By Simon Bond

Ever since Michael Dell and his partners started quietly acquiring small independent TV stations in the US for a “song” I have been watching how this story unfolds. He’s not alone as Private Equity Firms in the US have been scouring the country for TV stations as well. It’s not been unusual for folks in small US country towns to see a raft of well dressed players rolling into town looking to “tune in”. 

Why would a billionaire buy a TV station in Pittsburgh that airs only a local Catholic daily Mass and old Roseanne reruns? How could a collective investment of $80 million dollars potentially reap up to $4 billion dollars? 

Well it’s all in the spectrum. That spectrum is becoming more and more valuable every day for the telephone companies and less and less valuable for the TV Networks it seems. In the US TV stations who hold rights to spectrum will be in the position to put this spectrum up for auction, and the buyers will be the likes of Verizon, Sprint and T Mobile in order to enhance their own wireless networks. 

The spectrum is becoming more and more valuable due to the insatiable demands of the consumer for video and broadband services, and it lays the groundwork for the upcoming 5G networks, which will usher in a whole new world of services, applications, and as they say “the Internet of things”. 

As TV broadcasters go, KSCI Channel 18 in Long Beach is a little fish in a big pond. The independent station, which airs local shows in Chinese, Korean and Tagalog as well as other Asian-language programs, was in bankruptcy in 2012 when Texas-based NRJ TV bought it and two small stations for a reported $45 million. NRJ TV purchased KSKT Channel 36 in San Marcos in northern San Diego County for $9.8 million from Blue Skies Broadcasting. The FCC's opening bid is $142 million for the airwaves of the station, which broadcasts local programming. KSCI's slice of the nation's second largest market could be a precious catch as well and may be worth as much as $585 million to telecommunications companies, according to opening bids released by the Federal Communications Commission. 

As more people access the Internet wirelessly, demand for airwaves has increased. An FCC spectrum auction that ended in early 2015 brought in a record $44.9 billion. 

Broadcast airwaves are the highest quality, able to carry signals deep into buildings and over long distances. The Congressional Budget Office has estimated the auction could raise as much as $40 billion for the federal government after payments are made to broadcasters. 

In simplistic terms if the case were the same in Australia it would make sense for say the Nine Network to buy the Ten Network. The Internet has changed the game of delivery as everyone knows and the market capitalisation of TEN is $210 million dollars. The broadcasting licence it seems is in the books at a value of $350 million dollars. 

Give the license back to the Federal Government and they then get to sell the spectrum to say Telstra, TPG, Optus or anyone else who can make a go of it.  

The spectrum would appear to be worth a lot more to the new types of telcos than it’s worth to an old TV network. 

Maybe the larger and more recent shareholders in the Ten Network have formed a similar view. But then again who knows?