In May, the little town of Bemidji, Minnesota—population, 13,000—came into its very own television station. Ordinarily, it would take several million dollars to establish a TV station, and a viewing audience of 13,000 couldn't support such an outlay. That's why a TV channel allocated to Bemidji in 1966 has never been used. Now, John W. Boler has obtained permission from the Federal Communications Commission (FCC) to build a new kind of TV station in this remote town. The promised station may come on line for less than $100,000 and will provide residents not only with signals imported from a distant station but with local news and public affairs programming, as well as movies and sports on a subscription basis.
What has made this possible is, in the words of ex-FCC Chairman Charles D. Ferris, "the first new broadcast service considered by the FCC in 20 years." It's called low-power TV, and it's set off a wave of excitement in and outside of the traditional broadcast industry.
SPECIALIZATION A low-power television station, as the name implies, transmits with less power than a conventional station and consequently reaches a smaller service area. No new technology is involved. For over 30 years the FCC has allowed broadcasters to build "translators" that operate on low power to pick up remote signals from other stations, boost them, and rebroadcast the signals. In September 1980, though, the FCC opened new doors when it proposed that low-power stations be allowed to originate programming and offer subscription services.
With start-up and operating costs at just a fraction of those of full-service broadcasting, low-power stations could bring TV to long-neglected rural areas, reasoned the FCC; and with their reduced level of power eliminating the problem of interference with other stations in a metropolitan market, they could cater to specialized audiences not served by the mass-market networks—minority groups, local sports fans, consumer groups, etc. Add the existence of satellite technology to link up low-power broadcasters—say a consumer information network—all over the country, and the possibilities are wide open.
It wouldn't be surprising to find interest in low-power TV—from corporate boardrooms to citizens' groups—running high. But it caught the FCC off-guard. In an unusual move, it had decided to accept applications for low-power stations while its proposed rules were under consideration. Nearly 5,000 applications poured in between September 1980 and April 1981, when the FCC abruptly called a halt so that its staff could get out from under the unexpected deluge.
Among those staking a claim, some applying for over 100 stations: ABC and NBC; Turner Broadcasting System, owner of Cable News Network; Community Television Network, set up by three black former FCC lawyers and backed by Golden West Broadcasters; Citizen Television Network, with Ralph Nader at the helm; the Southern Baptist Convention, with plans to establish the American Christian Television System; and the Phoenix-based Neighborhood Television, backed by Allstate Insurance.
The FCC won't decide until late 1981 whether or in what form actually to go ahead with its proposal to allow low-power broadcasting. Meanwhile, in May it granted the first conditional low-power license to John Boler for the town of Bemidji. Until final approval of rules for low-power broadcasting, the FCC will not process any applications for stations in the same geographical area (for the Los Angeles area, for example, 20 applications had been received by April). And any conditional licenses granted are contingent upon that final approval.
The promised emergence of low-power stations is a small step toward efficient use of the airwaves. For many years the FCC has restricted commercial broadcasting to fairly large blocks of service areas. This is how a few stations have come to serve thousands of square miles and millions of viewers.
The problem is that large service areas are not the most efficient units for reaching certain audiences. Not all those millions of viewers in a service area desire the same type of TV shows. But since broadcasters depend on advertising revenues to provide "free" TV, they must choose programs that appeal to broad segments of society. That's the way to obtain the favorable audience shares that advertisers are looking for.
The result is that shows appealing to fairly narrow segments of society are dropped by the networks. Examples of programs that were intensely popular among smaller viewing groups, and thus faced cancellation on commercial television, include Lawrence Welk among elder viewers, Dark Shadows among teenagers, Star Trek among science fiction fans, The Waltons among nostalgic idealists, and Dick Cavett or Paper Chase among intellectuals. Imagine how many programs have never even been produced because of the pressure to appeal to large audiences.
Of course, some viewers who do not like Loveboat (ABC), Dallas (CBS), or Family Feud (NBC), have been able in recent years to switch to public television. But there are limits to what one additional channel can offer in specialized programming: not everyone wants to see Masterpiece Theatre, either. If a wide selection of programs is to be offered to fit the many interests of potential viewers, there simply have to be more stations available.
THE SPACE PROBLEM The advent of low-power stations is a step in the right direction—but only a step. Low-power broadcasting will mean that at least one more option will be available to viewers. These additional stations can provide a valuable, specialized, and local alternative. In some areas with empty broadcast frequencies, such as the Midwest, licensing of low-power stations will provide several more program choices, but in major service areas such as New York or San Francisco, there is a channel space for only one more television station.
The only way to provide many more program choices for everyone is to allow many more channels for television stations. But that requires that more frequencies, or portions of the electromagnetic spectrum, be allocated to commercial broadcasting. As it is now, broadcast stations are bunched up on a fairly narrow band of frequencies.
It's not that there's a scarcity of spectrum itself, however. The range of frequencies in the broadcast spectrum is limitless, extending from zero to infinite cycles per second, and the technology is still expanding to make more and more of the spectrum usable for communications. But the FCC has preempted most of the usable spectrum for noncommercial purposes. It is this misallocation of spectrum that prevents there being more broadcast stations and more viewer choice.
Allocation of spectrum by the FCC is analogous to federal land allocation in Alaska. One would expect that the vastness of Alaska, combined with fairly low levels of land usage, would result in land being a cheap and easily obtainable resource. However, the federal government has preempted nearly 90 percent of Alaskan lands. This has led to crowding of people onto the remaining land and artificially high prices for that land.
Similarly, because the federal government has preempted most of the usable frequencies, the remaining portions are overcrowded and overpriced. A symptom of the misallocation of spectrum is that a television channel in a major market may command a "price" of over a million dollars; yet it is estimated that if the spectrum were efficiently allocated, the price for the right to use any portion would be essentially nil.
If spectrum use were unfettered by bureaucratic shackles, the potential for cheap communications would be enormous. In May 1977 the House Subcommittee on Communications reported:
We could have today, if we wanted, a CB service with 1,000 channels and no congestion.…We could have today, if we wanted, hundreds of local radio stations in every community.…Our current spectrum-regulation system delays and denies the development of new, effective, efficient and desirable radio services.
The same regulatory problems prevent better use of television because the current spectrum-regulation also delays or prevents desirable television broadcasting and programming.
REFORM NEEDS Unfortunately, the FCC has long treated the reform of frequency allocations as a low priority. And present users of the overvalued spectrum like it that way. A comprehensive legislative proposal, HR 3333, which would have reallocated spectrum, was introduced by former Rep. Lionel Van Deerlin, chair of the House Commerce Committee's Subcommittee on Communications.
Because the proposed legislation succeeded in irritating a wide range of special interests, particularly established broadcasters, it was rewritten, only to die a quiet death in committee last year. Although two other legislative reform proposals, S 611 and S 622, have been submitted, progress, if any, on these two bills is expected to be very slow because of intense industry and public interest group pressure. However, various broadcast reform proposals from other sources retain currency.
Most reform proposals consider all three of the parameters that define a broadcast station: frequency, service area, and hours of service. Conventional television stations broadcast in the VHF or UHF bands, are on the air 24 hours a day, and cover an area ranging from 35 to 70 miles in radius around the transmitter.
The low-power television proposals will effect reform only of the unnecessary uniformity of television service areas. It is expected that the rules for low-power television will allow broadcasting over a 10-12 mile radius. The reduced broadcast area makes low-power stations the most efficient conduits of specialized programming to geographically concentrated—say minority groups. Beaming of these specialized programs to (presumably) unappreciative groups outside such small areas is an unnecessary broadcast expense and a misuse of spectrum. Hence, low-power television is an improvement in efficiency. With respect to frequency allocation and hours of broadcast, however, the proposed low-power stations would be quite conventional.
TIMING IDEAS The typical hours of broadcast for television stations is not the most efficient time-structure feasible. Why have one station on one channel for 24 hours a day? Suppose that, instead, a broadcast company were given two or three channels for one given segment of the day. Rather than let ABC broadcast on channel 7 the whole day, it might be given channels 2, 4, and 7 for the hours of noon to 5:00 P.M.
To see what effect such a system might have on programming, consider the weekday noontime audience. Suppose that 90 percent of the viewing audience wishes to see soap operas, 5 percent prefer talk shows, and another 5 percent want to see old movie reruns. Under the present system, we find three competitive stations each producing a soap opera and capturing about a third of the soap opera audience, or about 30 percent of the total viewing population. The remaining viewers, 10 percent of the audience, are ignored.
On the other hand, if one company had a monopoly on all three channels during noontime, it would seek to capture the greatest total audience rather than the greatest viewer share possible. With all three channels, it would be able to capture all of the soap opera audience, yet have one channel for talk shows and another for movie reruns. This would avoid duplication of programming—for example, all stations broadcasting soap operas at noon, cartoons on Saturday mornings, news shows at 5:00 P.M., or the same special event, such as a presidential speech. Similar improvements in programming could result from partial monopoly structure, as well.
Although restructuring of broadcast hours would lead to more diverse programming, it would again be only a partial reform that would leave other inefficiencies of the present system unchanged. Members of the FCC, legislators, and others are agreed that there is need for systematic reform of federal regulation of broadcasting. As usual, however, there is no agreement on the substance of the reforms.
FREE TV Various proposals have surfaced, the most challenging and radical articulated by a group made up of research engineers, economists, and a lawyer. This group, headed by Arthur De Vany, has recommended the institution of a free-market system of allocating television and radio space. Owners would be free to trade or sell portions or all of their broadcast frequencies, service areas, or broadcast times. As observed in a report from the Office of Telecommunications Policy of the Commerce Department, such a free-market system would have the dual advantages of tending toward economic efficiency and avoiding the problem—always troublesome from the perspective of the First Amendment—of government control of the broadcast media.
Under the proposed system, the broadcast spectrum would initially be auctioned off to various bidders. From then on, voluntary sales of "packages" of a given frequency, service area, and service times would allow the present inefficient or inappropriate allocations to evolve to more appropriate packages. The number of frequencies serving various purposes would automatically and smoothly expand or contract to meet demand. As technological advances made more of the electromagnetic spectrum usable for communication, broadcasters might take immediate advantage of the increased usable spectrum rather than waiting years for bureaucratic approval that may never materialize.
In the free-market approach, small groups with unusual program preferences could obtain access to broadcasting on lesser-used frequencies. Programs in languages that are currently ignored, topics such as women's affairs, sports such as sailing, and other events and issues that do not garner high ratings could be expected to obtain some coverage on television. Similarly, stations could serve small geographic areas without the added expense of having to transmit to huge and unsuitable areas.
Had there been such a free interplay of economic forces in the broadcast industry, low-power television stations for urban ethnic groups, for example, would have emerged 20 years ago or more. And the local affairs and consumer programming now sought by various activist groups would be a reality today.
PERCEIVED PROBLEMS Of course, the idea of having a free market in broadcasting is unappealing to some—those who have a financial stake in the system as it is and those who fear the worst from a laissez-faire allocation of resources. Such objections have generated proposals to:
—Run the electronic media like public utilities.
—Use a simulated ("shadow") price mechanism, similar to that used by the Nuclear Regulatory Commission. This system would attempt to parallel administratively, or simulate, allocation by the free market by estimating the market value of a given frequency.
—Instruct the FCC or other administrative body to run the licensing process with greater regard to allocative efficiency. Proponents of these alternatives do not claim that there is any (theoretical) economic advantage to these market substitutes. Indeed, there is every reason to believe that, because of administrative limitations, these market substitutes would be less efficient than a free market.
Despite the lesser efficiency of these alternatives to free-market allocation, various groups perceive advantages in them. Present users of the spectrum wish continued use of their frequencies with no cost to them. If broadcast packages could be bought and sold like land, users would be faced with purchase prices and property taxes or rent. Because current users do not now have to bear these costs, the broadcast companies have traditionally been the most profitable group in American industry. The average return on shareholders' equity for all US industry is 16 percent. The broadcast industry has consistently obtained a rate of 22 percent or more. In 1978, the return for broadcasters was 60 percent higher than that for oil companies.
Other opponents of the free-market proposal harbor a fear of private property: suppose someone bought up a disproportionate amount of spectrum? But the chances of private monopoly of the broadcast spectrum is remote. The electromagnetic spectrum is huge: no one has the financial resources to monopolize it. Since spectrum property rights would be analogous to land and water property rights, the potential for private monopolization of spectrum should be no greater than the potential for monopolization of land and water rights. Finally, the possible harm of private monopoly is less than the danger inherent in federal control of broadcast spectrum.
Although efficiency in frequency allocation is attractive, there is an even more persuasive reason for opting for the free-market approach. Government control of station licensing inevitably involves control of media content. The Supreme Court's decision in Red Lion Broadcasting Co. v. Federal Communications Commission in 1967 affirmed the federal government's power to control broadcast content. Because the Court found a scarcity of broadcast frequencies (without noting that any such scarcity is a direct result of FCC regulation), the Court argued that government has a right to take away a station's license if it broadcast material contrary to the so-called fairness doctrine.
Licensing of stations is inseparable from some measure of censorship. Elimination of licensing would eliminate governmental evaluation of content; the broadcast media could be put on an equal footing with newspapers and magazines.
BROADCASTERS' POWER Unfortunately, current political reality makes unlikely any significant change in broadcast industry structure. Some minor change is possible, but progress is likely to be slow. Low-power television is about to go forward long after its desirability was obvious. And low-power television is a relatively minor development.
The more comprehensive, though hardly radical, changes proposed by the Van Deerlin bill were found "too controversial" by Congress. The hearings for that legislation show that the controversy was founded directly upon the opposition of entrenched broadcasters. Broadcasters feared that the proposed changes would erode their profit positions.
One representative of network-affiliated stations in larger cities spoke very frankly at a public hearing concerning the proposed legislation: "The lack of government regulation of the number of other sources of television programs entering the market…will cause a drastic fractioning of viewership, and thus [will] drastically reduce our revenues." The industry pleas for continued high profits through maintenance of the status quo did not go unheeded. The broadcast industry has great influence in Congress. Former FCC Commissioner Nicholas Johnson has described the mechanism for this influence:
Broadcasters elect and defeat officials, and there are a million ways they can do it. For starters, stations determine how much people in their areas know about public issues. They can accept or reject that half-hour on weekend television of "Your Congressman Reports." When he comes back to his district, they can treat that as newsworthy or ignore it. They can give time to those who might challenge him. And, finally, they can editorially endorse.
In addition to local broadcasters who put pressure on their own congressmen, the industry has a well-funded national lobby. These tools for legislative influence will no doubt be called into play against any meaningful reform, for such reform will inevitably mean greater competition in broadcasting and will thus threaten the industry's exceptionally high profit levels.
In spite of substantial obstacles to reform, the introduction of low-power television proves that change is possible. The growing conviction among viewers that current program choices are inadequate, and a general belief that government control of licensing and media content is unhealthy, mean that the impetus for reform of the airwaves will remain.
Robert G. Docters has just completed his second year of law school, holds a degree In economics from Stanford University, and has an FCC Third Class License with broadcast endorsement.