Those Free Airwaves Are Pretty Expensive

In a New York Times op-ed piece titled "The Price of Free Airwaves," FCC Commissioner Michael Copps makes the case for compelling broadcasters to carry good-for-you programming their audiences evidently don't have the good sense to demand:

America lets radio and TV broadcasters use public airwaves worth more than half a trillion dollars for free. In return, we require that broadcasters serve the public interest: devoting at least some airtime for worthy programs that inform voters, support local arts and culture and educate our children—in other words, that aspire to something beyond just minimizing costs and maximizing revenue.

Using the public airwaves is a privilege—a lucrative one—not a right, and I fear the F.C.C. has not done enough to stand up for the public interest. Our policies should reward broadcasters that honor their pledge to serve that interest and penalize those that don't.

In case Copps' notion of a "public interest" that is distinct from what actually interests the public was not confusing enough, here's another puzzle: If broadcasters use "the public airwaves" for free, how do we know that privilege is worth half a trillion dollars? It turns out those free airwaves are pretty expensive:

Broadcast licenses continue to be very valuable. Univision's assets—many in small markets—were sold for more than $12 billion. A single station in Sacramento, owned by Sinclair Broadcasting, went for $285 million in 2004. A station in a megamarket like New York or Los Angeles could easily fetch half a billion dollars or more.

Since the price a company pays for a station consists mostly of the broadcast license's market value, that company, pace Copps, has in fact purchased the right to use "the public airwaves." While the initial recipients of broadcast licenses enjoyed a windfall, subsequent owners do not. Why should they be subject to the special requirements that Copps says are justified by their free enjoyment of something for which they paid a lot of money?

Comments

MelK | June 4, 2007, 1:07pm | #

Who decides what is "worthy" information for the voters, "worthy" arts and culture or "worthy" enough to educate our children?

joe | June 4, 2007, 1:12pm | #

If the popularity of ideas and media products was an effective way of judging their value, why would anyone read a libertarian magazine?

And here I've been thinking that the Jim Lehrer News Hour provides better coverage of international news than the CBS Evening News.

I guess not.

Kid Handsome | June 4, 2007, 1:13pm | #

Again - I've never understood the Government's assertion that they own and regulate what amounts to a frequency. Why not just treat it as a private property right and regulate it civilly.

Just because the government claims it as "public airwaves" shouldn't make it so.

Of course, after Kelo, why couldn't the government just take away television stations for the "public benefit" and give them to people who will pay more taxes and broadcast Sesame Street 23 hours a day?

I'm sure satelite tv will soon be viewed the same way, since the signal is beamed through the public airwaves.

John | June 4, 2007, 1:13pm | #

Assets like water flowing down hill naturally flow to the party that most values them. If the government owns something, it can literally give the asset away and as long as there are no artificial restraints on its sale, the asset will inevitably end up in the hands of the party that most values it. Think of it like ticket scalping to the Super Bowl. The NFL sells the tickets at a value much lower than many people are willing to pay. Inevitably, the people willing to pay the most get the tickets because they offer the people holding the tickets enough money.

Looked at that way, there is nothing wrong with the government giving away the broadcast licenses. The people that value the licenses the most and will put them to the best use will get them eventually. As far as the public service requirement, all that does is reduce the resale value of the licenses. The people who buy them discount their purchasing price by the amount of money they think that public service requirement will cost them.

In answer your question Jacob, no there is nothing wrong with keeping the public service requirement for the new owners of the licenses since those owners have presumably discounted their purchase price to account for the requirement. All you are doing is lowering the amount of money the original owners make off of them, but they got them for free anyway.

Grotius | June 4, 2007, 1:24pm | #

Jacob Sullum,

Why is it confusing?

Doctor Duck | June 4, 2007, 1:24pm | #

there is nothing wrong with the government giving away the broadcast licenses.

Well, yes there is, since 'the government' doesn't own them. They're a public good. If they have a value, it should be established by auction and the proceeds used to lower my taxes (but not yours).

While I don't remotely support the notion that the FCC should be telling anyone what to broadcast (or not broadcast), the fact is that taxpayers have not been the beneficiaries here, from the sale of something we all own a bit of.

joe | June 4, 2007, 1:27pm | #

It does kind of put us in the same position as the Europeans, with their anti-Nazi-speech laws.

Hey, you've got the power to ban that sort of thing! You've got to ban my pet peeve, too!

John | June 4, 2007, 1:29pm | #

Doctor Duck,

If you auction them, you are just raising the price of braodcasting and letting the government take the money. That functions just like a tax. The government does own them in the sense that they are only valuable because of the government's coercive power. Without that, everyone is free to broadcast on any frequency making each individual frequency pretty valueless. How do you run a radio station if someone if free to set up and broadcast over you? You can't. So, the government has to be involved.

If the government auctions them off, it is money someone in the private secter would have otherwise made going to the treasury. That is a tax. If you want to tax the broadcasting industry, fine. But call it a tax and don't pretend that the auction is something different implying that it is free money for the government because it is not.

GregA | June 4, 2007, 1:32pm | #

At least with cable, there's no such worries about public resources being used. The FCC must be downright relieved to not have that responsibility; no worries on cable about whether "the F.C.C. has not done enough to stand up for the public interest".

Taktix® | June 4, 2007, 1:33pm | #

Whoa whoa whoa... let me get this strait.

So the guy who is in charge of regulating radio doesn't even have a basic understanding of how the radio industry functions?!?

*pulls tuft of hair from head*

I am really beginning to think that we are too far along the road to tyranny that we may be too late to change.

Insomniac | June 4, 2007, 1:38pm | #

And non-stop, omni-present infomercials between the hours of Midnight and 6 am and all weekend long serves the public interest how? How about a little programming here.

tarran | June 4, 2007, 1:39pm | #

First, the FCC was granted power of radio spectrum not because it was needed, but in order to protect the profits of certain well protected corporations (and friends of the Hoover administration).

"One of our troubles in getting legislation [to nationalize the airwaves] was the very success of the voluntary system we had created. Members of the Congressional committees kept saying, 'it is working well, so why bother?'" Herbert Hoover

The rationale for having an FCC is as silly as the rationale for having the governemnt issue licenses to land, requiring people to use their land in ways that are acceptable to the "common good", parceled with threats to seize the land if the owner dissatisfies them somehow.

Third, joe, you really might want to bone up on the subjective theory of value. It's relation to objective theories of value such as Adam Smith/Karl Marx's labor theory of value is like that of Newtonian Mechanics to Aristotlean physics.

MikeP | June 4, 2007, 1:40pm | #

Insomniac, it's in the public interest to bore you so much that you go to sleep and wake up in the morning a good productive worker.

Doctor Duck | June 4, 2007, 1:48pm | #

If you auction them, you are just raising the price of braodcasting and letting the government take the money

Spectrum is like oil on federal lands: a limited resource that's owned in common. If you're in favor of giving away all such assets, then at least you're consistent.

If not, then I'd like to hear how you feel they're different.

John | June 4, 2007, 1:53pm | #

Doctor Duck,

They really aren't in that sense. I wouldn't have a problem with giving away the oil leases. In fact, outside of places with special reasons for ownership, like national parks, or land needed for governmental functions, military reservations, I would like to see the government get completely out of the land owning business. Give all the land away by lot and then let the private sector put the land to use as the market determines. Yes, the governmet would miss out on all of that money in sales, but the country at large and the economy would benifit by putting all of that land into productive use and through ending government mismanagement. The fact is that the government is a terrible land manager, both inefficient and destructive.

Dan T. | June 4, 2007, 1:56pm | #

Michael Copps makes the case for compelling broadcasters to carry good-for-you programming their audiences evidently don't have the good sense to demand

Similar to the way Sullum and others here at Reason want America to adopt a system of government that Americans evidently don't have the good sense to demand.

R C Dean | June 4, 2007, 2:02pm | #

give the asset away and as long as there are no artificial restraints on its sale, the asset will inevitably end up in the hands of the party that most values it.

In a word (or name), Coase.

Spectrum is like oil on federal lands: a limited resource that's owned in common.

This begs the question of "ownership" of the spectrum. On what basis does the federal government claim to own the spectrum?

mediageek | June 4, 2007, 2:03pm | #

"At least with cable, there's no such worries about public resources being used. The FCC must be downright relieved to not have that responsibility; no worries on cable about whether "the F.C.C. has not done enough to stand up for the public interest"."

Uh...

Given the FCC's recent attempts to move into regulating satellite radio and cable television, I'm going to have kind of disagree with you there.

Dan T. | June 4, 2007, 2:20pm | #

This begs the question of "ownership" of the spectrum. On what basis does the federal government claim to own the spectrum?

Because the government is the institution we've set up to handle such things.

MikeP | June 4, 2007, 2:33pm | #

Because the government is the institution we've set up to handle such things.

Government is the institution "we've" set up to handle public goods issues that cannot be handled well by the market. The government's role here is to define parcels of spectrum and provide a means to deal with trespass upon those parcels.

Everything else the government does in this venue is a power grab.

robc | June 4, 2007, 3:03pm | #

I think the LA Purchase is a better example than oil. "We" suddenly came into a bunch of land that wasnt owned by anyone (except the Indians living on it, but you know, they dont count) sort of like the government came into a bunch of frequencies that werent being used (purchase from France vs just claim them - really about the same).

Wasnt some of the western land given away and some sold? Either way, private property rights went with it. There wasnt a public interest requirement.

pigwiggle | June 4, 2007, 3:04pm | #

Because the government is the institution we've set up to handle such things.

Commerce clause, something something, ... eh Dan.

Some light reading for your soft head.

John | June 4, 2007, 3:20pm | #

"Wasnt some of the western land given away and some sold? Either way, private property rights went with it. There wasnt a public interest requirement."

There really was. So much land of every township was held for schools and under the homestead act you had to actually live on the land and make productive use of it. You couldn't just claim it for speculation purposes.

MikeP | June 4, 2007, 3:25pm | #

John, that is not a public interest requirement. That is simply a smart distribution of property using a Lockean definition.

Carl | June 4, 2007, 3:30pm | #

Time to read some Henry George folks. Land and other such natural resources are God-given, not man-created. Taxing such and divvying up the proceeds prevents rent-seekers from depriving the masses of their natural rights.

Broadcast licenses should be taxed at something close to the going real interest rate. To find out the value, use an idea similar to one Heinlein used in "The Number of the Beast". Let the owner assess the "ask" price. Then, apply a discount factor (0.5?). Then apply the tax rate.

If someone thinks a license is worth more than the declared ask price, he can buy it at said price and pay the tax difference between the old ask price and the new. This would make hoarding spectrum very expensive -- which is the point.

Proceeds can be used to reduce immoral taxation such as the income tax.

Fluffy | June 4, 2007, 3:44pm | #

Not to threadjack, but Carl, that's nuts.

The value of the land is only partially "created by God". The improvements on the land constitute much of the value of the land.

As an owner of land, I would have to set an "ask price" [and face the tax] that was sufficient to protect not only my investment in the land, but also any investment I have made in improving the land.

You're also counting on people hitting the ask price only out of economic motives. I could hit the ask price of a competing business interest for competitive reasons or purely out of spite. So owners would have to set astronomical ask prices to account not only for the improved value of the land, but to protect themselves against those who would happily suffer a loss on that one land purchase in order to accomplish some future competitive goal or in order to conduct a personal vendetta. For example, do you really think that the land owned under such a system by Planned Parenthood, or by a synagogue, could be owned safely or reasonably?

jh | June 4, 2007, 3:47pm | #

The federal government "owns" the airwaves in the same sense that criminals who carjack you and then chop shop your car "own" the parts they've extracted. But, if we're looking for an efficient libertarian solution that benefits all but a few special interests (i.e., one with no chance of being enacted by politicians), we'd auction off all the airwaves to the highest bidder, allow the new owners to broadcast any damn thing they please, and use all the proceeds to retire part of the national debt.

R C Dean | June 4, 2007, 3:51pm | #

Because the government is the institution we've set up to handle such things.

If by "such things" you mean the arbitrary and capricious exercise of power, I would have to agree.

There is at least a (very) long history of all land titles being (originally) granted by the sovereign that you can point to for homestead grants and the like. I have absolutely no idea what the historical or legal basis was for the US government to declare itself the owner of the broadcast spectrum.

VM | June 4, 2007, 4:02pm | #

Obligatory Ramones reference...

hier

Fluffy | June 4, 2007, 4:04pm | #

To shift the discussion slightly, I also look askance at the type of programming Mr. Copps asserts serves the public interest.

It certainly can't make that claim on the basis of actual public demand for the programming. If that existed, the programming would already be on the air.

I detect the type of classism that infects discussion of PBS and NPR - programming is "in the public interest" if it matches the somewhat affected tastes of a certain subset of the upper middle class. If it's programming that you might watch if you're a Volvo-driving, latte-drinking, book-reading, wine-sniffing guy who went to Williams, it's in the public interest to use the state to compel broadcasters to carry that programming. Strangely enough.

John | June 4, 2007, 4:05pm | #

"There is at least a (very) long history of all land titles being (originally) granted by the sovereign that you can point to for homestead grants and the like. I have absolutely no idea what the historical or legal basis was for the US government to declare itself the owner of the broadcast spectrum."

That is the most important and legitimate function of government; to determine and protect property rights. As I said above, the spectrum is only valuable if you can use it exclusivly. It just like land ownership only means anything if you can keep other people out. Granting rights to the spectrum is no different than granting title to land. All the government is doing is giving ownership and enforcing ownership rights to a particular thing, in this case a part of the spectrum. Just like a land owner depends on the sheriff to come out and arrest tresspassers or courts to award damages against someone pollutes his land, a spectrum owner depends on the government to shut down anyone who interferes with his use. This isn't complex stuff. It is just the government gaurenteeing property rights.

Robert | June 4, 2007, 6:47pm | #

Who decides what is "worthy" information for the voters, "worthy" arts and culture or "worthy" enough to educate our children?

According to Copps, "experts".

Paul | June 4, 2007, 7:36pm | #

Similar to the way Sullum and others here at Reason want America to adopt a system of government that Americans evidently don't have the good sense to demand.

And when we libertarians use legislative and police powers to force the rest of the country to adopt this government of which you speak, then your analogy will be complete. But until then, all we have is the power of persuasion.

Hayekian Dreamer | June 4, 2007, 10:15pm | #

Obligatory Family Guy mention

here.

David Oxenford | June 4, 2007, 10:16pm | #

The Commissioner's suggestions yearn for a regulatory regime that really never existed, and would never accomplish much more than creating more bureaucracy. See the post on my blog for more details: http://www.broadcastlawblog.com/archives/programming-regulations-you-can-force-a-broadcaster-to-program-but-you-cant-make-people-watch-proposals-for-more-license-renewal-obligations.html

Gilbert Martin | June 4, 2007, 11:01pm | #

"There is at least a (very) long history of all land titles being (originally) granted by the sovereign that you can point to for homestead grants and the like."

Well the United States wasn't created as a monarchy.

I would like to know what the legal rationale was that all untitled property that existed within the confines of any state when it was admitted to the union was presumed to be owned by the federal government rather than the state government.

Is there some article in the Constitution that gave the federal government the authority to claim all that land vs the state governments?

kevrob | June 5, 2007, 1:38am | #

Gilbert:

The Federal government did automatically become the owner of any unowned lands within the 13 original states, but did as a result of the "dinner table compromise" worked out by Hamilton, Jefferson and Madison. The Feds took ownership of the new states' claims to western lands, in exchange for assumption of their war debts. The Potomac River site for the new Federal capital was agreed upon as a concession to Virginia, which had paid much of its debt.

Much of the rest the U.S was transferred from other sovereign powers. Some of those were Native tribes, while others were European colonial powers, or American republics. I'm not sure if the Feds got any public land in Texas, though.

Once a territory became a state it would have seemed reasonable to me to transfer ownership of much of the public lands, excluding actual Federal installations (post offices, army bases) and Indian Reservations. Instead the national government held onto much more.

Kevin

kevrob | June 5, 2007, 1:40am | #

Make that:

The Federal government did not automatically become the owner....

Kevin

Jim Walsh | June 5, 2007, 1:51am | #

Speaking of the FCC, check out the following story from allaccess.com, a broadcast industry website. Make note, in particular, of the comments from Kevin Martin (Note: this is not a joke):


Court Throws Out FCC Fox Indecency Ruling


If we can’t restrict the use of [these] words during prime time, Hollywood will be able to say anything they want, whenever they want.

A federal appeals court has thrown out the FCC's ruling that FOX's broadcasts of the 2002 and 2003 BILLBOARD MUSIC AWARDS violated indecency regulations.

The telecasts involved spontaneous profanity by CHER and NICOLE RICHIE, and a three-judge panel of the Second Circuit Court of Appeals ruled 2-1 that the FCC's rules regarding profanity is arbitrary and capricious, remanding the case back to the FCC. The majority said that the FCC policy revision made major changes to previous policy without articulating "a reasoned basis" for the change.

NAB Exec. VP DENNIS WHARTON said, "This is a timely opinion as public policymakers weigh the merits of further program content restrictions. NAB has long believed that responsible industry self-regulation is preferable to government regulation in areas of programming content."

FCC Chairman KEVIN MARTIN, on the other hand, was upset enough with the ruling to release a statement including the very words he had ruled were indecent when uttered by others on TV, saying, "I completely disagree with the Court’s ruling and am disappointed for American families. I find it hard to believe that the NEW YORK court would tell American families that 'shit' and 'fuck' are fine to say on broadcast television during the hours when children are most likely to be in the audience. The court even says the Commission is 'divorced from reality.' It is the NEW YORK court, not the Commission, that is divorced from reality in concluding that the word 'fuck' does not invoke a sexual connotation.

"These words were used in prime time, when children were watching. Ironically, the court implies that the existence of blocking technologies is one reason the FCC shouldn’t be so concerned. But even a vigilant parent using current blocking technologies such as the V-Chip couldn’t have avoided this language, because they rely on the program’s rating, and in this case the programs were rated appropriate for family viewing.

"If ever there was an appropriate time for Commission action, this was it. If we can’t restrict the use of the words 'fuck' and 'shit' during prime time, HOLLYWOOD will be able to say anything they want, whenever they want."

Commissioner MICHAEL COPPS was also upset with the ruling, calling it "disappointing to me and to millions of parents and concerned citizens across the land. But it doesn't change the FCC's legal obligation to enforce the indecency statute. So any broadcaster who sees this decision as a green light to send more gratuitous sex and violence into our homes would be making a huge mistake. The FCC has a duty to find a way to breathe life into the laws that protect our kids. That may entail an appeal of this decision. Certainly it includes strong enforcement action of the many indecency complaints before us that are untouched by today's decision. Enforcing the laws against indecency, profanity and obscenity must remain a Commission priority -- AMERICA's families and children expect and deserve no less."

--------------------------------------------------------------------------------

Brendan Perez | June 5, 2007, 8:54am | #

I could maybe-kinda-sorta see this argument flying if all available broadcast channels were taken up and a majority(I know, I know) of people felt their "needs" still weren't being met. But, is there even one area where all 69 or so broadcast channels are in use? 30? I can't think of any area I've been to that had more than maybe 15 broadcast television stations.

I have the exact same argument for broadcast radio. In nearly every area, there exists a plethora of bandwidth for anyone who wishes to pony up for the equipment and licenses necessary to serve the segment of the public that wants to be served by them.

kevrob | June 5, 2007, 11:22pm | #

Brendan:

The way the FCC assigned TV licenses, no town was going to have a full boat of VHF stations. One town could have full-power channels 2, 4, 5, 7, 9, 11 and 13, while its neighbor 100 miles down the road had 3, 6, 8, 10 and 12. I once lived on the North Shore of Long Island, opposite Bridgeport, CT. If we aimed our TV antenna at the Empire State Building, we got one set of stations. If we pointed it at the the Sound we got TV from New Haven, Hartford and even Providence, RI. The spacing was meant to avoid interference problems. I use the past tense because the switch to OTA digital is changing the frequencies, even if the channel names stay sorta the same. Some low-power VHFs can reside on those normally vacant slots, though.

UHF is a different ball of wax. Before cable came along, most UHFs were weak sisters in their markets, and some markets had channel assignments that went unused because nobody thought they could make any money with them. That's one reason why the UHF band is the home of so many PBS, religious and shopping channels. Low power UHFs often have trouble getting picked up by cable systems. There's some quirk or other in the "must carry" rules that makes it tougher for them than their full-power colleagues.

UHF was so underused that channels 70-83 were reassigned, to cellular telephony, IMS.

Kevin