Saturday, October 03, 2009

Are TV Stations Worth More Dead Than Alive?

Tom Wheeler of Core Capital Partners has written an interesting article on how the U.S. broadband bandwidth crunch could be solved. He points out that at current market prices, Sinclair Broadcasting's 30 television stations are worth less than $100 million, or $3.3 million per station, and there are 100 bankrupt stations that, by definition, have no market value.Why not take some of those stations' bandwidth and apply it to either Hulu-like offerings or common carrier-style data services?

The idea is seriously worth considering, especially when mated to the "white space" data service proposals made by Microsoft, Google, HP, Philips and others. Microsoft in particular has had significant technical success experimenting with two-way WiFi-like data services and devices that can work within the "white spaces" between television channels, without interfering with the adjacent channels. However, there's a lot more bandwidth available within a channel than between channels. If a television channel is converted to a data service, the "white spaces" will do what they're supposed to do, which is protect other channels from interference.

The FCC is going to have a lot to say about this, of course. It issues (essentially free) licenses to broadcasters for television, not data. It won't allow the only television station serving a community to become a data service. The U.S. Congress could also get involved, because if free television bandwidth is repurposed into a paid data service, the Government could resell tha licenses and make money from them.

However, converting some television stations to data services would be very appealing. Broadcasters in markets with converted stations would see competition for advertising sales go down and revenues go up. Existing "white space" users such as public safety and wireless microphones wouldn't have as much competition for their frequencies and would have far fewer problems with interference. Even cable and IPTV operators, who would naturally oppose the entry of new competitors, would benefit, because their "must carry" obligations for the stations converted to data usage would end. They could then use those channels to add more cable networks, add more bandwidth to their own data services, or both.

A company like Microsoft or Google could pick up Sinclair for pocket change. They would then have the ability to offer high-speed wireless data services in 30 cities, if the FCC approves. This could turn virtually worthless television stations into very valuable properties indeed.

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