Although the market for free, over-the-air broadcast TV is shrinking, it may also improve the fortunes of wireless carriers whose networks are nearing full capacity.
A new law buried inside the payroll tax package signed last week by President Obama authorizes the Federal Communications Commission to explore ways to shrink the amount of spectrum dedicated to over-the-air broadcasting and auction off the freed up spectrum to the highest bidders, which likely would include wireless carriers such as AT&T (NYSE:T), Verizon (NYSE:VZ), Sprint (NYSE:S), and Deutsche Telekom’s (PINK:DTEGY) USA T-Mobile.
About 11 million households rely on TV antennas to receive TV broadcasts, while 89 million are cable or satellite subscribers, according to Nielsen. The free-TV contingent is expected to shrink further as viewers shift to programming delivered online or via video streamed to smartphones, computer tablets, and other mobile devices.
Experts say that once the spectrum allocations are auctioned off, it will take at least 10 years to put the spectrum to use. All of the major wireless carriers are eager to acquire more spectrum to boost their networks’ capacity, improve download speeds, and beef up the features of their data plans so that they can attract more customers.
AT&T has said that with Apple’s (NASDAQ:AAPL) iPhone in its lineup, data traffic doubled each year since 2007. Overall, mobile data traffic in 2011 was eight times the size of that for the entire global Internet in 2000, according to the Cisco Visual Networking Index. Verizon already is pursing deals to buy spectrum from cable companies by midyear, if objections by rivals and consumer groups don’t bury the deal.
A voluntary process
Carriers looking to buy spectrum at the prospective FCC auction would have plenty of time to line up financing, since the bidding likely wouldn’t begin until late 2013 or early 2014. The delay also would give broadcasters time to assess how a reduced spectrum allotment would affect their business.
The FCC envisions freeing up 500 megahertz of spectrum over the next 10 years, with about 25% of that coming from television. Broadcasters that own spectrum best suited for mobile broadband use will have to decide if they want to sell all of part of the spectrum at auction. They likely would be compensated enough to build new towers and make other adjustments, although it’s uncertain what will happen if enough broadcasters don’t agree to participate in the auction. Participation is entirely voluntary. Those that do participate could choose to go out of business, significantly reduce service, or operate as cable-only channels.
It would be the second time since 2009 that the FCC has taken steps to shrink TV airwaves to accommodate new technology and consumer trends. Back then stations gave up Channels 52 to 69 as part of a transition to digital broadcasts. Most of the freed spectrum has been reassigned.