Interactive TV Lottery: Hardly a Game of Chance
Federal air wave lotteries are back. And that spells boom times for con artists around the country who promise lofty “guaranteed” profits to investors who want to get in on the ground floor of the nation’s latest technology.
The Federal Communications Commission in Washington plans to launch lotteries for Interactive Video and Data Service licenses--often referred to as “interactive TV”--this fall. Just as the term lottery implies, the federal agency will pick the winning licensees at random from the 4,100 applications it has already received.
The first drawing--which will determine who can operate interactive TV franchises in Los Angeles, New York, Chicago, Philadelphia, Dallas, Houston, Boston, San Francisco and Washington, D.C.--is expected to be held this fall. The application process for this lottery is closed, the FCC says.
However, once that lottery has been conducted, the FCC will begin accepting applications for smaller markets until all of the 734 IVDS licenses are taken, says Marc S. Martin, staff attorney for the FCC’s private radio bureau.
Dozens of fly-by-night companies are offering to get you into the lottery--some even guaranteeing a win--if you’ll just pay them an application fee ranging between $5,000 and $15,000, consumer advocates say. And they’re making the pitches compelling by talking about the handful of people who made fortunes in past FCC lotteries by winning the drawing and then immediately selling the license to the highest bidder.
That strategy is not possible this time, though. The FCC has enacted a series of rules meant to bar speculators. This time, if you win the lottery, you’re in the interactive TV business. And you’ll probably need to spend thousands more to build television facilities, transmitters, satellites, antennas, etc.
Those practical concerns have not stopped the promoters, though.
“I’ve been overwhelmed by phone calls from every con artist in the country,” says Bill Haggarty, a retired engineer who participated in FCC lotteries for cellular phone services and wireless cable. “The way they sell this stuff, they tell you nothing could go wrong. A lot can go wrong.”
Haggarty, whose engineering background gives him an edge over some other investors, knows from experience. He participated in three lottery “alliances” for cellular phone markets back in 1985, spending $13,000 on applications in the process. His alliances won licenses in two markets. But he’s a long way from recovering his investment.
In fact, he’s had to pay another $12,444 to help finance the creation of a cellular facility in Reno, Nev. Total investment: $25,444. His return so far: $2,600.
“You’ve got to tell people not to invest unless they’ve got money they can afford to lose,” he says.
Indeed, making a profit will be harder than ever with the IVDS lottery, experts say. The reasons are twofold.
First, interactive video technology is far from completely developed. Although there are numerous promising experiments and tests being conducted by phone and technology firms across the country, the ability to mass market so-called interactive TV could take five to 10 years, experts say.
Meanwhile, the FCC is also placing hurdles in the way of speculators who want to win IVDS lotteries simply to sell their licenses to the highest bidder. If you win the IVDS lottery, you will be barred from selling your license until after you’ve built transmitters, satellite cells and a station capable of serving at least 50% of the community where you’re licensed. If you attempt to sell before that point, the FCC will take your license away.
You can’t simply sit on the license without getting started on offering service, either. If your facility isn’t 10% complete in the first year, 30% complete in the third year and 50% complete in the fifth year, the FCC pulls your license.
You can’t submit more than one application per market to increase your chance of winning, either. That’s also to distinguish the FCC lottery from Atlantic City.
Still, if you’re a technology whiz with the expertise and financial wherewithal to make a go of interactive television, this may be your chance. Watch the Federal Register or communications industry trade papers to find out when application windows will open for the markets you’re interested in.
There is no reason to pay thousands for an application, though. You can file one yourself for a $35 fee. If you win, the FCC will require a more detailed application with plenty of technical specifications to be filed within 48 hours. You may decide to hire a firm to help with the details, but the mass-marketed lottery services are probably not the place to go.
