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FCC to set a price for digital profit

WASHINGTON — Broadcasters who use digital channels for subscription services would have to hand a percentage of their receipts to the federal government, according to proposals unveiled Thursday by the Federal Communications Commission.

Back in 1996, Congress said broadcasters could use billions of dollars’ worth of airwaves for digital television services for free — as long as those services were free to viewers. But Congress also said if broadcasters used a portion of the airwaves for subscription services, which could range from pay-per-view movies to Internet access, the government should get some digital payback.

Congress said that compensation should reflect, “to the extent feasible,” the digital spectrum’s value on the open market. In its proposals, the FCC noted it would be difficult to determine how much money the spectrum would be worth on the auction block. That’s why the FCC has opted for the simpler approach of taking some percentage of revenue.

The FCC has a lot of flexibility when it comes to charging broadcasters. The bottom line, according to the Telecommunications Act of 1996, is the FCC should ensure broadcasters do not enjoy “unjust enrichment” by using airwaves they received for free to offer subscription services.

Among the options the FCC put on the table are: taking a cut of gross subscription revenues; taking a cut of incremental profits stemming from the subscription services; a hybrid charge that will blend a flat rate with a percentage of revenues.

FCC chairman Bill Kennard said it is important that the method settled on be “simple and easy for broadcasters to implement.”

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