Digital Shift Anything but a Sprint

Broadcasters’ conversion to using digital microwave technology for their live news remotes is being held up by complicated negotiations with Sprint Nextel. The wireless-telecommunications giant agreed last year to compensate stations for the cost of new electronic- newsgathering (ENG) equipment, in exchange for receiving new microwave spectrum from the Federal Communication Commission. But the transaction isn’t exactly going smoothly.

The shift of local stations’ ENG operations from analog to digital is part of a broad $4.8 billion agreement the FCC brokered with Sprint Nextel in February 2005. The deal moves some of Sprint Nextel’s operations out of the 800 megahertz (MHz) frequency band, where its signals were interfering with public-safety communications, and into part of the 2 gigahertz (GHz) band, which broadcasters use to send both live and taped feeds from their trucks to the station.

Sprint Nextel must spend roughly $500 million on digital ENG gear that will allow broadcasters to operate in a smaller swath of microwave spectrum. The telco will give back spectrum valued at $2.1 billion and also write the federal government a check for $2.2 billion.

Broadcasters are to make the overall conversion by Sept. 30, 2007. Some say that’s not much time. “It’s a very aggressive schedule,” says John Leahy, Western region sales manager for microwave- antenna manufacturer NSI.

The conversion process, known as the 2 GHz Relocation, was never expected to be easy. Local stations have to inventory their existing microwave gear and present their shopping lists to Sprint Nextel, which then uses third-party examiners to verify their accuracy before placing orders. The vendors then have to crank up their production lines to replace what Leahy describes as “30 years’ worth of analog ENG equipment.”

Finally, all stations in a market have to install and test the equipment, make sure the signals don’t interfere with each other or neighboring markets, and switch overnight to digital transmission of their live remotes—which happens to be the lifeblood of their most valuable product, local newscasts.

But broadcasters say it’s legal issues, not technical challenges, that are holding up the process. While more than half the 1,000-plus stations and other Broadcast Auxiliary Spectrum (BAS) licensees that use the 2 GHz spectrum have submitted their inventories to Sprint Nextel, equipment began shipping only last month. And as of press time, no call-letter stations had received the new gear. That’s because Sprint Nextel and broadcasters are still jousting over accounting matters—specifically relating to sales, property and income taxes—and whether the telco will also pay to upgrade “fixed-link” 2 GHz systems used by low-power stations and television translators.

Bob Seidel, CBS VP of advanced technology, says that the inventory process went smoothly at Viacom’s 35 stations and that Sprint Nextel has already certified their equipment requests. CBS has also completed testing of digital ENG gear and potential interference patterns in the New York market. But it has yet to receive any equipment. “We’re ready to go,” says Seidel. “It’s a question of the lawyers’ finishing up the agreement.”

Broadcasters’ tax hit is a major sticking point. Sprint Nextel agreed to pay sales tax on new equipment but says that property and income taxes are broadcasters’ responsibility. Since broadcasters are giving up part of the spectrum while getting new equipment, they would like the process treated as a “like exchange,” which would ease their tax burden.

“The accounting treatment of this thing is an enormous issue that nobody gave any thought to,” says a broadcast source who asked not to be named. “It’s all been legalese in Washington that’s been holding this up.”

Cindy Hutter Cavell, Sprint Nextel’s director of broadcast engineering for the relocation project, says the FCC has been clear “that it is the licensee’s responsibility to pick up property and income tax.” But she adds that Sprint Nextel may facilitate like-exchange arrangements “where it is appropriate.”

As for low-power television (LPTV) stations and translators that rely on 2 GHz fixed links to distribute their signals, Hutter Cavell says that they aren’t part of the FCC deal and that such users are “secondary licensees.” But broadcasters in Phoenix, along with industry trade group Association for Maximum Service Television (MSTV), have petitioned the FCC to reconsider how these systems will be treated. MSTV President David Donovan says there are a number of fixed links in the 2 GHz band and there is “every reason to believe” they were contemplated in the original FCC agreement.

“Translators are an important part of providing service to communities in rural areas, and they lack the resources to afford the switch themselves,” says Donovan. “We’re hoping to work constructively with [Sprint] Nextel to continue service to small rural areas. Replacing fixed-link costs were well-documented in the original estimate, and this should not be a surprise.”

Hutter Cavell doesn’t want to speculate on how that issue will turn out, but she maintains that the 2 GHz relocation is on schedule and says most broadcasters have been working with Sprint Nextel “in a good-faith manner.” Out of 1,055 total 2 GHz licensees, 570 inventories have been submitted, and 303 have been verified, she says. A few call-letter stations have even reached terms with Sprint Nextel, though they haven’t gotten their shipments yet.

Hutter Cavell, who has spent the bulk of her career as a television engineer, predicts that smaller markets will be the first to make the digital conversion, because large markets have bigger inventories and take longer to work out their equipment requests with manufacturers. But she notes that small and large markets are a “little interdependent” in terms of frequency coordination. Los Angeles can’t switch to digital ENG without San Diego’s making the switch, too, since they share the same geographic space.

Such considerations just add to the complexity of the process. Sums up Hutter Cavell, “It’s a wild, wonderful project.”