IP: The NAB and its PACs

[David Farber <farber () cis upenn edu>]

Date: Wed, 13 Aug 1997 18:43:05 -0800
To: farber () cis upenn edu
From: "--Todd Lappin-->" <telstar () wired com>


> Denis,
>
> I agree but to pull this off you will have to first eliminate the
> substantial influence of the NAB and their PACS on the Hill
>
> Dave


Dave... in light of your comment about the NAB and it's influence in
Washington; please feel free to pass this along to IP.  It details the
story in lurid detail.


--Todd-->




> From WIRED Magazine, September 1997, page 45.


The Netizen:


Your Master's Voice


The most rapacious lobby in Washington?
It's not the telcos or oil. It's big media.


A report from Common Cause.




During prime time, an advertisement =DElls 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 of=DEcials and protest the imposition of this "tax"
before it is too late. The listed toll free number, 1 (888) 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-de=DEnition
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 =DErst 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 =8A 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 pro=DEtable. 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. =8A 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 bring costs down.


Regardless, broadcasters are getting their spectrum for free. The
Telecommunications Act of 1996 contains "spectrum =FEexibility" 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 re=DEning the art of
in=FEuencing 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 =FEout 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 Telecommunications 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 party committees.


Lobbying lucre


In addition to contributing substantially to elected of=DEcials' 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
-af=DEliated 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 =DErs=
t
time, the magnitude of the broadcasters' lobbying effort. Reports =DEled for
the =DErst 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 Ri=FEe
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
in=FEuence elected of=DEcials and regulators. According to lobbying reports,
these largest broadcasters, along with the NAB, spent more than $4 million
on lobbying during the =DErst half of 1996.


But even this =DEgure underestimates the resources expended to in=FEuence
elected of=DEcials 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 =DErst 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 just the =DErst six months of 1996.


Those lobbying dollars were used to supplement the industry's 24-carat
connections to Washington's power =E9lite. 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 =DErms that
work for major broadcasters. Barbour, Grif=DEth & Rogers, which conducted
$60,000 worth of lobbying for CBS last year, was founded by Haley Barbour,
who returned to the =DErm in 1997 after serving as chair of the Republican
National Committee. Barbour, Grif=DEth & 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
=DErm of Verner, Liipfert, Bernhard, McPherson & Hand, which earned $120,000
during the =DErst half of last year from NBC, has enough Democrats on its
staff
to form a campaign committee. "The =DErm's letterhead and alumni form a road
map to media and telecom hot spots in Washington," Mediaweek declared,
noting that the "=DErm's handiwork is all over the telecom bill now slogging
through Congress." Recent additions to the =DErm include former Senate
majority leader Mitchell, former Treasury secretary Lloyd Bentsen, and
former Texas governor Ann Richards. Another of the =DErm'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 de=DEcit.
Senator John McCain (R-Arizona), chair of the Senate Commerce Committee,
has introduced S 255, which would auction off a portion of the spectrum
between channels 60 and 69 - territory estimated to be worth as much as $7
billion. (See "The McCain Mutiny," Wired 5.06, page 122.) 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 in=FEuence 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 in=FEuence-money game, the=
 broadcast
industry has hit the jackpot to win one of the largest corporate welfare
giveaways in US history.


--------------


Common Cause (www.commoncause.org/) is a nonprofit, nonpartisan citizen's
lobbying group that regularly publishes investigative studies on the
effects of money in politics. This article was adapted from "Channeling
Influence: The Broadcast Lobby & the $70 Billion Free Ride," copyright =A9
1997 Common Cause.
###