Recorded conversation on February 25, 2010 between FCC Chair Julius Genachowski and NAB President Gordon Smith concerning the FCC’s Broadband Plan, to be released March 15, 2010

BBB News Service
April 1, 2010 Thursday

SUBJECT: Recorded conversation on February 25, 2010 between FCC Chair Julius Genachowski and NAB President Gordon Smith concerning the FCC’s Broadband Plan, to be released March 15, 2010.

LOCATION: National Association of Broadcasters Headquarters, 1771 N Street NW, Washington DC 20036

Genachowski: How are you?

Smith:  Good to see you.

Genachowski: The Trail Blazers are doing great this year.  I bet you’re pleased.

Smith: Yeah, it’s nice to have a winning hometown team.

Genachowski:  And it’s even better to have a winning trade association!

Smith: You bet!

Genachowski:  If you had a choice, would you take your old job back in the U.S. Senate?

Smith:  I’m happy where I am.  Actually, my current job isn’t much different.

Genachowski: How so?

Smith: Well, I wouldn’t be here if it weren’t.  (Pause).  Look, I can trust you, right?

Genachowski: Yes, the last thing I want is to have you guys after me! (laughs).

Smith: Well, the truth is, leading the NAB is very much like being a U.S. senator from Oregon.  After all, why do you think they selected me?  This is a political job.

Genachowski: I bet you didn’t meet as many TV celebrities on Capitol Hill.

Smith: Yes, that’s true, too! (laughs).

Genachowski: I cannot flip my fingers and get a meeting with Meet the Press’s David Gregory.

Smith:  He’s speaking next week at the NAB state leadership conference, just before my grassroots crew blitzes the Hill.

Genachowski: I know.  I feel a little like Custer at the Alamo.  (laughs).

Smith: (laughs).  That’s just the way we want it.  (Pause).  So let’s get down to business.  What’s this talk about the broadcast band being the oxygen of mobile broadcast service?

Genachowski:  I didn’t say that.  What I said was that spectrum—our airwaves–is the oxygen of mobile broadcast service.  Look, America is facing a looming spectrum crunch, and this is a great opportunity for the broadcast industry.

Smith:  Okay, tell me about your Broadband Plan.  My team hasn’t seen it.

Genachowski: It’s a win-win-win.  Broadcasters win, the government wins, and the public wins.  We’re going to propose that 120 MHz of spectrum currently allocated to broadcasting be reallocated to mobile broadband and auctioned.  But here’s the kicker.  We’re going to make the auction voluntary for FCC license holders, and they’ll get the lion’s share of the auction receipts.

Smith:  Who says?

Genachowski: Well, we’re going to leave that part of the plan vague.  Leave it up to Congress to choose the proportion of auction receipts that go to broadcasters versus the public.  And we all know what Congress will do!  (laughs).

Smith:  This is not a laughing matter.  You’re talking about my members’ bread and butter.

Genachowski: (stops laughing).

Smith: Your approach is wrong.  Yeah, Congress is not going to stiff the broadcasters.  But it will also never agree to such a blatant giveaway to some of the wealthiest individuals and corporations in America.  You’re talking about a giveaway that could make Cash for Clunkers and GM’s bailout look like petty cash.  And for some of the most profitable companies in
America: Disney-ABC, GE-NBC, Viacom-CBS, and Fox.  What are you thinking?

Genachowski:  Look, the broadband plan makes no mention of spectrum windfalls.  I was very careful only to mention the positive aspects of the voluntary auction.  That’s why I always call my proposal a win-win-win.

Smith: I wasn’t born yesterday.

Genachowski:  You’re reading way too much into this.   When it comes to mobile broadband, our goal is clear: To benefit all Americans and promote our global competitiveness, the U.S. must have the fastest, most robust, and most extensive mobile broadband networks, and the most innovative mobile broadband marketplace in the world.  There is not one thoughtful observer who doesn’t agree with this goal and recognize that the only politically feasible way to convert broadcast spectrum into mobile broadband spectrum is to give broadcasters an incentive to make the transition.  Everyone recognizes the social benefits from converting broadcast to broadband are immense.  We’ve got the entire public interest community behind us in this!  There is no controversy!

Smith: What about the press?

Genachowski:  You mean your members?  I just cannot believe your members will give you a problem.  Your members control not only the radio and broadcast media but most of the major newspapers: the Washington Post, the Wall Street Journal, the Los Angeles Times, The Chicago Tribune, U.S.A. Today.  It would be suicidal for them—unprecedented—to give Congress a hard time on this.

Smith: You’re wrong.  There will be negative op-eds.   Members of Congress won’t like it.

Genachowski: So how should the FCC proceed?

Smith:  Congress isn’t going to object to giving us a spectrum windfall.  They just want it done right, which means you’ve got to give them political cover.  Recall the great spectrum giveaway in the Telecom Act of 1996.  Congress told the American public broadcasters weren’t getting any more spectrum, that all we were getting was a minor modification to our license, allowing us to offer a single HD channel instead of our traditional SD channel.  Congress conveniently didn’t mention that we were getting the right, for every SD channel we currently had, to provide an additional dozen SD channels or fifty mobile TV channels.  For the temporary loaned digital channel, Congress claimed it wasn’t a giveaway but a giveback; that at the end of the DTV transition the broadcasters would give back the spectrum they were loaned to make the transition.  Nobody told the American public that during the intervening years we’d constantly renegotiate the deal, whittling down the amount of returned spectrum, from 158 MHz to 102 Mhz, and the quality of returned spectrum, letting us pick the best of our original or loaned channel, and then holding out for billions of additional subsidies, including billions of dollars in equipment subsidies for our customers.

Genachowski: I don’t see how that strategy can work here.

Smith: Certainly, if you ask for an auction, you’ve got to bring in Congress.  Otherwise, one of our competitors will sue you for violating the spectrum windfall clause in the Communications Act and the many other Congressional statutes banning windfalls to public companies.  But the solution is simple.  Give us what we want through minor modifications of our licenses.  That’s the way it’s always been done.  That’s the way Congress likes it.

Genachowski:  But that’s too slow a process.  I want this complete by 2015.

Smith: My boy, we’re almost there, just be a bit patient.  In the last five years the FCC, with Congressional approval, allowed us to transition from site based licensing to geographic service area licensing, so we can now use a local cellular architecture to broadcast rather than a single giant tower.  And you also allowed us to abandon HDTV and create a new mobile TV standard built into cell phones that can provide TV, voice, data—whatever—and use the cell phone for the return link.  Doesn’t that already sound an awful lot like mobile broadband?  You bet.  Those free rights were worth more than $10 billion to us. Not only that, they’ll turn those new converter boxes the government just paid for into obsolete equipment faster than Windows 7 rendered your Windows 2000 computer into a doorstop.  And we did it with not a pipsqueak from Congress, the FCC, any influential public interest group, or the press itself.  That’s what Congress expects from you, and that’s what we expect from you.

Genachowski:  Okay, I hear you.

Smith: Now I don’t want to suggest that your plan is bad.  You’ve gotten Congress’s attention.  They won’t do the straight-out auction, but they will give you political cover so you can complete the regulatory transition from broadcast to broadband, where the money is.  Just listen to Dingell, Markey, Boucher, Rockefeller, and the other leaders.  They’re masters at this game.  You just follow their cue.

Genachowski:  But the auction proposal?

Smith: No need to worry.  Your spectrum inventory proposal will do the trick.   Congress will tell you to do the spectrum inventory first.  That will give us three to four years to continue our policy of saving broadcasting by killing it.  By then, our mobile broadcasting—did I say broadband?–business will be established, including popular interactive services.  Why then go through the effort of holding an auction for rights that we already possess?

Genachowski:  Tonight I’m giving a media award at the Kennedy Center to Newton Minow.  I’m going to call him a national treasure; I’m going to observe that people remember him for turning the most memorable phrase in communications policy history—the declaration that television was a vast wasteland; and I’m going to opine that for decades FCC chairman have been trying to one-up him and all have failed.  But what I’m really going to be thinking about in front of that audience is that I hope to be remembered for turning the vast wasteland into a vast giveaway that allowed the broadband age to finally come to America.  (laughs).

Smith: (laughs).

Genachowski:  What’s that copy of Orwell’s 1984 doing on your desk?

Smith: My favorite book.

Genachowski: Mine, too.  There is no better preparation for serving as an FCC Chair. (laughs)

Smith: (laughs).


LOAD-DATE: April 1, 2010



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