JIM GLASSMAN:
Welcome to Ideas in Action a television series about ideas and their consequences. I'm Jim Glassman.

This week: the battle for space on America's airwaves. As the demand for wireless gadgets grows so does the need for bandwidth also called the spectrum. Cell phones and laptops using wifi and iPads with their endless supply of apps all need spectrum to operate but a big portion of the airwaves is already inhabited; licensed to traditional radio and TV broadcasters that also use the spectrum. Is there a looming space crunch on our public airwaves? What should be done about it? Joining me to discuss this topic are; Steve Largent, president and CEO of CTIA, the wireless association and former U.S. representative from Oklahoma; and Gordon Smith, president and CEO of the National Association of Broadcasters and former U.S. senator from Oregon. The topic this week: jockeying for space on the spectrum. This is Ideas in Action.

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JIM GLASSMAN:
The Federal Communications Commission, the FCC, the agency that oversees broadcast and wireless communications, declared a looming spectrum crisis last year. It wants to reallocate a big chunk, 500 megahertz of spectrum over the next decade for wireless broadband use, 120 megahertz of that would come from TV broadcasters. One proposal; auction off spectrum to those willing to pay and give incentives to traditional broadcasters who already occupy the space to give some of it up. The proposal has made for a huge classic Washington battle between entrenched interest for wireless and broadcasters. There could be billions of dollars won and lost depending on what regulators decide.

Steve Largent is there a spectrum crisis?

STEVE LARGENT:
Well Jim I'd explain it this way first of all for your viewers that spectrum are the highways that the wireless industry utilizes to operate on. So the cars are like your cell phone or smart phones or tablets that we use and they drive on these highways. And the looming spectrum crisis that we talk about quite often is the fact that we're running out of spectrum so there's more cars on the highway, we need more lanes. So that's the crisis that we're facing in the years to come and the fact is is that the last two spectrum auctions that occurred in congress over the last five years took somewhere between eight and twelve years to even come to fruition. So we cannot possibly wait another eight or twelve years to have a spectrum auction in this country or we will be actually facing a situation that I don't think anybody is going to enjoy.

JIM GLASSMAN:
And Gordon the reason that these highways are getting clogged up is because for example there's a lot of video that's traveling down-- there are a lot of video cars traveling down-- but do you think that the spectrum is being outstripped by demand?

GORDON SMITH:
Well it certainly demand is going up, Steve's got a good point. But rather than a crisis my perception is it's more of a capacity crunch and if you have congestion on the highway you build additional lanes. One of the arguments that we have to protect our airwaves is that if they would just simply do more cell division, offload more onto wifi, improve receiver standards, these kinds of things-- and digital compression technologies are exploding. We see a world of the future of broadband and broadcast--

JIM GLASSMAN:
So digital compression means being able-- it's almost like building smaller cars you can-- if you want to use the same metaphor--

GORDON SMITH:
You can do-- get a lot more cars on the same highway. Most of what people watch on TV is broadcast content not cable content. It's broadcast content like the Super Bowl, 24, certainly Glee, and these kinds of programs, that's where the eyeballs are. And it's free to people-- people are saying I can get enough TV on the Internet and through broadcast and I want it that way because it's cheaper for me. As Steve's members continue to build out their networks through cell division they won't have the same congestion and you can preserve broadcasting which represents localism, not nationalism, but local values, local news, weather, sports and information, particularly emergency information--

JIM GLASSMAN:
So your problem is that the wireless people want your spectrum that you already have to use for broadcast-- do you want to keep it or do you want to sell it to them under your terms?

GORDON SMITH:
Well we could do both but the answer is we want to stay in business and two years ago we gave up nearly 30% of our spectrum in the analog to digital transition. What the FCC is proposing now is that they take another 40%-- pretty soon you begin damaging a great American industry that people count on and rely upon. So when it comes to video nobody does it more efficiently than we do. There is no spectrum crisis unless you're doing video. Steve's members would have a one to one transmission. When you put video over that kind of a system there's probably not enough spectrum in the universe to handle that.

JIM GLASSMAN:
Yeah what about that Steve? There are few things that are more efficient than broadcast-- kind of what we're doing here. We're sitting here and we're beaming this out to millions of people whereas the way people are using video now-- and it seems to be the way they want to use video is one to one. They want to pluck out a particular video program.

STEVE LARGENT:
Yeah. Well let me say first of all that I'm sympathetic with Gordon's argument and that's why we're calling for voluntary auctions. We're not mandating auctions to be held and they have to give up their spectrum but we feel like that there's enough spectrum out there-- in the Washington market for instance I think there's 194 megahertz of spectrum, 17 or 19 stations on the network here in the Washington DC area and so there's about 100 megahertz of spectrum that's going unused. But the fact is that we are facing a looming spectrum crisis in this country as it relates to the wireless industry. We have to have more spectrum to continue to roll out the types of services that you're seeing today.

JIM GLASSMAN:
I want to be clear on one thing. Who actually owns the spectrum? I mean do you-- do the broadcasters actually own it or are they being loaned the spectrum by the American people?

GORDON SMITH:
Well they were licensed this when television was invented. The government was begging people to go into television because when you get a broadcast license you have obligations of decency standards, which are important for American families, you have obligations of providing local news, weather, and sports, and again particularly life saving emergency information in this age of natural disaster and terrorism--

JIM GLASSMAN:
--But the government can take it away as you--

GORDON SMITH:
Of course.

JIM GLASSMAN:
--Gave the example of this move from analog-- kind of the old fashion way of broadcasting to digital and that involved sacrificing a certain amount of spectrum.

GORDON SMITH:
Yeah and I've even-- I've even said half joking to FCC commissioners let us buy it. I mean Steve's people want to buy it, let us buy our spectrum but then relieve us of all the government obligations. But those government obligations actually represent important public values.

STEVE LARGENT:
And Jim I would tell you that in our industry with the exception of the early cellular users in the '83, '84, '85 timeframe, we've auctioned our spectrum. So we've paid for our spectrum when it's become available but it's still technically the government's-- we lease it and so we're estimating that for broadcast spectrum that you-- that the government would be able to get about 36 billion dollars for that spectrum if it were auctioned.

GORDON SMITH:
Now we don't oppose voluntary auctions. We're just concerned--

JIM GLASSMAN:
--So I'm not sure what the difference between the two of you is. I mean you're saying that if all the broadcasters said well you know what we don't want to give up our spectrum that would be ok with you?

STEVE LARGENT:
Well it wouldn't be ok I mean we need the spectrum. We need as much as we can get but we can--

JIM GLASSMAN:
But they said we don't want to auction it off. We don't want the government to force us to auction it off, and you would say that's alright?

STEVE LARGENT:
Well I would say that number one I think even Gordon would say that there are some broadcasters that are willing to sell and that's the group that we'd want to try to appeal to---

JIM GLASSMAN:
So is somebody preventing them from selling?

STEVE LARGENT:
--In the proposal--

JIM GLASSMAN:
--Are they preventing?

STEVE LARGENT:
--In the proposal the government's making they would actually be paying those broadcasters to sell their spectrum even though they didn't pay for their spectrum as Gordon mentioned. One of the points of contention between Gordon's group and our group is the fact when we start to talk about repacking. That needs to be done delicately; it needs to be done thoughtfully--

JIM GLASSMAN:
What do you mean by repacking?

STEVE LARGENT:
Well exactly--

GORDON SMITH:
They assign you to a different highway.

JIM GLASSMAN:
Moving the spectrum around so it gets closer to each other--

STEVE LARGENT:
Exactly.

GORDON SMITH:
Broadcasting has historically been on the super highway. If they move us to a dirt country road that's a problem because what broadcasting serves is really local things. What the internet and wireless broadband represent is we're usually more individual one to one interest or national interest and broadcasting their licenses come with frankly a loss leader, you got to do local news, weather, and sports for a lot of these licenses and that's actually important. I mean in my own life I love my internet, I love my wireless-- my iPhone and things like that but I still count on the news to find out what's happening now. The world of tomorrow has to be broadband and broadcast. I've actually thought it interesting the reason in my view that AT&T is buying T-Mobile is because T-Mobile has built out a compatible system where the problem really exists. This is not a nationwide problem. It's an urban problem in New York and Los Angeles specifically--

JIM GLASSMAN:
You mean the lack of spectrum.

GORDON SMITH:
The lack of spectrum. And so AT&T buys that, spends 39 billion for it because that may be cheaper for them than buying it through the government.

JIM GLASSMAN:
So you support that merger?

GORDON SMITH:
Well we're neutral on that, it's not our business but we hope that they're given a good and fair look at it. But that's why-- see that's why I go back to well if you have congested roads with one to one transmission, build some more roads and you do that in wireless broadband by more cell towers and it's cell division is the way they make their space more efficient. And we want to build out our space, which we are doing as we speak, with mobile television, with multicasting, which includes lots of foreign language programs, minority programs, religious programs, weather programs, sports programs, that go along right next to the say the Channel 4 signal.

JIM GLASSMAN:
What about that point? I mean is it possible to solve your capacity problem through building more cell towers? I mean is it spectrum that's needed or is it other kinds of investments?

STEVE LARGENT:
Well I would tell you that you can increase your productivity by building more towers and the fact is that the cellular industry has been very busy building towers over the last 4 or 5 years but in the past two years we're reaching quickly the end of the road as far as what we can do with the spectrum that the cellular providers have today.

JIM GLASSMAN:
I've heard that the use of spectrum is multiplying by like 100% a year I mean it's--

STEVE LARGENT:
110%.

JIM GLASSMAN:
110%.

STEVE LARGENT:
Actually between '09 and '10.

JIM GLASSMAN:
So usage is just going out of sight and is this mainly because of what we were talking about earlier? It's this demand for video?

STEVE LARGENT:
Yeah well it's-- that's a piece of it. It's a demand for everything wireless and what we're seeing now is that we're-- the wireless industry used to cater to individual customers now we're finding entire industries relying on their wireless device. Whether that's the medical community to track patients or to be able to deliver information to patients or patients to deliver information to their doctors-- all these different industries are taking advantage of wireless devices and using it exponentially more. In fact Cisco is a company that's very involved in the wireless industry and they've said that they anticipate the amount of use of wireless from now until 2015 is going to increase by 56 times the amount that we used in 2009. So those numbers are astronomical and we cannot possibly support that kind of demand in 2015 with the spectrum that we have today.

JIM GLASSMAN:
What does that mean? I mean does that mean that you know every time I go online to get a video or even to make a phone call it's going to be a lot slower?

GORDON SMITH:
Well it means it's costing more. That's one way when you have demand exceeding supply is with price. And that's why AT&T and Verizon and other of my friends are already announcing we're going to start billing by the bit and I suspect when mom and dad see the bill for streaming this and streaming that and texting and all of the rest they're going to start putting some limitations on it. So that's one way you control the imbalance of supply and demand--

JIM GLASSMAN:
So unless some of this spectrum is relinquished or sold you think that people's bills-- wireless bills-- are going to go up?

GORDON SMITH:
That's exact-- they're going north and they will. I mean that's-- inevitably they will but there are some, Steve's not among them I don't suppose that would say well we just got to get rid of broadcasting--

JIM GLASSMAN:
Well what about that? I mean some people would say gee broadcasting that's kind of old technology isn't it?--

GORDON SMITH:
Ok there goes the World Series, the Super Bowl, the NCAAs, the U.S. Open, there goes--

JIM GLASSMAN:
Well why wouldn't--

GORDON SMITH:
Dancing with the Stars--

JIM GLASSMAN:
Why wouldn't a cable network-- let's say broadcast--

GORDON SMITH:
We produce it. So if you degrade the broadcast industry then somebody's got to produce it. Maybe they just would say ok we're all cable but think about--

STEVE LARGENT:
And let me say I want to keep the Super Bowl broadcast--

GORDON SMITH:
Yeah people want to see some stuff live. We're the live component.

JIM GLASSMAN:
I'm just making this up but why wouldn't CNN say you know what if NBC doesn't buy the Olympics we're going to buy the Olympics--

GORDON SMITH:
There were a lot of people when the Rose Bowl went to cable that were really hosed because they couldn't see their team because they didn't have a cable subscription. You want to replace something that has historically been free to the American people and just make it available for a fee. And that's why this is a delicate balance that Steve and my industry are trying to strike here-- you know when I go into the offices of members of congress I will say hey Joe last time you were on the ballot did you run some internet ads and they'll say yeah and a couple people watched them and I say well did you run any cable ads and they'll say yeah but I had to run them for a month before it had any penetration. So when it comes to eyeballs and ears where'd you put your money when you were trying to speak to the American people? He said you're right broadcast television and radio.

JIM GLASSMAN:
Isn't actually some people would say that that's really the root of your power is that--

GORDON SMITH:
Of course it is.

JIM GLASSMAN:
Is that members of congress are kind of afraid of broadcasters because you're so powerful? I'm not talking about the ads I'm talking about the news--

GORDON SMITH:
We're the megaphone for them.

JIM GLASSMAN:
What do you mean? You've used the term megaphone of democracy. What do you mean by that?

GORDON SMITH:
Well I mean you think about-- where do you watch a presidential debate? A senate debate? A gubernatorial debate? You watch them on broadcast television. That's the infrastructure that provides this megaphone for democracy. So members of congress I think value us, don't want to damage their own megaphone. It's free to their constituents but it's expensive to run.

JIM GLASSMAN:
You-- Steve you said something I found somewhat startling. You said the reallocation of spectrum is quote, 'an area that absolutely requires FCC leadership and experience' end quote. You're a free market republican--

STEVE LARGENT:
Absolutely.

JIM GLASSMAN:
Why can't the free market handle these issues?

STEVE LARGENT:
I think you know this is a proper role for government and I am a limited government free market guy. But I think there is a proper role for government in this situation where they're allocated the resources that they own. The government owns the spectrum. We don't own spectrum. We lease spectrum from the government. And I think that's a proper role for government to play because they can come at it in an impartial way and try to do it in the benefit for the most people.

JIM GLASSMAN:
So why can't your members simply develop the kind of technology that would-- we talked about this earlier-- squeeze out-- use the spectrum more efficiently? Isn't that a solution?

STEVE LARGENT:
Great question and we're doing that. Since I've been at CTIA, I've been there now 8 years, we've gone from analog to digital to 3rd generation, and now we're into the 4th generation of our spectral efficiency and that is unbelievable amounts of change in the industry. We've spent more than 20 billion dollars each of the last 3 years when we're basically in a bit of a recession and we've spent more money than we've ever spent ever. So you know our companies are doing the right thing--

JIM GLASSMAN:
But you think it's not enough?

STEVE LARGENT:
It's not enough. We actually asked for 800 megahertz over ten years and we got the FCC to agree to do 500 megahertz over that ten year period, 300 megahertz over 5 years and that's ok, it's not going to be enough at the end of the day--

GORDON SMITH:
What I would point out-- I was on the senate commerce committee when we went from analog to digital and I remember the broadcast representatives saying look we'll give you a third but let us develop our mobile video, let us develop multicasting, let us produce higher quality HD signals all the time and tomorrow right around the corner is great 3D as well, all of that takes spectrum.

JIM GLASSMAN:
Are you really doing that though-- because sometimes when I turn on these digital channels that the local broadcasters have you know they're just showing me some kind of weather map the whole time?

GORDON SMITH:
Well that's one of them and I mean in an emergency you would turn to that.

JIM GLASSMAN:
Speaking of emergency what do you think about this D-block and again I don't want to get too technical but the idea is the government wants to have-- wants to increase the amount of spectrum that it has for first responders in the case of an emergency.

GORDON SMITH:
Yeah. Well I think there's a very serious question whether they need 10 megahertz frankly but--

JIM GLASSMAN:
They already have ten they want another ten.

GORDON SMITH:
Yeah they want another ten. I was on the senate commerce committee when we authorized that auction before. We budgeted 3 billion dollars, which the house and senate then promptly spent. The auction failed and now the current bill says well never mind that 3 billion we'll write that off let's reauction it by selling broadcast spectrum that then pays for the build out of the public safety network. And again we're fine with a voluntary auction but we are simply asking the FCC tell us how you will repack us and then we'll know if we have to respond or if we can help propose some adjustments. They won't tell us and would you representing an industry say well I'll just take it on good faith that they'll treat us right?

JIM GLASSMAN:
If these wireless companies want this spectrum that they're-- you know they have the money to pay for it-- am I right?

STEVE LARGENT:
Well absolutely and we're willing to pay it and we've estimated that an auction of the broadcasters' spectrum would bring as much as 36 billion dollars and--

JIM GLASSMAN:
And would the broadcasters get any of that?

STEVE LARGENT:
Well we would be in favor of them getting some of that money; we're not obviously paying them--

GORDON SMITH:
We're asking-- look there will be some who volunteer. Probably about 30 megahertz worth of spectrum that's what I've calculated that we can identify. So they'll be bought out. Then there's the repacking; you've got to move all of these signals, all of these towers, all of these-- all the equipment, refitting, retrofitting everything-- that's probably somewhere 3, 4, to 5 billion dollars. And then they say that they want to put $10 billion against the national debt-- it depends on how much Verizon is willing to pay for the balance of that spectrum. Because AT&T will have satisfied theirs I suppose that's why they're buying T-Mobile. Whether Sprint's going to want more or ultimately sell to Verizon I don't know that's an open market question.

STEVE LARGENT:
I think that's a good point. And I would just tell you that Randall Stephenson, the CEO of AT&T has said that they're still going to be participating in the auction because they're going to need more-- they're going to need additional spectrum even with the spectrum they're-- they would gain with the T-Mobile deal. So--and we're going to see more companies than just wireless companies get involved in these auctions as well. The last auction cable jumped in in a small way but a significant way and I think--

JIM GLASSMAN:
What about technology companies?

STEVE LARGENT:
--Involved too--

JIM GLASSMAN:
--Google or--

STEVE LARGENT:
I really believe that some of those companies could be involved in this spectrum auction as well.

JIM GLASSMAN:
Can you-- both of you-- foresee a win-win outcome for your two industries on this issue?

STEVE LARGENT:
Absolutely.

GORDON SMITH:
I think it's important we ultimately find that.

JIM GLASSMAN:
And what would it be?

GORDON SMITH:
Well frankly let's say somewhere between 30 and 60 megahertz you get volunteered from broadcasters--

JIM GLASSMAN:
[Laughs] but he wants 300 or 5 actually 500--

GORDON SMITH:
But remember the government has at least a third of the spectrum out there. They went from analog to digital too. Well it takes a lot less spectrum to move digital than analog. Why can't we get some from them? Why does it have-- why do we have to victimize the broadcast industry that serves American values that are valuable still?

JIM GLASSMAN:
So is that the win-win? Is to take it away from the government?

STEVE LARGENT:
Well we're looking at all possibilities. So we think that there are going to be some legitimate government users that can be moved and we can use that spectrum. We think the satellite providers have spectrum that they're not using currently.

JIM GLASSMAN:
Is your position that the FCC should say to the broadcasters you need to give up this spectrum? And you need to give it to wireless. Or are you saying the FCC doesn't really have to say that we just-- we certainly hope that the broadcasters give up some of their spectrum through an auction but if they don't they don't.

STEVE LARGENT:
Well what we're saying is those broadcasters who want to sell their spectrum come on we're ready to pay for it and then when we repack broadcasters there's going to be some spectrum that's available that nobody's using and that spectrum would be available as well.

JIM GLASSMAN:
But the bottom-line is we're running out of spectrum according to you and that seems to be a pretty good argument as far as I can see and if we are running out of spectrum that's going to mean either at the very least higher prices or worse service or both and limitations on what we can do technologically.

STEVE LARGENT:
Ab-- you're absolutely right and I would add that we are going after as aggressively as broadcast spectrum the spectrum that the department of defense and the government users are using as well as satellite. So we're trying to look and see where there's spectrum available from all users.

GORDON SMITH:
And what we're asking Jim is really four things; we're asking the FCC in repacking to protect the contours of our signal, don't reduce our power and don't take away the promise that was made to broadcasters but more importantly to the American people that the innovation that is available to broadcasters be allowed to be developed. I don't think that's a real big ask but if they take too much when there's others that they ought to go get then they hurt an American institution that serves local needs instead of just national, something that's free and replacing it with an ever escalating fee.

JIM GLASSMAN:
Thank you Gordon Smith, thank you Steve Largent. And that's it for this week's Ideas in Action. I'm Jim Glassman, thanks for watching.

Keep in mind that you can watch Ideas in Action whenever and wherever you want. To watch highlights or complete programs just go to ideasinactiontv.com or download a podcast from the iTunes store. Ideas in Action because ideas have consequences.

ANNOUNCER:
For more information visit us at ideasinactiontv.com. Funding for Ideas in Action is provided by Investor's Business Daily. Every stock market cycle is led by America's never ending stream of innovative new companies and inventions. Investor's Business Daily helps investors find these new leaders as they emerge. More information is available at investors.com.

This program is a production of Grace Creek Media and the George W. Bush Institute, which are solely responsible for its content.