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S.C. debate is whether broadband leasing means less chance of more service
Aug 29, 2009 (The Times and Democrat - McClatchy-Tribune Information Services via COMTEX) --
State Rep. Gilda Cobb Hunter, D-Orangeburg, envisions a day when virtually every South Carolinian has high-speed Internet access -- if not at their homes, then at "common places" where people gather, such as the senior citizens' center in Vance or the Branchville community center.
She is concerned that day will be a long time coming if the state proceeds with a proposed contract to lease a slice of broadcast spectrum for the next 30 years to a pair of firms for $142.7 million.
"That seems like less than chump change," Cobb-Hunter declared at a three-hour Joint Bond Review Board subcommittee meeting Aug. 5 in Columbia. The subcommittee, of which she is a member, could is to make a recommendation on the contract.
"My God! Are we giving up something simply because we have limited vision?" the Orangeburg lawmaker asked.
Turning to the company representatives, Cobb-Hunter said, "Y'all are about to make a bundle off this. Y'all are about to reap a real windfall here."
The proposed lease involves the 67 licenses issued to South Carolina Educational Television for use of the Educational Broadcast Spectrum.
The federal licensing of broadcast spectrum specifically for educational purposes dates back to 1962, five years after the USSR launched the Sputnik satellite, spurring the United States into action to improve its educational system, explained Sascha Meinrath, director of the Open Technology Initiative at the New America Foundation in Washington, D.C.
South Carolina is the only state that owns all of the educational broadcast licenses in the state.
When the Federal Communications Commission ordered commercial television stations to switch from analog to digital signals, it also ordered EBS license holders to do likewise.
In addition, the FCC ordered EBS license holders to submit plans for the "substantial use" of their broadcast capability by May 1, 2011, or risk losing their licenses.
The FCC also said the EBS license holders could lease up to 95 percent of the spectrum to "commercial entities," which would not only provide revenue to the state but would allow the state to avoid the considerable expense of replacing its analog broadcasting facilities with digital equipment to comply with the "substantial use" requirement.
With the remaining 5 percent, "we can provide the same level of service we're providing now" in terms of "distance learning" instructional programming for kindergarten through grade 12, SCETV President and Chief Executive Officer David Crouch told the subcommittee.
Sen. Harvey Peeler, R-Gaffney, expressed concerns about whether 5 percent of the spectrum is enough for the state to retain.
"As far into the future as I can look and guess, yes," Crouch said. "I don't know enough about future applications that may require spectrum."
He said SCETV has pretty much phased out use of the "antiquated" educational broadcast spectrum in favor of T-1 high-speed data-transmission lines.
Cobb-Hunter asked if it wasn't "shortsighted" not to consider that in the coming 30 years the state might not want to just maintain its level of service at the current level, but expand it. For instance, "we might need to rethink" limiting instruction to the K-12 grades and may want to expand to the college level, the Orangeburg legislator suggested.
Crouch replied, "We're looking at K-12 being our customers and did not look beyond" that population.
But Cobb-Hunter said she doesn't think the level of service is enough at the present time, much less 30 years from now.
Some public schools in rural areas -- she cited one in Eutawville as an example -- still don't have access to instructional television right now, Cobb-Hunter said. She asked Crouch whether that was because the schools failed to get the reception equipment or because SCETV did not have the capability to provide it.
"If you could give me specifics ..." Crouch began.
"I thought I just did," Cobb-Hunter interjected.
"I'd have to look into the specific examples," Crouch replied.
The seven-member S.C. Educational Broadband Commission that the Legislature established in May 2008 specifically to hammer out a contract to lease the spectrum "did a great job," Crouch said. We agree with their recommendations. They got the best deal they possibly could have."
Under the proposed contract, Kirkland, Wash.-based Clearwire Spectrum Holdings III LLC would lease 59 percent of the spectrum (41 licenses) to serve the state's metropolitan areas, while 36 percent of the spectrum (26 licenses) would go to DigitalBridge Communications of Ashburn, Va., to serve smaller towns and rural areas.
A glaring omission from the contract is a timetable.
Gary Pennington, chairman of the S.C. Educational Broadband Commission, said eight companies expressed interest in leasing spectrum under the right terms, and "not one of the eight would agree to service requirements."
"They refused to negotiate time lines and service requirements," Cobb-Hunter echoed, and asked if the state really expects them to quickly build infrastructure in rural areas "out of the goodness of their heart."
Not really, Pennington said. The contract requires the firms to provide $1 million at signing, $6 million upon FCC approval and monthly payments thereafter, creating an imperative for the companies to generate a revenue stream in order to remain profitable.
Markets in which Clearwire is active include Atlanta, Las Vegas, Baltimore and Philadelphia, said Gerry Salemme, executive vice president. Sprint Nextel Corp. uses the WiMax network operated by Clearwire in those markets and others, and Clearwire also sells wireless broadband service under its own brand.
Cobb-Hunter asked DigitalBridge Chief Executive Officer P. Kelley Dunne if his company has a "commitment to the concept of access in rural communities."
"Absolutely," Dunne replied. "This is our business plan."
Dunne cited his company's work in such markets as Milledgeville, Ga. (which is a bit larger than Orangeburg), Liberty, Ind. (about the size of St. George) and St. Joseph, Minn. (a little smaller than Bamberg).
He said the company often works in conjunction with rural telephone cooperatives and makes decisions on a market-by-market basis. "The service delivery will be market-driven," he said.
"The build-out date is what, 2111?" subcommittee Chairman Glenn McConnell, R-Charleston, suggested.
A letter from Brandon J. Bullis, Clearwire's director of spectrum development, explains a particularly sensitive detail of the lease agreement. At the outset, Clearwire will use only 75 percent of the spectrum, but it will pay the state as if it is using 95 percent. The state will continue to use the 20 percent, plus the 5 percent it is not allowed to lease. At any point in the future, Clearwire can give notice that it is going to begin using that 20 percent. Alternatively, the state can give notice that it is permanently reserving the 20 percent, and at such time, Clearwire's lease payments will be reduced accordingly, prorated on the basis of $35 million over 30 years.
The ultimate outcome will depend on which party exercises its "recapture" rights first.
There is also a clause allowing for limited renegotiation of the lease agreement after 15 years.
Brett Bursey, for one, doesn't want to wait 15 years before rethinking the proposed lease. The director of the South Carolina Progressive Network says the agreement was negotiated in closed-door sessions and reflects "politics, ideology and money" rather than an effort to meet current needs and give the state the flexibility to embrace future opportunities.
For instance, he said the University of South Carolina earlier this month agreed to pay a private firm $840,000 a year for Wi-Fi services on campus.
Too, the state Department of Public Safety spent $10 million to buy laptop computers and card readers for law officers, but has no money to buy commercial broadband wireless service for them, Bursey said.
Bursey also said just seven of the 140 buildings owned by Orangeburg County are wired for the Internet.
And just as much of the technology we take for granted today was "science fiction 30 years ago," it's virtually impossible to imagine what may develop in the next 30 years, Meinrath told the subcommittee.
"We're at the cusp of an entirely new era of telecommunications," he said.
What is easier to predict, Meinrath said, is that the value of spectrum "is going to jump up exponentially," because there's only so much spectrum available and more uses are continually being found for it. Spectrum historically has been undervalued by a factor of 10 or even 100 over a 30-year period, he said.
"Selling off some of our most valuable assets -- even at market value -- is incredibly shortsighted," Meinrath told the subcommittee. He predicted that, in 20 years, a 20 percent slice of the state's spectrum will be worth more than 95 percent of the spectrum today.
Bursey said he was disappointed the company executives did not respond to Cobb-Hunter's and Peeler's concerns about service, particularly in rural areas, by pledging service commitments or time lines.
Cost is an impediment, too, Bursey said, pointing out that the 235,000 South Carolina children who qualify for free or reduced-price school lunches come from families that cannot always afford a computer and broadband service.
McConnell wrote in a July 27 op-ed article that "South Carolina has broadband available to the vast majority of its citizens through wireline and wireless facilities."
Bursey, however, says the U.S. Census Bureau reported that only 39 percent of households in South Carolina have Internet broadband access in 2007, ranking the state 44th nationally.
The Progressive Network has supported requiring the companies that get the leases to provide "free wireless Internet -- below the subscription tier -- to all South Carolinians."
McConnell asked Bursey if he believed the state should get into the business of providing broadband access.
"That's beyond the purview of this hearing," Bursey parried.
But he did argue that the state would do well to "recapture" the 20 percent of the spectrum that the proposed contract essentially leaves up for grabs.
Cobb-Hunter said the state should pre-empt the possibility that the companies will claim the 20 percent. "Let's put it in the kitty," she said. "Let's hold onto it for someone who comes along with vision."
The ultimate decision will be made by the State Budget and Control Board.
On the Net: EBS Commission: http://ebscommission.sc.gov/ S.C. Progressive Network: http://www.scpronet.com/wordpress/
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