Datacasting, ATSC 3.0 create new questions for pubcasters

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Television’s move into ATSC 3.0 “NextGen” broadcasting is providing exciting new opportunities for public TV stations. While many pubcasters are already using datacasting capabilities for public safety and education, the additional bandwidth available in ATSC 3.0 could have commercial potential, too. 

At the NAB Show and the Public Media Venture Group’s Public TV Technology Summit in Las Vegas, broadcasters discussed some of that potential, including the possibility of using low-power TV signals to provide more ATSC 3.0 bandwidth that could be leased out for commercial datacasting, channel-sharing with commercial TV stations or even audio streaming for radio stations. Among the technical papers presented at the NAB Show was a proof-of-concept to put as many as 50 full-market radio signals on a small portion of ATSC 3.0 bandwidth.

As a few pioneering pubcasters such as WFYI in Indianapolis begin exploring their new ATSC 3.0 opportunities, there are also some big questions about just how commercial a noncommercial licensee can be. 

During the NAB Show, Current sat down with lawyers Melodie Virtue and Brad Deutsch of Foster Garvey PC, who work extensively with public broadcasters, to discuss what’s next for pubcasters experimenting with ATSC 3.0 and what questions are still too new to even have answers yet. The conversation has been edited for space and grammar. 

Scott Fybush, Current: There was a time when we all knew that as a noncommercial station, what goes out on your broadcast airwaves has to be strictly noncommercial. We’ve moved beyond that now, haven’t we?

Melodie Virtue: In some areas, yes. When we were doing the transition and the repacking, if you did channel-sharing you were allowed to be separate. Now, with ATSC 3.0, the noncommercial station can be a host and host multicast channels that are commercial channels as part of their quid pro quo. 

Brad Deutsch: But these are technical ideas. I mean, the idea is that sure, from a technical perspective, you have your six megahertz of television spectrum, and is it possible to have commercial programming carried on that spectrum? The answer is yes, but only because it’s not part of your license. You’re in a channel-sharing arrangement, either because of the repack or because of this hosting with 3.0, or you’re the lighthouse with the 1.0.

The FCC created this legal fiction that you now have several licenses that can be jammed into one six-megahertz channel, but it’s not your license in a sense. So the idea that a noncommercial broadcaster thinks that this injects new flexibility to somehow leverage that into providing something less than strictly noncommercial programming, I just think that’s not accurate. 

Virtue: Now, there is also a possibility that with some broadcasters, their subchannels, for years, they’ve been leased to Sony for wireless transmission. So that was more like an ancillary service, and that can be commercial.

Current: And that I think seems to be where a lot of the gray area is coming in. So we know obviously, if I’ve got the .2 of the Fox channel running over my bandwidth, that’s still their license, that’s still their responsibility for everything from commercial content to educational/instructional programming, to public files and all that. That part is crystal clear. And obviously in the programming that I put out in video, that all has to still be noncommercial. But what about that datacasting? Because there is that capacity now that everybody is looking to lease. What do broadcasters have to be mindful of if [they’re] holding a noncommercial license but … also still want to do something with that datacasting?

Virtue: I’m going to dodge the question for a moment. One, because I don’t know the answer totally. But also there’s the question mark about CPB-funded stations, and I believe in the CPB agreements there’s a responsibility to dedicate at least half your spectrum to noncommercial education programming. And what impact does that have on a datacast? I don’t know. 

Deutsch: Yeah, I don’t know what the restrictions are on the content of the datacasting. But I know that there are income consequences, because you owe a 5% fee on any income that you generate from your supplementary and ancillary services, which you have to send over to the commission [FCC]. In my experience, although there was a lot of excitement about that, there are so few ancillary and supplementary fees being paid now, that my sense is that there’s not much revenue. By definition, there’s not much revenue being driven by it. I mean, it’s interesting to hear you think that broadcasters are excited about this. … Now if that excitement is connected to 3.0 possibilities, I think that’s a whole different world.

Current: That’s exactly where I’m hearing the excitement coming from. 

Deutsch: But then that brings up the whole larger question of what is 3.0 going to look like? And where are the revenue streams going to be, and what is the service going to look like? And I don’t know what your impression is, but my sense is that there’s a whole lot of hyperbole going on.

Current: There is. I’m also hearing from broadcasters who say they are already seeing the beginnings of a revenue stream there. I think there is at least some sense that there is this potential coming, and some questions about how we get ready for that. I guess that extends beyond just the FCC license. On a business end, for something that is incorporated as a nonprofit business, what are some of the considerations that licensees need to think about as they’re getting into this new world? 

Virtue: Well, they have to think about what is their mission — their noncommercial, educational, nonprofit, legal requirements of state law. Because at some point the IRS might say that this is not your primary mission, and therefore you are for-profit. Or they will obviously tax. And the noncoms know this, that they get taxed on what they call their Unrelated Business Income Tax, or UBIT. So the more that that grows, and you get more beyond your noncommercial mission, then it has potential impacts for you being a nonprofit entity, which has impacts for you becoming a noncommercial educational licensee at the FCC. It kind of comes full circle. If that’s ever happened, I don’t know of any case, but that’s the risk.

Deutsch: The technology is so new that we just haven’t seen the issues yet that are possible.

Current: And this concept of dealing with UBIT is nothing that’s new to a lot of noncommercial broadcasters. We’ve seen them running stores and running magazines, and in some cases even holding commercial licenses. I know you’re not a tax attorney, but where should stations start thinking about “I’m creeping up towards this line, and I want to be careful”?

Virtue: I think they want to talk to their tax accountants before they cross that line, find out where that line is. I don’t know. I haven’t even an educated guess. If I were to make an uneducated guess, I would say 50% for sure. But again, I don’t even know if that’s for sure. 

Current: And I’m hearing that number, the 40 or 50%, coming up also with respect to datacast. Is that still really sort of a gray area that’s waiting for a case to establish what portion of your data stream can be used for commercial content that’s not video?

Deutsch: I don’t think the commission has even considered it. It’s not even a twinkle in their eye yet. Because in many ways, noncommercials have not been able to participate in this first wave as robustly as maybe they wanted to, and certainly the rulemaking has addressed almost none of the noncommercial issues other than the issue of whether or not an noncommercial station can host a commercial signal, a commercial license. 

Current: Which in and of itself feels like kind of a change from where the commission has been.For them to even allow that flexibility, how big a deal was that in making ATSC 3 possible for noncommercial stations?

Deutsch: In the commission’s eyes, it was a very big deal. It required them to twist their brains in terms of changing the paradigm of how they perceived noncommercial licenses. In many markets, the holdup of noncommercial television stations being able to participate in this first wave of ATSC 3.0 conversions is that often noncommercial television stations won’t have the same market coverage as the commercial stations. Because they don’t have multiple-ownership issues, they’ll own several licenses that cover their area, but they won’t have a single license that covers the whole market in the same way that the commercial stations do. Which, at least according to the way the rules were written, pretty much precluded the noncommercials from participating in this round of negotiations. And it was a lot of work in one market, where we got the FCC to agree through a series of STAs [Special Temporary Authority licensing] that a noncommercial could participate by gathering together those different licenses as if they were one license.

Virtue: And it also relates to having 95% coverage so that viewers aren’t disenfranchised. But just the whole PBS model is different from the commercial model. Because the commercial stations are clustered around the main market, whereas the noncommercial model is, serve everybody. Even out in the rural areas. They want to cover the entire United States. And there are a lot of underserved areas that there’s just no one to partner with that will not have the exact same coverage as they do. 

Current: I was having that conversation with Kentucky Educational Television, where they’re dealing with that. So many of these ATSC 3 reciprocal launch agreements, it feels like the model right now has been nobody’s exchanging cash on either side. You provide me with a .3, we provide you with a .1, the expenses get split somehow.

Virtue: But the ones I’ve seen, I’ve done a couple now that everyone bears their own expense. And there’s no money changing hands. 

Deutsch: Which is a surprise. I wouldn’t have anticipated that on the front end. 

Current: So does there come a point, especially if you have a statewide public TV network that can get your signal into some of these places where you as a commercial station may not have had the ability to put a signal, where we can see cash changing hands as the FCC starts to move just past that 95% rule? Everybody seems to feel there’s going to be more flexibility later on in that. Does there come a point where that becomes a revenue stream for a noncommercial broadcast, or to say we have a transmitter that can reach this area that you can’t, give us X number of dollars per month and we’ll put you on there?

Virtue: Under the current rules, you cannot lease any of your multicast streams. The only way we get around that is through this fiction of it’s not your license and we’re channel-sharing, and that’s yours, and that’s mine, we just happen to be going out over the same antenna.

Deutsch: But it raises a really good question, and I don’t think I’ve really thought about it. Assuming that ATSC 3.0 pans out in the way that everybody thinks and wants it to, we’re going to be in a world, whether that’s three years from now, four years from now, 10 years from now, where 1.0 is retired. And the question is, now that we’ve jumped into the deep end with this fiction of being able to have multiple licenses on a single channel, not leasing, will that fiction stick in a post-transition world? That’s a fascinating idea, because it’s “oldthink” in a way. We’ve proven that it’s oldthink, in the sense that people are doing it now. Obviously it can be done. Before this whole thing, I don’t think anybody would have contemplated that.

Virtue: And potential fallout in the post-transition world with this particular standard is aging equipment. You’re now being hosted by someone who’s not taking care of their physical plant. What do you do about it? There are all those kinds of questions.

Deutsch: I would argue that that’s a good thing that you would have. We kind of become more self-regulated. It kind of feels to me like the multiple-ownership rules and the way people are talking about them now, the commercial multiple-ownership rules that still apply now, we would never have come up with that if we were starting from scratch. They’re a complete legacy of the way the world was 30 years ago, 40 years ago, whatever it was, and the way that technology was. There was no internet competition, and there was no compression. When these rules were all made, it was inconceivable that you could have two programming streams on a six-megahertz channel. And now with ATSC 3.0 you can just jam-pack tons in there. 

Current: With this talk of being able to put 50 radio stations on an ATSC 3 channel, will the FCC look at those then as being separate licenses that are hosted? If you’re a noncommercial station and you’re thinking of getting into that, it seems to me these are questions that nobody has answers for yet.

Deutsch: Yeah, let the games begin. And then you throw in the whole thing that all new stations, commercial stations, are supposed to be subject to auction.

Virtue: And by the way, the FCC doesn’t have auction authority right now.

Deutsch: At some point, we were talking about this on one of the panels — it’s very hard to get Congress motivated to take on big issues, but at some point the Telecom Act is going to have to get rewritten to reflect these new technologies.

Current: So is the future that we’re headed towards, transmission as a service, separated from what the actual underlying license is? And if so, what does that mean for people who are really thinking long-term as noncommercial licensees?

Deutsch: We’re just lawyers. You need to talk to a futurist on this one. 

Virtue: Anything’s possible if the people with the ideas who have the means to implement it —– there will be a lot that fail, but someone will eventually come up with something.

Current: But the basic underlying piece of this for noncommercial licensees is your video programming still has to follow these rules.

Virtue: Yes.

Deutsch: You’ve got to keep your eye on the ball. 

Virtue: If you’re an educational licensee, you may or may not be publicly funded in part, either because of your CPB grants if you have them, or if you don’t, your state funding, or your school — if you have that, it’s all changing. So people will need to find new revenue streams. And the more that they find, maybe by selling off their excess capacity, means they’ll probably put at risk their public funding. So it’s a two-edged sword.

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