March 3, 2008


The Lobbyist's Boss (Scott Woolley 02.27.08, Forbes)

The airwaves are the most important natural resource of the information age and must be divvied up for use by cellphones, wi-fi, satellite radio, TV and other wireless technologies. Yet even today, large sections of the airwaves allotted long ago to UHF televisions sit vacant. In any given city, most UHF channels between 14 and 69 are unused, and the few that are used are mostly unwatched.

In 1996, Congress took a first step that was aimed at clearing part of the UHF airwaves so they could be put to a better use. Lawmakers gave television broadcasters an equal-sized slice of the airwaves for a digital transmission, and set a deadline of 2006 for the end of analog TV broadcasts and a return of the airwaves. It was an even swap, ostensibly.

Opponents, most notably McCain and FCC Chairman Reed Hundt, called the deal a sellout. It wasn't an even trade, they argued. Digital technology would let broadcasters increase the number of channels they could transmit sixfold. And while the handout of new airwaves occurred almost immediately, the deadline for broadcasters to return the old UHF airwaves was to be delayed for at least a decade--and thanks to a glaring loophole in the law, possibly several decades more after that.

Estimates of what the digital TV airwaves might have fetched had they been sold at auction--instead of just given away--generally ranged between $30 billion and $70 billion.

Hundt, the Democratic chairman of the FCC in 1996, recalled the losing fight in his memoir. "Sen. McCain supported our critique of the congressionally mandated gift of airwave spectrum to the broadcasters. The senator said publicly, 'I am completely dismayed about the giveaway aspect of this legislation. One thing I want to make clear to the American public is that Congress, at the behest of special interest groups, has turned its back on $30 billion of potential revenue.' "

William Safire wrote in The New York Times in 1996, "One lone senator tried to oppose this giveaway. John McCain, Republican of Arizona, was flattened by the broadcast lobby's steamroller."

At the time Congress was passing out digital TV airwaves for free, no one owned more broadcast stations than Paxson Communications, and thus no one won the right to as much free spectrum. On the open market, the value of the airwaves he filled with infomercials was easily several billions of dollars.

The trick was turning that theoretical value into cold hard cash. In 2000, as Paxson Communications' financial fortunes continued to slide, Paxson set about trying to do just that. His plan was simple. All he needed to do was convince Congress to let the cellular phone companies buy the rights to the UHF TV airwaves--and write their checks to him instead of the government.

He faced several hurdles. First, the rationale for giving broadcasters the digital TV airwaves in 1996 had been to compensate them in advance for the day they would hand back the older airwaves. Second, Paxson did not legally own the airwaves he hoped to sell. TV station licenses are not property titles (a fact the licenses make clear in explicit language). Rather, TV licenses are essentially temporary leases, and rent-free leases at that.

Nevertheless, Paxson argued flatly that the airwaves were rightly his. He compared himself to Jed Clampett, the Beverly hillbilly who happened to find oil on his land. "The free enterprise system is about people working hard and making money, or getting lucky and making money," he said in a 2002 interview with Forbes.

Paxson became the head of the "spectrum clearing alliance," a group of broadcasters who would agree to hand over the airwaves in exchange for a big payout.

The Final Battle

Given the history of the 1996 airwave giveaway, there was little question about which members of Congress would seek to block Paxson's plan.

Sure enough, McCain openly scoffed at the idea that broadcasters deserved to pocket a multibillion-dollar payoff, calling stations that refused to relinquish their spectrum "squatters."

McCain had often joked that in his fights with the broadcast lobby (of which there had been many), he had compiled a record "unblemished by victory." But this time, as chairman of the Senate Commerce Committee, he found himself in a much stronger position.

He portrayed the broadcasters' hold on empty UHF airwaves as not just selfish but dangerous. During the terrorist attacks on Sept. 11, 2001, problems with wireless communications hobbled rescue efforts in New York, Washington, D.C., and Pennsylvania, according to the 911 Commission. The commission recommended that "Congress should support pending legislation which provides for the expedited and increased assignment of radio spectrum for public safety purposes."

Still, it wasn't quite enough. McCain regularly introduced bills and amendments seeking to accelerate the return of the UHF airwaves, and he continued to lose.

In 2004 McCain invited Paxson to testify before the Commerce Committee, which he chaired. Paxson said that if he was forced to return his analog spectrum, it could cause his company to fail. He concluded his testimony by once again threatening to sue, telling McCain that the government's reclaiming of the airwaves was "an illegal taking of our rights, and we would be forced to respond."

It was an empty threat, and McCain continued to push for a deadline. In 2005, wireless communications again failed during Hurricane Katrina. "Some of the human tragedy that took place as a result of Hurricane Katrina could have been avoided if Congress had acted in a more timely fashion," McCain said.

Finally, at the end of 2005, McCain and his allies succeeded in setting a hard deadline to clear the broadcasters off UHF Channels 52-69. The broadcasters would get no cash payout for relocating their signals. His dreams dashed, Paxson quit the fight and resigned from Paxson Communications.

Today, the UHF airwaves still lie vacant. But they will finally be put to more worthwhile uses starting Feb. 17, 2009. A big chunk will be handed to police and other public safety groups, improving their ability to communicate in emergencies. The rest of the airwaves are now being auctioned to the highest bidder by the FCC.

Cellphone carriers, Google and others have competing plans for new forms of wireless communication. Current bids in the auction now stand at $19.5 billion. All that money will go into the U.S. Treasury. None of it will wind up in the coffers of Paxson Communications.

...but he definitely did to her boss what W does to Harry Reid with some regularity.

Posted by Orrin Judd at March 3, 2008 5:40 PM
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