restrict
In a modern example, the cable
companies didn’t make that mistake. They redefined themselves from video
retransmitters to telecommunications companies.
was at NCTA the “T” stood for “Television.”
the name has been changed to reflect the industry’s broader focus -- the
National Cable and Telecommunications
Association. We would like to help “television stations” similarly to pivot to
become digital “information providers.”
licensees have a powerful opportunity to bring the benefits of competition to
the new media market. When I look at broadcasting I see the traditional public
trust where you received spectrum and in return provided important public
benefits – and I don’t see that changing.
But I also hope
we can see local broadcast licensees as a growing source of competition in the
Your content represents far more than
the potential for retransmission fees. It can be the basis for a fixed and
mobile-delivered cable-like service. You possess the two most important
components of a successful digital strategy: compelling content – specifically,
the most important content: local content – and the means to promote it. Even
better, you can leverage those advantages at only incremental cost.
The hottest thing in the media business today is OTT – Over
the Top – content. OTT is content that is owned by someone other than the
network operator. Netflix is the classic example. It has seized the opportunity
to buy programming from the same studios and networks you buy from, and put it
A new study by the Pew Research Center, however,
points to a way forward for local licensees. That study reports that a third of
all Americans watch news videos online.
licensees are in the pole position to leverage off that trend to deliver broader
OTT services anchored in local news and information.
stations today have websites on which they feature their local news content,
which they can update 24/7.
You have the opportunity to
leverage that content to become broader OTT competitors as the source
for local news down to the neighborhood.
For all the
wonderful things the Internet has done, one place that it has yet to deliver on
its promise is local content. When I was a VC I looked at business plans to
plug that gap but did not invest because the cost of developing the content and
the cost of promoting it made the plans unsustainable.
don’t suffer from either of these limitations. News is already a high-margin
activity, and your unsold avails are the ultimate promotion vehicle.
The cable companies use their unsold avails to promote their
Internet-based businesses – the same opportunity exists for broadcast licensees
to promote their Web-based local content. And the cable companies don’t have
the reporting boots on the ground that you do.
where our policy activities become relevant to creating a new expansive era for
We have been spending a lot of
time at the FCC working to assure that there is an open Internet. This is
directly relevant to the opportunity the digital future presents for you.
Again, those who provide you with content have taken advantage
of the open Internet to distribute their content without relation to your
service. The open Internet represents the same kind of expansive opportunity
for local licensees.
Essential to the open Internet are
the concepts that a network provider – and here we are increasingly talking
about your cable friends – cannot block lawful content or unfairly target
content and other edge providers.
I hope you don’t view
the open Internet is something relevant only to a different part of
The open Internet rules should be seen
as an Open Sesame for the expansion beyond your local license; to move from the
“television” business to the “information” business.
your window of opportunity won’t stay open forever.
is reportedly relying on the open Internet to expand into local TV news. The Wall Street Journal reports they plan to
spend $300 million to acquire a company that syndicates news clips from 200
local stations. Yahoo’s strategy is to offer personalized local news content
and to sell higher CPM video ads around it.
companies aren’t hesitating in their pivot either. Both Verizon and AT&T
are reportedly exploring new lines of business based on broadcast LTE. Verizon has
bought Intel’s media platform and recently paid $1 billion for NFL rights –
what does that tell you?
Clearly, Yahoo, AT&T and
Verizon are well aware that history is full of businesses that when confronted
with technological change clung to their old models – and did not survive.
They all are embracing something new that looks startlingly
like your model.
Because we are pro-competition, we
hope that broadcast licensees will see this challenge as a call to action.
Again, that’s why the open Internet initiative is important.
I’ve heard many broadcasters argue that they haven’t considered a mobile
strategy because they would have to pay mobile carriers too much for the
carriage. Think open Internet here instead.
While the rules
for mobile have been different from those for wired providers, the root concept
is openness – including in wireless.
Of course, there
is the pesky little matter of how you pay for this kind of pivot. Here, again,
the ongoing policy activities of the FCC can be helpful.
Which brings me to the second big opportunity I wanted to highlight – the
A few points up front on the
Incentive Auction. The FCC is carrying out the mandate of the Congress. The NAB
was at the table when Congress created the Incentive Auction. I was not.
As I observed from afar, you lobbied hard and ultimately
supported the legislation as enacted. The FCC is simply doing what Congress
authorized: creating a market mechanism for spectrum reallocation. There is no conspiracy.
Those who want to participate can. Those who choose not to participate, that’s
fine as well. You will have the ability to determine for yourself if you want
We are developing an outreach plan that
will include the provision of detailed auction information to help you make
Going back to the point about
funneling cash into your coffers so you can pay for a pivot to Over-the-Top
opportunities, I continue to believe that the auction presents a terrific
financial opportunity for broadcasters.
under-considered and under-appreciated aspect of the Incentive Auction is the
idea of spectrum sharing. The pilot project conducted by Los Angeles stations KLCS
and KJLA has provided real-world evidence of channel sharing’s technical
I’ve been to the station. I have seen its
success with my own eyes.
Spectrum sharing will allow
you to maintain your existing business while taking home an auction check. It
is a once-in-a-lifetime, virtually risk-free opportunity to expand your
business model on somebody else’s dime.
will allow you to remain on the air, maintain must-carry status if you are a
must-carry station, AND have a new source of capital that doesn’t dilute your
ownership. Sounds like a pretty good deal to me.
however, that the Incentive Auction opportunity is not likely to come again anytime
soon. While legally we could hold another auction, realistically I’m not as
Having just done a repacking, to restart the
process yet again, I imagine, is something the industry – as well as the
government – would find disruptive and unappealing.
third opportunity I want to talk about is using a new television standard as
the entry point to the broadband economy for broadcasting.
I have always been and I remain a proponent of new technological ideas. I
have been a part of businesses that seized the new technology to ride to a
great future, and I have been a part of businesses that discovered that
technology alone does not make a revolution.
comes to OFDM technology – popularly referred to as ATSC 3 – the FCC will be
ready and responsive when the standard is completed. While ATSC 3 is not
backward-compatible with existing televisions (a non-trivial challenge), it is
compatible with the Incentive Auction.
licensee keeps the channel or decides to use the Incentive Auction’s
opportunity to share spectrum, the expanded throughput of ATSC 3 will be
available when ATSC 3 is finally available.
If it is
possible to get a multiple of throughput on spectrum with OFDM, we, as stewards
of the spectrum, need to be supportive.
If it is
possible to expand competition by offering wireless throughput at or better
than the level that will be commonly available at the time of its rollout, we
need to welcome the competition.
We just lived through
one TV transition; I’ve been there, you’ve been there. We both know the
magnitude of that challenge. We should neither shrink from it, nor
underestimate its magnitude.
broadcasting will need to work together because it’s going to be a long and
While my remarks have focused on
opportunities, let me close briefly with a point about obligations – yours and
As NAB correctly says, broadcast licensees are “licensed
to serve.” As to the service part, your long history attests that you are right
to take pride in your record. As to the “licensed” part, there are additional
obligations that fall both on the industry and on the FCC.
This means that when it comes to broadcast licensees our job is to fulfill
the instructions of the Congress to promote competition, diversity, and
That is the root of our recent decision on
JSAs and SSAs. Simply put, where sidecar agreements serve the public interest
by advancing the goals established by Congress, they are appropriate.
When entanglements between separately owned stations serve as
end runs around our local television rules, however, it is appropriate to push
the stop button.
Let me be clear, where sidecar
agreements are tailored to facilitate statutory values such as a diversity of
voices and ownership they will have no problem clearing the FCC.
The waiver process we instituted is sympathetic to
efficiency-producing agreements so long as they do not impair competition and
ownership diversity. The actions of some, however, adversely affect competition
and diversity. They have forced new actions that have the simple goal of
enforcing our rules.
But I’m not here to rehash old
My message today is that we want to work with
you to focus on the future.
confront and challenge broadcast licensees.
any of these opportunities calls for entrepreneurial imagination and leadership.
It requires a willingness to think anew and act anew.
Our job at the FCC is to facilitate such innovation.
Your industry has led the way in serving America’s viewers in
the past, and we have every confidence that you can do so in the future.
We look forward to working with you as broadcast licensees who
have meant so much to this Nation, reach for and define new levels of service