Las Vegas, NV – Apr 12, 2011 - NAB President and CEO Gordon Smith presented the annual NAB State of the Industry address during the 2011 NAB Show.
Smith notes, "The state of broadcasting is more forward-looking than it has been in two decades."
Two topics Smith addressed included the so-called spectrum crisis, or capacity crunch facing wireless carriers and how to address the problem; and he also touched on the fact that the performance royalty tax died after the NAB offered to compensate record labels and performers if they helped get radio in every cell phone. Their offer was denied and the discussion is still on the table.
Below is a transcript of his prepared remarks.
I saw a cartoon in The New Yorker a while back. This man is standing at a lectern to give a speech and he's saying, "I know so much I don't know where to begin."
Well, I don't know that much, but I know more than I did a year ago, and I do know this: The state of broadcasting is more forward-looking than it has been in two decades.
A few years ago at this convention, Eddie Fritts, whom we honored yesterday with the Distinguished Service Award, said something about broadcasting's future that I think bears repeating.
He said, imagine that local radio and TV broadcasting didn't exist.
That people had to pay for their radio.
That they had to pay for their TV.
And that news of the local community was pretty much limited to the morning paper.
Then, imagine a new wireless technology came along and said: We can give you radio and television for free. And as part of your local communities, we will bring you local news, local weather and warnings about local emergencies, as they happen.
Eddie said, if broadcast technology were invented today, it would be viewed as a "miracle technology." And he's right. It would be viewed as a great public good, a force for cohesion when communities are being fragmented by unemployment or plant closings or crime or by technology itself. It's great you can get BBC World News and Al Jazeera on your iPhone. But isn't it a greater value for a community to get local Channel 4?
Isn't that a public good?
It's great that you can get XM Channel 153 - the comedy of Canada - on your iPad. But isn't it more important for a community to get severe weather warnings on local 101.1 FM or local 1580 AM?
Isn't that a public good?
--Continued on page 2
Let me add something else to Eddie's premise.
This new advancement called broadcasting is technologically astute, because it uses much less spectrum to reach more people. The axiom of its existence is that its signal goes from one to everyone...rather than one to one as cell phones do. So, in terms of spectrum use, it is a much more efficient technology. Technologically agile, beneficial to the community and free - so what's not to like?
Well, the so-called "new media" for its own purposes would have people and policymakers believe broadcasting is still living in the Howdy Doody era.
So, as they say, we have issues. And let me begin with the one that most threatens broadcasting in the coming year.
At NAB, we're not worried about technology - we're excited about the digital world that is re-inventing broadcasting. We're not worried about revenues - broadcasting has bounced back from the worst recession in history.
But we worry about those who would damage our business. And about government in a rush, or over-reaching - that, we worry about.
Less than two years ago, broadcasters gave up more than 25 percent of TV spectrum and spent $15 billion transitioning from analog to digital television. That was our cost of leaving Howdy Doody analog and moving to high definition and multi-channel digital. We embraced this digital future so that we could offer dazzling HD programs and multicasting; so we could offer consumers more choices and deliver content on different platforms, such as sending video to smartphones, tablets and laptops.
We spent these billions because we knew we needed to remain relevant to new generations, who expect to get their content on the go. Now, less than two years later, wireless companies want ANOTHER 40 percent of TV spectrum.
Hey...we already gave at the office! So we are in full battle mode to protect broadcasters from being forced to give up spectrum involuntarily.
If a station simply can't make it and it volunteers to sell its spectrum, that's fine - as long as it doesn't harm another station that wants to stay in business and is excited about the future. The problem is that what is voluntary for the former could become involuntary for the latter. It concerns us that the FCC could forcibly relocate a broadcaster, crowd channels closer together, reduce their coverage, destroy innovation for viewers, increase interference, or otherwise degrade their signal.
This endangers our digital future, and violates President Obama's promise to prevent a world of digital haves and have-nots.
Ladies and gentlemen, there is not enough spectrum in the universe to replace our one-to-many broadcast system to a one-to-one transmission architecture. Even the wireless companies themselves concede they will need to eventually use some of their spectrum in a broadcast-type architecture, specifically for sending mass appeal video content to smartphones.
Broadcasting already has the architecture, and it's worked for more than 60 years. What sense does it make to take spectrum that is being used efficiently and use it less efficiently?
Is that a public good?
--Continued on page 3
And where exactly, other than dense urban markets like New York and LA, is this great spectrum shortage? It's certainly not in rural America.
Wireless carriers are talking about a "looming spectrum crisis" these days. For whatever reason, they seem to have found a sympathetic ear in Washington. Sounds spooky, but the truth is what they really have is a capacity crunch -- not a spectrum crisis.
The fact is there has been more spectrum allocated to mobile broadband than there is capital to deploy it.
What is needed to address the capacity crunch is more investment in towers and infrastructure, and receiver standards that maximize the use of the huge swaths of spectrum that wireless carriers have already been allocated. But apparently they have determined that it is cheaper to buy our TV channels at auction than to build out their networks. Hence, spectrum crisis.
One needen't look any further than the recently announced AT&T and T-Mobile merger to see my point. In announcing their deal, corporate executives stated that one of the greatest benefits of the proposed merger is that AT&T's network capacity would DOUBLE by adding T-Mobile's already built towers in urban areas. Moreover, recent press reports indicate that certain companies licensed to provide mobile broadband service are simply not making the necessary investments to deploy their service, but instead are sitting on more than $15 billion of spectrum they aren't using.
Why? Because in the words of one of those CEOs, it's a good inflation hedge.
Spectrum should not be used for speculation.
I'm not saying there will not be future demands for spectrum to sate consumers' want for more reliable wireless service, but before anything is done, we believe a respected third party, like the Government Accounting Office, should conduct a comprehensive inventory of what spectrum is out there and MORE IMPORTANTLY, how much of it is being used today.
Won't that help us know the best way to meet America's communications and spectrum needs? What is there to fear from a comprehensive inventory unless you don't want people to know what you really have or how you're using it?
There's a lot at stake here. So why rush? Once spectrum is reallocated and local TV stations are gone, they won't be coming back. And at what cost to the 43 million people that rely exclusively on over-the-air television for free.
They don't have cable.
They don't have satellite.
And their numbers are growing, not declining, as evidenced by the growing pay TV cord-cutting phenomenon embraced by younger, tech-savvy viewers. In fact, many who depend on free over-the-air television are older, lower-income, minority and rural viewers. One in three Spanish-speaking households, for example, depend totally on over the air.
Isn't it ironic that a former Republican Senator is urging the Obama administration not to lose sight of an important segment of its political base? They shouldn't be forgotten so that urbanites can have faster downloads of the latest game or gimmick.
It's like those stories you hear about people whose homes are taken away by eminent domain, so that some developer can put up a high rise or a mall. Why should people in Kentucky, for example, have their local stations' signal potentially degraded...so urbanites in Manhattan can have a faster download of the app telling them where the nearest spa is located?
--Continued on page 4
Now, don't get me wrong... There are some pretty useful apps out there - I have many on my iPad. But my point is this -should we risk weakening a broadcasting system that serves a real purpose in American life, a system that is a pillar of our communities for the chance to play more games on our iPads?
Recent projections show the demand for smartphone capacity is likely to slow - mainly because wireless providers want to charge you a fee, while broadcasting comes to you for free. And "free" is better than "fee."
Another reason may be that while some apps are fun, they are not important to everyday life and their novelty wears off. I've got 100 apps on my iPhone, and I use only 5 or 6 with any regularity.
But I guarantee that none of those apps comes close to matching what broadcasting contributes to local communities.
So, what we're saying to the government is keep voluntary, voluntary. Broadcasters have a unique identity. We are important voices in our local communities. We live where we broadcast, and we reflect the values of those communities, large and small across the country. Our competitors say broadcasters are "squatting" on this spectrum. A more legitimate concern is that our competitors will end up "squandering" this spectrum simply for higher fees.
Now, while I'm discussing television, let me say something about retransmission consent.
Cable stations get paid for their content, and they should. But shouldn't broadcasters also be paid when cable and satellite companies use their signals to attract customers? Stations deserve the right to negotiate for compensation of their programming. And we know that the system works, because thousands of agreements have been successfully negotiated over the years, with a success rate of over 99 percent. Only a sliver of the negotiations has led to a disruption of service. Some pay-TV companies, however, want to pay nothing or only a pittance for local stations' signals - even though local content and network programming offered by broadcasters are the ones viewers watch most.
In fact, of the top 100 primetime shows, more than 90 of them are on broadcast TV each week.
When we say it's free, we mean it's free to viewers, not to multi-billion dollar corporations that sell subscriptions on the backs of our content.
Just recently, the FCC recognized again that it lacks the authority to intrude on private business negotiations, as pay-TV providers wanted. So the issue is quiet ... until it is not...until a contract can't be settled immediately.
Americans don't like people interfering with their guns, their faith or their favorite TV show. This issue will re-surface periodically, and we'll be ready when it does.
Finally, let me talk about radio. Last year we stopped the legislation that would impose a performance tax on local radio stations. This was a freight train headed for passage.
The White House was for it.
Congressional leadership supported it.
Both the House and Senate Judiciary Committees had passed it.
This put radio in a position of maximum peril.
--Continued on page 5
One of my former colleagues, a congressman who was running for the Senate, once told a town meeting in Mount Pleasant, Michigan: Keep your expectations low because Congress doesn't have all the answers. "Congress," he said, "is not the sole suppository of wisdom."
Now, I think he meant repository, but I have to tell you, the rank and file of 260 members of the House of Representatives - Republican and Democrat alike - with grassroots engagement, by radio and television working together, really came through.
With their help and that of broadcasters across America, we brought the freight train under control by seeking a good faith, workable agreement with the music industry, while at the same time aggressively opposing the bill as written. Our objective was to make certain that if something passed, it provided a bright future for radio.
We offered to compensate record labels and performers if they would help us get broadcast radio on every future cell phone, which is important not only for entertainment, but more importantly, to provide the public with an effective emergency alert warning system.
In the end, the record labels rejected our offer, but the performance tax bill also died. We remain open to discussions. We're still at the table, and we hope the other side comes back.
By the way, the context of our approach marked a stark divergence from the past.
Until last year, NAB was viewed on Capitol Hill as The House of No - almost no matter the issue - which is not a long-term strategy for success, especially when trying to navigate the political minefields in Washington. In politics, we always say you can't beat something with nothing. With this new flexibility, we now find ourselves in a position of greater strength and credibility among policymakers. And this will serve us well, I think, as we shape radio's future, which remains very bright indeed.
Now in closing, let me say again in the words of Eddie Fritts...
Broadcasting is a miracle technology, still giving great value to and doing great good for the American people. The world of the future must include broadcasting and broadband without degrading either.
Finally, this thought...
If you look around the world right now, you will see we are involved in three wars.
You will see people trying to recover from an economic meltdown and keep their mortgages from going under.
You will see incomprehensible suffering in Japan.
You will see Middle East dictators, thugs and emirs trying to hold on to power amid turmoil.
Broadcasters obviously cannot alleviate these harrowing events, but we provide our listeners and viewers with the information our communities need to know during times of crisis like these. Every day we make a positive difference in our communities, local station by local station. We provide an anchor to communities when often there seems to be little to anchor them.
As I said last year, the centrifugal forces of modern life are fraying the bonds that tether our citizens to their communities. Broadcasting keeps our citizens connected to our communities and gives those communities coherence.
That is a public good that we provide. The enduring value of broadcasting is not something that policymakers should take lightly. And I assure you that NAB will continue to make that case in Washington.
Thank you very much.