“Go on take the money and run.” Steve Miller Band.
The National Association of Broadcasters (“NAB”) last Friday sent to the Chairmen and ranking members of the Senate and House Commerce Committees a letter attacking Time Warner for warehousing spectrum in the AWS-1 band. The letter implies that, because Time Warner is warehousing spectrum, broadcasters shouldn’t be subject to an incentive auction. Those who live in glass houses (in this case its more like cellophane) shouldn’t throw stones: The broadcasters have been warehousing their spectrum since Congress passed “must carry” laws.
Without the implied government subsidy of must carry laws, broadcasters would have been out of business years ago and television spectrum would have already transitioned to more valuable uses. As a result of the success of cable television, it had become clear by 1992 that broadcasters lacked a viable business plan. Because fewer and fewer people were watching broadcast television over the air, broadcasters were having a more difficult time selling advertisements. To prop up the dying broadcast industry, Congress decided to force cable providers to carry broadcast channels on their cable systems. Forced cable carriage ensures that broadcasters reach enough “eyeballs” to satisfy advertisers, which is how broadcasters make money. Because only about 10% of the population actually watches television transmitted over-the-air, broadcasters couldn’t sell enough advertisements to survive without “must carry” subsidies – which means that broadcasters are now using their spectrum solely to reap the benefits of “must carry” laws rather than serve consumers.
In other words, an industry that uses spectrum so it can use cable networks – indeed, an industry that owes its continued existence to cable – is now lobbing stones at Time Warner for warehousing spectrum. That’s counterintuitive. Of course, broadcasters have been enjoying the use of free spectrum and “must carry” rights so long they’ve probably forgotten that their spectrum doesn’t serve an actual market. I bet they’d remember if Congress eliminated their “must carry” rights. There would then be no need for incentive auctions because there would be no broadcasters to “compensate,” and the billions that would otherwise be funneled to the broadcasters through such auctions could be used for a more worthy subsidy, like providing broadband to unserved areas.
NAB would better serve broadcasters by advising them to support incentive auctions. Starting a debate about the efficient use of spectrum can only spell trouble. Broadcasters use large swaths of extremely valuable spectrum to serve 10% of the population using decades-old technology (development of the ATSC standard began in 1987) and rely on government subsidies to survive. In contrast, wireless providers are spending billions upon billions to deploy the latest technologies to hundreds of millions of consumers who are clamoring for more and more bandwidth. Broadcasters should take the money and run.