October 1, 1997

FCC CHIEF OF STAFF BLAIR LEVIN PROPOSES PATH TO SURVIVAL IN DIGITAL
                              ERA

     In an address Monday to the 50th Annual Convention of the Tennessee Association of
Broadcasters, FCC Chief of Staff Blair Levin discussed how to clear a path for broadcasters to
succeed in the Digital era.  Levin began by asking his audience to consider the following
scenario:  "One of your lobbyists says let's pitch the government on this idea: restrict the use
of 82% of broadcasters' digital spectrum capacity, precluding any new revenue producing
opportunities.  Another lobbyist says, how about this:  let's just set aside 5% of our digital
capacity for public interest purposes in return for no restrictions at all on the rest."  Levin
asked: "Which deal is better for your business?" The answer, he observed, reveals "that there
is a disconnect between the way these problems are thought about by your Washington
lobbyists and the business realities you face in the market."

     Levin, observing that the content and conduit parts of the broadcasters business face
competitive threats from digital transmission by wire, satellite, and other wireless delivery
media, called it curious that the broadcasting industry "has focused so much of it's political
capital on preventing any enforceable rules on public interest obligations; the only practical
effect of such efforts is to protect those broadcasters who wish to provide no public interest
programming at the expense of the 80% who are serving the public interest."

     As a result, the broadcast industry has been ineffective on issues of great economic
significance such as degradation of the broadcast signal, digital must-carry and the architecture
of the cable box, issues on which Levin predicted "broadcasters will lose even before the battle
has fully begun."

     But, Levin noted, these battles pale in economic significance to the battle over how
broadcasters commercially exploit the digital spectrum.  Levin cited a CBO study that
predicted that multicasting would be the "most profitable" use and HDTV would be
"unprofitable."  Levin cited a number of industry trends that suggest that "The business
opportunities of the future lie in becoming a digital medium, not a high definition medium." 

     That's why it was so extraordinary that, at a recent congressional hearing, all the
elected officials told broadcasters to provide high-definition services.  And even more
extraordinary, the broadcast lobbyists agreed.

     Levin concluded that no matter what one believes the right business model is,
government should not become "pixel police" and that, "broadcasters agreeing to a 
governmental restriction on their use of spectrum to High Definition, a business with no
upside, at a time when all your competitors are figuring out new ways to earn new dollars, is
tantamount to an agreement to a death sentence."  Rather, broadcasters would be better off
being free to "explore the digital frontier" while keeping true to the principles of the public
interest.

                            --FCC--