Beginning in the 1950s, local TV broadcasters have argued that because they provide a "free" (i.e., ad-supported) product to the American people, the government should treat them more favorably than other commercial businesses that charge consumers for their products. In the name of preserving free TV, the government has transferred from the public to broadcasters control over assets (spectrum) worth at least $100 billion in the last decade alone -- despite the fact that fewer than 15% of U.S. households still rely on over-the-air broadcasts, the rest subscribing to paid cable and satellite TV. Thanks to this special treatment, local TV broadcasters routinely earn profit margins from 40 percent to 60 percent on this "free" service -- a remarkable feat for any business.
Free TV started as an economic necessity for broadcasters and evolved into a lobbying rationale to keep down competitors. Now, as the technology of broadcasting is changing, broadcasters are moving into fee-based services. But while they are abandoning free TV whenever it is profitable to do so, they don't want to sacrifice the subsidies they are getting in its name. The end result of this pattern will be the death of TV at the hands of the very people who claim to be supporting it.
This paper calls into question the vast subsidies given to broadcasters in the name of free TV. There is, however, an alternative to the current policy of corporate welfare for "free" TV. Every American could be guaranteed their current free TV fare, just not over the same airwaves. Currently, these broadcasters use the most valuable airwaves available on earth to distribute their programming. But the programming could also be delivered over the much less valuable spectrum that can be used with satellite TV delivery and equipment subsidized by the government for a fraction of the revenue that would flow from freeing up and auctioning prime broadcast spectrum.
For the complete document, in full Working Paper form or more compact Issue Brief form, please see the attached PDF documents below.