** Sell the airwaves!
Topics: Regulation
05 Feb 1995
From: "DG Ervan Darnell"
The socialization of the airwaves is one of the least recognized disasters
of the government being involved in a business. The original declaration of
the airwaves as public property to be managed by the government has
engendered all sorts of pernicious consequences from censorship to
substantial economic damages. The precedent has led to the FCC regulating
all manner of things that never even remotely were public property, e.g.
cable TV and tranmission protocols.
When the young U.S. made the Louisiana purchase, the whole of the land was
public in the sense that the government owned it. That government did the
right thing: sell it or give it away as private property. Think what a
disaster it would be if that much of the U.S. were managed by the government
for the "public interest" (e.g. as well as the "public" grazing lands are).
It's obvious what a disaster that would be.
The airwaves are similar but having no real alternative to compare to, it is
harder to see. They were undiscovered territory until the late 19th
century. Unfortunately, the government claims ownership and is doing a
perfectly dreadful job of managing an incredibly valuable piece of property.
I won't here undertake to list all of charges against the FCC for no one
would want to read to the end of the list. Instead I'll settle for a
general remark and two specific cases that have been in the news recently (*).
The airwaves are "public" only in the sense that the government owns them.
They manifestly are not "public" in the economic sense of having
externalities that justify government intervention. All of the value
produced by transmitting a signal can be captured, one way or another. If
someone is willing to pay $1G to get a channel and someone else is
broadcasting a nice public affairs show that no one is watching, the higher
bid is necessarily producing the greater good for society as a whole, even
though it cannot immediately be seen. So, the best way to serve the public
interest is to sell to the highest bidder.
The first case I have in mind is the Repbulican proposal to defund PBS &
NPR. Both of these are net transfers from the poor to the rich (the poor
pay the taxes for the shows that the rich are more likely to enjoy). And
both could easily make up the lost 14% (or 5% for NPR) by ads or
merchandising (e.g. Sesame Street toy sales). So, getting rid the public
funding part is a no brainer. But, that is not my main point. There is
something more fundamentally wrong at work here: the original notion that
since the airwaves are public property, TV signals must be broadcast
unscrambled. This is a terrible policy, but it flows directly from a flawed
conception. If signals could be sent scrambled, broadcasters could capture
the full value. The first benefit is that there would be fewer ads (just
check HBO). Liberals hate ads. Ads are one of their favorite reasons to
engage in censorship. But it was their very own flawed policy which created
the problem (of course, some stations might continue to be paid for by ads
alone, just like some magazines are). In the particular case of PBS, they
rely on begging to get their funding. I forget what the numbers are, but
something like 10% of regular viewers contribute. If PBS could make people
pay, they would probably lose half the audience (that half that does not
like it that much) but the other half would pay and PBS would have a lot
more money. With more money they could produce more quality shows (and none
of this 5:00 AM cooking with extra virgin olive oil b.s.). So, in the
interest of better programming, "public airwaves" have created worse
programming. In the interest of making it available to everyone, there is
actually less available to everyone because there are lots of shows that
have never been produced that would have been. Again, this mess has arisen
because the fundamental property status of the airwaves has not been legally
recognized (2).
The second issue is about PCS (short-range, high bandwidth digital voice and
remote data equipment). The FCC is currently conducting an auction to sell
two 30 MHz PCS channels (channels "A" & "B") in each of the 51 MTA regions
in the U.S. This is a good thing, a great thing. But why not finish the
job? In major metropolitan areas likes New York, these licenses are
estimated to be worth > $1G each, yes, billion with a "b". In rural areas
they are worth only $100M. That makes the total national value of just
these two channels >$20G. Contrast this with UHF. UHF is mostly empty and
much of what is there is totally useless (measured by income). Let's say
that a major market has 3 useful UHF stations on average. That leaves 65 at
6 MHz (NTSC) each, that comes to 390 MHz of prime real estate that is
wasted, absolutely wasted, because the FCC has a plan to develop it. Has
had a plan since the 50's. We can see the result of that plan. This is
equivalent of 13 PCS channels (in a much more favorable part of the spectrum
to boot, in terms of technological costs to implement). That's >$100G in
UHF alone, just sitting there waiting for some dufus to set up a video
camera in the back of the holy church of redeeming wayward personal checks.
This is the FCC operating in the public interest. If this were truly
private property, this sort of wasteful allocation would never be tolerated.
Someone would buy it and put it to good use. But there is no check on the
FCC's good intentions. They are playing with your money and their interest
is in preserving their bureaucratic butts by proving their "good ideas" will
eventually work. Letting competition show what fools they have been is just
intolerable.
Sell the airwaves!
------------
(*) And a single footnote remarking that there was an excellent article in
the Feb '95 Reason on how the FCC has engaged in censorship, destroyed
diversity, hamstrung competition, and greatly retarded new technology all in
the name of doing exactly the opposite. The cellular phone alone was held
up 10 years waiting on the FCC.
(2) Okay, another footnote, this one for the libertarians who want to insist
since radio waves enter your house, you should be allowed to receive them.
Receive maybe, transmit no. In any case, I would argue that radio waves are
"somewhere else", that particular electrons in your fingernail might get
occasionally flipped by blocking an RF photon is just so much techno-babble
searching for an excuse to confiscate someone else's property. If you want
to get really picky, I'd insist that in fact you never actually bought the
right to be free of "photon pollution" any more than you bought the airways
10K feet up just because you have a deed to some soil. I think that
property right is very important, I just don't agree that it has arbitrary
extension.
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