Cash-For-TV-Spectrum Scheme vs. A Property Rights Solution

by on October 21, 2009 · 21 comments

Potentially huge FCC development here, and one they actually has some sense to it. According to Kim McAvoy over at TV News Check.com:

FCC broadband czar Blair Levin earlier this month met with leading TV broadcasters in Washington to discuss the nation’s urgent need for more spectrum for wireless broadband access to the Internet and the possibility of broadcasters’ relinquishing most of their spectrum to help meet that demand. According to sources familiar with the Oct. 8 meeting with the board of the Association for Maximum Service Television (MSTV), Levin suggested broadcasters might want to consider returning their spectrum in exchange for a share in the billions of dollars that would come from the auction of the spectrum to the wireless industry.

Broadcasting would retain just enough spectrum so that each station could provide a lifeline standard-definition service to the millions of TV viewers who still rely on over-the-air reception. Broadcasters could no longer offer over-the-air HD and second channels and mobile video would be off the table, but they could continue to provide a single channel of TV to every home in their markets as they do today — in full-blown HD via cable and satellite carriage and SD via the over-the-air lifeline service.

Wow, this is a very big deal, folks, since we are talking about a mother lode of prime spectrum that could be put to any variety of excellent alternative uses.  The problem is, broadcasters will—rightly, in my opinion—protest that they have occupied that spectrum for a long, long time and they have something akin to a property right in their allocations. Of course, paying them to relocate might be a very sensible way to get them off that spectrum voluntarily. But the question is whether they should be forced off of it and whether that is even legal.  No doubt, any attempt to force them off would be held up in court for many years because of inevitable legal challenges.

There is another solution: Just give the broadcasters a full, unencumbered property right in their spectrum and let them sell it or use it however they wish. Some will protest that it’s not “fair” and that the broadcasters should never be given a property right in something they did not pay for to begin with. Yet, at some point we have to stop the endless search for what I have referred to as a “spectrum reparations policy” and just get on with life.

I think everyone can now agree that the old command-and-control regulatory regime for “zoning” spectrum has retarded innovation. Imagine if we told Apple back in the 1980s that, because they started in the PC business, they could never leave the PC business and offer other innovations.  That would have been nuts! We’d never have the iPhone today. But that’s U.S. spectrum policy for broadcasting in a nutshell.  As a broadcaster, it is illegal for you to repurpose your spectrum for alternative uses.  Stated different, spectrum innovation is a crime.  How pathetic.

It’s time to change the rules and move forward.  I applaud Blair Levin and the FCC for offering at least one solution, but if it doesn’t work, we should try the other: property rights and flexible use rights in spectrum. And here are 4 or 5 other ways to get the job done.

  • haroldfeld

    Actually, broadcasters can already innovate with 4/5ths of their spectrum. It's called “ancillary services.” they can put it in secondary markets, innovate, do whatever they want — and with only a 5% revenue share to the Treasury to compensate for the fact that the broadcasters got the spectrum for free rather than at auction.

    Do they do anything with it? Well, multicast. Some are dabbling in mobile. Some do a bit of datacasting. That's it.

    Why? Because they are broadcasters. That is the business they do. they _like_ being broadcasters. They have zero interest in doing anything other than being broadcasters. Which is why the FCC wants to pay them to get off the spectrum. Because they are sitting on a resource they do not particularly care to use efficiently.

    Private ownership, which is what they have in all but name as long as they continue to provide one free over the air channel, does not confer entrepreneurial spirit or innovative imagination. People get into broadcasting because they like it. The virtue (or fault) of private property is that the holder does what he or she wants. In this case, they want to broadcast. Maybe they will eventually break down and use existing secondary market mechanisms to start leasing out the spectrum to others with a more innovative vision. But that is already explicitly allowed by statute and the FCC.

  • http://www.techliberation.com Adam Thierer

    Harold… I must say, a sweeping statement like “Private ownership… does not confer entrepreneurial spirit or innovative imagination” is a bit shocking even coming from an old radical like you! But when you say “the virtue (or fault) of private property is that the holder does what he or she wants” and pretend this is what is happening in the broadcast spectrum field today, I’m sorry, but I have to call bullsh*t. That is absolutely NOT the system we have today, and you know it. I know you have covered this field long enough to know that we have rigidly “zoned” that spectrum (and a lot of other swaths) according to top-down, command-and-control regulatory micro-managed guesses as to what the best use of that spectrum should be. In a true property rights system, by contrast, the owners of the allocations would have the right to freely trade AND flexibly use that spectrum for whatever was the most highly-valued use. I have to imagine that if we lived in a world, a great many broadcasters would have long ago set the wheels in motion on a spectrum migration plan to either find a better business or sell that spectrum to someone who had a higher valued use in mind. Of course, if you really do not believe that “Private ownership…” will not spark the “entrepreneurial spirit or innovative imagination,” then I guess this whole discussion is moot. You just don’t believe markets and property rights work, and I do. We can’t have much of constructive debate when we begin from intellectual foundations that are so far apart.

  • Lewis Baumstark

    Adam, on the point of allowing spectrum-holders wide, even unrestricted, latitude in how they use that spectrum, we agree.

    On the point of “giving” away the spectrum, without renumeration, let's just say you need to explain yourself further. “Occupation of spectrum for a long time” does not, as you suggest, confer any property right — the broadcasters were, after all, contracting to use it and knew the limits. They have no more claim to it than a tenant who rents an apartment “for a long time.” Frankly, as you have presented it here, what you suggest sounds like good old corporate welfare.

  • http://www.wetmachine.com Harold Feld

    Adam:

    What I mean by “Private ownership does not confer entrepreneurial spirit” is that you either have it or you don’t. Lack of ownership may frustrate the would be entrepreneur, but plenty of people who own stuff have no desire to experiment with it.

    Which is the thrust of my rebuttal , which I blogged over here: http://www.wetmachine.com/totsf/item/1694

    The critical thing missing for innovation in broadcast spectrum is that the folks who “own” it want to do broadcast. Making them owners of the spectrum won’t change that. You’d have to pull a _Kelso_ type relocation to get them to stop doing broadcast and do “more efficient” stuff. As proof, I point out that they have had all the freedom to innovate one could desire. And the big thing they want to do is mobile television.

  • haroldfeld

    Do you believe that simply giving broadcasters title to spectrum will radically change their behavior? Why, when they have not taken advantage of the existing opportunity to do so?

    Contrast this with what has gone on in the BRS/EBS spectrum, where EBS licensees given the opportunity to trade away 95% of their spectrum for cash have done so, and the lesees have gotten into a variety of innovative services (Clearwire being the biggest player there).

    I argue the difference is that Clearwire got into BRS/EBS spectrum because they wanted to do lots of interesting things with spectrum. So given the opportunity, they have done so. EBS licensees need money and used a minimal amount of spectrum to do certain core things then leased our the rest. Brodcasters, given the same opportunity as EBS licensees, have shown no interest.

    Certainly the property-like regime in BRS/EBS enabled innovation. But it didn't in broadcast. The difference is the nature of the licensees.

    Now, in 5 years, when lots of hungry telcos have deployed in the 700 MHz band and driven up the value of broadcast spectrum in the secondary market, maybe we will see more interest by broadcasters in secondary market sales.

    Bottom line, property does not change the nature of people. It may enable people to do things they have interest in doing that they could not otherwise do, but it does not suddenly change broadcasters into non-broadcasters. Which is why NAB and MSTV are saying that they want to oppose Blair's spectrum plan.

  • haroldfeld

    And not to beat a dead horse, but: http://www.tvnewscheck.com/articles/2009/10/23/

    Broadcasters aren't interested in doing anything other than broadcast. Whether they own the spectrum or not is unlikely — IMO — to change that.

  • http://www.techliberation.com Adam Thierer

    Wow, you are obsessed with this, aren't you Harold! Anyway, what a few broadcasters say today versus what they might actually do in the marketplace when presented with (a) declining economic fortunes and (b) cold hard cash to get out of the business, well, those are two very different things. And we'll only know the answer if we allow for such experimentation. The question is: Why stop it?

    Even if some broadcasters chose not take such offers or move their spectrum to alternative uses, I have to imagine that many would. Again, we'll never know unless we allow experimentation to happen. Of course, we would likely need more than the FCC's blessing for all this to happen. Congress will need to act, and there's not going to be a lot of political momentum behind this unless there's a kick-back to Congress. But a kick-back to Congress sorta defeats the whole incentive structure since it would lessen the chance of innovative moves / trades from occurring.

    So don't worry Harold, nothing will likely change for a long, long time. It's OK, you'll have broadcasters around to micro-manage for many years to come! Just keep your paws off my Internet, thank you very much.

  • haroldfeld

    Spectrum is my current obsession, yes, although I am surprised by your tone.

    We need more spectrum. While I don't agree with CTIA too often (although surprisingly more these days), I do agree we need to maximize spectrum access. Which is why chasing mirages like broadcast spectrum is problematic because it is counter productive.

    But OK, will stop trying to engage you on this. Will simply stick own blog.

  • haroldfeld

    Spectrum is my current obsession, yes, although I am surprised by your tone.

    We need more spectrum. While I don't agree with CTIA too often (although surprisingly more these days), I do agree we need to maximize spectrum access. Which is why chasing mirages like broadcast spectrum is problematic because it is counter productive.

    But OK, will stop trying to engage you on this. Will simply stick own blog.

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