Specter of selling spectrum

Nov 19, 2001  •  Post A Comment

In what could be an unprecedented windfall for TV stations-and a major boost to wireless communications-broadcasters may soon be free to sell or lease their frequencies for non-broadcast purposes.
As it stands, Federal Communications Commission rules essentially limit broadcast channels to use for broadcasting, even when a channel is sold. Agency regulations also severely restrict what services may be offered over many of the other channels the agency regulates.
But FCC Chairman Michael Powell is expected to announce soon a spectrum reform initiative that ultimately could change all that. Sources said Mr. Powell wants the agency to consider changing the rules to give broadcasters and other spectrum users wide latitude to use the spectrum as they see fit, as long as the new use doesn’t interfere with other spectrum users.
“He would rather leave it up to the marketplace to make decisions,” an FCC source said.
One well-placed source said the rule changes under consideration, which would benefit broadcasters by increasing the number of potential bidders for their frequencies, could be viewed as an extension of a 1999 agency policy statement favoring flexible use of spectrum.
“It’s really carrying that policy forward in a broader, more aggressive way,” the source said.
Free-market advocates maintain that such a change in policy would ensure that spectrum is used for its most valued purposes-a major concern in the United States, where wireless radio providers are complaining that they’ve run out of frequencies.
“If a broadcaster has spectrum which it doesn’t value highly, but there is a new, innovative data application that values it very highly, a market would say, `Facilitate conditions to let that person [the data person] buy it from that person [the broadcaster],”’ Mr. Powell said in pitching the concept recently.
The idea of freeing up the ground rules for spectrum use is hardly a new one. It was promoted vigorously, albeit mostly to boos and hisses, in the 1980s during former FCC Chairman Mark Fowler’s administration.
Proponents say the argument has been approaching critical mass as spectrum shortages have become more pronounced recently, with wireless radio operators lobbying to get at least some of the spectrum currently reserved for broadcasting.
Spectrum reform also appears to be gaining momentum in Washington’s think-tank community, where it is perceived that cash inducements may be needed to get broadcasters to relinquish one of the two channels they currently have. Broadcasters received the second channel for free through a federal government program designed to help them make the switch to digital TV technology, a transition that critics say doesn’t appear to be happening.
“It would achieve the very important goal of freeing up the spectrum they’re hoarding by encouraging them to sell it though private auctions to those who value it more highly,” Adam Thierer, a self-described libertarian and director of telecommunications studies for the Cato Institute, wrote in a recent paper.
Watchdog groups are vowing to fight on grounds that broadcasters should have never received the digital channels free in the first place.
“We will launch a campaign to urge the American public to reject this bailout for the broadcasters,” said Jeff Chester, executive director of the Center for Digital Democracy.
Still others are already floating a compromise of sorts that would force broadcasters to pay a windfall profits tax on their gains, a proposal that would at least ensure that the federal government gets a cut.
According to Mr. Thierer, Sen. Ernest Hollings, D-S.C., chairman of the Senate Commerce Committee, is expected to oppose any FCC move to give the broadcasters additional ownership rights to their channels.
But sources said other lawmakers-including Sen. Ron Wyden, D-Ore.-are enthusiastic supporters of a market-based solution.
“The key to spectrum reform is harnessing the power of market forces,” Sen. Wyden said in a recent speech. “At its most basic, that means that licensees must have the flexibility and the incentive to sell or lease excess spectrum instead of hoarding it.”
What’s more, sources said that if the FCC doesn’t mind taking a little political heat in trade, it can reform the spectrum rules without congressional approval.
Oddly, while broadcasters would appear to be the big winners from reform, the National Association of Broadcasters is cool to the initiative, in part because it would undermine the notion that broadcasters are special and warrant special regulatory treatment.
“In our view, it would be an abdication of the public-interest standard,” said an NAB official.