May 2017 Advocate: KCSM-TV
THE SELL-OFF OF KCSM-TV
KCSM-TV Spectrum Pot Of Gold Dissolves Into Dueling Lawsuits
By Tracy Rosenberg, Executive Director of Media Alliance
(The Media Alliance is a Bay Area democratic communications advocate. Tracy fought a lonely war to save KCSM-TV between 2011 and 2013.)
For years, KCSM-TV, one of two noncommercial broadcasting outlets owned by the College of San Mateo, trained generations of students in communications. The program was probably the best broadcasting training available at a public two-year college and one of the best in the whole country. The TV station, the 5th largest public TV outlet in the state of California, had fallen on hard times in recent years, losing its PBS affiliation and running annual operating deficits. The trustees of the San Mateo Community College District, during a prolonged process to sell the license, kindly referred to KCSM-TV as a “junker car”, reflecting the District’s lack of enthusiasm for revitalizing its public television station.
Every junker has a suitor
But every junker has a suitor, and a hedge firm came calling for KCSM-TV’s carcass. Here is how we got to dueling lawsuits.
The initial request for proposal for the sale of KCSM-TV ended in August of 2012 with the SMCCD Board of Trustees rejecting 6 different bids from potential new operators of the station. Among the spurned applicants were Public Radio Capital, one of the biggest brokers of public media assets in the country, Independent Public Media in Colorado, and local operators KAXT and KTMP. Offers ranged from $2 million to $7 million dollars. The bids, obtained via a California public records act request, can be seen on the Media Allaiance website.
Trustees smell a windfall
Take 2 started in November of 2012. The reason for the rejiggering and the rejection of all six initial offers was that District Trustees smelled a windfall. The Federal Communications Commission (FCC) was getting serious about running a spectrum auction which would sell unwanted television space to wireless companies, whose appetite for spectrum was virtually endless. Spectrum auctions are complicated and take a long time to execute so while talk had been going on for a long time, it was not easy to ascertain what the actual timeline would be or even if it would happen at all. But in the fall of 2012, the casual conversation was looking to be coalescing into a three-year plan. The inclusion of noncommercial broadcasters in federal spectrum auctions has been controversial, with notable academics questioning if it served the public interest and this author pointing out that the purpose of the noncommercial licenses is not asset speculation.
District makes deal with notorious hedge fund
But the District saw $100 million in its future, instead of $7 million and was determined to figure out a way to get it. Cue hedge firm. In the District’s second RFP process which was launched in November of 2012 and concluded in June of 2013, there were 4 bids received. The district never responded to any bid but that from Locuspoint Networks, a 98%-owned subsidiary of the notorious Blackstone Group, the largest hedge firm in the United States. This second set of bids were also obtained via a public records request, but this time the district redacted the documents and blacked out some of the text.
Blackstone/Locuspoint’s bid called for the complete eradication of the TV station into wireless spectrum. In jumping at the Blackstone offer, the District refused an offer that proposed to sell just some of the station’s spectrum but retain a live public interest broadcasting outlet. Instead, the District embarked on a business deal with a hedge firm subsidiary whose parent company’s abusive and exploitative behavior with public pension funds is well-documented.
District sues, then gets sued back the next day
All did not end well. On the way to the pot of gold at the end of rainbow, and after Locuspoint had shoveled $3.3 million dollars into the District to subsidize KCSM-TV’s operations for the three years leading up to the 2016 spectrum auction, a mistake was made. Namely, District staff who were charged with filing bids throughout the lengthy bidding process, missed a required bid and were, per the auction’s strict rules, immediately dropped from the auction. This outcome meant everybody was out the $114 million dollars the KCSM spectrum was estimated to have possibly sold for and Locuspoint was specifically out the $3.3 million dollars it had invested with hopes of getting about a third of the spectrum proceeds. So the two uneasy partners turned on each other with the District suing Locuspoint and Locuspoint suing the District right back the next day.
Lawsuits dispute who’s at fault
The lawsuit filings can be seen on the Media Alliance website. The District, apparently wary of public humiliation, filed their original lawsuit on April 7, almost completely under seal with 29 (of 31) pages of completely blacked out text. After Locuspoint’s cross-complaint was filed on April 10 and released in full, the District amended their complaint and this time did not black out the text. The long and short of it is that only the licensee’s authorized bidders themselves may place the auction bids. District Vice President of Administrative Services, Jan Roecks, had done so in 46 previous rounds of bidding (of a total of 52 the District had previously participated in prior to the mishap). Locuspoint indicates in the filing that Roecks signed a bid submission confirmation sheet that evening, then informed the Chancellor the bid failure had occurred, but neither informed Locuspoint of the failure. A month later, the District certified to Locuspoint no failure had occurred and collected a $225,000 subsidy payment.
In its amended complaint, the District asserts the third party consultant had the responsibility for ensuring the District’s authorized bidder in fact placed a bid when required to do so. This statement is somewhat contrary to the Federal Communications Commission’s auction rules, which state that only the licensee may submit bids and the process may not be outsourced , although of course licensees may informally consult with whomever they wish.
The upshot of the lawsuits is uncertain, although neither party is likely to recover anything resembling the hundred million dollars plus they were eyeing. Locuspoint may have a valid case for the return of their $3.3 million in subsidy payments and the District still has a TV station it doesn’t want that it can sell for somewhere between $2 and $7 million dollars.
Concerns about KCSM-FM radio station
In the meantime, the District’s popular jazz FM radio station, has started to run an operating deficit and laid off staff and alarmed community members have pointed to the fate of the TV station as a disturbing precedent.
While the final chapter of what will happen to the noncommercial broadcasting licenses housed at the College of San Mateo since 1964 is still uncertain, the saga demonstrates the risks when the licensees of rare noncommercial mass media outlets lose interest in operating them and they get flung about in a free market with little interest in public service.
We’ll end with a quote from the February 2012 Advocate article titled “Maui Condos Or Public Trusts: Questioning the Sale of KCSM.”
The Federal Communications Commission defines non-commercial educational licenses to broadcast as public trusts that belong to the American people and are leased out to meet the information needs of communities. So speculating on them like a Maui condominium is not exactly the intended purpose… None of this should be construed as a lack of sympathy with the financial challenges facing higher education today. Budget cuts have been ruinous. Any source of sorely-needed funds needs to be seriously considered. However, some lines are always drawn. Leasing out the humanities building is not usually on the table. Educational assets cannot simply be up for auction to the highest bidder regardless of the public interest.
KCSM-TV was up for auction to the highest bidder. Some are afraid KCSM-FM may be next. In an era when reliable information, news and culture is increasingly hard to find and our democracy is suffering as a result, that’s not good news.