Homesteaders Beware

I already wrote on the egregious FTC proposals to begin the government takeover of journalism.  But I missed this part, via South Bend Seven, which caught my eye in their post:

Tax on broadcast spectrum. They argue "commercial radio and television broadcasters are given monopoly rights to extremely lucrative spectrum at no charge," and this is a massive public subsidy. They therefore suggest the revenues generated by that spectrum be taxed at a rate of 7 percent, which should result in a fund of between $3 and $6 billion. In exchange, commercial broadcasters would be relieved of any obligations to engage in "public-interest programming," which the broadcasters claim costs them $10 billion annually.

Much of the TV and radio spectrum was indeed "given away," in exactly the same process that the Homestead Act (and I believe the Northwest Ordinance before that) "gave away" land to Americans who were willing to develop it.  These acts gave land away to pioneers who were willing to take the risk and effort to develop what was essentially value-less land into a productive asset  (the land had potential value, but until someone tilled it and put up structures and built rail and road to it, it was worthless).  When TV and Radio broadcasters first started using the spectrum, it was worthless -- and we were even less confident in its potential value than we were of the land in the Homestead Act.  The spectrum did not have value until private broadcasters demonstrated it had value through their investment, development, and experimentation.

So is Congress next going to tell everyone who lives on homesteaded land that they received a massive public subsidy and that their land is now going to be taxed?  The current landowner would likely argue that they didn't get the land for free - they bought it for a substantial price from the previous owners, who bought if from someone else, who bought it from the original homesteader.  But the situation is no different in the broadcast spectrum.  Clear Channel did not get the spectrum for free -- it did not even exist for decades after the spectrum was homesteaded -- it paid a full market price for the spectrum it controls.

Postscript: However, I am happy to see even the leftish Obama Administration admit that public-interest programming is a questionable requirement.  Because broadcasters only make money if they broadcast things people want to see or hear, everything they do is "public-interest."  What is meant in practice by the term "public-interest" should actually be called "political-interest" programming, because this programming tends to be uninteresting to the great majority of the public (have you ever listened to the garbage at 5am on Sunday morning on radio?) but is supported by small niche groups that have disproportionate political influence.  Let's remove these requirements as stupid without holding up broadcasters for more taxes in exchange.


  1. Rob:

    Will I have to pay back taxes on three decades of having an amateur radio license?

  2. Sean:

    Something like this happened in New Jersey about 20 years ago with property taxes. It seems that so many generous tax incentives were given to the casinos in Atlantic City to get them to set up shop that they generated very little revenue for the state directly. Someone in the state had the clever idea that the since much of the area around Atlantic City had been built on filled in wet lands, that possibly the casinos did not have clear title to the land they were on. A law was passed and it set in motion a mechanism where historical records were checked and compared to current property plots and low and behold, a lot of property around the coasts and bays were indeed filled in wet land and what's more, the state of NJ had title to it all. (Interestingly, it did not include land under the casinos.) People who thought they owned their property outright now had to purchase it again from the state. Many title companies when bankrupt and people on the waterfront paid a second time for their land.

  3. Dr. T:

    The FCC has been conducting spectrum auctions since 1994. Radio and TV stations have been among the buyers. In 2008 the FCC auctioned off the old TV broadcasting spectrum for nearly 19 billion dollars. The TV spectrum holders received none of that money. Instead, their broadcast licenses were transferred to the new HDTV spectrum. Therefore, the government already was paid for the TV spectrum. The current holders of HDTV licenses ceded their valuable TV spectra to the FCC which then auctioned those spectra at great profit. But, naturally, the FCC now acts like HDTV broadcasters got their spectra for free. And, the Obama administration will try to pretend that a tax on broadcast licenses is not a tax on the people. But, even Obama cannot be stupid enough to believe that the broadcast companies will not recoup these taxes as higher prices to their consumers or advertisers.

  4. rob sama:

    This is an inaccurate description of how spectrum rights came into being. Originally, broadcasters did much as you described and disputes were being governed by common law. But President Hoover decided that there wasn't enough spectrum to go around, and so he set up the FCC to allocate spectrum. This created artificial scarcity, which enormously benefitted the incumbant players, and was the main reason why we only had 3 or 4 TV channels in most major markets.

    Having said that, Dr. T is right above re: spectrum auctions since 1994.

  5. Dr. T:

    The reason for the paucity of broadcast TV stations in the pre-cable era was not the lack of broadcast spectra: UHF had scores of unused channels in every city, and VHF had only three of twelve channels in use in most regions. The scarcity was due to the high costs of operating a TV station and providing enough high-quality programming to satisfy advertisers. The three national networks had studios and writing teams to create shows. Local TV stations had to work from scratch. I grew up near Syracuse, NY. There was one independent UHF channel that struggled for years to fill its time slots with program. (Syndicated shows were rare in the 1960s.) The station survived based on a full hour of local news, live shows for children in the early mornings and after school, and lots of black and white B movies with monster and horror genres dominating. (The popular westerns cost to much for a local station to lease.)

    There were a number of failed attempts at establishing a fourth national network. The failures were not due to the costs of leasing VHF broadcast channels, they were due to the high costs of building and staffing broadcast stations in every region of the country, the high costs of TV program production, and the difficulties in wooing advertisers away from ABC, CBS, and NBC. It took the introduction of cable to turn successful regional stations (WGN Chicago and WTBS Atlanta) into national stations.

  6. me:

    So, public interest programming. Interestingly, there's a similar debate going on in Germany right now.

    I'd argue it's public interest not so much because the public is generally interested, but because it attempts to raise the bar on the quality of programming as opposed to the targetting of the lowest common denominator that is otherwise so common (think science shows, arts and documentaries that are freely accessible instead of paid programming available to the minority actually expressing an interest).

    The eventual upshot of that just might be children who just might end up having some exposure to matters beyond mindless chatter and violence, and thus generate income to service the growing US debt.

    The longterm investment and free-upfront-to-generate-eventual-income aspect of this makes it suitable for "public" involvement.

    The only evidence I can cite are the relative qualities of international TV programming and the education levels around the world, which I realize is rather thin.

  7. Rick C:

    "I’d argue it’s public interest not so much because the public is generally interested, but because it attempts to raise the bar on the quality of programming as opposed to the targetting of the lowest common denominator that is otherwise so common (think science shows, arts and documentaries that are freely accessible instead of paid programming available to the minority actually expressing an interest)."

    Pull the other one. Discovery, Science channel, History channel, Military channel, Animal planet, National Geographic, Biography, TLC, Style, Travel, Bravo, etc. Yup, nothing but LCD trash there, certainly no arts, science, and documentaries.