OCT. 9, 2009 -- State government is on the verge of cutting a $142 million deal with two companies to lease an overwhelming majority of state's broadcast bandwidth that South Carolina currently controls.
Depending on one’s perspective, the deal will either net the state some much-needed cash for a telecommunications asset it may struggle to use effectively. Or it will short-sightedly hand over an enormous and unique package to an industry in a deal shepherded, in part, by a telecommunications lawyer. If the deal goes through, the state is not guaranteed on getting a statewide broadband Internet network that many believe is key to future economic and educational growth.
For decades, the state has owned a big chunk of broadcast spectrum, a unique situation nationally for any state, according to several sources. The federal license for that broadcast spectrum -- the regulated area of radio frequency that’s used to transmit radio, television and other signals -- has been held by S.C. Educational Television (ETV) for more than 30 years for use in educational video services.
SC at a digital crossroads
But thanks to recent advancements in technology and efficiencies that allows the agency to do a lot more with a smaller amount of the spectrum, some 95 percent of the state’s spectrum has been freed up. In other words, technology has allowed spectrum to be compacted, sliced and diced to a much smaller amount than is needed to do what’s currently done. This put the state at digital crossroads.
- Should the state hold onto that spectrum and create its own proprietary system that could make wireless Internet access available across the state, especially in under-served rural areas?
- Or should it get out of the business of owning and managing its bandwidth altogether, and let the industry take on the cost and risk of developing the technology and network structure to support the state’s telecommunications and wireless future?
Special commission appointed to look into matter
In January of this year, the state Joint Bond Review Committee convened a special commission to look into those questions. Over the summer and fall, their answers and reports began to come out.
Two weeks ago, the Joint Bond Review Committee, on recommendation of the special commission, gave preliminary approval to a lease agreement between the state and two telecommunications firms, ClearWire Spectrum Holdings III, LLC, a company that specializes in providing telecommunication access in urban settings, and the Digital Bridge Spectrum Corporation, which specializes more in rural settings.
The deal would be for $7 million up front, and a little less than $5 million a year for the next three decades. In return, those companies would have access to the freed-up 95 percent of spectrum.
The deal also would allow the state to recapture some of that spectrum capacity, called the “midband,” should the companies not be able to sell any of it. That could enable the state to potentially create its own proprietary broadband system, like for first-responders, in the future.
ETV officials said the leasing of the spectrum would not affect how it served the public.
What the deal will and won’t do
The state Budget and Control Board still has to approve the deal, and will tackle the issue in the coming months, if not weeks, according to board spokesman Michael Sponhour
“Basically, the commission agreed that the state had no business competing with private telecommunications companies,” said Gary Pennington, the commission’s chair, who also doubles in his private life as an attorney representing telecommunications firms.
Pennington, as a Sanford appointee, declined to divulge who his clients were, saying, “I don’t want this story to be about them.” He did confirm that neither of the companies involved in the deal were his clients and that he had donated substantial amount of his time and expertise to the
state while serving on the commission.
Pennington also confirmed what the deal would not do:
“It does not provide any quid pro quo” with the state for a free or reduced-price wireless broadband network access, he said. It would be largely straight cash-for-access deal that would also provide some smaller nibbles, like a broadband research project at two college campuses.
Pennington said the idea of a “quid pro quo” was shot down because of concerns from other industry counterparts that worried the state would be giving the two companies an unfair advantage in the field.
Critics point to weaknesses
It was hoped, according to several sources, that the overall deal could eventually provide the state with an alternative and competitively-priced, privately-owned broadband service that could be used for cellular phone and affordable broadband Internet service, among other amenities, for about $30 a month.
Critics of the deal, including watchdog Brett Bursey of the S.C. Progressive Network, decried the proposed payout of $142 million over 30 years as being far too low and, considering how much the state already spends on telecommunications, that it would hamstring its future.
Bursey argued that if the state were to keep a complete hold on the spectrum, or even a scant 25 percent more, it could develop its own system and network, and potentially provide integrated communication to all of its law enforcement and public safety agencies throughout the state, in addition to providing Internet access to residents.
But maybe this isn’t right business for state
Not so fast, said state Rep. Dan Cooper, R-Piedmont.
“Well, it’s [$142 million] a lot higher than what ETV originally discussed leasing it out for,” said Cooper, whose primary job as the committee chairman of the powerful Ways and Means has been to keep an eye on the state budget.
Cooper said this was not the first time the state “partnered” with outside communications companies.
“Years ago before I was chair of Ways and Means, I chaired a subcommittee that oversaw the build-out of an 800-megahertz radio station that linked emergency personnel statewide,” he said. “But what we found out was that we were government, not a communications company. After we built 10 towers, we realized this was stupid.”
The state, he said, then partnered with Motorola, who, in exchange for building out the rest of the state’s 800-Mhz towers, got access to the bandwidth to recoup their costs. The proposed deal with ClearWire and Digital Bridge would also mean that the state would not have to spend to maintain whatever system is eventually installed.
Both Cooper and Pennington said that the companies were willing to take on the risk of developing the technology and building the towers, and that the state wasn’t and shouldn’t be willing to take on.
“What if we went through all that trouble of developing the technology and infrastructure and it was no good; or that someone came along and just made a better one?” said Cooper.
Crystal ball: This may be the deal of the century for both the state and the telecommunications business. But in 30 years, the state may have missed out on turning telecommunications into a utility in South Carolina. Time will tell.