Vision is a favorite topic of Dr. Garth W. Coonce, a minorChristian-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 communiqués 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 beespecially thankful for the Lord's business smarts. After years of scraping by ongoodwill offerings and souvenir sales, his nonprofit, commercial-free networkjust hit the corporate-welfare jackpot. This coming June 19, Tri-State ChristianTV and Radiant Life Ministries--Coonce's two main evangelical concerns--will joinat least 20 other broadcast companies in auctioning off a portion of theirelectromagnetic spectrum, the invisible commodity that carries broadcast signals.The spectrum to be sold was given gratis to Coonce and hundreds of otherbroadcasters in 1996--a slab of political pork that Arizona Senator John McCaincalls "one of the greatest scams in American history." Now, thanks to thelargesse of the Federal Communications Commission, small-fry religiousbroadcasters like Coonce stand to become tycoons literally overnight. "I'm surethey're seeing this as manna from heaven," says Norman Ornstein, a residentscholar at the American Enterprise Institute (AEI). "Except instead of coming viaGod, it's coming via the FCC."
Coonce's sudden good fortune has its roots in the deregulatoryTelecommunications Act of 1996, which granted every TV station an extra sixmegahertz of spectrum--in effect, a second channel's worth of airwaves. Themighty National Association of Broadcasters (NAB) pushed through the gift--thenvalued at somewhere between $37 billion and $70 billion--with the dubious claimthat American viewers were clamoring for digital TV, with its sharper picturesand $3,000 high-definition TV sets. The NAB insisted that stations would usetheir bonus airwaves to convert gradually from analog to digital broadcasting;while the new spectrum was being set up for digital, stations could stillbroadcast on their existing analog spectrum. When the transition was complete,the stations would return their old six-megahertz slices to the FCC, theairwaves' public guardian.
But the law's fine print contains some slippery wording. The broadcasters areallowed to retain their analog spectrum until December 31, 2006, or whenever 85percent 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 recognizethe money to be made in exploiting the telcos' desperation. Paxson formed theSpectrum Clearing Alliance, a consortium of broadcasters--Coonce's companiesincluded--that own stations on UHF channels 60 to 69, a boob-tube Siberiapopulated by televangelists, shop-at-home outlets, and Pax TV's family-friendlypabulum (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 hewrote 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 hisstations now slink by on proceeds from Praise-a-Thons and the peddling of "lovegifts." Radiant Life Ministries has been a money loser; according to a 1999 taxreturn, the ministry was nearly $310,000 in the red. Its sole asset is WLXI-61 TVin Greensboro, North Carolina, a station that Coonce purchased for a paltry $1.9million in 1991. Considering that Greensboro is part of the 44th largest TVmarket in America, even an ultraconservative estimate of WLXI's share of thebooty is around $70 million--a 3,700 percent return on investment. In fact, thesale of WLXI's spectrum alone could bring in nearly three times more cash thanthe value of Coonce's entire network.
Tri-State Christian TV and Radiant Life Ministries will not be the onlynonprofit religious broadcasters to benefit from the FCC's decision. TrinityBroadcasting Network, the self-proclaimed "world's largest Christian televisionnetwork," is also an Alliance member. Financially, however, TBN has little incommon with Coonce's humble network; the ministry made $192 million in 2000, andits vast holdings include the movie studio that produced the apocalyptic sleeperhit 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 publictrough infuriates Senator Ernest Hollings of South Carolina, the Democrat whochairs the Senate Commerce Committee, which oversees the FCC. After learning ofthe spectrum-clearing decision, he dashed off an angry missive to FCC ChairmanMichael Powell. "Allowing industry to negotiate private marketplace deals thatdictate the governance and the transfer of spectrum and to earn profits on thespectrum through such arrangements is outrageous," Hollings wrote.
Powell's lengthy reply noted the long-term benefits of assisting the nascentwireless-telecommunications industry, as well as the potential for some of thecleared spectrum to be used for public safety. Powell also alluded to the moneyto be gained by the federal government--after all, 34 cents of every dollar bidis better than nothing.
What Powell's response lacked, however, was a direct response to Hollings'score objection--that broadcasters have been authorized to sell something thatdoesn't really belong to them and that they got for free. As a "creature ofCongress," the FCC's power to alter the situation fundamentally is limited; onlylegislative action, such as a modification of the overly permissive deadline forthe return of the analog spectrum, can truly curtail the broadcasters'profiteering. But that doesn't mean that the FCC couldn't have thrown a wrenchinto the Alliance's plans by, say, pressuring broadcasters to live up to theirend of the bargain and vacate the airwaves in a timely manner.
So, what will Coonce, the Crouches, and other religious stakeholders in theBand 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 vastsums that Alliance members will likely rake in. The cost of a digital conversiontops out at $6 million, far short of the $70 million that a small station likeRadiant Life Ministries' WLXI could net from the auction (to say nothing of thelarger payouts that stations in major cities will garner). And there's noguarantee that the broadcasters will ever spend even that relatively meageramount of money. "How many of them are going to say, 'Screw the broadcasting partof this'?" asks AEI's Ornstein.
May downplays his clients' interest in the auction proceeds. "We're happy forwhatever is generated, but we truly don't have large expectations," he says,adding that any leftover auction monies will be used "to fulfill the traditionalmissions to feed the hungry, clothe the naked." With hundreds of millions ofdollars to play with, his clients will indeed have plenty of resources with whichto do good works. And perhaps buy a few nice knickknacks for that Newport Beachpad.
