Taxes, Regulations, and the Public Media Mantra

A recent paper from the New America Foundation continues the push for taxes on spectrum and more regulations on broadcasters and wireless companies, all for the supposed betterment of “public media.” Each policy recommendation amounts to a call for consumers to pay higher bills, but the paper’s broadest failure comes from trading a consumer-driven market for special interest demands.

New American Foundation bemoans the decline of print and broadcast media, while simultaneously complaining that “quality journalism” (a term they never define) and localism and diversity in media are eroding. Aside from asserting a problem that may or may not exist, the primary fault of the paper lies in forgetting that markets are dynamic and markets evolve because they are driven by consumers. The demand for certain types of media is alive and well – just in a different place than it used to be. The Internet isn’t just becoming the conduit for video and print journalism; it is absorbing and boosting local media through blogs and local news outlets. Calls for increased taxes or regulatory measures to fund or push public media are attempts to boost supply grossly beyond what consumers demand. Now a few specific problems with the study:

First, New America Foundation slams a property rights based system for spectrum (along with spectrum auctions) claiming that it entrenches powerful companies who are loathe to relinquish finite spectrum. Their solution is a five percent tax on spectrum holders with revenues dedicated to “public media.” The tax, which was also proposed by President Obama, is supposed to create an opportunity cost for holding unused spectrum instead of putting it to more efficient uses. Instead, the tax is likely to be passed along to consumers using mobile devices or watching broadcaster content. Unfortunately, it's not the first time we've heard calls for higher taxes to fund public media. The FTC floated a $35 billion tax on wireless devices and more back in 2010.

We are approaching a point where available spectrum for wireless service will not meet demand, but making spectrum more expensive through taxes certainly won’t help bring more to market. The joke is that New America Foundation’s saving grace (government) holds 60 percent of spectrum ideal for mobile broadband. Government – not the private sector – is the most entrenched and powerful interest loathe to give its spectrum up. A better solution would be to force government to give up its inefficiently used spectrum to the private sector. Additionally, Congress rightly enacted voluntary spectrum auctions this year, where licenses will be traded when it’s more valuable to sell than to hold spectrum. Finally, government rules should be relaxed so that spectrum holders can more easily offer their spectrum to others on a secondary market.

Second, the paper calls for Net Neutrality style “non-discrimination” rules on wireless broadband service to ensure access to public media. Quite simply, this is a solution in search of a problem. For the pit-falls of such rules, like decreased quality of service and the FCC’s complete lack of legal authority to enact them, click here.

Lastly, the paper’s final recommendation is for regulations on wireless providers to build out universal service, supposedly to achieve “reasonably priced” service. They rightly hint that the current Universal Service Fund (paid for by taxpayers) has a better track record of waste, fraud, and abuse than at connecting all Americans. But forcing companies to build cell towers in locations with virtually no customers translates directly into higher prices for all the company’s consumers. This is a tangible cost with almost no guaranteed benefit for public media.

It’s time we ditch the public media mantra and all the disastrous policy solutions that come with it. If consumers demanded it more, there would be more of it. Consumers – not special interest groups or corporations – drive markets.