Onward, Christian Moguls

Vision is a favorite topic of Dr. Garth W. Coonce, a minor
Christian-broadcasting magnate from Marion, Illinois. In his monthly newsletter,

Partnership,
he often muses on the sacred visions that have inspired him to
amass 16 television stations, creating a 24-hour network that beams charismatic
preachers like Creflo Dollar and Benny Hinn into devout homes. Coonce also likes
to share the communiqu├ęs he still receives from the Almighty, who
occasionally instructs him to expand his media holdings into, say, Detroit or
greater Boston. "Perhaps it is good that God doesn't give us the big picture in
the beginning," he wrote in the September 1999 issue of Partnership. "Seeing
too much would likely scare us out of taking a single step."

As he begins his 25th year in Christian broadcasting, Coonce must be
especially thankful for the Lord's business smarts. After years of scraping by on
goodwill offerings and souvenir sales, his nonprofit, commercial-free network
just hit the corporate-welfare jackpot. This coming June 19, Tri-State Christian
TV and Radiant Life Ministries--Coonce's two main evangelical concerns--will join
at least 20 other broadcast companies in auctioning off a portion of their
electromagnetic spectrum, the invisible commodity that carries broadcast signals.
The spectrum to be sold was given gratis to Coonce and hundreds of other
broadcasters in 1996--a slab of political pork that Arizona Senator John McCain
calls "one of the greatest scams in American history." Now, thanks to the
largesse of the Federal Communications Commission, small-fry religious
broadcasters like Coonce stand to become tycoons literally overnight. "I'm sure
they're seeing this as manna from heaven," says Norman Ornstein, a resident
scholar at the American Enterprise Institute (AEI). "Except instead of coming via
God, it's coming via the FCC."

Coonce's sudden good fortune has its roots in the deregulatory
Telecommunications Act of 1996, which granted every TV station an extra six
megahertz of spectrum--in effect, a second channel's worth of airwaves. The
mighty National Association of Broadcasters (NAB) pushed through the gift--then
valued at somewhere between $37 billion and $70 billion--with the dubious claim
that American viewers were clamoring for digital TV, with its sharper pictures
and $3,000 high-definition TV sets. The NAB insisted that stations would use
their bonus airwaves to convert gradually from analog to digital broadcasting;
while the new spectrum was being set up for digital, stations could still
broadcast on their existing analog spectrum. When the transition was complete,
the stations would return their old six-megahertz slices to the FCC, the
airwaves' public guardian.

But the law's fine print contains some slippery wording. The broadcasters are
allowed to retain their analog spectrum until December 31, 2006, or whenever 85
percent of American households are able to receive digital signals, whichever
is later. As of last August, fewer than 1 percent of households possessed
digital tuners; at that snail's pace, the broadcasters could hold on to all their
spectrum until approximately the end of time. Meanwhile, with the boom in mobile
phones and the like, the demand for spectrum--which carries wireless signals in
addition to Facts of Life reruns--has soared, and telecommunications companies
are aching for airwaves. According to Bernstein Investment Research, demand from
the wireless industry has pushed the value of the broadcasters' freebie to $367
billion--more than three times the combined value of every TV station in the
land.

Lowell "Bud" Paxson, chairman of Paxson Communications, was quick to recognize
the money to be made in exploiting the telcos' desperation. Paxson formed the
Spectrum Clearing Alliance, a consortium of broadcasters--Coonce's companies
included--that own stations on UHF channels 60 to 69, a boob-tube Siberia
populated by televangelists, shop-at-home outlets, and Pax TV's family-friendly
pabulum (such as Doc, starring mullet-sporting Nashville washout Billy Ray
Cyrus). The Alliance offered to relinquish its bonus spectrum and allow the FCC
to auction it off, in exchange for a cut of the proceeds. These broadcasters also
agreed to make an eventual "hot switch" conversion to digital broadcasting on
their analog spectrum, rather than slowly moving from an old channel to a new
one.

Paxson has never made a secret of the Alliance's Mammon-centric goals; as he
wrote in a letter to the Barron's Web site last March, "We are entrepreneurs
hoping to reward our shareholders who invested in our business of amassing
spectrum." On September 17, the FCC exceeded those shareholders' fondest dreams,
even permitting Paxson and his peers to negotiate their own share of the auction
loot. This June, accordingly, a hearty 66 cents of every dollar bid will go into
a "clearing fund," which will then be divvied up among the 140 or so stations on
the 60-to-69 band according to a population-based formula. Based on past
auctions, the Alliance's members could collectively haul in upwards of $30
billion, a figure that has industry wags dubbing channels 60 to 69 "the Band of
Gold." As for the overnight digital switcheroos that the Alliance agreed to,
they're far from faits accomplis; the order merely lowered the mandatory
conversion threshold from 85 percent of households to 70 percent, which should
still take years to reach.

Coonce's windfall should be astounding, especially considering that his
stations now slink by on proceeds from Praise-a-Thons and the peddling of "love
gifts." Radiant Life Ministries has been a money loser; according to a 1999 tax
return, the ministry was nearly $310,000 in the red. Its sole asset is WLXI-61 TV
in Greensboro, North Carolina, a station that Coonce purchased for a paltry $1.9
million in 1991. Considering that Greensboro is part of the 44th largest TV
market in America, even an ultraconservative estimate of WLXI's share of the
booty is around $70 million--a 3,700 percent return on investment. In fact, the
sale of WLXI's spectrum alone could bring in nearly three times more cash than
the value of Coonce's entire network.

Tri-State Christian TV and Radiant Life Ministries will not be the only
nonprofit religious broadcasters to benefit from the FCC's decision. Trinity
Broadcasting Network, the self-proclaimed "world's largest Christian television
network," is also an Alliance member. Financially, however, TBN has little in
common with Coonce's humble network; the ministry made $192 million in 2000, and
its vast holdings include the movie studio that produced the apocalyptic sleeper
hit The Omega Code. The husband-and-wife team of Paul and Jan Crouch, TBN's
president and co-founder, respectively, earned a combined $750,914 in salary last
year, a healthy portion of which will doubtless go toward paying for the couple's
recently purchased $5-million, 9,500-square-foot estate in Newport Beach,
California (complete with an elevator, a six-car garage, and a climate-controlled
wine cellar).

The prospect of such a lavish empire fattening itself further at the public
trough infuriates Senator Ernest Hollings of South Carolina, the Democrat who
chairs the Senate Commerce Committee, which oversees the FCC. After learning of
the spectrum-clearing decision, he dashed off an angry missive to FCC Chairman
Michael Powell. "Allowing industry to negotiate private marketplace deals that
dictate the governance and the transfer of spectrum and to earn profits on the
spectrum through such arrangements is outrageous," Hollings wrote.

Powell's lengthy reply noted the long-term benefits of assisting the nascent
wireless-telecommunications industry, as well as the potential for some of the
cleared spectrum to be used for public safety. Powell also alluded to the money
to be gained by the federal government--after all, 34 cents of every dollar bid
is better than nothing.

What Powell's response lacked, however, was a direct response to Hollings's
core objection--that broadcasters have been authorized to sell something that
doesn't really belong to them and that they got for free. As a "creature of
Congress," the FCC's power to alter the situation fundamentally is limited; only
legislative action, such as a modification of the overly permissive deadline for
the return of the analog spectrum, can truly curtail the broadcasters'
profiteering. But that doesn't mean that the FCC couldn't have thrown a wrench
into the Alliance's plans by, say, pressuring broadcasters to live up to their
end of the bargain and vacate the airwaves in a timely manner.

So, what will Coonce, the Crouches, and other religious stakeholders in the
Band of Gold do with their newfound wealth? The American Prospect tried
several times to contact employees at Radiant Life Ministries, Tri-State
Christian TV, and Trinity Broadcasting Network to answer that question, to no
avail. As it turns out, all three are represented by the same Washington
attorney, Colby M. May. "The groups I represent are religious organizations, so
they don't look at this as a profit-making venture," said May. "Whatever
revenues become available, they would certainly be invested in the digital
transition."

But the expense of upgrading a station to digital is nowhere near the vast
sums that Alliance members will likely rake in. The cost of a digital conversion
tops out at $6 million, far short of the $70 million that a small station like
Radiant Life Ministries' WLXI could net from the auction (to say nothing of the
larger payouts that stations in major cities will garner). And there's no
guarantee that the broadcasters will ever spend even that relatively meager
amount of money. "How many of them are going to say, 'Screw the broadcasting part
of this'?" asks AEI's Ornstein.

May downplays his clients' interest in the auction proceeds. "We're happy for
whatever is generated, but we truly don't have large expectations," he says,
adding that any leftover auction monies will be used "to fulfill the traditional
missions to feed the hungry, clothe the naked." With hundreds of millions of
dollars to play with, his clients will indeed have plenty of resources with which
to do good works. And perhaps buy a few nice knickknacks for that Newport Beach
pad.

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