Freedom Line Blog

As Congress considers reauthorization of the Federal Communications Commission (FCC), it must exercise extreme diligence to prevent it from becoming a vehicle for crony capitalism and waste of taxpayer dollars.

Currently, Congressional FCC reauthorization includes provisions that would reimburse broadcasters in spectrum incentive auctions, which could in turn be exploited to subsidize the upcoming ATSC 3.0 transition, as many had predicted.  By way of background, ATSC 3.0 refers to the upcoming transition to yet another new broadcasting standard, which will force over-the-air viewers to purchase new television sets or converter equipment at their own expense.  If that rings a bell, it’s for good reason.  That’s what occurred in recent years with the last conversion.

Here’s the problem.  Current provisions could constitute a blank check at taxpayer expense to broadcasters so that they could fund new equipment for the transition from the U.S. Treasury, as the legislation creates a new Treasury Fund in an undisclosed amount of money.  Although broadcasters ostensibly must direct the money they receive only toward costs associated with the spectrum auction, the likely scenario remains that the FCC will remain unable to detect and stop waste, fraud and abuse if the funds are used instead to upgrade their equipment in pursuit of ATSC 3.0.

Accordingly, it’s important that Congress not allow this legislation to become a wasteful open account for broadcasters to exploit for their own benefit at taxpayer expense.  At a minimum, they must establish greater safeguards to ensure that waste, fraud and abuse are not allowed, and that American consumers are not deprived of access to over-the-air TV access as a consequence of necessary installation of ATSC 3.0 transition equipment funded by taxpayers, whether in whole or in part.

To be clear, we welcome any and all technological and telecommunications advancement in this field, but we must also remain vigilant against the looming likelihood of crony capitalism and waste of taxpayer dollars in an era of growing deficits and debt.  Congress must therefore ensure that protections against those possibilities are incorporated into upcoming FCC reauthorization.

The new Federal Communications Commission (FCC) has been one of the most consistently outstanding agencies of the Trump Administration in terms of restoring regulatory sanity after eight years of politicized abuse throughout the Obama Administration.

Unfortunately, the FCC remains under assault from groups seeking to leverage federal policy toward its own advantage, and continued vigilance is critical.

In just the latest illustration, broadcasters have begun pressuring the FCC to allow television stations to begin transmitting signals in a new “ATSC 3.0” format.  Also referred to as “Next Gen,” such a transition would impact every American consumer who watches television, and not necessarily for the better.  In addition to costing taxpayers, it could create a de facto federal mandate on television service providers.

First, the ATSC 3.0 format is incompatible with existing televisions and set-top boxes, meaning that Americans who wanted to simply continue watching television would have to purchase new equipment or join a pay-TV provider that had spent the time and money transitioning its equipment.  That, of course, would be a cost transferred to customers.

Second, the proposed transition could also mean weaker signals for consumers who choose over-the-air broadcast.  That’s because it would involve simulcasting from facilities with smaller or new coverage areas, placing rural voters in particular jeopardy.

Additionally, ATSC 3.0 could bring more dreaded blackouts, since broadcasters could seek to force pay-TV providers to carry ATSC 3.0 signals under threat of blackout (a tactic broadcasters have exploited in the past on behalf of such efforts as ratcheting up retransmission fees).  Accordingly, broadcasters can leverage their government-provided bargaining position to obtain higher fees for themselves via threat of consumer blackouts, which they’ll surely employ in their effort to force consumers and providers to purchase the new equipment necessary for reception.

That, of course, translates to higher costs for consumers, or giving up their favored programming altogether.

The better alternative is to let market forces work, by making the Next Gen transition wholly voluntary.  Broadcasters operate under an umbrella of government license, which allows them to hold consumers hostage in order to increase revenues.  Accordingly, the FCC should continue its good works by rejecting broadcasters’ attempt to leverage federal bureaucracy to achieve a new government handout to be subsidized by consumers.  Next Gen should be a truly voluntary standard that doesn’t leave consumers holding the bill for the broadcasters’ innovation.

Next month’s arrival of a new Trump Administration, alongside a Congress ready to hit the ground running, promises a flurry of corrective activity after eight years of Barack Obama.

However, Americans should remain vigilant against regulatory mischief that some are trying to push through unnoticed at the outset of the new Administration and Congress.

Exhibit A:  An effort by broadcasters to convince Obama’s Federal Communications Commission (FCC) to approve an entirely new broadcast television standard known as ATSC 3.0.

In a nutshell, the ATSC 3.0 standard amounts to yet another new federal action upon a private marketplace and a handout to a favored industry that could inflict significant and unnecessary costs, ultimately to be paid by consumers.

Under current law, cable and satellite television providers must carry local television stations, so the regulatory scales are already tipped in broadcasters’ favor.  The proposed new mandate could extend the scope of providers’ obligations requiring them to transmit broadcast signals in the new standard to the public.

As a result, consumers who currently receive local stations over the air or via cable or satellite providers suddenly would face the possibility of incurring the cost of new equipment in order to receive the new signal, as current equipment does not support the new standard.  Obviously, millions of consumers who are already struggling to make ends meet could thus be forced to pay – whether through higher monthly subscription fees or direct charge – for new equipment for a “benefit” that may not be needed or even desired.

Satellite and cable providers could also face technological hurdles to accommodate the new standard, which could inevitably lead to additional costs and quality assurance issues.  Ultimately, subscribers could have to pay those costs and endure those potential technological glitches as well.

Keep in mind that all of these costs and changes could be imposed without a sober cost/benefit analysis from the FCC.  It’s precisely the sort of hasty, top-down, crony capitalist federal regulatory action that has tested the limits of American tolerance over the past decade.

Technological advance is a good thing, whether in the TV market or elsewhere.  But that’s something that should occur as the result of market forces, not through fast-tracked federal regulatory action riddled by too many uncertainties.