Announcer next, q a with former chief economist of the fcc, thomas hazlett. Brian tom hazlett, why did you write the book the political spectrum . Tom there is a great set of stories, unknown to most people about how we got into the age of wireless. Wireless seems like a bit of magic. It has always seemed that way. We had 100 years ago a Supreme Court chief justice say he did not want to get any radio cases because he did not want to have to dive into the law there. The law of the occult. So, this seems offputting to a lot of people. The way we allocate radio spectrum come and how we make Resources Available to the Wireless World we are in today, is fascinating, and there is a political structure that was crafted in the 1927 radio act. Primary actor Herbert Hoover, secretary of commerce through those rules, 90 years ago, still govern the way we actually allow resources to be used in our economy today. It is tremendously important, fundamental to innovation, to technological progress, the way we talk, that way we get medicine. Everything is changing to wireless, for obvious efficiency reasons but we have a lot of problems still with some of the ery rigid i would say traditional oldfashioned rules put into place and previous generations. We are trying to break away. It has been a pattern of liberalization that has been extremely successful, but we have a long way to go, and so much more could come forth if we really understood that. Brian what is a radio spectrum . Tom it is a space through which signals travel. It was originally thought to be a gaseous substance, the ether. It turns out, that is not t. Even in dead space, these radio signals can still travel. They are used recommendations. Radio transmits, radio receives. We put stuff together and all of a sudden, you are in the Wireless World. They think that is just part of society, to pull out the phone and text or snap. And it is. But through rules that have been very restrictive in some cases, overly conservative, we have held off a lot of the innovation, and loosened up enough so we got a glimpse of what is possible, and that is where we are now. Brian what do you mean by political spectrum . Who owns it . Tom in the 1920s, we had our first blast of a wireless industry, the new Radio Broadcasting business took off like wildfire. Kdka, the first station in pittsburgh, november 2, 1920, broadcasting election returns. The little political element in it from the getgo. Tremendously popular trade within two years, there are 500 stations broadcasting across north america. It became contentious to use radio waves. We had the science since 1895. Guglielmo marconi. But we had not had the innovation, the business model, to create actual conflict over who got to use what spaces, and try to remedy whatever conflict existed to now, there were conflicts because broadcasters spewed a lot of transmitting power. Across large areas, trying to get to these receivers with their programming, there content. And so in the new age of wireless, we came up with new rules and we had an essentially, firstcomefirst serve. If you had a Radio Station transmitting with authorization, which was pro forma for the department of commerce, you got to be there and continue until some of the else came along that you might want to share with, or you might want to sell to. There were rules in place to firstcome, firstserved. That created a political kickback. On the one side, the first stations that became commercially successful did not want new entries, that kind of liberal policy to allow new bandwidth to be utilized. On the other side of it, you have policymakers like hoover and members of congress that wanted some control over this powerful new medium of expression. They wanted to license broadcasters according to what they said, what content was transmitted. Those interests came together and created the 1927 radio act. Hat act put into political process a policy, and you often have this exact same coalition with incumbent powerful incumbent businesses getting in line with policy makers to say this will be the Public Interest. There will be license is carved out of washington, hammered out in stone. You can only do this, that, this technology, this business model, this service. And the lucrative licenses will be passed out according to Public Interests, and that has to do with the political calculations that are made. On the other side, policymakers get to regulate under that system, kind of a quid pro quo. In fact, it has been called that quite regularly by regulators. And, that put into place things like the equal time rule that goes back to 1927 and the radio act. And even though things like the fulltime role did not work in the sense that they actually suppressed coverage of political candidates and debates. A fascinating aspect of president ial television debates. Those debates could not happen until we deregulated the equal time ill and made it possible for top candidates to get on the stage without 30 or 40 other minor candidates there. Even though these rules did not work well to produce the Public Interest outcome, they did work well for the interests of the political spectrum. Brian when did you start the book . Tom people ask about that. I have been writing this book since 1975, and it has been a areer looking at how the economics and regulation Work Together in this space. I literally started on these issues in the late 1980s. I served at the federal Communications Commission in the early 1990s, and i have written many academic articles since. I started seriously writing this book about four years ago. Brian where is your home and what do you do other than write this book . Tom i grew up in los angeles, and i went to ucla. I taught at the university of california, davis. I moved to the east coast and ended up at George Mason University and northern virginia, and then three years ago, i moved down to south carolina. I teach at Clemson University. Go tigers. We are now in a different part of the world. Certainly different from the washington, d. C. Area, where we spent the last 15 years. Certainly different than california. It is an academic institution. Very good economics department, so i teach economics to undergraduate and graduate students alike. Brian what kind of things in our daily lives uses the spectrum . Does the iphone or any phone use the spectrum . Tom absolutely. It is routine now, a social amenity for kids growing up. They use computers that are internet connected through wireless, they use phones that are in networks or locally connected to broadband networks. In a general sense, even our fixed or wired Broadband Systems are part of the radio spectrum ecosystem. Spectrum in a tube. The highcapacity lines that distribute to most homes, roadband services to maybe a cable operator or telephone company, that is spectrum in a tube, and that is regulated some have the same, usually by the same agency in the United States and most other countries. Brian a lot of cars today have the pushbutton opening to the door. Garages have pushed a button, you know, far away from it. Pectrum use . Tom absolutely. Baby monitors, monitors and hospitals, sensing devices. There is a whole ecosystem now developing for what they call m to m, machine to machine to machine communications. In one vending machines call up Distribution Centers to say what they are out of. They need more granola bars and fewer m ms, or vice versa. When you have a car that is stolen, there might be a locator that uses a wireless communicator. When you have Something Like onstar, a crash and a car, that makes it an automatic phone call. Those are m to m devices where people are not making calls anymore periodically, they make calls when using cell hones. Audio, video, and we still have over the air broadcasting for television. That is largely in terms of the consumer end of things, shifted to cable, satellite, and over the top broadband distribution and cell phone reception for video, but we still allocate a very large swath of radio spectrum for essentially a 1939 technology. That is when tv started in terms of the regulators, putting aside spectrum. Brian i wanted to talk politics because you delve into this in your book, starting about page 139. You can pick up and go from there. A young new dealer emerged as a key defender of the agency. You name the federal Communications Commission. Texas congressman lyndon b. Johnson intervened with has speaker sam rayburn to support the commission and quash the budget cuts. What is the rest of the story . Tom this is one of those, you know, interesting tidbits you get from this political history of spectrum allocation. It turns out that there is a very powerful Georgia Southern democrat eugene cox in the early 1940s. Extremely powerful within the house. He, at the same time he was a congressman, was actually doing business as a lawyer, which he was. With Radio Stations getting renewals. Icense renewals. He was close to the line on what was ethical. The fcc at the time was headed by a man who in history has become rather well known. James fly. He later became head of the American Civil Liberties union. He stood up for civil iberties and wiretapping. While he was fcc chair. He is very renowned in any contemporary versions. He is the best fcc chairman in history for what he stood up and did. One of the things he stood up to was this powerbroker in the house. Congressman cox. In fact, when it became known, reported in the press, that there had been this ethically dubious action by the congressman, he did not back down. He scheduled that station for a hearing. Now that, in regulatory, in the clinical spectrum, that is a very hostile thing for an agency to do because now this station has to spend money for lawyers, they might lose a license. It generally is not going to happen that way but they still have a very significant expense and maybe some risk. So in any event, this congressman cox, he just went ballistic. He engineered a number of bills to be introduced and budget cuts two the fcc budget. This became quite something. A row challenge to the agency by the incumbent policy maker. A littleknown congressman from texas figure it out an opportunity and he ran in the background in under the radar to help salvage the fcc. Now, the thing that makes this story rather sensational and completely ironic is that as good a reputation as he had and has standing up for ethical conduct at the agency, this relationship between johnson and the fcc would save the fcc nd lead to johnson having the clout to engineer radio, later television licenses, that made johnson perhaps the wealthiest president in the history of the United States. Now, he always had a public story that these licenses had no effect. He tried to put her name on as much as the documentation as possible. There is no question. Johnson engineered stations, preempted competitors from getting competing stations, and made a fortune on tv and radio media licenses in austin, texas as a result of this relationship at the fcc in the early 1940s. It is really jawdropping when you see the nature of that political relationship. This is probably a sensational example. Not all of it is this corrupt. But that is certainly part of the story. Brian let me get the page here and read it. Age 144, you say that in in bethesda, maryland, phillips found extreme right wing broadcasting irrationally hostile to the president and his programs. Talking about can you donald and another man involved in this, the jfk years. What is the point of this . Tom the fairness doctrine. It turns out that when we went to this political system for allocating spectrum rights in 1927, within a couple of years, the regulators at the commission are renewing licenses, but very carefully noting that propaganda stations will not be allowed. Early on, in 1929, in a period, you have left wing stations, to use that political term, with eugene debs who bought a station in new york city. They wanted it for political reasons. They wanted to espouse their opinions. These were immediately dubbed propaganda stations by the regulars. And when they were renewed, they were told to be careful about expressing their opinions. And that was an interesting kind of attack on open and free dialogue by the Radio Commission that in 1984 became the federal Communications Commission. There was further progress in this direction to keep the opinions quiet during the new deal, when, in fact, newspaper publishers, which were thought to be right wing and antinew deal, they were told they would face restrictions on owning Radio Stations. That was within the Roosevelt Administration to keep voices silent. They have rules that came out. That discourage the Radio Stations from editorializing. That is just around after world war ii and in the late 90 40s, utcomes and explosive policy that will be mandated to carry issues of controversy, of ventures to the community in which they broadcast and to do so from a balanced perspective. Ok now, the question of what is a balanced perspective, what is a controversial issue that needs to be covered. I think the chapter title, orwells revenge. I mean, fairness doctrine, doesnt that semisomething that would be political to define . Fastforward to the 1960s. There was a Nuclear Test Ban treaty. It passed the senate by a fairly healthy margin in 1960 two, but there are a lot of conservative, very conservative radio commentators who are against it, and that was troubling to the Kennedy Johnson administration, and there was actually a Monitoring Program of these Radio Stations put together in washington to help provide it by the national committee. Complaints amending free and equal time. The people who ran his operation said explicitly afterwards that it was done to harass and intimidate the stations are actually espousing this point of view. Brian let me read what you wrote. As a commerce official said we wanted to use the fairness doctrine to challenge and duress rightwing broadcasters in hope that the challenges would be so costly to them that they would be inhibited and decide it was too expensive to continue. Where did he say that . Tom in testimony, investigating after the fact. It comes from a wonderful 1975 book by fred friendly, former president of cbs news. The good guys, the bad guys, and the First Amendment. It does upset the apple cart in terms of your normal view of partisan politics, perhaps, and maybe then, maybe more now, but there are dirty hands all around the political spectrum. Conventionally defined, i am talking about. They use these rules to take out opinions on the other side. So this actually, the thing that is amazing about the fairness doctrine and this time is that there are actually becomes a case that goes to the Supreme Court. The red line case. It comes out with one of these challenges where a journalist on the left, fred cook, wrote a book, goldwater extremist on the right. He is attacked and criticized on a conservative Radio Station in pennsylvania by the reverend, and ultraconservative. The journalist demands free, qual time. The owner of the station says i will sell you the same 15 minutes the reverend use for 7. 50. That is what he paid. Cook says i want free equal time. That goes to the Supreme Court. The Supreme Court finds 80, with Justice Douglas recused, saying the fairness doctrine is ok, and it is just part of this licensing. If you do not do it this way, you will have chaos in the spectrum. And yeah, the government could look at what the Public Interest is and how the content works in things like the fairness doctrine. That is editorially ok. If they could show there was any Chilling Effect on the editorial independence of the Radio Stations, in this case it was a Radio Station, same law for tv. If there is any editorial effect, then there would be evidence of chilling affect. It turned up a whole case was a Chilling Effect because it came out of this monitoring investigation. This came out of a political effort, a campaign, if you ill. It was to harass and intimidate these small, lowbudget broadcasters that had seemingly extreme views and were on the opposite side of the fence. The Supreme Court just missed that. That would be a rather sensational example of regulatory failure when it became exposed i fred friendlys book. Brian when did the fairness doctrine finish and stop . Tom there were a lot of controversies. In 1985, the federal Communications Commission, during the Ronald Reagan years, actually asked the court to overturn the fairness doctrine on First Amendment grounds. The court came back to the fcc and they basically said it is your regulation. If you do not like it, do not tell the court to overturn it. You just undo it. What happened in august in 1987 is the federal Communications Commission overturns the fairness doctrine. They withdraw it and there is a big negative reaction, the idea that that was going to cause problems with fairness. What it did do and what studies have found, and my report on one such study i wrote with a former student of mine, david sosa, published a few years back, did find there was an explosion in informational programming on am and fm radio. You have news, talk, Public Affairs format programming all through radio. A lot of people all the looked at that and say that they are conservatives and Rush Limbaugh and all this rise of conservative talk radio, and there is a link saying the deregulation allowed more vibrant opinions, so just be. The conservatives in general were against eliminating the fairness doctrine. Newt gingrich, james falwell, ardent conservatives were opposed to that reagan era deregulation policy. They wanted to re the fairness doctrine. Host when there was a fairness doctrine, you and i had to walk somewhere and find the person responsible for dealing with a complaints. Where would he or she be . Tom at the federal Communications Commission brian how many people fussed over the fairness doctrine . Tom is good over decades. You know, i cannot give you the numbers brian small dozens . Tom i was there in 1991 and 1992 and the chairman of the commission was appointed by the chairman and george h. W. Ush. So, you know, the media bureau gets these complaints. The staff goes through them and obviously tries to formulate some kind of policy. Consistent over time. Again, it is not just the Democratic Left in the Kennedy Johnson years saying conservatives need to be attacked this way. The conservatives in the 1970s filed very big fairness doctrine complaints against Major Networks are being allegedly too liberal. That was on defense policy issues. Brian you have in your book, on the same section, a lot of politics. You have a memo from herb klein to chuck colson in the nixon years. For your eyes only, please. Haldeman, nixon, they are all involved in this, 1970. The following is a summary of the most pertinent conclusions from my meeting with the three network chief executive spirit one, the networks are terribly nervous over the uncertain state of the law, the recent state decisions and granting Congress Access to tv. They are also apprehensive about us. Why did you put that memo in the book . Tom because of the licensing control that was vested in washington, ostensibly, in an independent regulatory agency, but the factor, there is political control. And the Nixon Administration had a very pointed policy to talk to the network chiefs, particularly the presence of the news divisions, at the three network, cbs, nbc, abc and to tell them they were not happy with the reporting, with the content and they would look at regulatory options. They would look at the fairness doctrine and foresman and look at licensing issues and make things difficult for the corporations in the economic sense. So, this happens early on in the Nixon Administration and chuck colson, the president ial aide who later went to prison in watergate, he is central in talking to the Network Heads in new york. And intimidating to this power that the regulator has that is supposed to be independent but implicitly is under the ages of the executive. Brian her client writes they told me anytime we had a complaint about slanted coverage, to call me. They are very much afraid of us, and trying hard to prove they are good guys. Ere is chuck colson around the same issue, december 15, 1972, talking to president nixon on the phone. Good. I was going to ask him. No, i never got a chance. He said, ok, see me. I said i have one thing to talk to you about. I said i cannot see you tomorrow. He did not want to talk. I am seeing him monday at 00. I will just say look, you guys are crazy. You can hire all the executives you want that will not solve the problem. You have to put someone on the air who will give balance to all of the god dam slamming we have been suffering. I will make a real pitch out of it. I am sure that would help us. All right, sure. That would help us. And also, give the client time and money. They have the money. They sure as hell do. Brian what are we hearing . Tom the Chilling Effect. And that is what is not supposed to happen with the regulatory structure. We have the First Amendment in the United States. Congress should make no law abridging freedom of speech or the press. That is an effort to abridge freedom of speech and of the press. Fairness doctrine challenges that do involve free, equal time and license renewals that are set aside for hearings. In some cases, denied, potentially. Brian if he was alive today, would he be as afraid . And perhaps the litigation that you can introduce to the court, i think is probably more compelling today. If there really were conversations of this nature, this as the court said, if there is a Chilling Effect, we are not going to look so kindly on the regulatory structure. I think there is a better defense today. There has been a liberalization. We get this political spectrum and there has been a lot of Great Technology and free speech and market conversation compensation that has been suppressed. , wheres a whole section the young emerging cabletelevision technologies stress regulation. There has been regulation since the 1970s and 80s that have allowed a lot more Market Competition to come in. They are much more freely distributed and open to innovative ideas and competing viewpoints within the media. Brian who in this town . Is there a person that has the most power when it comes to the spectrum . Tom certainly the chair and the chairs of the Commerce Committee in the house and senate have some. Sometimes there is an interplay in the white house depending on how engaged the white house is. One of the interesting things about the Johnson White house is in about the Johnson White house is the president is literally in the white house talking about business deals. Having johnsons stations get better terms for affiliation agreements with cbs. And, at the same time, johnson had people in his administration suggesting that there be better, more market oriented positions and to open up new technology for things like network tv. But he would not go there. He was compromised on the fact that he did not want there to be much focus on this. He had his own conscience to worry about. He literally kept that staff at bay. Finally starting in the 1970s, there is a tendency to look more favorably on Market Competition and freedom of and ceding freedom of speech to the First Amendment actors in the market. Brian who was Edwin Armstrong and why did he commit suicide . Tom a great inventor. A student at Columbia University at the early part of the last century. By the time he graduated he had , patents in a. M. Radio that made him first a professor, when he graduated. He was a gunman at columbia. He was also a wealthy investor for a time. He was a leading shareholder in rca. He then, as sort of the zenith of his inventive career in the 1930s, came up with a better , whichogy fm radio was excellent in terms of high fidelity reception. It took him quite a while to get the regulators to give him any help because there had to be , spectrum allocated for this new technology. Existing stations , so theyed to a. M. Poopood the innovation. But he wasnt he was able to 400 receiver sold for fm radio. In this days, that was something. The reception and the audience and the technical reception was excellent. World war ii comes, and he ends up being a major in the army that helps with radios. At the end of world war ii the federal Communications Commission for reasons that are described sensationally in many places, uproots the entire fm spectrum allocation. 42 50 megahertz. That is an old allocation if you have an old radio receiver. That was fm until 1945, and then it moves. The entire industry is destroyed. Armstrong thought it, fought it, and it broke him. He was also litigating on intellectual property against rca, became very despodent in 1954 with his baby being so flummoxed by the system. He was a prominent professor, a famous inventor, committed suicide in sensational fashion in new york city. Brian how did he do it . Tom he dressed in formal attire and walked out of the apartment. He walked out the window. He left a note to his wife, apologizing. Years later, she did win significant settlements against rca and other users of the fm radio technology, and she became wealthy. He was not there to see that, nor was he there to see what happened in the 1960s, when the spectrum regulators finally let f. M. Fully compete with a. M. In a very short number of years, fm just dominated given its excellent quality, particularly for music. So by the 1970s, youre saying fm stations and fm audiences become dominant, and a. M. Of course becomes superseded in importance. Brian i want to show the cover of your book, because if people want to delve into this, they have to read about it. There is so much, hard for us to deal with even in an hour. Called the political spectrum, published by yale. Our guest is at Clemson University now. I want to know how often you have seen this. This is a hearing in 2016. You have the chairman of the fcc and a member of the fcc at a hearing, greatly disagreeing with one another. Tell us the politics of this. This is tom witter and ajit pai. Tom witter was chairman then, democrat, and pai is chairman now, a republican. They have very strong disagreements over policy. Lets watch. [begin video clip] there is no accident the Regulatory Framework we have built is depressing broadband investment. We are not seeing a decline in broadband infrastructure investment. You can say it, but it does not make it a fact. Facts speak for themselves. I would be happy to cement sworn declarations. I would be happy to submit the information that the companies provide under penalty of sec to their investors about their investments. What is striking is that ceos with pending mergers will say about the top priorities. Im talking about at t and comcast, Companies Like that. Who are typically repeat players before an agency that regulates highly. [end video clip] brian what are we seeing there . Tom that is great. Usually it is the other way around, that people in public are collegial. I dont oppose collegiality. You wont see the disagreement be stated. Here, you see the disagreement stated. Certainly, they were talking about the effects of title ii Net Neutrality regulation. These are broadband rules that have come about both for wired and wireless systems, so it certainly does enter into the political spectrum. A very big factor is whether or not these roles tend to suppress investment in the markets, to undergird expansion and higher speeds and better functionality for networks. Brian a little bit into the weeds for the average person. I want to ask you to define three things. What is the difference between wireless, wifi, and broadband . Tom broadband has to do with the speed at which you are receiving information through electronic communication. So broadband is a very generic term for anything from cable television, the video signals, to what you usually talk about now, Data Networks that have speeds that we associate with fast enough to be able to do things like stream video and get fast turnaround on website access and things of that nature. The fcc has its own rules for exactly what speeds, and that changes over time and to adjust those. And they adjust those. Wireless is spectrumbased technology, and it is curious that we define something by what it is not. Wireless. That has come to us from the days of marconi, from the very beginning. It was magical we could do something that we thought needed a wire without the wire. So wireless is any kind of communication that goes through space without that wire. Wifi is a type of technology that is very common, very popular. What we call wireless local area networks. If you subscribe to a Broadband Service that does data, brings data into your house through the Cable Company or telephone company, you will quite typically then have a wireless modem that distributes your signal around the house through a standard called wifi. So that is a particular type of wireless technology. Brian you say some very positive things about a politician that is no longer alive. He left congress, defeated in 1980. He was the chairman of the Communications Subcommittee in house. This is not good audio, but i want to show the audience what he sounded like. I want you to tell me how he fits. [begin video clip] three years ago, the subcommittee had just completed a hearing on the breakthrough study of cable, cable promise versus performance. We found out that the regulatory impediment to full Cable Development has been such that you would have almost been put out of business. I thought then, i still think, that some radical surgery was called for in National Communications law, failing that the 1934 act under which we operate, you operate, really annotated so much of the technological development, including broadband cable, that some basic changes were necessary. [end video clip] brian a former anchorman from san diego, chairman of the Communications Subcommittee. What would you tell us about him . Tom sitting here today, 2017, it is remarkable. Brian the video is from 1979. Tom he was a remarkable leader. Between 1976 and 1979, he was pursuing what he talked about, a reform of the 1934 communications act. He was very frustrated with the fact that the government had blocked competition to television, broadcast television, which was condemned as a vast wasteland in the most famous speech ever given by an american regulator, 1961. Newton minow. When cable comes to compete and offer more selection then just abc, cbs, nbc, cable is pushed back and broadcasters protected by regulation. This goes on for years, until the late 1970s period, there was deregulation. He was fighting for more. The fcc and courts were moving on separate tracks in the same way. Lionel van deerlin had a lot more in mind. He wanted to abolish the fairness doctrine and replace that sort of regulation, which was designed to promote Public Interest programming and Public Affairs and news and so forth. He said, lets just take a small tax on the value of the licenses and put that in an endowment for public broadcasting. That would take away a lot of the political control over licensees. It would mitigate some of the stuff that came out that we have been talking about during the Nixon Administration, previously during the kennedy and johnson administrations, undue political influence on broadcasters. He thought very highly of First Amendment rights for broadcasters, having been one. He had a very deregulatory program. It was going to constrain at t, which was a monopoly with all kinds of practices and restraint of trade, as was alleged by the u. S. Government and finally broken up in the 1982 consent degree. He was very forwardlooking. He just triggered all kinds of political opposition. The broadcasters hated what he was doing. They were afraid he would open up too much competition with cable. Public interest advocates were afraid he was going to do away with regulation they liked. Conservatives like Barry Goldwater fought him. He didnt have any natural allies at the end of the day. He had great ideas, in my opinion, and he has been proven to be ahead of the curve by what has happened since. We have had a deregulation that allowed cable to compete. We have a flowering of hundreds of channels and diversity of content today, versus when we had three networks, doing 15 minutes of news a day. It was not even independent news, it was all the same news, the news from nowhere, and edward epsteins great book talks about how the networks did not have political views. They just had the sort of godly presence. We have competition in cable. That has extended to the net. It is important to see the antecedents of free speech with the technology of today, broadband and internet. We have a laissezfaire position that allows free speech to get out there. That is what the freespeech mandate in the constitution seems to suggest. Brian you mentioned the chairman newt minow, of the federal Communications Commissions in 1961. He was 35 years old. Here he is. This is audio talking about the vast wasteland. I want to ask if anything has changed. [begin video clip] when television is bad, nothing is worse. I invite each of you to sit down in front of your own Television Set when your station goes on the air. Keep your eyes glued to that said until the station signs off. I can assure you that what you will observe is a vast wasteland. You will see a procession of game shows, formula comedies about totally unbelievable families, blood and thunder, mayhem, violence, sadism, murder, western bad men, western good men, gangsters, more violence, and cartoons. Endless commercials, many screaming, cajoling, and offending. Most of all, boredom. True, you will see a few things you will enjoy, but they will be very few, and if you think i exaggerate, i only ask you to try it. [end video clip] brian what do you think . Tom it is the most famous speech ever given by u. S. Regulator. It is remarkable then and now. The vast wasteland he refers to, which certainly appeals as a description to many of us, was created by regulation. Even in the 1940s, before we had the tv allocation table of 1952 finalized, we had four competing networks. The Dumont Network was crushed by rules of licensing. We suppress competition to very few voices. It was a product of that system, that structure. The idea we could have more and more competition and better, more quality, not all higher, but more diversity, appealing to people with different tastes, that was just around the corner through cable. Cable was an end run on regulation, because we had suppressed voices through over the air broadcast licenses. Now there was spectrum being built to give us more choice. That was suppressed by newtons fcc that turned the tables. There was not a policy until 1952. 1962. That started at period where we stopped cable broadcasting from competing through a series of arcane rules. Only through the 1970s deregulation, when you allowed broadcasting competition, did you get cspan, Public Affairs, cnn, competition between msnbc and fox news and cnbc and al jazeera and vice and bloomberg. Now we have a situation where networks come and go, but they can compete and have different views. We have sports, movies, reality tv. People say there is a vast wasteland, but there is a lot of diversity. Through overthetop and expanding to broadbanddelivered video programs and wireless, all part of the mix, we are getting it is a golden age of hollywood. This is really a cornucopia, a bountiful cornucopia. We may not like what some people like. We may not like the taste and preferences of the consuming public, but there is an opportunity for high quality and diverse programming, whether it be cspan or hbo or netflix. Brian how often in the history of communications in the spectrum have incumbent industries, existing industries, blocked expansion in communications . And how often has money influenced politicians to stop something from happening, or for that matter, to get something started, in your opinion . Tom it is i mean, it is the modus operandi. In terms of actual examples, it is the operating day. It is sort of the locus of control has to do with the interests of incumbents and other powerful industries, as well as certain key institutional players. But the Public Interest, of course, is a fiction. This is the standard for making decisions in the 1927 radio act, Public Interest, convenience, and necessity. There is no where to look up the nowhere to look up the Public Interest. It is a political determination. The voices that are most influential in making that determination are certainly backed by important players. There is normal politics. You go back to the eisenhower administration, newspapers wanted tv licenses that have endorsed eisenhower. They generally got them. Newspapers that endorsed stevenson generally did not. There is strong evidence of that. That is traditional politics. The much more ubiquitous aspect of politics is the influence of incumbent interests. Today, as we sit here, satellite radio, which is popular with about 30 million subscribers, cannot do what is called local news. It cant broadcast local news. You might wonder, thats part of a program that is supposed to advance, literally, the Public Interest in local news. How did this perverse outcome come to be . The incumbent Radio Stations, terrestrial broadcasters, are very concerned about local advertising by their competitor in satellite. They have gotten rules attached to the satellite licenses to prevent satellite from doing locally distributed programming that is not distributed everywhere. You can get on satellite radio, you can get news and weather reports for miami, but you have to get them if you are in seattle, it has to be nationally broadcast, which is very inefficient, takes up space. The satellite, sirius xm, has the ability to attach in local patch in local programming, but they are by law prohibited. They have to have national programs. Highly inefficient, anticonsumer, antinews, and it protects the incumbent. That is what we are trying to get away from, but that is what we still have. Brian how much do people that own a Radio Station or television station today, how much did it cost them for spectrum . Tom tv and radio, the prices are implicit. Those licenses a footnote for a couple of exceptions but those licenses were assigned without competitive bidding. Brian do they pay a tax now . Tom no. There are very nominal licensing fees for regulatory administrative. In general, that kind of transaction is administrative. Brian we have not got much time. There are billions and billions of dollars being paid to these broadcasters to give up the spectrum. Why, who is paying them . Tom the idea of auctioning licenses, not issuing them administratively through agency fiat, was broached in the 1950s, and was very controversial. People said, for technical reasons, you can do it. You cant do it. Economists put this idea forward who thought seriously about organizing competition in the market. One ended up getting a nobel for some of his insights. Very interesting part of the story. At any rate, in the 1990s, some countries not first United States, but soon after we had legislation passed, 1994, auctions are allowed, not for television at first, but for mobile licenses and other services. We have been doing auctions over 20 years, raised about 120 billion for the u. S. Treasury. We just had a big auction that took a year. Auction, option, it was 2sided. It actually paid tv stations to hand their licenses back in to the u. S. Government to make more room for their spectrum that was allocated to their tv broadcasts, make more spectrum for mobile services. And so that spectrum has been turned around in this socalled fcc incentive option, with money coming in, about 20 billion bid for the new mobile licenses, and about half going to tv stations paying for about 133 licenses that came back to the fcc and have been taken off the air at about 2000 total fcc licenses. Brian in other words, where the government gave these frequencies to people years ago for free tom yes. Brian the government is now, or they are being paid billions of dollars to give them up . Tom you got it. Brian it is hard to process. Tell us how that happened. Tom let me just say, in the political spectrum, what sounds completely straightforward to somebody who is there and the way i think about it in fact, it is a good idea to do this option, relative to some other policies it just sounds kind of crazy. Yes, the government distributed these licenses in the Public Interest, and the government has now determined there is much too much spectrum allocated to over the air broadcasting, because we made the switch to cable and satellite and broadband. Brian digital. Tom Digital Technologies all around. Yeah, and we have also done digital tv broadcasting. The big switch is we use other Media Distribution platforms, so why do we have this stuff that is very valuable going to tv . You might think, if you believe that the Public Interest works the way it is written on paper, that the government just ends the license. They dont renew it. They say, were going to reallocate the spectrum. That is not the way happens. Broadcasters say, you cant do that. They are politically influential. So you have to figure out a way to get the broadcasters to cooperate. It turns out, actually paying the broadcasters and allowing the spectrum to be used on higher valued use, is liable to society. Is enormously valuable to society. Given the constraints and rigidity and inefficiencies of the political spectrum, this is the best way to do it. There are other alternatives i talk about in the book that i think would be even better than the Current Situation has been structured by regulators, but this is a move in the right direction. Brian are you glad this book is finished and published . How many total years would you say you took to write it . Tom i think of course, i am happy to have it published, delighted. Delighted with my editor and Yale University press for helping in that effort. I have spent most of the last four or five years tied up in the book. I hope others think it was time well spent. Brian we are out of time, but what level should you be at to be able to read this and understand it . Who did you write for . Tom certainly not for professional economists or engineers. I am glad you asked. Certainly anybody who is interested in the way the economy works, washington works, fascinated by wireless technology, and just where we are in terms of this extraordinarily wonderful and disruptive set of opportunities that society has, and understanding how these opportunities came to be, some of the hurdles that have had to be overcome, and some of the barriers still in place, where we could do a lot better if we understood the market better. Brian again, our guest has been thomas hazlett. The book is the political spectrum the tumultuous liberation of wireless technology, from Herbert Hoover to the smartphone. We thank you very much for joining us. Tom thank you, brian. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] announcer for free transcripts or to give us your comments about this program, visit us at qanda. Org. Q a programs are also available as cspan podcasts. 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