Congress’s ‘instant replay’ will save Americans’ broadcast signals

Congress’s ‘instant replay’ will save Americans’ broadcast signals

American sports fans have grown accustomed to the use of instant replay to correct the erroneous judgments of officials that cause game-changing inequities. The Senate must now pass the House’s legislative version of instant replay to correct a game changing “bad call” that threatens to permanently silence many local radio and television stations across the nation and harm the public thereby.

On February 22, 2012, Congress signed P.L. 112-96, codified at 47 U.S.C.A. § 1452. Among other things, that law, with the marvelously transparent and typically utopic Obama-era title of “The Middle Class Tax Relief and Job Creation Act of 2012,” contained Title VI, or the “Spectrum Act.”

The Spectrum Act ambitiously seeks to resolve a long-festering broadcast frequency/spectrum crisis through reallocation of the existing frequencies assigned in the broadcast spectrum for television, radio, wireless communication, and public safety broadband networks on a nationwide basis.

These broadcast spectrum assignments often dated from the dawn of television network broadcasting. The broadcast frequency assigned to a broadcaster is valuable property and represents the “real estate” owned and occupied by the broadcast station as the place it does business. Washington bureaucrats unequivocally promised that no broadcaster’s signals or business would be negatively affected under the Spectrum Act because all broadcasters would simply receive a new spot on the MHz bandwidth.

The reallocation idea, a very good one in theory, was to establish a process for television broadcasters to release spectrum licensed to them for auction as commercial licenses to be “repacked” by the FCC for greater efficiency and for other more modern like high-speed wireless broadband.

The Spectrum Act’s “incentive auction” concluded on March 30, 2017. In total, the FCC repurposed 84 MHz of spectrum, yielding $19.8 billion in revenue, and more than $7 billion in clear governmental profit – by most measures, an overwhelming success.

However, Congress did make one bad call – an unintended oversight – in the early innings that have made a win, or even sustained survival, nearly impossible for some broadcasters. Structural upgrades on TV towers will necessitate spending on renovations and has forced affected broadcasters to look for new channel assignments – a task that must be completed thirty-nine months from the auction close date, e.g., June 30, 2020.

In 2012, Congress anticipated these costs, or presumed they did, and earmarked “$1,750,000,000 of the proceeds from the incentive auction of broadcast television spectrum … shall be deposited in the TV Broadcaster Relocation Fund”, see 47 U.S.C. §309(j)(8)(G)(ii)(I).

Unfortunately, many broadcasters – most of them small, rural, and local – are in danger of losing a significant amount of their audience reach because the auction and repacking failed to contemplate the full financial impact of the Spectrum Act on the low-power television stations, as well as the over 600 AM and FM radio stations that co-locate their antennas.

A total of 175 television broadcast stations participated in the auction, but over 950 TV stations did not put their spectrum up for bid and are nonetheless still forced to relocate to new channel frequencies. Therefore, while 85% of these broadcasters did not “sell” their frequencies, the government took them and must be liable to protect their ability to broadcast.

As for radio stations, they have received nothing and will not receive a thin dime under the Spectrum Act as written. As a result, the Spectrum Act has the potential to silence many consumers’ local radio broadcasts and blackout or substantially limit 85% of their local television broadcasts.

Now, it is up to Congress to use a legislative “instant replay” to correct the missed call that if unchanged will unfairly cause social, financial, and cultural losses. This week, The House of Representatives approved this legislative remedy under H.R. 4986, RAY BAUM’s Act. Now, the Senate needs to get on board. If they need any convincing, they should consider the constitutional implications of this decision.

The Takings Clause of the Fifth Amendment of the Constitution provides that private property shall not “be taken for public use, without just compensation.” As the Constitution’s text makes clear, the Takings Clause does not prohibit the government’s taking of private property, but instead places a payment condition of “just compensation” on the exercise of that power.

Lawsuits involving the Takings Clause are called eminent domain actions. The overriding principal of eminent domain is the constitutional philosophy that the government shall not force individuals to bear public burdens which should be borne by the public as a whole. That guiding principle fits the disparate impact suffered by radio and television broadcasters via  the Spectrum Act like a glove.

Some argue that the eminent domain causes of action for deprivations of broadband frequencies are not fully assured due to clauses within the Communications Act of 1934. However, the broadcast licenses at issue have the two primary hallmarks of property: transferability and exclusivity. Therefore, a very strong argument can be made that the Spectrum Act, if left uncorrected, constitutes an unconstitutional regulatory taking under the Fifth Amendment to the United States Constitution.

It is manifestly clear that those silenced and bedarkened broadcasters that do not receive sufficient amounts from the reserved relocation funds are being forced to bear the public burdens of reallocation of the broadcast spectrum which, in all fairness and justice, should be borne by the public as a whole.

Additionally, the FCC admits that license renewal is routine and perfunctory. Therefore, the expectation of continued use of the assigned broadcast frequency creates an expectation interest in the frequency assignment that is treated like property. As it is, the broadcasts are pledged as collateral and supported by extensive investment in manpower, advertising, customer goodwill, equipment, programming, and content to create profits, all of which would disappear if the assigned broadcast frequency is taken.

The assigned broadcast frequency is a tangible “thing”; an electromagnetic space that is occupied exclusively by a broadcaster. In that regard, it is no less of a protectible property than land, home, water, farm, factory, or grove. Regardless, the Supreme Court has long recognized that intangibles can be property subject to the Takings Clause.

Finally, an eminent domain action may be preserved based upon the “unconstitutional conditions doctrine” established by the United States Supreme Court in property development cases. The unconstitutional conditions doctrine holds that “the government may not deny a benefit to a person because he exercises a constitutional right.” In this case, the requirement of alleged waiver of property rights by the broadcaster in application of the right to receive a broadcast frequency would arguably be violative of the Nollan/Dolan doctrine, named after two U.S. Supreme Court decisions which hold that the Government cannot pressure a person or business into voluntarily giving up property rights for which the Fifth Amendment would otherwise require just compensation in exchange for a license or permit.

Left without an adequate legislative remedy for this “blown call” in the Spectrum Act, affected broadcasters would be forced to seek judicial remedies. These potential lawsuits would involve not only eminent domain claims arising under the Fifth Amendment Takings Clause but claims for denial of Equal Protection, potential Section 1981 of the Civil Rights Act claims, as well as potential breach of contract, quasi-contract, and tortious interference claims.

This is an important scenario to keep in mind because, if successful, these litigants harmed by the Spectrum Act would stand to recover damages for future lost profits, business expectations, and other damages that would far exceed the relocation costs denied them by the inadequate reserves. Additionally, attorneys’ fees, interest, and potentially other damages may be available that would dwarf the relatively microscopic costs of fixing the myopic bad judgment call of the 2012 Congress.

We, the people, are the home team in this dispute. Thankfully, Congress has very recently shown promising signs of moving forward in unison to correct their error. As the home team, let us not rest until the umpire (Congress) gets the call right and fixes the short-sighted error that may cause the broadcast stadiums to go dark and the microphones to fall silent.

An explosion of litigation to fix the wrong is not a better “fix.” It will be harmful to the general public if the broadcasters fail in their quest for damages in the stead of Congressional action or if they fail and the broadcast landscape becomes barren, silent, and dark. Neither scenario provides a winner. The only winning scenario is if Congress revisits the one oversight it had in this otherwise commendable, pro-consumer incentive auction and rectifies its currently unfunded government mandate.

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W. Bruce DelValle

W. Bruce DelValle

W Bruce DelValle is a litigator and founding member of the Washington, D.C. constitutional law, commercial and civil litigation firm Fein & DelValle PLLC.

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