700 MHz Aftermath: Verizon, AT&T & the $16 Billion Termites.

Imagine you just spent a fortune on some excellent beachfront property, only to discover some termites in the basement. Now imagine that the only way to get rid of the termites involves some toxic chemicals that may arouse the ire of the environmentally conscious locals. What do you do? Learn to live with the termites, or spray and tell your green neighbors to deal?

Oddly, Verizon and AT&T now find themselves in a similar mess — if we substitute “wireless microphones” for “termites.” Verizon and AT&T (As well as a bunch of other folks) just spent a boatload of cash on licenses in the reclaimed analog television spectrum. The FCC has rules in place to migrate the broadcasters — both full power and low power. But — as far as I can tell — no one has plans to migrate the wireless microphone folks, who operate on vacant channels in the band. While in theory wireless microphones are a secondary licensed service and notifying the licensees that channels 52-69 are off limits after the digital conversion, the situation is a little more complicated. As comments filed in white spaces proceeding confirm, wireless microphones are bloody everywhere — with huge numbers of users buying and operating them without licenses.

The NAB and the FCC have turned a blind eye to proliferation of unlicensed wireless microphone use (despite the NAB’s usually firm stand against unauthorized use of “their” spectrum), both because the wireless microphones don’t actually cause any interference with television and because the “unauthorized wireless microphone user community” (which sounds so much better than “pirates”) includes megachurches, Broadway groups, and other warm cuddly folks able to gather political support. Indeed, so great is the political protectzia for the unauthorized wireless microphone user community that the FCC is, apparently, requiring that unlicensed devices in the white spaces have the ability to sense and protect these illegal wireless microphone users. (Hence Google’s recent extension of an olive branch which NAB promptly grabbed and started thwaking Google over the head. D’oh!)

AT&T, Verizon, and the rest of the 700 MHZ auction winners therefore face a bit of a dilemma. They just dropped a bundle on the 700 MHZ, and damned if they want to set precedent by allowing a bunch of illegal squatters to use “their” spectrum. Heck, if they’d thought of it earlier, they’d probably have initiated a rulemaking to migrate the legal users.

In fact, under a fair reading of the rules, if the FCC does nothing, licensed wireless microphone systems may enjoy equal or superior rights to 700 MHz Auction winners. OTOH, no one involved is stupid about the politics, giving an incentive to maintain a low profile. If you don’t mind telling shareholders that the NFL may have superior rights in the spectrum you just paid $16 Billion for.

Meanwhile, for those of us happy to see the NAB and the wireless microphone folks get their comeuppance, while not weeping overmuch for the incumbent wireless winners, one word: SCHWEET.

More below . . . .

To take this from the top. The FCC authorizes “broadcast auxiliary devices” and “broadcast auxiliary services” under Part 74 of its rules. Specifically, wireless microphones fall under Subpart H. The key take aways here are (a) this requires a license, and (b) Under 47 C.F.R. 74.832, only a very small class of people can get a license. While certain non-profits can use wireless microphones that operate in a different part of the frequency band under Part 90 of the FCC’s rules, that doesn’t cover the broadcast bands and has no impact on white spaces.

Why the restrictions? Well, back in the dawn of time, television producers realized it would be very useful if you could have microphones and cameras and other equipment that could feed directly into program production without wires. Then cable programmers and the MPAA wanted to play too. So after much wrangling between these programmers and the broadcasters (who view any intrusion into “their” spectrum with the same warmth as Minutemen Militias watching a Cinqo de Mayo parade), the FCC agreed to authorize wireless peripherals at one-watt or less as a secondary service, but only to qualified applicants in the programming production business.

So how did it get out of hand? Rather than bugger about with maintaining strict control over the licenses for so many mobile little uses, the FCC delegated it to the industry to do its own frequency coordination. After all, reasoned the FCC, these are the guys who care about this stuff. If they can’t work it out and enforce it why should we care? The industry, in turn, left it up to licensed manufacturers. The manufacturers then sold to third parties, like Radio Shack and Circuit City and so forth, with stern warnings that they needed to obey FCC rules even if no one checked up on them Nudge, nudge, wink, wink. And before you could say “what would willing buyers and willing sellers do in an unregulated market,” everyone who wanted a good, cheep wireless microphone with decent range was buying a Part 74 microphone and using it without a license.

So while folks like the NFL, the MPAA, and a number of other people who have filed against allowing unlicensed use of the broadcast white spaces have a perfectly legal right to file, a lot of folks — like the Grand Olde Oprey, Broadway theaters, churches, convention centers, and countless others — do not. Yet the practice is so widespread and so blatant that folks boast of it in official filings, and members of Congress openly champion these illegal uses as deserving protection from regulated FCC Part 15 devices that would use the spectrum legally. And, as long as the devices didn’t cause any actual interference to television reception (and served as a useful tool to keep out unlicensed white space users), the NAB tacitly supported it.

As for the FCC, going after wireless microphones in the middle of the white spaces proceeding would raise all manner of hue and cry about silencing criticism and punishing people unfairly. Since Kevin Martin can’t breath these days without someone denouncing him for violating due process and unfairly favoring one industry over another, the FCC is extremely unlikely to start any enforcement proceedings — even in the face of rather blatant evidence that its rules were regarded as a joke by the companies it regulates.

But now comes AT&T and Verizon — along with the other licensees. Unlike broadcasters who got their licenses for free (and can therefore afford the hypocrisy of aligning themselves with unauthorized users of the broadcast white spaces to keep out authorized users of white spaces), these guys just paid $19 billion for licenses. That’s a lot of money. And they want that spectrum free and clear of any other previous users — authorized or otherwise. If nothing else, it would set a bad precedent to allow squatters to remain unchallenged and unmolested in the band. For another thing WE WANTS IT! WE WANTS IT PRECIOUS! HSSSSSS!!!!!! OUR LICENSES!!! THIEF!!! WE HATES SQUATTERS AND BAGINSESS FOREVER!!!

Now the wireless microphone guys, given ten years warning that the digital transition was coming, and four years warning of the hard date for the transition, have not stayed completely useless. But — as near as I can determine — neither the wireless microphone guys or the FCC has any plan to deal with equipment manufacturers, sale of legacy equipment, or users of legacy equipment. So while Shure wants to reassure its customers that it has a cunning plan and that “there will still be unoccupied channels in every market” (for themselves anyway — that’s not what they and the NAB say about white spaces when they talk about unlicensed uses), there’s nothing official. Manufacturers are still making equipment that works on channels 52-69, merchants are still selling them, and unauthorized users are still buying them and using them.

But in fact, the situation is potentially much, much worse for the 700 MHz Auction winners. Under the FCC’s Part 74 rules, use of these channels remains technically legal, since the only restriction is that allocations be “removed from existing co-channel TV broadcast stations” (47 CFR 74.802). When last I checked, Verizon, AT&T and the other licensees are not “TV broadcast stations” within the meaning of Part 73.

As a result of the way the rule is written, licensed BAS users and 700 MHz auction winners are co-equal licensees. The rules do NOT establish whether licensed BAS users are primary or secondary to licensed users in the 700 MHZ band who are not broadcasters. Indeed, as the senior licensees, a strong argument can be made that licensed BAS users cannot be ejected or moved and enjoy protection from any interference from the new service until such time as the FCC gives 30 days notice and provides some kind of due process right. (That’s 47 U.S.C. 316, if you are checking my work.)

So not only is it completely legal for Shure, other manufacturers, and the (legally licensed) users to treat Channels 52-69 as utterly free of any pesky licensed users and keep manufacturing equipment and using the channels. If the services deployed by the 700 MHz auction winners interfere with the operation of licensed BAS systems, the licensed BAS systems can demand that the 700 MHz Auction winners cease operation and stop interfering. (That’s Section 309(h) for those of you following with your Communications Act of 1934 Home Edition.) Yes, the original basis for allocation is gone (the frequencies are no longer used for broadcasting) and the service is “secondary” — but only to TV broadcasting. As senior users, existing licensees should have the right to protection from any new licensee — even if that new licensee paid over $19 Billion dollars and the senior licensee got the license for free.

Happily for the auction winners, licenses are not property — despite the nonstop efforts of folks who should know better to make it so. In fact, the FCC has already invoked its Section 316 powers to smooth the way for 700 MHZ winners. So all Verizon and AT&T need to do is get the FCC to hold a proceeding, amend the rules to eliminate the allocation above Channel 51, order a recall of the legacy equipment (at least the stuff that hasn’t sold), and clear both the licensed users and the squatters out of Channels 52-69. Easy — as a legal matter.

At this point, readers may actually be able to feel the schadenfreude oozing off their screens. Because while the legal solution is easy and obvious, the application is not. The NAB could afford to ignore unauthorized uses of the broadcast bands as long as they remained under the table. Manufacturers could afford to do the same, as could retailers and the FCC. But once an official proceeding starts it all comes out into the open. If the auction winners make an official matter of it, the FCC will have to take notice and the NAB and the wireless manufacturers will have to decide whether to openly support an enormous population of illegal (if politically useful) users.

Alternatively, the NAB and the equipment manufacturers could go begging to AT&T and Verizon to lay low – at least until the white spaces proceeding is over. (Rather a pity Google didn’t actually win some licenses so it could raise the matter itself.) Given the political pull of the NAB and the wireless microphone guys, AT&T and Verizon might well decide that there is no risk of real interference and allow themselves to be persuaded/bribed into letting the matter go (at least for now). Except that the longer the auction winners delay and fail to take action, the more such devices get manufactured, sold and distributed to unauthorized users who are impossible to track.

Of course such a solution cries out for a compromise. And how lucky for everyone that I happen to have one in mind. It not only solves the problems for auction winners, but it provides a convenient way to deal with the illegal user population and, if done properly, also provides more than adequate protection for wireless microphones and white spaces devices to coexist. NAB will loath it, of course, because they like using the wireless microphone people as a shield against the engineering data that shows no interference to broadcast stations. But that’s their problem, and I can’t say that seeing NAB get its just desserts for its rank hypocrisy in this proceeding would displease me.

What is my clever solution? Oh come now, you don’t expect me to share it out here in public do you? If someone gets the ball rolling at the FCC or in Congress I’ll certainly file my proposal. But until then –

Stay tuned . . . .

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8 Comments

  1. Tim Wu says:

    Wow

  2. bp says:

    since Verizon, AT&T and NAB are so fond of the “free market”,

    charge NAB $16B as the fair market value for using the airways for free and use the proceeds to buy off the unlicensed mic squatters sitting on frequency claims NAB style

    calculate what portion of the $16B paid by Verizon and AT&T is expected monopoly profit and give it to Google for its role as a “contestable entrant” to jack up the price and spur an open policy for interchangeable devices, along with a handsome fee for the economist at the FCC who prevented bid manipulation with anonymous bidding

    send Verizon and AT&T a bill for the $200B of increased rates in the ’90s for a new fiber infrastructure that was suppressed while municipalities were bullied not to build out as well

    congratulate the FCC for a “free market” broadband policy moving away from the competition provided by net neutrality and towards concentrated ownership with half as much service and twice the price of global counterparts

  3. Henry Cohen says:

    Arguably the most cogent and well outlined summary of this issue I’ve read or heard over the past year. Two points though:

    1)You said “. . . the FCC agreed to authorize wireless peripherals at one-watt or less as a secondary service . . .” Not quite: CFR47 74.861 states that VHF devices are limited to 50mW and UHF to 250mW.

    2) “But — as near as I can determine — neither the wireless microphone guys or the FCC has any plan to deal with equipment manufacturers, sale of legacy equipment, or users of legacy equipment. So while Shure wants to reassure its customers that it has a cunning plan and that “there will still be unoccupied channels in every market” (for themselves anyway — that’s not what they and the NAB say about white spaces when they talk about unlicensed uses), there’s nothing official. Manufacturers are still making equipment that works on channels 52-69, merchants are still selling them, and unauthorized users are still buying them and using them.” Remember that Shure’s marketing blurb is just that; a press release, generated by their marketing department. In reality, out in the marketplace, professional users/owners of wireless microphones, intercoms, in-ear-monitors (IEM) and interruptible foldback (IFB) at all levels are in fact slowly but certainly migrating their inventories out of 700MHz into the 470 (where permitted) – 698MHz and to a lesser extent, 944-952MHz. Some of the smaller players are even taking advantage of the 902-928MHz and 2.4GHz license-free offerings. I believe the Radio Shack and Circuit City customers are so few in number, they are essentially irrelevant, and in the VHF band so as to not be part of this discussion.

    I would however like to make one final point. It may be me, but I detect an underlying distaste, if not outright disdain on your part for Part 74 BAS users. I offer no excuses or justifications for the illegal use of the spectrum by those who are not eligible for licenses (my firm included) or are eligible but never got licensed (a lot of users BTW), but a *hugh* amount of the audio for the content people enjoy or use today; whether live, in person, via remote access or prerecorded, is obtained with the use wireless mics. It’s the only way to provide the production value we as consumers have come to expect – Including all that new 700MHz mobile TV and web access with which we’re going to bombarded.

    I actually was quite surprised when the October 2007 revision of Part 74, and more so the FCC’s release of ‘Amendment of Parts 1, 2, 25, 73, 74, 90 and 97 of the Commission’s Rules to Make Non-Substantive Editorial Revisions to the Table of Frequency Allocations and to Various Service Rules’ on March 12th still had Part 74 BAS devices permitted to use the 700MHz spectrum. I also believe that some associate in Verizon or AT&T’s legal department will notice this and bring it to the attention of the bean counters and board room. Hey, lot’s of customers in South America who love our UHF gear.

    Henry Cohen

  4. Harold says:

    Henry:

    <i>It may be me, but I detect an underlying distaste, if not outright disdain on your part for Part 74 BAS users.</i>

    No, but there are plenty of bad actors and the whole system is foolish. There was no reason to constrain wireless microphone use except as a political matter to appease the broadcasters. But having done it, there was no excuse for the FCC to turn a blind eye to the proliferation of unauthorized users, no excuse for NAB to embrace these unauthorized users as useful political tools, and absolutely no excuse for what Shure and certain other folks are doing in this proceeding.

    I have a lot of friends who use wireless microphones, believing that if they can buy it at Radio Shack then it must be o.k. for them to use them. And it should be. There is no technical reason for it.

  5. Dave Burstein says:

    This is great

  6. publius says:

    mmmm… pass the popcorn.

    i wonder how much silence costs?

  7. Henry Cohen says:

    Harold,

    “. . . absolutely no excuse for what Shure and certain other folks are doing in this proceeding.”
    What exactly is it that Shure and ‘other folks’ are doing that gets up your ire? Protecting their market and revenue stream? Seems like that’s *exactly* what this game is all about. Or is that they haven’t ante’d up a few billion to the US treasury like Verizon and AT&T? In that case, I applaud Shure for figuring out how to play this capitalistic game without making professional wireless equipment cost $100k a channel to their customers.

    “I have a lot of friends who use wireless microphones, believing that if they can buy it at Radio Shack then it must be o.k. for them to use them.”
    But they’re not the bulk of BAS wireless users, or the ones who will be affected the most; it’s the commercial users of the gear who provide end user and intra-enterprise content.

    Henry Cohen

  8. bj says:

    Hmm. Wonder how long it would take Verizon and AT&T to set up TV broadcasting studios.

    One also wonders if there are some ex legal weenies from AT&T and Verizon, the ones who missed this whole devil in the details thing, who are now polishing up their resumes . . . (in preparation to join the vast horde of industry lobbyists, most likely.)

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