Subject: [NEXTEL-1] WSJ - "As Berlin's TVs Go Digital, Airwaves Lie Unused"

From: [email-masked]
Date: Wed, 26 Nov 2003 15:25:19 -0500

-------- Original Message --------
From: Anthony Townsend <[email-masked]>
Subject: WSJ - "As Berlin's TVs Go Digital, Airwaves Lie Unused"

http://online.wsj.com/article_email/0,,SB106963101439888700- 
H9jeoNnlah2op2uaYKIa6qEm4,00.html

As Berlin's TVs Go Digital, Airwaves Lie Unused

By THOMAS W. HAZLETT

In August, Berlin became the first place on earth to turn off its  
analog TV broadcasts. Viewers without digital receivers (priced between  
€88 and €279), or cable or satellite feeds, saw their TV screens go  
blank. Given that countries around the world are taking decades to make  
the analog-to-digital switch, the Berlin experience is extraordinary.

The TV switchover from analog produces two important benefits, both  
related to the fact that digital technologies allow radio waves to be  
used much more intensively. First, going digital delivers lots more TV  
channels. Second, it frees up abundant spectrum space for innovative  
wireless services.

Regulators in Berlin grasped the first of these social savings. Under  
the all-analog system in Berlin-Brandenburg, 12 stations broadcast. But  
given the magic of digital multiplexing (transmitting additional video  
signals in the bandwidth one analog channel occupied before), there are  
now 27. These additional channels calmed the passions that make  
governments tremble -- namely the anger of television devotees watching  
their TV screens go black. Although forced to pay for new gizmos to  
continue tuning in, Berliners found much better choices as their  
reward.

The "Berlin Switch" is so far an international novelty. Other nations  
are likely to spend a tedious decade (or two) pushing away from analog  
signal standards developed in the 1940s. But the real payoff offered by  
the digital TV transition is not more or better (including  
high-definition) pictures for TV viewers. It is in clearing out the TV  
band for an array of exciting and productive wireless technologies --  
an opportunity that Berlin regulators have been strangely slow to  
embrace.

While Berlin's TV stations were increasing to 27 from 12, the number of  
channels used to broadcasts these programs actually declined to seven  
from 12. Five channels, or 35MHz, worth of prime airspace, is now  
available to deliver new services.

Regulators in Berlin have yet to seize this opportunity, even as scores  
of wireless applications would die for a chance to use these valuable  
airwaves. In particular, high-speed wireless Internet access could  
compete with cable modems and digital-subscriber-line (DSL)  
technologies, promoting high-speed Internet deployment. The bandwidth  
could also be used to offer a competitive alternative to local phone  
service (through wireless voice service or voice-over-Internet  
offerings). Wireless equipment maker Nokia argues that "datacasting"  
services (such as high-speed Internet services) should be given an  
opportunity to use the frequencies, but notes that "regulators need  
convincing of the business case behind Datacast before supporting it  
fully . . . [they] require proof of the commercial viability of such a  
platform."

This industrial policy blocks enormously valuable technological  
advance. The stakes escalate when one considers that Berlin is largely  
a special case. Under the federal-state divisions in the German  
regulatory system, the Berlin regulator controls a small fraction of  
the country's TV band. (This appears to have provided the key pressure  
on regulators to quickly abandon analog TV, as simulcasting TV programs  
in both analog and digital formats, as is done elsewhere, was virtually  
impossible. Berlin regulators simply did not have the spectrum to  
waste.) Throughout the European Union, the TV band blankets over 400  
MHz of lush radio waves, nearly twice the bandwidth reserved for  
mobile-phone service.

Consider the provocative case of the Netherlands, where 96% of  
households subscribe to cable (just a bit ahead of Luxembourg and  
Belgium, which also sport near-universal cable penetration).  
Cable-television-equipped homes watch broadcast-TV stations, but  
receive them via wire, not over the airwaves. Out of seven million  
Dutch households, just 280,000 families receive their television  
broadcasts over the air.

In July 2000, five third-generation phone licenses were sold by the  
Dutch government for a total of $2.5 billion. The total spectrum  
allocated for those licenses was less than one-third the bandwidth  
currently allotted to the TV band. At a similar valuation, licenses to  
use TV band spectrum for wireless telecommunications might bring over  
$7.5 billion. This implies that it now costs an astounding $27,000 per  
household to keep the TV band reserved for the tiny number of homes not  
subscribing to cable. (This estimate may be conservative: In contrast  
to the sky-high prices fetched in countries such as Germany and the  
U.K., Dutch 3G license prices were modest, owing to an auction that  
attracted more controversy than competitive entrants.)

Such considerations are pushing the Netherlands toward digital TV;  
digital stations are now broadcasting alongside analog stations, and an  
analog switch-off is scheduled for next year. Dutch authorities also  
claim to be motivated by a desire to promote an alternative to cable TV  
monopolies. The rich irony is that cable TV has prospered precisely  
because governments have been so parsimonious with broadcast TV  
licenses, particularly to protect state monopolies. Consumers have  
embraced cable to bypass this protectionism. (The exception proves the  
rule. Italy's regulatory agency actually boasts -- quite correctly --  
that the Italian cable TV sector is today virtually nonexistent because  
Italian law liberally awarded broadcast TV licenses in the 1970s,  
allowing the thickest deployment of stations anywhere in the world.)

The sharpest picture digital TV delivers is not in video, but in public  
policy. Unplugging spectrum blockages imposed by analog TV should  
unleash a cornucopia of wireless innovation. That can be done  
expeditiously by allowing entrepreneurs to get access to TV band  
airspace, buying and selling spectrum parcels as market demands  
dictate. So long as spectrum use remains rigidly controlled by  
government fiat, with business plans approved by the state, disruptive  
technologies will be stifled.

There are at least three major roadblocks. Bureaucratic inertia is one.  
Taking years to make decisions that markets make in minutes is not an  
entirely unprofitable way to spend a career in the civil service. Then  
there is the influence of dyspeptic incumbents. Whether wireless or  
wireline, telecoms operators are ill disposed towards most new capacity  
-- particularly if that capacity might end up in the hands of  
aggressive new rivals deploying advanced technologies.

And perhaps most important is the special place TV regulation holds in  
the hearts of policy makers. Letting the market determine the use of TV  
spectrum naturally undercuts the traditional power political incumbents  
have had to influence the content of broadcast television. Wireless  
Internet services are themselves treated as "nonbroadcast" services,  
meaning that content is unregulated. The classification depends on the  
information qualifying as "not opinion forming." But data-service  
operators today feature video streaming and the hope is that these and  
other technologies emerge to challenge broadcasting, cable and  
satellite TV. This sends a chill down the spine of some, driving  
spectrum regulators to be wary of what advanced wireless services will  
bring.

A September report by the European Commission noted that the question  
over how to "reallocate the 'digital dividend'" comes down to a choice  
between choosing more and better broadcast TV, vs. other wireless  
services. The assumption is that governments, not markets, will make  
this call -- and that "the momentum is toward keeping the spectrum  
within broadcasting."

The commission report solemnly notes that broadcasting is special in  
its "transmission of social values," and in that it "both influences  
and reflects public opinion." Political incumbents and establishment  
elites leverage regulation of frequencies into sway over cultural  
content. Conversely, rival wireless platforms promise individuals the  
opportunity to access information on their own terms. Little wonder  
policy makers are nervous about letting consumer purchases determine  
how radio spectrum is deployed.

Mr. Hazlett is a senior fellow at the New York-based Manhattan  
Institute and a former chief economist of the U.S. Federal  
Communications Commission in Washington, D.C.

Updated November 24, 2003

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