By Maury Mechanick

The National Association of Broadcasters (NAB) convention in Las Vegas this past April was thought provoking on a number of levels. NAB is always an interesting venue for the satellite industry, as satellites play a significant role in the broadcast world, whether in the form of satellite newsgathering, content distribution arrangements or direct-to- home (DTH) services. At the same time, as a technology, satellites tend to be relegated to the periphery of NAB’s focus, leaving those of us with a satellite orientation peering into the party from the outside.

This is also true on the regulatory front. I came to NAB to share my thoughts on satellite regulatory developments on a panel session in the NAB Satellite and Media Forum, jointly sponsored by the Society of Satellite Professionals International and the World Teleport Association. But as I discovered, the truly hot regulatory issues at the event were in an entirely different orbit, dealing with the Federal Communications Commission’s broadcast ownership rules, the transition to digital over-the-air television (DTV) transmission, and preservation of broadcast spectrum allocations and rights. Still, certain aspects of the satellite industry’s past experiences may provide some useful lessons for our broadcast brethren.

Broadcast Ownership Rules

The most compelling regulatory issue at NAB dealt with the FCC’s consideration of broadcast ownership rules, in particular the national television multiple ownership rule, which prohibits any entity from controlling television stations with a combined reach exceeding 35 per cent of the television households in the United States. The review of this restriction is driven by Section 202(h) of the Telecommunications Act of 1996, which mandates that the FCC re-examine its broadcast ownership rules every two years in order to eliminate those rules no longer required to serve the public interest. In making such a determination, the FCC is supposed to assess the extent to which such rules are required to safeguard diversity and competition. Based on its review of the record developed in the proceeding, the FCC may decide to retain the ownership rules as they are, modify them or eliminate them altogether if no longer necessary. Whatever the FCC decides (and the prevailing wisdom seems to be that some relaxation or elimination will occur), this matter is likely to be particularly contentious and is but the first step of a lengthy, drawn-out court appeal process. As always, the stakes are high and the rhetoric intense. Moreover, the advocates on both sides are casting their respective positions as the key to the very survival of the broadcast industry.

The satellite industry has experienced its fair share of structural change. The historic separation between domestic and international satellite systems has faded away. International satellite organizations have been converted into privately-owned companies. Major satellite operators today provide integrated networks of satellite, fiber optic and even wireless local loop services bound together in a single global infrastructure. As such, evolution and consolidation of business segments is a phenomenon that the satellite industry has handled in stride.

It is equally important to consider the types of industry transformations that lie ahead. This may best be illustrated by a recent development that is a precursor of the changes to come – the proposed acquisition of Hughes Electronics [NYSE: GMH] by News Corp [NYSE: NWS].

This transaction contemplates the vertical integration of a major television network (Fox) with a DTH provider (DirecTV), a fixed satellite service operator (PanAmSat) and a broadband satellite service operator (Hughes Network Systems) thrown into the mix. What is most interesting is that this transaction, which will produce a unique coalescence of broadcast and satellite interests, essentially falls outside the scope of the current broadcast ownership regulation debate. (At most, some concerns about fair access to programming may lurk in the background, although News Corp has already signaled an intent to diffuse this issue.) These “multimedia” combinations are the true wave of the future and will have a profound effect on the broadcasting and satellite industries – redefining the identity of the players, the services they provide, and the manner in which they interrelate and compete.

DTV

The second regulatory issue prevalent at NAB concerned the transition to DTV. The problem here is not opposition to such a conversion, but rather a desire to preserve the analogue world for as long as possible. As the satellite industry has experienced first hand, the digital revolution is potent and real. In the context of any debate over the speed of the transition to DTV, the key advice we can share is – “the sooner, the better.” The prospect of digitisation was initially perceived by some in the satellite industry as our death-knell, but it opened the way for explosive new growth opportunities. The advantages in quality and efficiency of spectrum utilisation that the digital world offers are simply overwhelming. This is one area where the focus must be on overcoming problems, not seeking delay as a means to forestall dealing with them.

With respect to the third burning issue at NAB – spectrum allocation – common ground already exists between broadcasters and satellite operators. Both share the same concerns about the possible encroachment of unlicensed technologies into their spectrum. To the extent that both seek to avoid the detrimental consequences of harmful interference, they are on fairly solid ground. But if they blindly seek to preserve rights in the face of legitimate competing demands for spectrum, where new means of technical efficiency might allow other uses to occur, then this would put both industries on perilous footing.

Even here, the satellite industry’s past experience with spectrum sharing may prove instructive. The satellite industry has dealt with spectrum sharing first hand, as a result of the rigorous co-ordination efforts that lie at the technical core of our business. Satellite operators have found the means to operate in close proximity to one another, and even to manage spectrum sharing when geostationary and non-geostationary systems are involved. More often than not, some form of sharing is possible.

Spectrum Demands

The competing demands for spectrum will not abate, and regulators in the U.S. and around the world will need to find new and creative ways to deal with them. The best strategy for the broadcast industry (and for the satellite industry as well) may well be to embrace proactively emerging technologies that maximise spectrum efficiency for all users. Giving a little bit of ground now may be the best means for forestalling draconian regulatory measures down the road that could materially affect an incumbent’s spectrum utilization capabilities.

If a common thread runs through these various issues, it is the relentless impact of change. If there is to be a regulatory debate, it should focus on the optimum way to manage these transitions, and not on preserving the status quo. Look forward and not back–this is the most important lesson the satellite industry has learned. It is a lesson that can be strongly recommended to the broadcast industry at this critical time.

Maury Mechanick is an attorney at the Washington, D.C. office of White & Case LLP, and a member of the firm’s Telecommunications Practice Group. He can be reached at E- mail: [email protected]