Derived from the August, 1997, issue of Wired (www.wired.com/5.08/netizen/) , who adapted the article from "Channeling Influence: The Broadcast Lobby & the $70 Billion Free Ride," copyright 1997 Common Cause. Common Cause (www.commoncause.org) is a non-profit non-partisan citizen's lobbying group that regularly publishes investigative studies on the effects of money in politics. (The reprinting of this article is not to be construed as any kind of endorsement of Common Cause, or its agenda).
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It's March 1996. During prime time, an advertisement fills television screens in millions of American homes, showing a bank of glowing TV sets tuned to popular programs: Seinfeld, Late Show with David Letterman, and Jeopardy. Then, one by one, the sets go dark as an ominous voice warns that government is about to impose a "TV tax" that would kill free TV. The announcer urges viewers to call their elected officials and protest the imposition of this "tax" before it is too late. The listed toll free number, 1 (800) NO-TV-TAX, reportedly logged about 3,500 calls a day while the ads ran.

Of course, no one in Congress had actually proposed taxing the television industry. Instead, a few Congress members were simply entertaining the novel idea that broadcasters should pay for the right to use broadcast spectrum -- a valuable public resource that may be worth more than US$70 billion -- rather than have it handed over to them for free. The airwaves that transmit radio and TV are not only public property, they also lie at the heart of the way our society communicates.

Nevertheless, the broadcasters' ad campaign got Washington's attention by obscuring the real issue at hand: a spectrum giveaway that some call the mother of all corporate welfare. The ads were a tactical victory, but to ensure success in the long run, the broadcast industry has skillfully exploited Washington's special interest money system by giving generously to political candidates and spending millions to lobby Congress, the Clinton Administration, and the FCC. Meanwhile, in an era when TVs are found in 98 percent of American homes and most Americans get most of their news from TV, the ads also focused attention on one of the most powerful tools in the broadcast barons' political arsenal -- their ability to shape the national news agenda by controlling the messages that TV viewers will and will not see.

THE BIG GIVEAWAY

Since 1934, the federal government has -- for FREE -- given broadcasters the right to use public airwaves to broadcast radio and television signals. Each current broadcaster holds a license assigned by the FCC to use a 6-MHz portion of the broadcast spectrum. Under current technology, that 6-MHz swath permits the broadcast of one channel of analog signal.

In the 1980s, the United States joined the race to develop high-definition television, or HDTV, to broadcast higher-quality TV pictures using the same analog signal. In 1987, to encourage the 1,500 existing American broadcasters to implement the new system, the FCC set aside enough spectrum to give each a second 6-MHz channel. Broadcasters were to use this new band to transmit the same programming as that on their first channel, but in HDTV format. Over time, as broadcasters simulcast programming on two channels, viewers would migrate from standard TV to improved HDTV. Then, when the HDTV transition was complete, broadcasters would return their original 6-MHz band to the government. No one was sure how long this transition would take, but estimates were as high as 15 years.

But then the Digital Revolution changed the story. Digital broadcasting brings not only a higher quality picture, like analog HDTV, but also makes it possible to transmit more information using the same amount of spectrum -- up to six channels of digital information can be sent over one 6-MHz band. The digital transmission can carry not only television and radio signals, but also paging services, cellular phone calls, and computer data. (See "Get Wireless," Wired 5.04, page 142). Simply, digital technology multiplies the utility and economic value of spectrum, but the spectrum giveaway prevents other high tech innovators from gaining access to this precious resource.

Broadcasters have balked at paying for the new spectrum, even if digital technology suddenly makes it much more valuable than originally anticipated. They want it for free because, they say, they can't afford to buy new HDTV technology AND pay for spectrum access. It would be "nearly impossible...to compete in the digital world" under such circumstances, the National Association of Broadcasters (NAB) declared in a position paper, adding that the extra expense would "eventually undermine the free television system."

The economics of broadcasting in America suggest otherwise. Despite competition from cable television, satellites, and the Internet, the broadcast industry remains enormously profitable. Even as the overall number of viewers has eroded, free, over-the-air television remains the only media vehicle that can deliver an audience of 100 million viewers or more. As Marc Hirsch, president of Premier advertising sales and director of worldwide advertising services for the Paramount Television Group, recently observed, "Network television may have lost its share of audience, but it hasn't lost its power and ability to make money for advertisers."

That ability has made the broadcast industry hugely successful. Indeed, broadcasters do better during economic downturns than most industries do during the best of times. In 1992, in the midst of a recession, the editors of Broadcasting magazine reminded television executives that "television's operating margins remain several lengths ahead of most business ventures. Many broadcast groups are still in the 30 percent-plus territory... They could be in almost any other business and be lucky to make 8 percent in a good year."

Meanwhile, it's not at all certain that broadcasters will have to invest the $8 million to $10 million per station they claim will be necessary to make the transition to HDTV. Outgoing FCC chair Reed Hundt has estimated that "putting up a digital transmission system will probably cost somewhere between some hundreds of thousands of dollars to a couple of million dollars per site." An expert at Price Waterhouse's Entertainment, Media and Communications Group estimated a cost of about $2 million per station, which would include a transmission tower, encoder/decoder equipment, and digital cameras. The so-called Grand Alliance of HDTV equipment manufacturers claims that a TV station would have to spend $1.1 million to relay digital TV signals. It's also possible that new transmitter technology will further brings costs down.

Regardless, broadcasters are getting their spectrum for free. The Telecommunications Act of 1996 contains "spectrum flexibility" provisions that direct the FCC to grant new spectrum licenses to incumbent broadcasters and to allow broadcasters to use the new spectrum for purposes other than broadcast TV. The bill doesn't require broadcast spectrum auctions, but it doesn't say that spectrum should be given away for free, either.

The industry is reluctant to take anything for granted. So in the spring of 1996, as Congress held hearings on whether to auction spectrum, broadcasters launched their "TV tax" media campaign. But they needn't have worried -- a slew of well-placed Democrats and Republicans rushed to the industry's defense by opposing spectrum auctions. How have the networks and their corporate parents been able to get so much support for their spectrum grab?

GREASING THE WHEELS

For more than 70 years, almost as long as federal regulation of broadcasting has existed, broadcasters have been refining the art of influencing Congress. Campaign contributions to key legislators have long been a cornerstone of their strategy. Over the past decade, major broadcast interests have given more than $9.5 million to Washington politicians through political action committee donations, individual gifts, and soft-money contributions.

According to Federal Election Commission (FEC) records, PACs of the four major networks' corporate parents, with that of the NAB, gave more than $6 million to Republican and Democratic congressional candidates between January 1, 1987 and November 25, 1996. And contributions from three of those broadcast interests and the corporations that own them -- General Electric/NBC, the NAB, and Westinghouse/CBS -- were large enough to place the fundraising groups among the top 5 percent of all PACs for the decade.

Donations from broadcast PACs were nearly equally divided between the two parties. Democrats, who controlled Congress until 1994, took in nearly $3.2 million while Republicans received more than $2.8 million. Not surprisingly, the giving patterns of broadcast PACs switched once Republicans took control of Congress. During the 1995-1996 election cycle, these PACs gave $882,474 to Republican congressional candidates, compared with $478,450 for Democrats.

But PACs were only one conduit for these major broadcast interests to pour money into the system. FEC records show that 58 broadcast executives from the 10 largest broadcasters contributed another $397,000 to the coffers of congressional candidates, presidential candidates, and political parties during the 1995- 1996 election cycle. And then there are soft-money contributions. Federal law prohibits corporations and labor unions from making direct gifts to federal candidates, and individual and PAC donations are subject to limits. But the soft-money scam lets deep-pocketed special interests flout these restrictions by giving money to the nonfederal bank accounts of national political parties. Since 1988, broadcast interests have made more than $3.1 million in unregulated soft-money contributions to Republican and Democratic national party committees.

These industry giants were pragmatic in their giving, targeting Congress members from both parties who could do them the most good. For example, the 70 members of the 104th Congress's Senate and House Commerce Committees -- which oversee telecom issues -- have received more than $1.26 million from broadcast-related PACs and top corporate executives since 1987. These major broadcast interests gave an average of $18,131 to each Commerce Committee member, or nearly three times the average contribution they gave to Congress members who did not serve on one of the committees.

Within the committees, money was targeted even more toward members of subcommittees that deal with communications issues. The 46 Congress members who have served on the House Subcommittee on Telecommuncations and the Senate Subcommittee on Communications have received more than $952,000 in contributions from broadcast PACs and top broadcast executives over the past decade.

Timing of contributions was designed to achieve maximum political impact. Although 1995 was not an election year, Congress held several key votes on telecommunications reform legislation. It also was a year in which congressional candidates received more than $820,000 from top broadcast executives and industry PACs and when broadcast interests gave more than $625,000 in soft money to national political party committees.

LOBBYING LUCRE

In addition to contributing substantially to elected officials' campaigns and to their parties, broadcasters also sponsor a massive lobbying effort in Washington. The NAB, the industry's leading trade group, is a lobbying behemoth founded in 1922. Today, boasting 7,500 members and annual revenues of more than $35 million, it represents 85 percent of network-owned and affiliated commercial TV stations and 40 percent of all independent and public TV stations in the United States.

The new lobby-disclosure act that took effect in 1996 reveals, for the first time, the magnitude of the broadcasters' lobbying effort. Reports filed for the first half of 1996 alone show that the NAB spent $2.3 million to lobby Congress, the Clinton Administration, and the FCC. During that period, the reports indicate that the association spent more on its lobbying efforts than the Bank of America, Chrysler Corporation, or the National Rifle Association.

But industry giants don't just rely on the NAB. Broadcasters such as ABC, NBC, CBS, Fox, and the Tribune Co. also retain their own lobbyists to influence elected officials and regulators. According to lobbying reports, these largest broadcasters, along with the NAB, spent more than $4 million on lobbying during the first half of 1996. But even this figure underestimates the resources expended to influence elected officials and policymakers. For example, it doesn't take into account the lobbying expenditures of Disney, Westinghouse, and General Electric, owners of the three major TV networks. These corporate parents spent more than $6.7 million on lobbying during the first half of 1996. Taking into account the money spent by the NAB, the major networks, and their owners, the broadcast industry invested at least $10.7 million in lobbying during the first six months of 1996.

Those lobbying dollars were used to supplement the industry's 24-karat connections to Washington's power elite. Former Senate majority leader George Mitchell has been nominated to join Disney's board of directors. Henry Cisneros, US Housing Secretary from 1993 to 1997, was tapped by Univision Communications, which broadcasts to 92 percent of the nation's Spanish-speaking audience, to serve as its president and CEO. NAB president Edward Fritts is a fellow Mississippian and former college roommate of Senate majority leader Trent Lott (R-Mississippi).

Connections to Lott also enhance the lobbying patina of several firms that work for major broadcasters. Barbour, Griffith & Rogers, which conducted $60,000 worth of lobbying for CBS last year, was founded by Haley Barbour, who returned to the firm in 1997 after serving as chair of the Republican National Committee. Barbour, Griffith & Rogers is full of Mississippi political hands, including James Johnson, who spearheaded Lott's campaign for student body president at the University of Mississippi and, more crucially, ran Lott's leadership PAC in 1996.

Republicans hardly have a lock on lobbying connections. The Washington law firm of Verner, Liipfert, Bernhard, McPherson & Hand, which earned $120,000 during the first half of last year from NBC, has enough Democrats on its staff to form a campaign committee. "The firm's letterhead and alumni form a road map to media and telecom hot spots in Washington," Mediaweek declared, noting that the "firm's handiwork is all over the telecom bill now slogging through Congress." Recent additions to the firm include former Senate majority leader Mitchell, former Treasury Secretary Lloyd Bentsen, and former Texas governor Ann Richards. Another of the firm's lobbyists, Lawrence Sidman, served as chief counsel for and staff director of the House Telecommunications Subcommittee.

SPIN CONTROL

Of course, the broadcasting industry is not the only lobby that makes big campaign contributions and hires powerful lobbyists. But there is one thing broadcasters can do that almost no one else can: shape the national news agenda by controlling the information beamed into American living rooms.

Broadcasters are a major presence in every congressional district in the country. They have the power to report and shape the news, including the power to control how issues affecting their own operations -- such as the spectrum giveaway -- are covered. They also control how, and IF, Congress members appear on television. That makes legislators extremely reluctant to take them on. As NAB president Edward Fritts told members in 1995, "No one has more sway with members of Congress than the local broadcaster."

On the networks, nightly news programs are packed with stories about government boondoggles, but this $70 billion giveaway to broadcasters has escaped detection on the radar screens of TV reporters. Worse, because of this news vacuum, virtually the only information television viewers received about the spectrum giveaway has come from propaganda produced by broadcasters themselves -- such as last year's ads raising the phony specter of a "tax" on free TV.

RETURN ON INVESTMENT

Broadcasters have won a lot of important victories, but they may not want to break out the champagne just yet. The 1996 Telecommunications Act permits the FCC to levy fees on broadcasters who use digital technology to offer subscription-based services. And broadcast spectrum remains attractive to Congress members interested in cutting the budget deficit. Senator John McCain (R-Arizona), chair of the Senate Commerce Committee, has introduced S255, which would auction off a portion of the spectrum between channels 60 and 69 -- territory estimated to be worth as much as $7 billion. The Clinton Administration also has been eyeing this swath of spectrum to raise money for rebuilding US schools.

Support from Congress, regulators, and the White House is also increasing for the notion that broadcasters should give something back to the public in return for their free digital TV licenses. The FCC is now considering whether to impose additional public-interest obligations on broadcasters, such as providing free TV time for political candidates. Last February, the Clinton Administration announced plans to convene an advisory committee to recommend new public-interest requirements for broadcasters in the digital age.

Of course, broadcasters don't like any of these proposals, and they're already marshaling their forces in opposition. Money buys influence in Washington, and the broadcast industry has been spreading lots and lots of cash around. Once again, the return on their investment will arrive in the form of side letters and backroom deals, as the broadcasters' allies move to resist any effort to give the public something back in return for their free gift of spectrum. Through their power to control what Americans see at home and their prowess at the Washington influence-money game, the broadcast industry has hit the jackpot to win one of the largest corporate welfare giveaways in US history.

SOURCE: Excerpted from the August, 1997, issue of Wired Magazine, from an article entitled, "Channeling Influence: The Broadcast Lobby & the $70 Billion Free Ride." This article is reprinted as a public service to the national interest of the American people.