The FCC’s UHF TV Diet Plan: Slimming Down the Free TV Dial to Make Room for Expensive Wireless Broadband

By the end of this month, the Federal Communications Commission will vote on proposed rules governing a planned 2014 auction that will allow over the air TV stations to surrender their “free TV” channels in return for money from the nation’s wireless phone companies looking for more mobile broadband spectrum.

The Commission is considering reallocating UHF TV channels 31-51 for mobile data, compacting the nation’s over the air TV stations onto VHF channels 2-13 and UHF channels 14-30. But the FCC also expects many stations, particularly smaller independent or specialty channels in large cities, will be happier surrendering their broadcast TV licenses in return for cash compensation.

If the five FCC commissioners approve the plan, it will be the largest spectrum auction since 2008, and could earn the U.S. treasury billions, tempered by payouts to television stations agreeing to shut down their transmitters, and to compensate remaining stations for the cost of moving operations to a new channel number, when necessary.

“To ensure ongoing innovation in mobile broadband, we must pursue several strategies vigorously: freeing up more spectrum for both licensed use and for unlicensed services like Wi-Fi; driving faster speeds, greater capacity, and ubiquitous mobile Internet coverage; and taking additional steps to ensure that our invisible infrastructure for mobile innovation can meet the needs of the 21st century,” the agency’s chairman, Julius Genachowski, said in a statement.

The controversial auction would compensate broadcasters even before the FCC knows exactly how much spectrum it will eventually have available to auction to wireless carriers. Nobody is sure how many stations will ultimately choose to abandon their over-the-air audiences, but an FCC report predicts the largest number of station losses would be in large metropolitan areas, which often have more than a dozen stations devoted to infomercials/home shopping, ethnic shows, religious programming, and independent network affiliates. The FCC suspects some of these lower-rated stations will see the money as a strong incentive to surrender their broadcast licenses.

Genachowski

The FCC considered several spectrum-saving proposals that would free up as much channel space as possible to resell to wireless operators. One proposal would have full power broadcast outlets switch to low-powered cellular-style transmitter networks to reduce the potential interference on an increasingly crowded dial. But that proved unpopular and expensive for broadcasters. Instead, the FCC predicts stations could effectively share channels and still retain HD service. For example, a local CBS station could agree to surrender its license and broadcast instead over the transmitting facilities of the local NBC station, splitting one station’s allocated channel bandwidth in half. Other stations will be relocated on the dial or moved to different transmitter sites to reduce potential interference from stations in nearby cities.

Stations that do not require an HD service could share space with those serving several standard definition channels to the public. These are typically public, educational, or ethnic-oriented broadcasters.

As a consequence, the FCC says many stations might have to give up on their “multicast” standard definition secondary services — the 24 hour local weather or news channel, Me-TV, This TV, Retro TV, Antenna TV, and Bounce, for example, because there would be insufficient bandwidth when two services sharing one channel are transmitting in HD.

The FCC does not believe stations would mind too much, quoting from RBR/TVBR:

“So far, nobody’s been able to figure out what can go on a digital side channel and pay for its own presence there. Mostly it’s been used as a revenue-neutral or money-losing place to put 24-hour weather… Nobody watches these things in strong enough numbers to generate any advertising revenue.”

But the FCC did recognize that certain viewers in fringe reception zones could experience a loss of service — one that could be addressed by subsidizing improved antennas for homeowners or requiring cable or satellite operators to develop a “lifeline” television service consisting of local broadcasters, either for free or at a minimal monthly cost.

Some consumer groups worry that any forthcoming spectrum auction would be dominated by Verizon Wireless and AT&T — the nation’s two largest carriers, who could easily outbid smaller cell phone companies also clamoring for spectrum. During the last auction in 2008, which netted nearly $20 billion, Verizon Wireless walked away with the bulk of the spectrum on offer. Without auction rules setting aside significant spectrum for smaller competitors, both dominant carriers could lock up one of the last spectrum auctions for the next 5-10 years, cementing their de facto duopoly.

The FCC is considering reworking its market concentration rules before the bidding begins, which could constrain Verizon and AT&T from bidding and winning the bulk of available frequencies in the cities where they dominate.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg FCC Chair on Spectrum Auctions 9-10-12.flv[/flv]

FCC Chairman Julius Genachowski talks about rising demand for mobile broadband access and the outlook for spectrum auctions to free up more airwaves. He speaks with Cory Johnson on Bloomberg Television’s “Bloomberg West.”  (7 minutes)

Deregulation likely means higher phone bills for CenturyLink customers in Arizona.

CenturyLink has convinced Arizona state regulators local phone service is now competitive throughout the state, allowing the company to raise rates with less regulatory oversight. But some consumers are wondering how deregulation benefits them.

“Once again the phone company has sold us another bill of goods in Arizona,” says Tucson ex-CenturyLink customer Miguel Gonzalez. “First Qwest and now CenturyLink told us that deregulation would bring rates down for phone service, yet both companies fought for years to raise, not lower prices.”

Under the plan approved by the Arizona Corporation Commission, CenturyLink will be able to raise its residential rates up to 10 percent per year, so long as the rate increases do not exceed 25 percent over three years.

Arizona residential landline customers have paid roughly $13.18 for standard urban phone service since the 1990s, when Qwest was the local phone company. Now CenturyLink is free to raise those prices $1.30 a month in any of the next three years or up to $3.30 overall, even as customers continue to disconnect service across the state. Business customers face potentially higher rate hikes — 15 percent annually or 25 percent over three years.

Regulators expect the company to file for a rate increase before you finish reading this article.

Oddly, both CenturyLink and some members of the commission called the change a victory for consumers, despite the likely higher rates to follow. The plan won approval in the Republican-controlled body in a 4-1 vote.

“It should be a win-win for the consumer (and the company),” said Democrat commissioner Paul Newman, who represents southern Arizona and voted for the plan with reservations. “That’s yet to be seen, but I hope it will be.”

The Arizona Daily Star reports CenturyLink will not be able to charge different rates in competitive and less-competitive areas, which consumer advocates say will protect ratepayers in areas where wireless coverage is poor and cable companies do not compete.

CenturyLink said it needs “rate flexibility” to compete as people disconnect landlines and head for cell phones and cable company “digital phone” products. Although the company did not elaborate, it argues the right to raise rates will allow it to compete more effectively with dominant cable operators Cox and Comcast.

Prior to deregulation, CenturyLink was allowed a guaranteed rate of return based on the true cost of providing landline phone service. The company also guaranteed to provide phone service to any Arizona resident inside of its service territory who asked. Under the terms of the new agreement, CenturyLink will now enjoy more rate flexibility, but will continue serving as the phone company of last resort.

“I’m still scratching my head about how the pointy-heads in Phoenix believe that raising rates makes you more competitive with cable and cell phone companies and not less,” Gonzalez says. “I guess it’s the same kind of New Phone Math that CenturyLink uses to try and keep the customers that are slipping away from them faster than ever.”

Gonzalez says he pulled the plug on CenturyLink last August.

“They offer nothing compelling to me when I can get a better price and better service with more calling features from the cable company, and now they offer even less.”

Fido puts per-second billing into the doghouse.

Canada, home of the three-year mobile phone contract, “service access fees,” high activation fees, unlock phone fees, $10 for 10MB of data, and $8 extra for “caller-ID” has had one thing going for it that American cell phone companies don’t offer — per-second billing.

Not anymore.

Our regular reader Alex writes to inform us that Fido (owned by Rogers Communications) has joined the parade of Telus’ Koodo and Bell’s Virgin Mobile Canada eliminating the money-saving billing feature for all new activations starting yesterday.

These prepaid customers will now pay by minute when they start new service or change an existing plan.

Mobile Syrup reached out to Rogers and obtained official confirmation and their explanation:

“Fido will adopt the common billing practice in Canada: per-minute billing beginning July 4th. This means that calls are rounded up to the nearest minute. This change will apply to new customers signing up with Fido. All customers who are on current plans with per second billing will retain this feature unless they change their monthly plan. The majority of customers should not notice any impact to their monthly bills. Fido offers several great plans with various call, text and data allowances that are designed to meet any need.”

The billing change further discourages Canadian consumers looking for a better deal in the prepaid market. It is the best alternative available from the handful of national carriers that charge considerably higher prices tied to an extra-long service contract and expensive data pricing.

Maybe not

Alex notes per-second billing was one of the great advantages Telus’ Koodo offered, and other competitors were initially forced to match that innovative pricing.

“Koodo’s new plans are simply the old plans, but with a $5/month increase for two calling features,” Alex notes. “Koodo found another way to gouge their customers: per-minute billing. They also removed 50 minutes from the $30/month (previously $25) plan, which used to have 150 minutes. At a time when Internet is the main demand, while talk and text cost virtually nothing to provide, Koodo is gouging.”

Koodo, Fido, and the other carriers are probably noticing that cell phone customers are talking on their cellular phones less than ever, and per-second billing can save an average of 25% off per-minute billing, especially for short conversations.

Alex has a petition up on Koodo’s website asking them to reconsider, but we’re doubtful they will. Rogers’ is not well-known for responding to customer desires for better, more cost-effective service.

Canadians: Get ready for more cell towers in your neighborhood.

Industry Canada’s fuzzy math threatens to allow cell phone companies to erect new cell towers in some of the country’s most scenic areas, which often coincidentally offer the best reception.

Residents in Pontiac, Quebec are learning that first-hand, as Industry Canada approves a controversial proposal from Vidéotron to install an 82-meter cell tower in the middle of a vista that tourist officials use in brochures to promote travel in the Ottawa River region.

It turns out the regulator now only considers an antenna’s base as a factor in determining whether to approve a new cell tower. That base amounts to just one square meter, “too small” by Industry Canada’s standards to conduct an environmental assessment. No matter that the antenna will tower nearly 270 feet into the skyline. Industry Canada is only interested in measuring the three legs of the tower (each leg is evaluated individually, not collectively), and at just one tiny meter, it isn’t worth their time.

That means local residents will have to contend with a new tower 25-stories high. As the Ottawa Citizen puts it, Vidéotron’s tower is smaller in the government’s eye than any pre-fabricated garden shed from Home Depot, which often requires a permit to install.

The new tower will be installed on Hurdman Heights, much to the consternation of area residents and naturalists opposed to its presence, ruining what many call the most scenic place in the region.

The local government of Pontiac has opposed the new Vidéotron tower since it was first announced, but the cable/wireless company pulled an end run around the municipality claiming there was a negotiating impasse and local officials would not meet to work it out, a good enough reason for the regulator to approve the new tower. Pontiac Mayor Eddie McCann says there was no impasse and the local council has been trying hard to reach a deal with the telecommunications company and never cut off talks:

While cell phone companies tell you the only fair way to price wireless data is to charge you for what you use, these same companies are now considering how to reverse that argument and force you to buy more expensive “unlimited voice calling” plans you may not want or need.

The Wall Street Journal reports that AT&T is the most vocal proponent of ditching “tiered minute plans” for voice calls, which let consumers pick cheaper plans with fewer calling minutes. With Americans talking less and less on their cell phones, customers have been downgrading voice plans to less expensive options.

Industry trade group CTIA-The Wireless Association notes the average cell phone call dropped from 3.03 minutes in 2006 to just 1.78 minutes in 2011. Customers who rely entirely on their cell phone and no longer have a landline used to talk an average of 826 minutes per month in 2007.  Last year, that number dropped to 681 minutes, according to CTIA.

Verizon Wireless sells customers 900 minutes for $59.99. But the company does not count minutes used during nights and weekends or when placing/receiving calls to or from other Verizon Wireless phones. If a customer now talking less still pays $60 for a 900 minute plan, they could shave $20 a month off their monthly bill if they kept their daytime calling to 450 minutes a month. Many do. In fact, younger customers use their smartphones for talking even less, with some not even reaching one hour of voice calling a month.

Verizon's cattle call? Will the company herd all of its wireless customers to unlimited voice calling at a higher price?

Given the option to downgrade, customers are jumping at the chance. With voice revenue declining 2-4% in the first quarter, Wall Street has been pressuring carriers to act.

The answer that works for them, although probably not for you, is forcing all customers to purchase an unlimited voice calling plan at contract renewal time. At today’s prices, that could add an extra $30 a month for customers used to paying $40 for a basic 450-minute calling plan.

“The industry’s definitely moving towards unlimited,” AT&T Mobility Chief Executive Ralph de la Vega said in a recent interview. “Especially as more people adopt smartphones that have voice capabilities over the Internet, segmented voice plans will become less relevant.”

Ironically, cell phone companies that have spent the last year or two defending the end of unlimited mobile data as “fair” because customers can “choose exactly the plan they need,” are adopting a completely different strategy to push for unlimited voice calling.

“It’s more important to offer a complete solution to consumers which is really, truly unlimited,” said T-Mobile USA Chief Executive Philipp Humm in a recent interview. “The new world is a completely unlimited, worry-free world.”

Sprint agrees, although its insistence on preserving an unlimited data experience for its customers protects the company from charges of hypocrisy.

Fared Adib, head of product development for Sprint, told the Journal eliminating tiered voice options makes sense because it simplifies choices for customers. “People like the freedom of not having to worry about either data or voice,” he said.

No cell phone company would go on the record as the first to discard tiered voice plans, but AT&T led the way to ending unlimited data, and the company is increasingly vocal about ending tiered voice calling as well.

At current prices, consumers could pay substantially higher cell phone bills as a result.

Both AT&T and Verizon Wireless currently charge $70 a month for unlimited calling. Sprint charges $99.99 for its combined unlimited calling and data plan. T-Mobile charges $60 for unlimited talking and texting. Compelling customers to adopt unlimited calling plans will likely bring smartphone monthly charges well above $100 a month when factoring mandatory data plan add-ons, taxes, surcharges, and fees.

Customers who find this pricing intolerable will likely gravitate to prepaid calling plans, which is where an increasing number of occasional and light cell phone users have already ended up.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/WSJ Voice Calling Plan Changes 6-5-12.flv[/flv]

The Wall Street Journal explores why cell phone companies want to compel customers to choose unlimited voice calling plans.  (4 minutes)