Commission changes the rules of the game for local license applicants

On January 16, the Federal Communications Commission authorized the allocation of 1 MHz of the public airwaves to “interactive video and data services.” Such services would make it possible to interact with one’s television set without using a telephone or in any way interfering with the broadcast of the video signal. Two-way interaction takes place instead over radio waves through a box connected to your TV.

This action came in response to a petition submitted by TV Answer of Reston, VA. The company has developed a technology that would allow viewers of television programming, regardless of its source — cable, satellite, broadcast, etc. — to “talk back” to their televisions (see following story).

Saying no to speculators. To determine who has the right to use the newly allocated radio frequency, the FCC will hold a lottery in 1992. Licenses will be granted to up to 100 of the top markets based on Metropolitan Statistical Areas (MSA) and Rural Service Areas (RSA) data. This is the same procedure that was used when the FCC was granting local cellular phone service.

The cellular phone licenses were quite a valuable commodity, and a lot of financial speculating took place during that lottery process. Allegedly, local licenses were granted and sold on the same day for huge sums of money.

In order to discourage similar speculation over the licenses for local interactive service, and to ensure that licensees actually build out their service areas, the FCC greatly altered the process.

Evaluating winners only. First, the FCC will not evaluate all the applicants before the lottery, as it has done in the past. Instead, it will evaluate only the lottery winners, significantly reducing the time necessary to grant the license.

Second, all potential applicants will have to pay a $1,400 filing fee, up from $35. In addition, grantees will be required to establish service in 10 percent of their market within the first year, and in 50 percent of the market before they are allowed to sell their licenses.

Another difference from earlier procedures is that the FCC will grant two licenses per market — ensuring, at least initially, that there is marketplace competition. One need only look at the local cable licensees to understand why this policy was enacted. (The U.S. Senate just voted to re-regulate the cable television industry in areas without competition to stem the rising costs and poor service often associated with cable.)

In the right place at the right time. TV Answer petitioned the FCC for this ruling, but the ruling does not allocate the bandwidth only to TV Answer. Any company that is interested in using the bandwidth for interactive video and data services can offer its own system to the local operators and programmers. But TV Answer has a big jump on the competition.

Besides owning and operating the satellite network and processing facilities, TV Answer will be offering all potential licensees assistance in preparing their proposals to the FCC, as well as offering significant technical assistance and financial support for the development of the local cell structure to the eventual winners. The company will also be applying for the local licenses itself in all available markets.

David Baron