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Mason Gaffney: Interview: Is There a Conspiracy in the Teaching of Economics and History within the American Education System?

TPR - If what you're saying is true, this is a pretty big story; why aren't you doing this interview with Larry King, or at least Geraldo? Do you think the press is getting paid off, too or do you just need a better press agent?

MG - Once the public domain was handed over to a handful of rich, politically connected people, they consolidated their position by taking control of the media, of education, and the churches. This has become so much a part of our being that people hardly think about it, and what it implies. No one needs to pay off the press: in most cities, the biggest single downtown landowner is the press itself. No one needs to pay off radio and TV stations: their spectrum assignments are the basis of their being.  Read the whole article

Chuck Metalitz: Licenses to Steal Are Expensive

The electromagnetic spectrum is, economically, land, in that it is a natural resource which cannot be manufactured. Accordingly, the economic value of a license to use a portion of the spectrum is determined not by its cost of production, but by its usefulness in comparison to licenses available for free. And, due to anticipation of future increases, the market value of a perpetual (or any long-term) license can grow to levels higher than can be supported by current use of the license.

Using financial reports filed by owners of radio broadcast licenses, this Research Note shows that license values are approaching, or may even have reached, such levels. It also shows that the main asset on these companies’ books is their licenses. This means that, while Henry George would recommend that substantially all the rent of these licenses be collected thru taxation, such a policy would be a major inconvenience for such companies.

This Research Note also provides some information about auctions of radio broadcast licenses, and their role in the Federal budget.

This paper was written because I resented being sold for $17
The value of privilege is visible— but it isn’t going to the shareholders.
The Radio Broadcast Spectrum is Being Auctioned.
Large operators have the advantage in getting financing, but FCC pretends otherwise.
Not only the radio broadcast spectrum is being auctioned.
The outlook for radio broadcast license values
Henry George’s solution might cause some dislocation.
Table 1: Licenses, Assets, Revenues for Some Major Broadcasters
Table 2: Operating Income and Related Factors
Table 3: Operating Profit and Income Available to Common
Table 4: Assets and Long Term Debt

This paper stems1 from an event last year, shortly before the Des Moines conference. Chicago’s only remaining privately-owned classical music station, WNIB2, was sold for $165 million. Bonneville International Corporation bought the station not because they wanted to continue or improve its operation; what they really bought was a license to broadcast to a market of nearly 10 million people. In fact, they bought the market, at a cost of about $17 per person.

Well, I used to listen to WNIB, and I resented being sold for $17. I wanted to look into the business of broadcast radio, and try to analyse it in Georgist terms. George pointed out that those who could monopolize natural opportunities could exact a toll on users, and that speculation could lead to excessive costs of access which eventually make productive use impossible.

What I found is, first, that the major asset of broadcasters is privilege. Actually, I could have figured that out just by reading the Chicago Tribune3, who quoted the publisher of a radio trade magazine: “These radio stations are a license to steal. They’re gushing oil wells.”

And, second, I found that speculation in broadcast licenses does indeed appear to have reached a point where productive activity is quite difficult, though not yet impossible. One can make money in radio, but it’s mainly done by holding licenses rather than producing programming. ...

I’m going to give some background on the industry, then some detail to support the assertions made above. Then I’ll treat some related matters, including the implications of spectrum auctions, future trends in license values, and, of course, Henry George’s recommendations. Limited financial data about the radio broadcast industry is available.

 The 4685 AM and 8032 FM commercial stations licensed4 in the United States have literally hundreds of owners. Many are privately-held corporations with just a few stations, or companies in other businesses— notably newspapers— with a station or two among their holdings. But the really valuable licenses, those serving large metropolitan areas, are largely controlled by a few huge corporations. One report claims that four companies control the stations receiving 90% of radio advertising revenue.5

The biggest radio broadcaster, Clear Channel Communications, owns 1,140 stations, including five or more in each of the seven largest market areas.

Infinity Broadcasting, a subsidiary of multimedia conglomerate Viacom, has 184 stations in 41 market areas, accounting for 13% of total U. S. radio advertising expenditures6. Some other large broadcasters are shown in Table 1. ...

It is, I think, well-known that large corporations can borrow cheaper than small ones. Therefore, as expensive licenses increase the amount of upfront money needed to get into the radio broadcasting business, it becomes relatively more difficult for small operators, and relatively easier for large ones, to own and operate stations.

As one station broker put it, “First time buyers are not going to get bank financing. In the present business climate some experienced buyers are not going to get loans unless they have ‘outside’ assets to pledge. . .Most bankers do not understand the broadcasting business. . . if it does not have a car title attached they are without a clue.”14

The FCC does not seem to recognize this problem. In their paper which “explains why auctions are superior to comparative hearings for selecting among mutually exclusive applications for spectrum licenses,” FCC staff address the concern that small businesses may be unable to compete, using phrases reminiscent of economist jokes: “Given efficient capital markets, the bidder with the best business plan, producing the highest expected profits, will get the best financial backing and will be able to place winning bids15.” The paper, of course, does not consider any other method of spectrum allocation. ... read the whole article


Mason Gaffney: Geoism, Recession and Control of Monopolies

It seems that a great deal of anti-trust legislation from the Progressive Era had been aimed at monopoly in the flicks, which had started with Thomas A. Edison, who was as much a patent-litigation bully as he was a pure inventor. Much of this legislation became unravelled under President - guess who? - Ronald Reagan, spawn of the "entertainment" industry, and political voice for same. Vertical integration and media mergers and monopolization then ran wild. Disney under Eisner, of course, has played a role in this. Disney as real estate developer throws its heavy weight around brutally.

This question arose in connection with Georgist taxation, and what it would do about Mr. Eisner, and overpaid CEOs like him. The answer, I think, is that "Georgism" involves more than taxation. It also involves promoting competitive markets and smiting or breaking up mergers, monopolies, and restraints of trade, by various means. It was, after all, part of first the Populist, and later the Progressive Movements.

"Georgism" may be construed narrowly as a limited fiscal reform. Some of its votaries present it that way. As such, it is rightly suspected of being a bit cranky, and too limited. I see it as a broad front program to limit centralized monopoly control of industry, and promote free entry and free competition with proper regard for both consumers and workers.
Some free market purists may look askance at anti-trust actions. Consider, however, that we are dealing with people who hold patents, which are inherently anticompetitive, especially when used as clubs in the Edison manner. Consider also we are dealing with corporations, which are inherently combinations of capital made possible by the device of limited liability. When government gives an anticompetitive privilege, it seems fitting that government should limit the resulting abuses of power.  Read the whole article

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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper