As mentioned last week, in a new series of essays, PFF scholars will be examining proposals that would have the government play a greater role in sustaining struggling media enterprises, "saving journalism," or promoting more "public interest" content. With many traditional media operators struggling, and questions being raised about how journalism in particular will be supported in the future, Washington policymakers are currently considering what role government can and should play in helping media providers reinvent themselves in the face of tumultuous technological change wrought by the Digital Revolution. We will be releasing 6 or 7 essays on this topic leading up to our big filing in the FCC's "Future of Media" proceeding (deadline is May 7th). And here's a podcast Berin Szoka and I did providing an overview of the series.
In the first installment of the series, Berin and I critiqued an old idea that's suddenly gained new currency: taxing media devices or distribution systems to fund media content. In the second installment, "The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media," I discuss proposals to impose a tax on broadcast spectrum licenses to funnel money to public media projects or other "public interest" content or objectives. Such a tax would be fundamentally unfair to broadcasters, who are struggling for their very survival in the midst of unprecedented marketplace turmoil. Moreover, such a tax is unnecessary in light of the many other sources of "public interest" programming available today. Finally, even if the government creates or subsidizes wonderful, civic- and culturally-enriching content, there's no way to force people to consume it. Nor should government force such media choices upon the public. There's no good reason for government to be socially-engineering media choices through taxes.
I've attached the entire essay down below.
PFF Progress on Point 17.2 [PDF]
by Adam Thierer*
In an ongoing series of essays, we're discussing proposals to have the government play a greater role in the media sector in the name of sustaining struggling enterprises or "saving journalism." Washington policymakers are currently considering what, if any, role government can and should play in assisting media operators, supporting journalism, or expanding public media. For example, the Federal Communications Commission (FCC) recently kicked off a new "Future of Media" effort with a workshop on "Serving the Public Interest in the Digital Era." Likewise, the Federal Trade Commission (FTC) has hosted two workshops on "How Will Journalism Survive the Internet Age?" Meanwhile, the Senate has already held hearings about "the future of journalism," and Senator Benjamin L. Cardin (D-MD) recently introduced the "Newspaper Revitalization Act," which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat--but also curtail their political editorializing.
Part 1 of this series examined proposals to fund media content via a tax on consumer electronics, broadband service, or cell phone bills. Other essays will address proposals to tax private advertising revenues to support public media; directly subsidize out-of-work journalists; expand postal subsidies; and to prop up or bail out failing media entities. A wrap-up essay will then focus on some potentially constructive policy reforms that could assist media enterprises without a massive infusion of state support or regulation of the press.
This essay will discuss proposals to impose a tax on broadcast spectrum licenses to funnel money to public media projects or other "public interest" content or objectives. Such a tax would be fundamentally unfair to broadcasters, who are struggling for their very survival in the midst of unprecedented marketplace turmoil. Moreover, such a tax is unnecessary in light of the many other sources of "public interest" programming available today. Finally, even if the government creates or subsidizes wonderful, civic- and culturally-enriching content, there's no way to force people to consume it. Nor should government force such media choices upon the public. There's no good reason for government to be socially-engineering media choices through taxes.
Former FCC Commissioner Glen Robinson has argued that the public interest standard "is vague to the point of vacuousness, providing neither guidance nor constraint on the agency's action." And Nobel Prize-winning economist Ronald Coase argued 50 years ago that "The phrase... lacks any definite meaning. Furthermore, the many inconsistencies in commission decisions have made it impossible for the phrase to acquire a definite meaning in the process of regulation."
And that is still true today. Simply put, the public interest standard is not really a "standard" at all since it has no fixed meaning; the definition of the phrase has shifted with the political winds to suit the whims of those in power at any given time. Nonetheless, the public interest regulatory regime remains with us and continues to apply to licensed broadcast radio and television operators.
Regardless of the rationale used to advance public interest regulation--public spectrum ownership, licensing, scarcity, pervasiveness, or "public enlightenment"--it is hard to explain why we have singled out broadcasters for unique regulatory obligations while operators of other media platforms have been given a free pass. Such regulatory asymmetry is more difficult to justify today in light of rising competition for many new platforms and players. And it is difficult to believe that Congress or the FCC could concoct a constitutionally-defensible rationale for extending "public interest" regulation to new media platforms. Indeed, efforts to do so for both old (newspapers, print) and new (Internet, video games) media have failed when tested in the courts. And, practically speaking, even if expansion of the old regime was desirable, it would be exceedingly difficult to do so in light of the sheer scale and volume of new media that would need to be covered.
provides a specific dollar value to the trade-off that has traditionally marked the public trusteeship theory of broadcast regulation. That is, for the initial grant and/or exclusive use of a valuable frequency, protected against interference or encroachment by governmental enforcement mechanisms, the broadcaster serves the needs and interests of the local audience service area.
But like the "public interest" standard itself, spectrum taxes are also an idea whose time has passed. Broadcast spectrum fees make little sense today, even if the notion might have made some sense two or three decades ago as a method of monetizing public interest obligations.
First, using spectrum fees as a reparations policy today fails to "punish" those who originally got their spectrum free-of-charge. The vast majority of broadcast spectrum licenses have traded hands in the secondary market for lucrative sums. In many cases, those television and radio properties have traded hands numerous times. Thus, the current spectrum-holders who would be taxed are generally not the beneficiaries of any "windfall," but have instead paid competitive market prices for the spectrum they use that should be roughly commensurate with the economic value of that spectrum (at least for the limited range of uses allowed by the FCC).
Second, although broadcasting remains an important medium, its once-supreme relevance has eroded significantly over the past three decades. Even Norm Ornstein, a defender of broadcast spectrum fees, has noted that "Over-the-air broadcasting is a dinosaur. It's not going to last very long." Although that might be hyperbole, it's certainly true that whatever weight the broadcast medium might have had in the past, that is now ancient history.
For most of the past century, broadcasting was a fairly stable industry that did not witness business model-shattering types of changes. As its very name implies, broadcasting attracted broad audiences. Consequently, returns were stable, even substantial at times. Today, however, stability has given way to volatility. The entire media marketplace is in a state of seemingly constant upheaval. Long-standing industry players are shedding assets or even disappearing as underdogs rapidly enter the sector and become big dogs overnight. This has become a textbook example of Schumpeterian "creative destruction" in action.
Consider what this has meant for broadcasters in terms of audience share and advertising revenues. Start with broadcast television. The television audience has grown increasingly fragmented since the 1950s. The top shows on TV during that era (e.g., "I Love Lucy") garnered 40-50% of the viewing audience. By the 1970s, the top broadcast TV shows (e.g., "All in the Family") were pulling in roughly 30% of the audience. Today, however, with so many other media options vying for our increasingly scarce attention, the top shows on television (e.g., "American Idol") are lucky to break 15% and most shows rarely break single digits.
The "problem" is growing competition for eyeballs. Broadcasters face a growing array of rivals: cable and satellite multi-channel distributors; DVDs and Netflix; VOD and online video; video game platforms; and much more. According to Nielsen Media Research, the "Big 3" networks of the past (ABC, CBS, NBC), which held 90% of the primetime market in 1980, control only 30% share today. In terms of total day shares, cable blew past broadcast television at the turn of the century and never looked back. The advertising situation is equally bleak for television broadcasters. According to McCann Erickson Worldwide, broadcast television's overall share of media advertising revenues dipped below 20% back in 1990 and continues to fall steadily, standing at approximately 15% today.
Unsurprisingly, the financial outlook for the broadcast TV sector is bleak. "Almost all the indicators for local TV are pointing down," notes the Pew Project for Excellence in Journalism in its annual State of the News Media report. It continues:
Revenue, too, was in a free fall. Ad revenue is always lower in a year without federal elections or the Olympics, but the drop in 2009 was especially severe even with the unexpected bounty of political spending on health care legislation. Revenues were estimated to have fallen by 22% from the year before. The last two non-election years, by contrast, recorded much smaller declines: 5% in 2005 and 6% in 2007. Looking ahead, most market analysts project revenues to grow only slightly, in the 3%-to-5% range in 2010, but that is hardly taken as good news given that it is a year that will include both the off-year elections and winter Olympic games.
In light of the recent turmoil, some major network television executives are now thinking about doing what was unthinkable just a decade ago: casting off their local broadcast affiliates and repurposing their content on alternative media platforms (e.g., cable, satellite, Internet). For example, in early 2009, CBS Corp. President and CEO Les Moonves told an investor conference that moving all CBS network programming to cable and satellite platforms would be "a very interesting proposition." If television networks start following their audience in the continuing mass exodus to alternative distribution platforms, how would local broadcast affiliates pay for a new federal spectrum fee? Even if that scenario does not develop, local television broadcasters face an uncertain future, and likely declining revenues for some time to come.
The situation for broadcast radio operators is even grimmer. The competition for our ears has never been more intense with satellite radio, non-commercial radio, iPods and MP3 players, online radio, downloadable music, podcasting, etc. with terrestrial broadcasters for audience share. As a result, radio operators have seen their audiences dwindle and their revenues nose-dive. According to Arbitron, time spent listening to radio has dropped for every age demographic they've measured for the past decade. And BIA Financial Network notes that while the radio revenue growth rate ran between 7% and 14% during the late 1990s, the industry hasn't seen growth above 3% since 2002 and in recent years growth has rarely broken 1%. Furthermore, the Pew Project for Excellence in Journalism reports that:
America's recent experience with spectrum auction proceeds suggests that Congress would first look to use a spectrum fee to pay for federal spending priorities or pay off past budget deficits instead of channeling those funds to new "public square" or "public interest" initiatives. But, for the sake of argument, let's assume Congress honored a pledge to use the broadcast fee only for its intended purpose. What exactly counts as a "public square" or "public interest" initiative, and who would be in charge of it?
Some proponents of a spectrum fee seem to long for a world in which everything looks or sounds like a combination of National Public Radio, the Public Broadcasting Service, and cable "public access" channels. But regardless of the quality of such networks or the programming on them, the viewing and listening public has shown a clear desire for programming of a very different nature. While critics might lament what they regard as the "low-brow" entertainment or supposedly lower-quality news seen or heard on some commercial networks or stations, there is no denying that citizens tune in to commercial programs in very large numbers. Whether regulatory advocates care to admit it, supply and demand are at work in America's media marketplace and citizens vote with their eyes and ears all the time. Media scholar Ben Compaine, co-author of Who Owns the Media?, focuses on the real issue here, choice:
If large segments of the public choose to watch, read, or listen to content from a relatively small number of media companies, that should not distract policy makers from the key word there: choose. ... It may indeed be that at any given moment 80 percent of the audience is viewing or reading or listening to something from the 10 largest media players. But that does not mean it is the same 80 percent all the time, or that it is cause for concern.
Commenting on efforts to make the modern media landscape look more like PBS or NPR, Compaine notes: "Content might well be different. But it wouldn't necessarily be better.... This might work only in a ... world of enforced equality, where no democracy of content was allowed, where the voice of the audience was not heard." He notes that PBS is instructive in this regard since, even in the days when it only had three primary rivals, it could rarely get the attention of more than 2% of the total TV audience. And as television journalist Jeff Greenfield has noted, "[W]hen you no longer need the skills of a safecracker to find PBS in most markets, you have to realize that the reason people aren't watching is that they don't want to."
Simply put, in a world of unlimited options and freedom of media choice, there's just no way to force the audience to tune in. Absent truly repressive measures to limit choice or alter consumer media consumption patterns, it will be impossible for policymakers to force the masses to pay attention to what they want them to see or hear in an age of abundant media content and unrestricted choice. "[R]egulation cannot, in a liberal democracy, force viewers to consume media products they do not think they want in the name of the public interest," argues Ellen P. Goodman of the Rutgers-Camden School of Law.
For example, the growth of news channels and programs (CNN, Fox News, MSNBC, Current TV, many financial news networks, and more) and international news outlets (BBC America, CNN International, etc.) has been well-documented. Most notable in this regard is the stunning success of the cable industry's C-SPAN network and its sister properties. But these cable news channels and programs are also a growing force online as well. "Like their television programs, the major cable news channels' websites attracted record viewership in 2008, driven in a large part by the political and economic news of the year," reports the Pew Project for Excellence in Journalism. Moreover, these cable news sites "have also evolved into true multimedia destinations. All now feature video archives, RSS feeds and features for accessing the sites on mobile devices. They all offer live streaming content." Meanwhile, C-SPAN recently created the C-SPAN Video Library, which archives 23 years worth (1987-on) of fully searchable (and free) video content, including: 161,000 overall hours of programming; 56,600 hours of House & Senate floor activity; and, 20,152 hours of House & Senate committee hearings.
Americans have many other ways of finding important news and civic information online. The 2008 presidential election serves as a dramatic illustration of how voters have become better informed and how candidates have exciting new ways to connect with them. The Pew Internet & American Life Project found that "some 74% of Internet users--representing 55% of the entire adult population--went online in 2008 to get involved in the political process or to get news and information about the election." And President Barack Obama's unprecedented use of new media tools during 2008 is often credited with helping to propel him into the White House. Millions of Americans made their views known about various issues on sites such as Obama's Change.gov website. Wired reported that "Obama's online success dwarfed [Senator John McCain's], and proved key to his winning the presidency."
Volunteers used Obama's website to organize a thousand phone-banking events in the last week of the race--and 150,000 other campaign-related events over the course of the campaign. Supporters created more than 35,000 groups clumped by affinities like geographical proximity and shared pop-cultural interests. By the end of the campaign, myBarackObama.com chalked up some 1.5 million accounts. And Obama raised a record-breaking $600 million in contributions from more than three million people, many of whom donated through the web.
Four years earlier, Joe Trippi, former campaign manager of Howard Dean's 2004 presidential campaign and the author of The Revolution Will Not Be Televised: Democracy, The Internet, and The Overthrow of Everything, had noted that the Dean campaign's heavy use of new, interactive media and communications technologies was, "a sneak preview of coming attractions--the interplay between new technologies and old institutions. The end result will be massive communities completely redefining our politics, our commerce, our government, and the entire public fabric our culture." He concluded: "what we are seeing--at its core--is a political phenomenon, a democratic movement that proceeds from our civic lives and naturally spills over in the music we hear, the clothes we buy, the causes we support." President Obama's campaign certainly seems to have been proof of that.
Of course, all this comes in addition to the stunning proliferation of user-generation media such as blogs, discussion boards, listservs, social networking sites, Twitter, You Tube, and so on. Dan Gillmor, author of We the Media: Grassroots Journalism By the People, For the People, notes just how profound the impact of new media and citizen journalism will be:
Tomorrow's news reporting and production will be more of a conversation, or a seminar. The lines will blur between produces and consumers, changing the role of both in ways we're only beginning to grasp now. The communications network itself will be a medium for everyone's voice, not just the few who can afford to buy multimillion-dollar printing presses, launch satellites, or win the government's permission to squat on the public's airwaves.
Likewise, in its recent State of the News Media 2010 report, the Pew Project for Excellence in Journalism reported that "Citizen journalism at the local level is expanding rapidly and brimming with innovation." The report also noted that:
highly promising citizen and alternative sites are emerging daily. Imaginative news formats, partnerships, formats, technological capabilities and passionate supporters of journalism values offer significant reasons for optimism as journalism continues its mission to inform citizens, make their lives better and nurture democratic processes.
Finally, regardless of how spectrum fee proceeds might be spent, the proposal raises fundamental fairness issues for broadcasters. Indeed, it is doubly insulting for them. Not only has public broadcasting and non-commercial media been siphoning off more and more market share in recent years, but this proposal would impose a new tax on private broadcasters to fund those competitors (or some other media outlets) at a time when broadcasters are struggling for their very existence. If Congress imposed a spectrum fee on broadcasters, it would essentially be signing a death warrant for the medium. It's hard to see how that's in "the public interest."
Related PFF Publications
 This essay is condensed from a chapter that appeared in a new book from Congressional Quarterly Press. See: Resolved, Broadcasters Should be Charged a Spectrum Fee to Finance Programming in the Public Interest, Pro: Norm Ornstein, Con: Adam Thierer, in Richard J. Ellis and Michael Nelson, Debating Reform: Conflicting Perspectives on How to Fix the American Political System (2010) at 53-69.
 See generally Adam Thierer, The Progress & Freedom Foundation, Media Myths: Understanding the Debate over Media Ownership (2005) at 85-104, www.pff.org/issues-pubs/books/050610mediamyths.pdf.
 Adam Thierer, The Progress & Freedom Foundation, Why Expansion of the FCC's Public Interest Regulatory Regime is Unwise, Unneeded, Unconstitutional, and Unenforceable, Testimony Before the Federal Communications Commission Hearing on "Serving the Public Interest in the Digital Era," March 4, 2010, www.pff.org/issues-pubs/testimony/2010/2010-03-04-Thierer_Remarks_at_FCC_Hearing.pdf.
 Glen O. Robinson, The Federal Communications Act: An Essay on Origins and Regulatory Purpose, in A Legislative History of the Communications Act of 1934 3, 14 (Max D. Paglin ed., 1989). Likewise, Lawrence J. White has noted that, "The 'public interest' is a vague, ill-defined concept. Under the 'public interest' banner the Congress and the FCC have established far too many protectionist, anticompetitive, anti-innovative, inflexible, output-limiting regulatory regimes and have unnecessarily infringed on the First Amendment rights of broadcasters." See Lawrence J. White, Spectrum for Sale, The Milken Institute Review (June 2001) at 38. See also William T. Mayton, The Illegitimacy of the Public Interest Standard at the FCC, 38 Emory Law Journal 715, 716 (1989).
 Ronald H. Coase, The Federal Communications Commission, 2 J. L. & Econ. 1, 8-9 (1959). Even supporters of broadcast regulation such as Paul Taylor and Norman Ornstein admit that, "neither in the 1927 [Radio] Act nor in the 1934 [Communications] Act, nor subsequently, did Congress define clearly what actions by broadcasters would represent managing their stations in the public interest." Paul Taylor & Norman Ornstein, New America Foundation, A Broadcast Spectrum Fee for Campaign Finance Reform, Spectrum Series Working Paper No. 4, (2002) at 6.
 See Adam Thierer, Media Myths: Making Sense of the Debate over Media Ownership (2005) at 85-104; www.pff.org/issues-pubs/books/050610mediamyths.pdf; Adam Thierer, Is the Public Served by the Public Interest Standard? The Freeman, Vol. 46, No. 9, Sept. 1996, at 618-20, www.thefreemanonline.org/featured/is-the-public-served-by-the-public-interest-standard; William T. Mayton, The Illegitimacy of the Public Interest Standard at the FCC, 38 Emory Law Journal, 1989, at 715-69.
 See John W. Berresford, Federal Communications Commission, The Scarcity Rationale for Regulating Traditional Broadcasting: An Idea Whose Time Has Passed, FCC Media Bureau, Staff Research Paper No. 2005-2, (March 2005) www.fcc.gov/ownership/materials/already-released/scarcity030005.pdf. Berresford refers to the scarcity rationale as "outmoded," "based on fundamental misunderstandings of physics and economics," and "no longer valid."
 Adam Thierer, Why Regulate Broadcasting: Toward a Consistent First Amendment Standard for the Information Age, 15 CommLaw Conspectus (Summer 2007) at 431-482; http://commlaw.cua.edu/articles/v15/15_2/Thierer.pdf.
 Thierer, supra note 4.
 Id. at 7-12.
 "By taking some modest fee from commercial broadcasters for their use of the public spectrum in lieu of the public trustee obligation, noncommercial television could be adequately funded to deliver high-quality public service programming." Henry Geller, Geller to FCC: Scrap the Rules, Try a Spectrum Fee, Current.org, Oct. 30, 2000, www.current.org/why/why0020geller.shtml. Also see Henry Geller, Promoting the Public Interest in the Digital Era, Federal Communications Law Journal, Vol. 55, No. 3, 2003, www.law.indiana.edu/fclj/pubs/v55/no3/Geller.pdf.
 Charles M. Firestone, The Aspen Institute, The Spectrum Check Off Alternative to Public Interest Regulation of Broadcasters, www.aspeninstitute.org/policy-work/communications-society/papers-interest/-spectrum-check-alternative-public-interest-regul
 See Ornstein supra 2 at 61. Also see Remarks of Norman Ornstein at George Mason University event, The Gore Commission, 10 Years Later: The Public Interest Obligations of Digital TV Broadcasters in Perfect Hindsight, Oct. 3, 2008, www.iep.gmu.edu/documents/Ornstein.doc.
 Paul Taylor and Norman Ornstein, New America Foundation, A Broadcast Spectrum Fee for Campaign Finance Reform, Spectrum Series Working Paper #4, June 2002, www.newamerica.net/files/IssueBrief5.FreeAirTime.TaylorOrnstein.pdf.
 Leonard Downie, Jr. & Michael Schudson, The Reconstruction of American Journalism, Columbia Journalism Review, Oct. 20, 2009, at 92, available at www.scribd.com/doc/21268382/Reconstruction-of-Journalism.
 See Robert W. McChesney & John Nichols, The Death and Life of American Journalism (2010) at 209-10.
 Firestone, supra note 14.
 Adam Thierer and Wayne Crews, Cato Institute, Just Don't Do It: The Digital Opportunities Investment Trust (DO IT) Fund, Cato TechKnowledge, No. 35, May 6, 2002, www.cato.org/tech/tk/020506-tk.html
 Quoted in Neil Hickey, TV's Big Stick: Why the Broadcast Industry Gets What it Wants in Washington, Columbia Journalism Review, September/October 2002, p. 53.
 See Thierer & Eskelsen, supra note 7.
 Pew Project For Excellence in Journalism, Local TV, The State of the News Media 2010, March 2010, www.stateofthemedia.org/2010/local_tv_summary_essay.php.
 Michael Grotticelli, Local TV Stations Face Uncertain Future, Broadcast Engineering, Feb. 23, 2009, http://broadcastengineering.com/news/local-stations-face-uncertain-future-0223.
 Pew Project for Excellence in Journalism, Audio - Traditional Broadcast and Broadcast Online, The State of the News Media 2010, March 2010, www.stateofthemedia.org/2010/audio_traditional_broadcast.php.
 Ben Compaine, Domination Fantasies, Reason, Jan. 2004, at 33, http://reason.com/archives/2004/01/01/domination-fantasies
 Quoted in Thomas G. Krattenmaker and Lucas A. Powe, Jr., Regulating Broadcast Programming (1994) at 314.
 Ellen P. Goodman of the Rutgers-Camden School of Law argues: "Given the proliferation of consumer filtering and choice, these kinds of interventions are of questionable efficacy. Consumers equipped with digital selection and filtering tools are likely to avoid content they do not demand no matter what the regulatory efforts to force exposure." Ellen P. Goodman, "Proactive Media Policy in an Age of Content Abundance," in Philip M. Napoli, ed., Media Diversity and Localism: Meaning and Metrics (2007) at 370, 374. And there is no reason to believe this situation has ever been different or will ever change. Writing in 1922, famed journalist Walter Lippmann noted that, "it is possible to make a rough estimate only of the amount of attention people give each day to informing themselves about public affairs," but "the time each day is small when any of us is directly exposed to information from our unseen environment." Walter Lippmann, Public Opinion (1922), p. 53, 57.
 Id. at 374.
 Importantly, many people fail to realize that C-SPAN is a private, non-profit company that is provided as a public service by cable industry contributions. It receives no government or taxpayer contributions. From 1979-2009, total license fees paid by cable & satellite companies to support C-SPAN totaled $922 million. See Adam Thierer, The Progress & Freedom Foundation, C-SPAN, Civic-Minded Programming & Public Interest Regulation, PFF Blog, March 2, 2010, http://blog.pff.org/archives/2010/03/c-span_civic-minded_programming_public_interest_re.html
 Cable TV, in State of the News Media 2009, www.stateofthemedia.org/2009/narrative_cabletv_digitaltrends.php?media=7&cat=6/#key6
 See Thierer, supra note 28. See also Brian Stelter, C-Span Puts Full Archives on the Web, New York Times, March 15, 2010, www.nytimes.com/2010/03/16/arts/television/16cspan.html
 Aaron Smith, The Internet's Role in Campaign 2008, The Pew Internet & American Life, April 15, 2009, www.pewinternet.org/Reports/2009/6--The-Internets-Role-in-Campaign-2008.aspx
 Joe Trippi, The Revolution Will Not Be Televised: Democracy, The Internet, and The Overthrow of Everything (2004), at 203. [emphasis original].
 Dan Gillmor, We the Media: Grassroots Journalism By the People, For the People (2004), at xiii.
 Pew Project For Excellence in Journalism, Community Journalism, State of the News Media 2010, March 2010, www.stateofthemedia.org/2010/specialreports_community_journalism.php