Mises Wire

Freedom for Television and Radio

There is one important area of American life where no effective freedom of speech or the press does or can exist under the present system. That is the entire field of radio and television. In this area, the federal government, in the crucially important Radio Act of 1927, nationalized the airwaves. In effect, the federal government took title to ownership of all radio and television channels. It then presumed to grant licenses, at its will or pleasure, for use of the channels to various privately owned stations. On the one hand, the stations, since they receive the licenses gratis, do not have to pay for the use of the scarce airwaves, as they would on the free market. And so these stations receive a huge subsidy, which they are eager to maintain. But on the other hand, the federal government, as the licensor of the airwaves, asserts the right and the power to regulate the stations minutely and continuously. Thus, over the head of each station is the club of the threat of nonrenewal, or even suspension, of its license. In consequence, the idea of freedom of speech in radio and television is no more than a mockery. Every station is grievously restricted, and forced to fashion its programming to the dictates of the Federal Communications Commission. So every station must have “balanced” programming, broadcast a certain amount of “public service” announcements, grant equal time to every political candidate for the same office and to expressions of political opinion, censor “controversial” lyrics in the records it plays, etc. For many years, no station was allowed to broadcast any editorial opinion at all; now, every opinion must be balanced by “responsible” editorial rebuttals.

Because every station and every broadcaster must always look over its shoulder at the FCC, free expression in broadcasting is a sham. Is it any wonder that television opinion, when it is expressed at all on controversial issues, tends to be blandly in favor of the “Establishment”?

The public has only put up with this situation because it has existed since the beginning of large-scale commercial radio. But what would we think, for example, if all newspapers were licensed, the licenses to be renewable by a Federal Press Commission, and with newspapers losing their licenses if they dare express an “unfair” editorial opinion, or if they don’t give full weight to public service announcements? Would not this be an intolerable, not to say unconstitutional, destruction of the right to a free press? Or consider if all book publishers had to be licensed, and their licenses were not renewable if their book lists failed to suit a Federal Book Commission? Yet what we would all consider intolerable and totalitarian for the press and the book publishers is taken for granted in a medium which is now the most popular vehicle for expression and education: radio and television. Yet the principles in both cases are exactly the same.

Here we see, too, one of the fatal flaws in the idea of “democratic socialism,” i.e., the idea that the government should own all resources and means of production yet preserve and maintain freedom of speech and the press for all its citizens. An abstract constitution guaranteeing “freedom of the press” is meaningless in a socialist society. The point is that where the government owns all the newsprint, the paper, the presses, etc., the government—as owner—must decide how to allocate the newsprint and the paper, and what to print on them. Just as the government as street owner must make a decision how the street will be used, so a socialist government will have to decide how to allocate newsprint and all other resources involved in the areas of speech and press: assembly halls, machines, trucks, etc. Any government may profess its devotion to freedom of the press, yet allocate all of its newsprint only to its defenders and supporters. A free press is again a mockery; furthermore, why should a socialist government allocate any considerable amount of its scarce resources to antisocialists? The problem of genuine freedom of the press then becomes insoluble.

The solution for radio and television? Simple: Treat these media precisely the same way the press and book publishers are treated. For both the libertarian and the believer in the American Constitution the government should withdraw completely from any role or interference in all media of expression. In short, the federal government should denationalize the airwaves and give or sell the individual channels to private ownership. When private stations genuinely own their channels, they will be truly free and independent; they will be able to put on any programs they wish to produce, or that they feel their listeners want to hear; and they will be able to express themselves in whichever way they wish without fear of government retaliation. They will also be able to sell or rent the airwaves to whomever they wish, and in that way the users of the channels will no longer be artificially subsidized.

Furthermore, if TV channels become free, privately owned, and independent, the big networks will no longer be able to put pressure upon the FCC to outlaw the effective competition of pay-television. It is only because the FCC has outlawed pay-TV that it has not been able to gain a foothold. “Free TV” is, of course, not truly “free”; the programs are paid for by the advertisers, and the consumer pays by covering the advertising costs in the price of the product he buys. One might ask what difference it makes to the consumer whether he pays the advertising costs indirectly or pays directly for each program he buys. The difference is that these are not the same consumers for the same products. The television advertiser, for example, is always interested in (a) gaining the widest possible viewing market; and (b) in gaining those particular viewers who will be most susceptible to his message. Hence, the programs will all be geared to the lowest common denominator in the audience, and particularly to those viewers most susceptible to the message; that is, those viewers who do not read newspapers or magazines, so that the message will not duplicate the ads he sees there. As a result, free-TV programs tend to be unimaginative, bland, and uniform. PayTV would mean that each program would search for its own market, and many specialized markets for specialized audiences would develop—just as highly lucrative specialized markets have developed in the magazine and book publishing fields. The quality of programs would be higher and the offerings far more diverse. In fact, the menace of potential pay-TV competition must be great for the networks to lobby for years to keep it suppressed. But, of course, in a truly free market, both forms of television, as well as cable-TV and other forms we cannot yet envision, could and would enter the competition.

One common argument against private ownership of TV channels is that these channels are “scarce,” and therefore have to be owned and parcelled out by the government. To an economist, this is a silly argument; all resources are scarce, in fact anything that has a price on the market commands that price precisely because it is scarce. We have to pay a certain amount for a loaf of bread, for shoes, for dresses because they are all scarce. If they were not scarce but superabundant like air, they would be free, and no one would have to worry about their production or allocation. In the press area, newsprint is scarce, paper is scarce, printing machinery and trucks are scarce, etc. The more scarce they are the higher the price they will command, and vice versa. Furthermore, and again pragmatically, there are far more television channels available than are now in use. The FCC’s early decision to force stations into the VHF instead of the UHF zone created far more of a scarcity of channels than there needed to be.

Another common objection to private property in the broadcast media is that private stations would interfere with each other’s broadcasts, and that such widespread interference would virtually prevent any programs from being heard or seen. But this is as absurd an argument for nationalizing the airwaves as claiming that since people can drive their cars over other people’s land this means that all cars—or land— must be nationalized. The problem, in either case, is for the courts to demarcate property titles carefully enough so that any invasion of another’s property will be clear-cut and subject to prosecution. In the case of land titles, this process is clear enough. But the point is that the courts can apply a similar process of staking out property rights in other areas— whether it be in airwaves, in water, or in oil pools. In the case of airwaves, the task is to find the technological unit — i.e., the place of transmission, the distance of the wave, and the technological width of a clear channel—and then to allocate property rights to this particular technological unit. If radio station WXYZ, for example, is assigned a property right in broadcasting on 1500 kilocycles, plus or minus a certain width of kilocycles, for 200 miles around Detroit, then any station which subsequently beams a program into the Detroit area on this wavelength would be subject to prosecution for interference with property rights. If the courts pursue their task of demarking and defending property rights, then there is no more reason to expect continual invasions of such rights in this area than anywhere else.

Most people believe that this is precisely the reason the airwaves were nationalized; that before the Radio Act of 1927,stations interfered with each other’s signals and chaos ensued, and the federal government was finally forced to step in to bring order and make a radio industry feasible at last. But this is historical legend, not fact. The actual history is precisely the opposite. For when interference on the same channel began to occur, the injured party took the airwave aggressors into court, and the courts were beginning to bring order out of the chaos by very successfully applying the common law theory of property rights — in very many ways similar to the libertarian theory — to this new technological area. In short, the courts were beginning to assign property rights in the airwaves to their “homesteading” users. It was after the federal government saw the likelihood of this new extension of private property that it rushed in to nationalize the airwaves, using alleged chaos as the excuse.

To describe the picture a bit more fully, radio in the first years of the century was almost wholly a means of communication for ships — either ship-to-ship or ship-to-shore messages. The Navy Department was interested in regulating radio as a means of ensuring safety at sea, and the initial federal regulation, a 1912 act, merely provided that any radio station had to have a license issued by the Secretary of Commerce. No powers to regulate or to decide not to renew licenses were written into the law, however, and when public broadcasting began in the early 1920s, Secretary of Commerce Herbert Hoover attempted to regulate the stations. Court decisions in 1923 and 1926, however, struck down the government’s power to regulate licenses, to fail to renew them, or even to decide on which wavelengths the stations should operate.1  At about the same time, the courts were working out the concept of “homestead” private property rights in the airwaves, notably in the case of Tribune Co. v. Oak Leaves Broadcasting Station (Circuit Court, Cook County, Illinois, 1926). In this case the court held that the operator of an existing station had a property right, acquired by prior use, sufficient to enjoin a new station from using a radio frequency in any way so as to cause interference with the signals of the prior station.2  And so order was being brought out of the chaos by means of the assignment of property rights. But it was precisely this development that the government rushed in to forestall.

The 1926 Zenith decision striking down the government’s power to regulate or to fail to renew licenses, and forcing the Department of Commerce to issue licenses to any station that applied, produced a great boom in the broadcasting industry. Over two hundred new stations were created in the nine months after the decision. As a result, Congress rushed through a stopgap measure in July 1926 to prevent any property rights in radio frequencies, and resolved that all licenses should be limited to 90 days. By February 1927 the Congress passed the law establishing the Federal Radio Commission, which nationalized the airwaves and established powers similar to those of the current FCC. That the aim of the knowledgeable politicians was not to prevent chaos but to prevent private property in the airwaves as the solution to chaos is demonstrated by the legal historian H.P. Warner. Warner states that “grave fears were expressed by legislators, and those generally charged with the administration of communications . . . that government regulation of an effective sort might be permanently prevented through the accrual of property rights in licenses or means of access, and that thus franchises of the value of millions of dollars might be established for all time.”3  The net result, however, was to establish equally valuable franchises anyway, but in a monopolistic fashion through the largesse of the Federal Radio Commission and later FCC rather than through competitive homesteading 

Among the numerous direct invasions of freedom of speech exercised by the licensing power of the FRC and FCC, two cases will suffice. One was in 1931, when the FRC denied renewal of license to a Mr. Baker, who operated a radio station in Iowa. In denying renewal, the Commission said:

This Commission holds no brief for the Medical Associations and other parties whom Mr. Baker does not like. Their alleged sins may be at times of public importance, to be called to the attention of the public over the air in the right way. But this record discloses that Mr. Baker does not do so in any high-minded way. It shows that he continually and erratically over the air rides a personal hobby, his cancer cure ideas and his likes and dislikes of certain persons and things. Surely his infliction of all this on the listeners is not the proper use of a broadcasting license. Many of his utterances are vulgar, if not indeed indecent. Assuredly they are not uplifting or entertaining.4

Can we imagine the outcry if the federal government were to put a newspaper or a book publisher out of business on similar grounds?

A recent act of the FCC was to threaten nonrenewal of license of radio station KTRG in Honolulu, a major radio station in Hawaii. KTRG had been broadcasting libertarian programs for several hours a day for approximately two years. Finally, in late 1970, the FCC decided to open lengthy hearings moving toward nonrenewal of license, the threatened cost of which forced the owners to shut down the station permanently.5

  • 12In the decisions Hoover v. Intercity Radio Co., 286 Fed. 1003 (Appeals D.C., 1923); and United States v. Zenith Radio Corp., 12 F. 2d 614 (ND. Ill., 1926). See the excellent article by Ronald H. Coase, “The Federal Communications Commission,” Journal of Law and Economics (October 1959): 4–5.
  • 2Ibid., p. 31n.
  • 3Harry P. Warner, Radio and Television Law (1958), p. 540. Quoted in Coase, “The Federal Communications Commission,” p. 32.
  • 4Decisions of the FRC, Docket No. 967, June 5, 1931. Quoted in Coase, “The Federal Communications Commission,” p. 9.
  • 5The best and most fully elaborated portrayal of how private property rights could be assigned in radio and television is in A. DeVany et al., “A Property System for Market Allocation of the Electromagnetic Spectrum: A Legal-Economic-Engineering Study,” Stanford Law Review (June 1969). See also William H. Meckling, “National Communications Policy: Discussion,” American Economic Review, Papers and Proceedings (May 1970): 222–23. Since the DeVany article, the growth of community and cable television has further diminished the scarcity of frequencies and expanded the range of potential competition.
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