MARKUP TIPS ODDS AGAINST McCAIN'S 700 MHz PROPOSAL

Fleeting hopes that a bill offered by Sen. John McCain (R-Ariz.) would establish a firm timetable to let wireless providers use 700 MHz spectrum were dashed last week when amendments were added to the legislation that arguably would strengthen broadcasters' hold on the valuable airwaves.

Drafted quickly in the wake of recommendations by the 9/11 Commission to improve interoperable communications among public safety entities, McCain's proposal called for broadcasters to relinquish the 700 MHz spectrum by Dec. 31, 2008.

Although that deadline would have been two years later than the existing timetable established in the 1997 Balanced Budget Act, most observers in the wireless industry like the fact that the McCain proposal would require broadcasters to vacate the spectrum regardless of digital TV's market penetration.

Eighty-five percent of all U.S. households own a television capable of receiving digital broadcast signals, and most Americans subscribe to cable or satellite television services that allow the transmission of digital signals. McCain proposed that those who cannot afford such services be given subsidized converter boxes that let analog televisions receive digital signals and limit disruption to viewers. Funding for this $1 billion worth of converters would come from the proceeds of a 700 MHz auction that Powell said could raise $30 billion to $70 billion.

But the legislation that emerged from the Senate Commerce Committee markup last Wednesday differed significantly from McCain's original proposal. Sens. Conrad Burns (R-Mont.) and Ernest Hollings (D-S.C.) pushed amendments that eliminated all deadlines for broadcasters to vacate the 700 MHz frequencies allocated for deployment of advanced broadband wireless technologies such as Wi-MAX.

The deadline for broadcasters to clear the portion of the 700 MHz spectrum allocated to public safety was accelerated to Dec. 31, 2007 (see figure), but the amendments would let the FCC grant waivers “to avoid consumer disruption” — a caveat that public-safety officials characterized as a “loophole to permit continued blockage of vital public-safety spectrum.”

Meanwhile, the subsidized converters remain in the legislation, but the revenue source expected to pay for them — a 700 MHz auction — would appear to be doubtful. The FCC already has delayed 700 MHz auctions on four occasions amid concern that wireless providers would not bid aggressively without knowing when the spectrum would be available. And, without subsidized converters, many question whether even the public safety spectrum can be cleared.

“That's a problem, and I don't know how you solve that,” Precursor wireless strategist Rudy Baca said.

With the text of the amendments generally unavailable at press time, many industry observers were reluctant to evaluate the legislation for the record, but several said their initial impressions indicate the amendments “gutted” McCain's bill. In fact, McCain reportedly said after the meeting that he doubted the Senate would consider the bill.

“Let's just say I think the broadcasters had a good day today,” said one wireless official who requested anonymity.

Broadcasters are the incumbent users of the 700 MHz spectrum, but the perception that broadcasters want to delay the digital-television transition is erroneous, said David Donovan, president for the Association of Maximum Service Television. In fact, more than 1400 of the 1600 U.S. broadcast stations have built digital facilities and would like to avoid the added expense of producing both digital and analog transmissions. However, cable providers are delivering only 300 to 400 of those digital stations' broadcasts to their subscribers.

Donovan and other broadcaster representatives said the FCC needs to require cable companies to carry digital signals to give the public the incentive to purchase digital televisions. Until that becomes the norm, broadcasters — and members of Congress who want to be re-elected — can't afford to alienate the viewers that use the more than 70 million analog sets currently in the marketplace, he said.

UPPER 700 MHz BANDPLAN