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Debunking the Free TV Spectrum Myth
1/21/2014

WASHINGTON—The broadcast lobby had finally deconstructed the long-held notion that its constituency has obtained spectrum entirely for fee while other communications giants have paid for theirs. Not so fast, says Jeffrey A. Eisenach, managing director and principal at Navigant Economics. Eisenach was hired by the National Association of Broadcasters to shed some light on an assertion that’s persisted—unchallenged—for at least 15 years.

“Those opposed to according television broadcasters strong property interests in their licenses often argue that doing so could generate a ‘windfall’ since they ‘got their spectrum for free,” Eisenach writes in “The Equities and Economics of Property Interests in TV Spectrum Licenses,” a study commissioned by the NAB.

“As an initial matter, this argument overlooks the fact that broadcast television licensees are not unique in the sense that they hold licenses originally granted without direct payment to the government,” he said. “Prior to the congressional grant of auction authority to the FCC, all spectrum licenses were issued for nominal payments of application fees. Today’s largest wireless carriers, for example, received their initial licenses for free, as did direct broadcast satellite providers.”

Eisenach further states that 92 percent of all U.S. full-power TV broadcasters have paid for their licenses—an aggregate $50 billion.

“Current television broadcasters, in short, did not receive their spectrum “for free,” and there is no sense in which they would receive a windfall by being accorded strong property-like interests in their licenses,” he said.

Eisenach said the Spectrum Act, which gave regulators the authority to hold the upcoming incentive auction, affirms certain de facto property rights for TV licensees in that it requires displaced broadcasters to be compensated. While legal authorities and policy makers don’t oppose the recompense, the dispute over perceived property rights remains. This is due in part to the continued assertion by individuals in the public arena that all broadcast TV spectrum was obtained for free, and who have a vested interest in seeing that spectrum reassigned to wireless providers. Preston Padden, former president of ABC, reacted to such a message from Consumer Electronics Association CEO Gary Shapiro.

“In fact, 90 percent of today’s full-power TV broadcasters bought their spectrum in a secondary marketplace that was supervised by the FCC… Verizon, AT&T, Dish and DirecTV—all of whom did get free spectrum; in the case of Verizon and AT&T it was predecessor companies such as Nynex, Bell Atlantic and Southwestern Bell—[and] all are CEA members.”

Of 1,344 full-power commercial broadcasters, 1,230 bought their licenses for an average of more than $40 million.

Eisenach estimates that around 11 percent of all mobile wireless spectrum now in the market was awarded for free in 1983, yet this spectrum remains subject to liberal, secondary market requirements. Broadcasters, meanwhile, must adhere to the rules that governed the original spectrum grant. Eisenach argues that freeing broadcasters from grant-based regulations and giving them secondary-market type property rights would encourage investment and inventiveness, as well as naturalize the market for spectrum

“There is no sensible equity argument against according television broadcasters strong property interests,” he concludes.

 

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