ITFS and Commercial Operators in the Digital Age

Christopher S. Hintz
Vice-President, Mergers & Acquisitions
Digital Broadcast Corporation

I recently had the pleasure of attending an Audio Conference held by the Association for Telecommunications Professionals in Higher Education (ACUTA), entitled "Instructional Television Fixed Service (ITFS) Two-Way Broadband Opportunities and FCC Filing Requirements." Presenters at the Conference were Patrick Gossman, PhD, Director of University Television, Wayne State University and Chair, National ITFS Association (NIA); Todd Gray, a prominent ITFS attorney with Dow, Lohnes, and Albertson; and Anthony R. Tanzi, Director, Communications, Brown University. The Conference was extremely enlightening, with each presenter bringing to the table issues relevant to the survival and success of the ITFS licensee in the Digital Age.

As Vice-President of Mergers & Acquisitions for Digital Broadcast Corporation, a commercial Digital Wireless Television and Internet Access operator headquartered in Great Neck, New York, my main responsibility is to negotiate and set in stone Excess Capacity Airtime Lease Agreements (ECALA) with ITFS licensees. It is from this viewpoint that I attended the ACUTA Conference, and it is from this viewpoint that I offer, through this article, the views and opinions of Digital Broadcast Corporation. The presenters at the ACUTA Conference discussed issues ranging from Non-Compete Clauses to Fair Compensation. This article is my attempt to illustrate Digital Broadcast Corporation’s position on important issues affecting ITFS licensees and their relationships with commercial operators.

Let me start by stating emphatically that our company opinion is that ITFS licensees have been lied to and stolen from for many, many years. You may be surprised to hear those words from a commercial operator. It is, however, the truth – and Digital Broadcast Corporation feels that it’s about time someone dealt truthfully with ITFS licensees. As Dr. Gossman stated during the ACUTA Conference: "How do we form partnerships with whomever we choose to lease capacity such that they are successful and so are we, both now and in the future? I think that both sides must avoid greed and proceed with open, honest negotiations and develop partnerships backed by smart lease agreements." Well put, doctor. Digital Broadcast Corporation couldn’t agree more.

Let’s discuss the issue of Fair Compensation. As Anthony Tanzi of Brown University pointed out during the Conference, "I believe that we are open to different forms of compensation – i.e., money, support, non-monetary compensation……" This is an important point. Many ITFS licensees I’ve dealt with want money, and nothing else – and that is their choice. Our corporate philosophy, however, involves providing to the ITFS licensee compensation that includes rewards that we feel are far more valuable than money – i.e., the provision of free video and Internet services to all receive sites on campus. After, all – the licensee makes it possible for our company to provide commercial services ("make a profit") in the market, so why should the licensee have to pay for such services as Internet Access and video provision? They shouldn’t.

Let’s be blunt: Raise your hand if your institution has ever signed an ECALA that only provided compensation after commercial services commenced in the market? This has happened all too often. After all my years of reviewing lease agreements, I am still saddened and astonished when I review an agreement that clearly takes advantage of the ITFS licensee. For years, many of the old analog "wireless cable" operators signed such agreements with unsuspecting ITFS licensees, correctly reasoning that they (the commercial operator) had nothing to lose, and everything to gain, once the agreement was signed; they had nothing vested, and were under no pressure to commence commercial operations or provide the licensee with compensation of any kind. The old analog operators did this for a reason: they wanted to make sure that they had assets to assign (your assets) to "buyout companies" – like MCI/WorldCom and Sprint – once the world finally realized the true value of MMDS and ITFS. In short, they were under no pressure, or obligation, to develop the market. They simply filed FCC Form 307 time and time again. In stark contrast, Digital Broadcast Corporation pays an up-front signing bonus, a guaranteed monthly fee that starts the moment the agreement is signed, and a per-sub fee that is paid on a monthly basis after commercial operations commence. In doing so, our company clearly has an investment in you, the ITFS licensee. If we don’t commence commercial operations, we don’t recoup our investment. My simple advice to the ITFS licensee? No matter whom you sign with, make sure they have a vested interest in your success.

What about forms of compensation other than money? I’ve already mentioned two provided by Digital Broadcast Corporation: Free Digital Wireless Television and Internet Access services to all on-campus receive sites. Is there more? You bet. Does your institution have a television studio? No? We’ll build you one. Do you already have a studio, but it sorely needs to be upgraded to today’s digital standards? We’ll perform, and pay for, the upgrade. You see, cooperation with the ITFS licensee, and the furtherance of the ITFS licensee’s mission, is our best advertising in the community. When we invest in the ITFS licensee, we realize far better returns. After all, what could be better to invest in than education?

By now, I’m sure you’re asking yourself: "Who are these people? Why haven’t I heard of Digital Broadcast Corporation before this?" In my many discussions with ITFS licensees, I have learned a few things. First of all, most have never heard of us. Secondly, many believe that the only commercial operator out there today is MCI/Sprint. Let’s dispel a few myths, shall we?

Digital Broadcast Corporation was founded on April 5, 1995. We have one operational system, in Roanoke, Virginia, which provides service under the name AirCable America. We are launching additional systems this year, starting with Mobile, Alabama and Scranton/Wilkes-Barre, Pennsylvania. At present, we own MMDS licensing and have ITFS alliances in 8 markets nationwide, with the expectation of developing 25 to 30 more markets over the next 3 years. Our developmental partner for AirCable America is Decathlon Communications, Inc., of Denver, Colorado. As our corporate name implies, we provide digital, as opposed to analog, services. We are relatively unknown to ITFS licensees because we have spent years quietly developing, with Decathlon, the only commercially viable 10:1 digital compression technology known to mankind, for which we have exclusive rights. In other words, 4 channels to us are actually 40.

The rules say that ITFS licensees must have minimum usage of 20 hours per channel, per week. With 4 channels, this equals 80 hours. What’s wrong with ITFS licensees having 168 hours per week? Why not give each licensee in the market a channel that is dedicated to that licensee’s mission? After all, if we lease 16 channels in a market, we end up with 160 channels for commercial purposes. So why not provide an individual channel for each of the 4 licensees? In doing so, we are still able to provide 156 commercial channels to the market. Wouldn’t it be great if the commercial viewers in any given market were given the opportunity to access your programming on a full-time basis? This is yet another advantage to signing with Digital Broadcast Corporation. Our commitment goes well beyond the "minimum requirements."

Digital Broadcast Corporation provides Digital Wireless Television and Internet Access services. As Dr. Gossman stated during the ACUTA Conference, "It appears that traditional cable television services are not currently part of MCI and Sprint’s plans." It is my impression that ITFS licensees want Internet and video services, and this is precisely what Digital Broadcast Corporation provides. In addition to these services, and to all of the forms of compensation previously described, Digital Broadcast Corporation pays for all legal and engineering services, as well. In choosing an alliance with any commercial operator, I urge you to discover what that operator truly offers, in terms of compensation, and in terms of services provided.

Messrs. Gossman, Gray, and Tanzi presented such additional issues as Term of Agreement, Digitization of Entire System, Technical Modifications, Equipment, and the Two-Way Filing Window(s). Digital Broadcast Corporation is available at any time to speak with ITFS licensees about these, and any other, issues. I can be contacted in our Maryland offices at 1.877.DBC.2410, or via email at DBCSouth@aol.com.

In closing, again, I urge you to know whom you are dealing with, and what can be provided for you. Always remember the Golden Rule: He who holds the gold, makes the rules. ITFS licensees clearly hold the gold.