TV Taxes

Government Should Neither Guide the Development of Television Technologies nor Ensure the Economic Vitality of Local Broadcasters

Christmas arrived early for TV broadcasters this year. Way back in March the federal government played Santa Claus.

Over a four-day period, from March 31 to April 3, Washington gave away the proverbial store to the nation’s over-the-air television broadcasters. A major step by the Federal Communications Commission (FCC)—taken per a Democratic White House and Republican Congress—and a decision by the U.S. Supreme Court will both prove quite costly for taxpayers, consumers, and the U.S. Constitution. It is corporate welfare run amok.

Broadcasters were handed tens of billions of dollars worth of broadcast spectrum, free of charge.

Earlier this century, the government asserted the right to manage the spectrum, the airwaves over which television, radio, and other forms of communication are transmitted. This year the federal government flexed its industrial-policy muscles, decreeing that American consumers should watch digital-quality television (with its purported better picture and sound) whether they want to or not. Broadcast television stations will use their new, free-of-charge channels to send out digital signals of their commercial TV service, currently delivered through less efficient analog signals; some frequencies will be left for subscriber-paid services. Broadcasters will simultaneously send out their analog and digital signals for about the next decade, after which the old signal will end, with that section of the spectrum supposedly returned to the government for auction.

In effect then, over the coming decade the broadcasters, backed by the federal government, will push consumers to buy new digital TV sets or set-top converters for their old TVs. This amounts to a TV tax on consumers, potentially running into hundreds of dollars for converters and thousands of dollars for digital televisions. At the same time, were the spectrum auctioned off, rather than given away, billions of dollars in revenues could be collected and used to retire a bit of the federal government’s outstanding debt. Indeed, at this point Washington’s lone goal should be to extract itself from any involvement in the broadcast spectrum—but for safeguarding property rights—and the best means to do so would be to auction off the entire spectrum, allowing the marketplace, not government, to decide the future of over-the-air telecommunications.

As for the promise by broadcasters to eventually return their old spectrum, don’t hold your breath. If consumers resist paying the TV tax and stay with their old televisions, the broadcasters could keep all of their spectrum for some time. Either way, it’s a lose-lose proposition for taxpayers.

The Must-Carry Rule

Meanwhile, also in March, the Supreme Court struck another blow for industrial policy and the TV broadcasters by upholding a 1992 federal law mandating that cable television systems carry local broadcast stations, i.e., the must-carry rule. In the continuing, perverse “tradition” of judicial activism, the Court utilized, as Justice Sandra Day O’Connor put it in her dissent, “a highly dubious economic theory” to uphold the law. The economic viability of local broadcast stations was considered as an issue by the Court, while the First Amendment (i.e., free speech) and the Fifth Amendment (i.e., takings) were discounted.

In the case of must-carry, the federal government has decided that a local broadcast station must be seen by cable TV subscribers over other stations such as C-Span and ESPN. Of course, this law violates private-property rights, interferes with the superior workings of the free market, and overrides what consumers may actually demand.

Government should neither be guiding the development of television technologies, nor ensuring the economic viability of local broadcasters. If only we could click off government officials, who insist upon ignoring the free market and the U.S. Constitution, as easily as we turn off the often moronic television shows the broadcasters offer over the airwaves.