Dell's buy of Binnie Nashua TV station seen as play for bandwidth
Whether Dell actually plans to get into the television business remains to be seen, but media analysts have been speculating for the past two years that he is more interested in bandwidth than broadcasting.
New Hampshire 1 Media, the radio and television network built in the past three years by former U.S. Senate candidate Bill Binnie, announced on Jan. 15 that WYCN, TV-13, Nashua, was sold to OTA Broadcasting, a subsidiary of Dell's personal investment firm, MSD Capital.
WYCN was purchased by Binnie in 2010 from well-known local broadcaster Carolyn Choate and her husband. Around the same time, Binnie acquired three other low-power stations in Concord, Manchester and Exeter, all of which simulcast programming from Binnie's hub, WBIN-TV in Derry, where Choate is now an on-air reporter.
Binnie wouldn't disclose what he paid for WYCN in 2010, but did reveal that he paid less than $500,000 for all four stations, which he converted from analogue to digital broadcasting. His company will realize nearly $4 million in profit from the $4.1 million sale of WYCN to Dell's company, according to a WBIN press release at the time of the sale.
"WBIN will continue to manage and program TV-13 from WBIN-TV studios," said Binnie. "This transaction will not impact TV-13's viewers." Binnie's company will be paid a management fee to run the station.
So why would Michael Dell pay more than $4 million for a TV station that was purchased for significantly less than $500,000 two years ago, and then turn management right back to the previous owner?
Although Dell has made no public statements that would answer that question, it's been widely reported that the FCC licenses the stations hold in some cases are far more valuable than the stations themselves, with emerging plans by the FCC to auction off parts of the broadcast spectrum once reserved for television to mobile carriers and Internet service providers for broader wireless networks.
The spectrum buy-back
Congress has approved an FCC plan for the government to buy back spectrum - or airwaves - from broadcasters and then auction them off to telecommunication providers for wireless networks that would have more robust bandwidth than is currently available.
The "broadcast spectrum" is the portion of the electromagnetic spectrum suitable for telecommunications, including TV, radio or Internet. There are only so many frequencies available, and Dell is apparently gambling that their value is going to increase significantly in the age of wireless Internet and mobile computing.
At the time Dell began to acquire TV stations, it was not clear that Congress would approve the plan, or that the FCC would initiate the auction.
But in September, the FCC unanimously approved what is called "the incentive spectrum auction," in which television companies will get some of the auction proceeds if they are willing to give up their frequencies to be resold by the government to the giant telecoms.
According to a Sept. 28 report in the New York Times, "The auctions are not expected until 2014, but FCC officials and Congress have estimated that the process could generate $15 billion in proceeds. About $7 billion of that would be set aside to build a nationwide emergency communications network for public safety officials, a yet-unfulfilled recommendation of the 9/11 Commission."
In the WYCN transaction, Dell adds to stations he bought in California, the Pacific Northwest and Western Canada, all of which continue to be managed and operated by previous owners. Binnie's organization gets $4.1 million to fund its continued growth as a media player in the Granite State.
New Hampshire 1 Media has plenty of bandwidth in the remaining stations Binnie owns, and has no plans to sell, he said.
"We continue to have the ability to program WYCN and, most importantly for our organization, we achieve a significant profit that we will now apply to our news and television operations elsewhere, principally in Concord," he said.
Much of the profit will be put toward construction projects underway in Lebanon, Laconia and Concord to house operations for Binnie's television stations and 16 radio stations, with an eye toward creating an integrated, statewide network.
"He (Michael Dell) is essentially buying a television station, and we're running it for him," Binnie said. "We get to take the proceeds and apply them to what is more interesting to us, which is New Hampshire programming and content."