Foes Say Spectrum Fee Will Fall

Like gardeners fighting a tenacious weed, broadcasters again will spend political capital this spring clearing a proposed spectrum tax from the federal budget.

Nobody in the industry seems particularly worried about the ultimate success of their effort—many a spectrum tax has sprouted before, and none has survived—but they acknowledge that the roots will be a bit tougher to extract than those of similar proposals.

"In years past, the degree of difficulty in killing the spectrum fee ranked a 1 on a scale of 1 to 10. Now it's a 3," said one industry source. "The outcome is the same: It will not see the light of day."

For the moment, page 300 of the 2004 budget states: "To encourage television broadcasters to vacate the analog spectrum after 2006, as required by law, the Administration is proposing legislation authorizing FCC to establish an annual lease fee totaling $500 million for the use of analog spectrum by commercial broadcasters beginning in 2007."

So why has this spectrum tax gained a little more traction? Policymakers face not only the ever present need for new money but also are under increasing pressure to sell analog TV spectrum to wireless companies and others hoping to roll out cutting-edge services.

Under the president's plan, TV stations would pay a tax on their analog spectrum beginning in 2007, one year after the government's ostensible target date for completing the switch to all-digital TV broadcasting and retrieving spectrum now used for analog channels.

Wireless companies that covet the frequencies are pushing what they call a "squatters tax" because it's clear to them that too few consumers will have digital TV sets by 2006 to meet the 85% penetration test that will legally trigger the analog giveback. That push, however, does not appear to be a match for the broadcast lobby.

Few in the broadcast industry will diss the president's plan on the record, lest ticked-off officials ramp up the degree of difficulty to a 4 or 5, but annoyance rather than fear seems to be the reigning sentiment of network and TV-group owners.

The National Association of Broadcasters will again take the lead in fighting the proposal.

"Free, over-the-air broadcasters are doing everything possible to complete the transition to digital," NAB President Eddie Fritts said in a statement. "Congress has wisely rejected spectrum taxes on broadcasters for the past several years, because lawmakers recognize the timetable for the transition to digital television will be determined by consumer acceptance and not by arbitrary government dictates."

Those lawmakers are searching for ways to speed the transition, but Rep. Billy Tauzin (R.-La.), chairman of the House Energy and Commerce Committee, has dismissed the idea. "We want the spectrum back as soon as possible, but we don't think a squatters tax is the best way," said Tauzin spokesman Ken Johnson. "Smaller stations might go out of business, and bigger ones might find it's cheaper to pay the fee and sit on the spectrum than convert to digital." Johnson said that alternatives to pushing the DTV switch are being considered, including DTV legislation Tauzin hopes to submit this year.

The bill is expected to address a number of DTV issues by requiring affiliates to pass through a network's entire digital signal without degradation, mandating that all TV sets recognize a "broadcast flag" that prevents unauthorized copying, prohibiting manufacture of sets with analog outputs, and forcing cable operators to transmit "plug-and-play" signals that don't need set-top converters.

A previous Tauzin bill called for a hard 2006 date for retaking analog spectrum, but the prospect of a potential consumer backlash makes revival unlikely.

Senate Commerce Committee Chairman John McCain (R-Ariz.) has included spectrum fees as part of his campaign-finance–reform drive, but that element of his push has gained little traction on Capitol Hill.

Broadcasters point out that the 2006 deadline was created to satisfy Clinton-era budget balancing and was not based on realistic estimates of how long it would take consumers to adopt DTV. Punishing broadcasters for not meeting an unrealistic deadline is unfair, they say.

Public advocates have mixed feelings about spectrum fees. On one hand, they say, broadcasters have not lived up to their promises to convert to DTV quickly, and they see nothing wrong with penalizing them for sitting on their spectrum. On the other hand, they are troubled by government's apparent willingness to view spectrum sales and fees as a cash cow. "Traditional public-interest concerns get squeezed out by the overwhelming need to balance the budget," said Harold Feld, Media Access Project associate director.