What to do with public TV’s ‘spectrum auction’ windfall

Via MaxPixel

SAY YOU MAKE $50,000 A YEAR—a reporter’s average salary in 2016—and suddenly you get $1 million. Proportionally, that’s about what has just happened to Commonwealth Public Broadcasting, a public television and radio station group based in Richmond, Virginia. The organization, whose most recent public filing showed an annual revenue of $9.7 million, won $186 million in the FCC’s first-ever broadcast spectrum “incentive auction,” in which broadcasters sold some of their over-the-air television channel space to spectrum-hungry wireless network companies.

The likes of T-Mobile and Comcast spent almost $20 billion on spectrum occupied by 175 commercial and noncommercial stations. Roughly $2 billion of that total was for noncommercial station spectrum, including the spectrum for two northern Virginia stations owned by Commonwealth. Now this NPR and PBS provider in Richmond has a one-time payment of about 20 times its annual revenue to do…what, exactly?

Commonwealth’s leaders are trying to run an open and inclusive process to find an answer to that question. But not all big beneficiaries of the auction are doing the same.

Now that the auction results are in, there’s a real danger that some of the biggest winners won’t use the money for local journalism or anything else in keeping with public media’s mission.

The airwaves are a public, natural resource. The federal government handed out most of the public media system’s broadcast licenses decades ago for free, with the expectation they’d be used to inform, educate and culturally enrich the public. Now that some of those licenses have appreciated in value, it seems unconscionable for the license-holders to literally sell them to the highest bidder and use the money for anything other than the public services for which the licenses were originally intended.

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Maybe the money doesn’t have to be used for TV. But certainly it should be used to inform, educate and culturally enrich the public, right? Corporation for Public Broadcasting board member Howard Husock argued in a 2015 article that stations should plan to invest their auction proceeds in local journalism—part of his vision of a public media system that shifts its primary focus from broadcasting national programs to filling the void left by shriveling local newspapers. Now that the auction results are in, there’s a real danger that some of the biggest winners won’t use the money for local journalism or anything else in keeping with public media’s mission.

Even at those organizations like Commonwealth that are talking about spending the money on new reporters and programs, there’s a risk that the people and institutions who’ve supported public media in their communities all along may determine that their help is no longer needed. There’s yet another risk that leadership at newly flush stations could grow complacent in their security and lose the drive to innovate and to serve new audiences on new platforms. In the end, these spectacular spectrum auction winnings could leave public media in the United States even weaker than it was before, unless stations and their supporters work to avoid a few obvious traps.

As listeners and viewers are increasingly able to get access to national programming in new ways, there will be an existential need for local stations to have original content in order to maintain local support.

THE BIGGEST POTENTIAL HAZARD is that some stations might not even get the money they’ve won. Remember that half of public TV stations are licensed to some bigger organization, like a university or government, which presents a number of editorial conflicts of interest. Here, it also presents a financial conflict: The license-holder gets the spectrum auction money, not the station.

New Jersey’s state government sold off NJTV channels in the Philly and New York markets for a combined $332 million, leading former New Jersey Gov. Tom Kean to write an op-ed pleading with state lawmakers to give at least some of that money back to the state’s public television system.

But, as a spokesperson for New Jersey Treasurer Ford Scudder told me in an email, “The FY18 budget anticipates $325M from asset sales. The Treasurer has expressed that he anticipates a portion of that coming from the FCC Broadband Spectrum Auction proceeds.” Sure sounds like they’re going to use the money to plug random state budget holes.

Another huge spectrum auction winner, California’s San Bernardino Community College District, sold a KVCR channel for $157 million. Station officials recently presented the college’s board with a plan that they said is dependent upon auction proceeds to modernize facilities and ramp up production to include a new local news program. However, college officials have clearly indicated that not all of the money will be going to the station.

In contrast, organizations like Commonwealth Public Broadcasting in Virginia and WGBH in Boston (another big auction winner) are at an advantage here, because they are licensed to single-purpose community boards that offer no other services on which they will be tempted to spend the money.

Governments or colleges that hold station licenses could make at least two good arguments as to why it would be appropriate for them to use spectrum auction proceeds on anything other than public media. First, most license-holders have spent their own money running these stations, and they deserve some of it back. Second, few of the public TV spectrum auction deals are resulting in a significant loss of service, because most of the winners say they plan to keep affected stations on the air via advances in technology that allow two channels to broadcast over spectrum that previously could only handle one.  

We’ll see if local communities hold these institutions to their promises about keeping affected channels on the air by “channel sharing” and other means. It’s important to remember that over-the-air TV is watched by a generally more vulnerable demographic that could be harmed by even modest reductions in service. At the very least, some of the planned channel moves could result in poorer reception.

Who’s to say a public TV station couldn’t sell off its spectrum, liquidate its broadcasting equipment, and use the resulting fortune to endow itself as a totally new, digital-only investigative news agency, like a local ProPublica?

THOSE STATIONS THAT WILL KEEP THE MONEY face some hazards of their own. To the vast majority of station organizations that won no money at all, these may seem like “champagne problems,” but they are problems nonetheless.

Say that Commonwealth put all its $186 million auction proceeds—20 times its annual revenue—into an endowment. A typical nonprofit endowment would generate, on average, one-twentieth of its value each year in spendable cash. Commonwealth could theoretically fund itself in perpetuity without ever having to raise another dime from donors or sponsors. Commonwealth officials didn’t reply to my request for an interview for this piece, but if they’re reading this right now, they might be shouting “For God’s sake, don’t make people think we don’t need them anymore!”

When McDonald’s heiress Joan Kroc bequeathed $200 million to NPR in 2003, fundraisers and lobbyists for public radio had to work against a misconception that they no longer needed anyone else’s money. Public television leaders now have the same anxiety. The big auction beneficiaries would like to use that money to significantly expand, not just maintain the status quo. To do that, they’ll need their spectrum proceeds and their traditional revenues.

A one-time windfall of $2 billion certainly won’t be enough to offset the Trump administration’s goal to eliminate CPB’s $445 million annual appropriation. Also, endowments are unpredictable—they lose money when the market does poorly. This is why nonprofits try to treat endowments as a supplement to incomes that are more stable on a year-to-year basis, like government appropriations.

Moreover, organizations like Commonwealth will definitely not be able to invest all their auction money into an endowment. The technical expenses of moving these stations around the spectrum are likely to be enormous, and the FCC is only planning to reimburse those affected broadcasters that didn’t sell any spectrum themselves.

The airwaves are a public, natural resource. Maybe the money doesn’t have to be used for TV. But certainly it should be used to inform, educate and culturally enrich the public, right?

IN THE BEST-CASE SCENARIO, a handful of organizations that were lucky enough to own expendable spectrum in electromagnetically crowded places will be able to use their proceeds to permanently endow their existence. That presents one more hazard: complacency.

Rhode Island PBS President David Piccerelli recently told me on The Pub that his board plans to place the “lion’s share” of their $94.5 million auction proceeds into an endowment, which could easily yield the organization’s current budget annually. He told me he plans to hire some reporters, but also to put a lot of money toward long-deferred broadcast facility upgrades—a sensible expenditure, assuming the intention is for Rhode Island PBS to go on being a television station.

There’s no reason to take that as a given. Who’s to say a public TV station couldn’t sell off its spectrum, liquidate its broadcasting equipment, and use the resulting fortune to endow itself as a totally new, digital-only investigative news agency, like a local ProPublica?

That would be something closer to what Howard Husock had in mind for the spectrum auction results. He’s in hot water with his CPB board colleagues lately because he wrote an op-ed arguing that public broadcasting, in its current form, no longer deserves federal funding. But he told me he’s still hopeful that auction money could transform at least a few stations into the local news orgs he thinks they ought to be in the 21st century.

“That’s in the enlightened self-interest of local licensees,” Husock wrote. “As listeners and viewers are increasingly able to get access to national programming in new ways, there will be an existential need for local stations to have original content in order to maintain local support.”

Perhaps the biggest risk of the spectrum auction is that some stations will use the money to just keep offering the same old national programming for which there will eventually be little local support—because, now, they don’t need any support at all.

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Adam Ragusea is a journalist in residence and visiting assistant professor at Mercer University’s Center for Collaborative Journalism and hosts Current.org’s podcast The Pub.