Remarks of Commissioner Rachelle B. Chong at ABA Forum on Communications Law and National Association of Broadcasters 14th Annual Legal Forum Las Vegas, Nevada April 9, 1995 Good afternoon. It is a great pleasure to be invited here today to be your luncheon speaker at this "Representing Your Local Broadcasters" conference. About 10 years ago or so, I was a brand new communications lawyer attending this very same conference to learn about broadcast law. I see the program hasn't changed too much, except that they've put in the words "convergence" and "cyberlaw" into the names of the panel to make them sound trendy and cool. A little over a decade ago, I was a brand new associate of a DC communications law firm. It was then that I learned that broadcasters are really fun to have as clients. You see, those wacky radio station promo guys always wanted to pull stunts that pushed the envelope of the FCC's lottery and contest rules. You might know what it's like to be the stick-in-the-mud lawyer who has to tell them they can't put a nude DJ in the middle of rush hour traffic to give away concert tickets! One of my fondest memories of those days is when I was working on a big radio tower case. It was a very complex and technical case. We had a huge litigation team made up of radio station personnel, engineers, aeronautical consultants, and lawyers. We all suffered through numerous five hour, multi-city conference calls. Finally, our client -- in a silent but eloquent comment on these marathon phone calls -- mailed a gift to the engineer -- a bedpan. So, if there are any new lawyers in this room, hang on to your hats. You are going to love representing broadcasters! You probably came to find out what the Commission is doing these days on broadcasting issues. I thought I'd cover the hottest of these issues. Topic One: Children's TV is on the Commission's front burner. And, as our meeting last Wednesday proved, the debate is lively among the Commissioners on this controversial topic. And no wonder. There are First Amendment content regulation issues at play. This never fails to get Commissioners Quello and Barrett fired up. This is balanced against our realization that television has a powerful influence on our children, and our desire to do what's right for kids. All of this is laid out against the backdrop of the economics of a commercial television market. Topic Two: High definition TV -- or HDTV for short -- is heating up too. I thought I would discuss where we are at the Commission on this important topic for broadcasters. Topic Three: The Telecom Reform Bill. Clearly, our colleagues up on the Hill have some distinct ideas what we ought to do about broadcasting issues as reflected in draft telecom legislation. My final subject will be a brief legislative review of the Pressler bill which has been voted out of the Senate Commerce Committee and is awaiting action by the full Senate. Children's TV I thought I would start with the current "hot" issue at the Commission these days. And that's children's television. Let's start with a bit of FCC history on the topic. As early as 1960, the Commission recognized that commercial broadcasters have a duty as public trustees of the airwaves to provide programs for children as well as adults in their audience. But the real action did not begin until 1970, when a group led by a grandmother, Peggy Charren, filed a petition with the FCC. Her group, Action for Children's Television, asked the Commission to adopt rules banning ads from children's shows and to require broadcasters to air specific amounts of children's programming. As a result of her plea -- which proves that one person can indeed make a difference -- the Commission began an inquiry into children's programming and advertising practices. Three years later, the Commission adopted a "Report and Policy Statement." This statement specifically recognized that the public interest obligation that Americans place on our television licensees includes a responsibility to provide diversified programming designed to meet the needs and interests of the children in the audience. To meet this obligation, the Commission asked broadcasters to increase the amount of children's programming; air a reasonable amount of children's educational and informational programming; separately target its educational programming to both preschool and school-age children; and to air children's programming during weekdays as well as on weekends. The Commission also recognized that children are not yet able to distinguish conceptually between programming and advertising. So it sought to protect them from commercial exploitation. Broadcasters were ordered to limit the amount of advertising on children's programming, to separate the programs from the commercials, and to stop having program characters sell products. In 1978, the Commission decided to evaluate how the broadcasters' were doing in this area. The report by a Task Force concluded that, by and large, broadcasters had complied with the restrictions on advertising, but not with the programming guidelines. So a new proceeding on children's television issues began. It is fair to say that the FCC did not focus much of its attention on children's television in the early 1980's, an era characterized by deference to the marketplace. In 1983, however, the Commission reactivated the proceeding and held a hearing. The next year, the Commission found that there was no need to take further action. Although the Commission still recognized that broadcasters have an obligation to serve the special needs of their child audience, it concluded that commercial broadcasters could use their own judgment to determine how to meet that obligation and simply be prepared to justify their decision at the time of license renewal. As to advertising during children's shows, the Commission dropped virtually all its restrictions. Like many of the FCC's controversial actions, these decisions were appealed to the judicial system. By the time the courts resolved the cases, three years had passed. At this point, the children's advocates became frustrated with the regulatory process, and turned to a new forum. Congress responded to their pleas by enacting a landmark piece of legislation, the Children's Television Act of 1990. In the Act, Congress recognized the value of television as a learning tool for children. Congress gave statutory status to the FCC's conclusion that television broadcasters have a public interest obligation to provide programming that serves the special needs of children. Congress found that safeguards were needed to protect children from overcommercialization. It directed the FCC to readopt limits on the number of commercial minutes during children's programs. In implementing the Act, the FCC set time limits on the advertising during children's programs. The good news is that most broadcasters have complied with these limitations. Only a few have failed to heed these limits. Where they have not, the FCC has enforced the Act by assessing forfeitures as high as US $80,000. So, be forewarned, advise your clients that the Commission is enforcing its commercial advertising limits for children's programs. The more challenging part of the Commission's job in implementing the Act was to create a workable definition of "children's educational and informational programming," while not constraining broadcasters' First Amendment rights nor inhibiting their creativity in designing children's programs. The Commission opted for flexibility and defined it as programming that furthers the positive development of the child in any respect, including the child's cognitive and intellectual or emotional and social needs. The Commission declined to require broadcasters to air specific amounts of children's educational programming. Instead, it made the extent to which a TV station meets the needs of its child audience a factor to be considered when renewing the station's license. The Commission pledged to monitor the good faith efforts of broadcasters to comply. In 1993, after reviewing 320 TV renewal applications, the Commission made good its promise to monitor the broadcasters' efforts under the Act. Now this is when I entered the picture. President Clinton appointed me to the Commission in May of last year. The current Commission, under the new leadership of Chairman Hundt, held a hearing last June on children's television. It was quite a memorable hearing. For one thing, I had never been lobbied by hand puppets before. Shari Lewis' Lamb Chop and Elmo of "Sesame Street" fame made eloquent cases for more children's shows. I was tremendously impressed by the often passionate arguments made by the advocates that day. Broadcasters argued that the level of children's educational programming had increased, and that more time -- not more regulation -- was needed. They expressed unease with what they saw as the Commission treading in the delicate content regulation area. Children's advocates expressed their frustration about what they considered to be paltry progress since the passage of the Act five years earlier. Many asked the Commission to order commercial broadcasters to air an hour a day of children's educational programming. Some have asked us to clarify the definition, charging that some broadcasters have listed clearly entertainment cartoons, the nightly news and other general audience programs as "educational programs" in their renewal applications. Others have complained that children's educational shows receive second class treatment from broadcasters. They say such shows are shunted into marginal time slots, preempted, and not promoted, and thus, face an uphill battle to succeed in a commercial environment. Producers came to explain the economics of how children's shows are made, and the difficulties of getting such programs aired in good time slots. Last Wednesday, the Commission voted on a Notice of Proposed Rulemaking designed to strengthen the functioning of the children's television marketplace over the long term. We were guided by three principles. First, we believe that judgments of the quality of a licensee's programming, educational or otherwise, are best made by the audience, not the government. Second, we believe the Commission's rules and processes should be as clear, simple and fair as possible. And finally, broadcasters should be guided by market forces to the greatest extent possible in determining whether they meet their programming obligations. In the Notice, we proposed to make two changes to our rules. First, we are clarifying what we mean by programming that is specifically designed to serve the educational and informational needs of children. Apparently, our old definition was broad enough to drive a truck through. Our new definition will ensure that our licensees know that entertainment cartoons and the news do not qualify for credit under the Act. The Notice makes clear that programming qualifying for credit under the Act must be specifically designed to meet the educational and informational needs of children ages 16 and under, and that educational has a significant purpose in the program. The educational objective of the program and the target child audience must be specified in writing in the licensee's required children's programming report. The program must be aired between the hours of 6 a..m. and 11 p.m., be regularly scheduled, and be of substantial length (15 or 30 minutes long). Finally the program must be identified as educational children's programming at the time it is aired, and instructions for listing it as educational programming are provided by the licensee to program guides. Second, we took action to improve the flow of programming information to the public. You see, we want the public, particularly parents, to be better positioned to judge the quality of the licensee's kids programming and act on that judgment. With better information, we hope that parents and community members will become better informed consumers, influencing the market through their choices. Also, with this information, parents, educators and child advocacy groups can more effectively use community based efforts to seek changes in children's programming without resorting to government intervention. To improve the flow of programming information, we've asked stations to identify childrens educational programming at the time they are aired and to provide such identifying information to publishers of programming guides. This will help parents find these programs in the TV schedule and enable them to encourage their children to watch them. I like this simple idea because it makes the process more user friendly. I also think that this requirement will discourage broadcasters from trying to claim shows as educational which in fact have little educational value. We've also asked stations to publicize the availability of their children's programming reports, and to place those reports in their own separate file in the station's public inspection file. This will make this information more accessible to the public, so that anyone can take a look at it. I also wanted to take this opportunity to encourage you broadcast lawyers to counsel your clients to comply with our current reporting requirements on children's television. These requirements are quite modest. We merely ask broadcasters to submit a record indicating the date, time, duration and "a brief description of any programming claimed as educational." However, Dr. Kunkel, a UC Santa Barbara professor who studied hundreds of license renewal claims filed in 1993, found that more than a quarter of all stations failed to comply with these reporting requirements! I emphasize our expectation that our licensees comply with our reporting requirements. The Act requires that we strive for an overall increase in the amount of children's television aired. Without this important information from our licensees, it is difficult for the Commission to determine whether an overall increase has been achieved. In the Notice, we expressed disappointment with the modest increase in the amount of children's educational programming since the Act took effect. We were concerned that, even with the better definition and the increased flow of information about the programming efforts, this may not be enough to serve the educational needs of children and bring about the kind of measurable increase in such programming contemplated by Congress. We proposed to adopt one of the following three options: First, to establish monitoring procedures for a specific period of time; Second, to establish a safe harbor quantitative processing guideline. This basically means that if a broadcaster can show that it met a certain quantitative guideline, for example, X hours of children's educational programs per week, the staff would have delegated authority to decide the broadcaster had met its obligations under the Children's TV Act. Third, establish a programming standard, which means each broadcaster would be required to meet a specific quantitative standard of hours per week. The third option is to establish a quantitative standard. This means that the Commission would put in a rule requiring broadcasters to air a certain quantitative number of hours of children's educational television per week. Should be choose this option, three hours has been proposed as the initial quantitative standard. Our principle about using market forces as much as possible would be furthered by a proposed program sponsorship concept. Under this option, the Commission could permit a broadcaster to meet the safe harbor processing guideline or programming standard by airing certain number of hours of children's programming on its own station or by sponsoring a portion -- but not all -- of those hours on another station in the market. Here, the idea is that what is important is making the educational programming as available to the children as possible. It doesn't matter that good programs are on every channel; just that there is plenty shown in a particular market. I note that Commissioner Andy Barrett dissented from the portion of the Notice proposing the quantitative standards, the safe harbor processing guidelines, and the program sponsorship approach. It is my opinion that bold and creative approaches are necessary in order to tap television's tremendous potential to teach our children. TV can help impart to our kids information, skills and teach them prosocial behavior, while still entertaining them and stimulating their curiosity. With our Notice, I believe we are taking an important step forward in clarifying our rules, and making it clear that we expect significant and substantial increases in the amount of children's educational television. As between the three options we are considering, I am keeping an open mind as to what path we should take next, but it is my hope that broadcaster will take some voluntary steps that would obviate the need for regulatory action. Let's not forget that the Children's TV Act is not about what's good for broadcasters, but about what's good for children. I think our ultimate objective here is to make use of the power of TV to capture our children's imagination and teach them about our world. Let's take advantage of the fact that kids like TV. When it is done well, kids TV should appeal to their sense of humor, and to their hearts and minds as well. So, if we dare to think creatively and selflessly, we can harness TV's enormous potential to shape our nation's youth into better citizens. Digital TV Here's another TV topic: Digital TV. As you know, the FCC is seeking to implement digital television services -- popularly known as Advanced Television Service or ATV -- to make substantial improvements in television sound, picture quality and related features available to the American public. The issues here mainly revolve around how to transition the public's free and universal broadcast system to new generations of technology without disenfranchising viewers of today's television service. Our current television service uses analog design principles called NTSC -- which stands for National Television Systems Committee. The Commission has undertaken in a series of actions to make available a second channel to each existing broadcaster and to set conditions and timetables for conversion to ATV. We hope to pave the way toward the final ATV standard and channel decisions in the coming years. The FCC has made the following decisions so far on ATV issues: * The ATV system will use design principles independent of the existing analog NTSC system. It will operate in channels of the same 6 MHz bandwidth currently used for existing television broadcasts. * The new ATV service will use the existing TV spectrum. * During the transition to ATV, service will continue to be provided to viewers with receivers capable of receiving only the existing NTSC system signal. * Initial eligibility for ATV channels will be limited to existing TV broadcasters. Broadcasters will have three years to apply for an ATV station and another three years to complete construction. * Each TV broadcaster will be provided a second ATV "conversion" channel. A sample table of ATV allotments have been published by the FCC for these channels. * Broadcasters would be required to "simulcast" the same programming on their NTSC and ATV channels. This requirement would be phased in over a 9 year period. * After a 15 year transition period, broadcasters would cease to use NTSC service and relinquish one of their two channels. Meanwhile, the Advisory Committee has supervised the testing of ATV hardware developed by a number of system proponents. The Grand Alliance -- consisting of the four finalist digital ATV systems -- came together to develop a final digital ATV system for the standard. Their system will incorporate the best performance features of the four finalist digital systems and include improvements on prior designs. It is hoped that the Grand Alliance will submit its final recommendation on the ATV standard to the Commission by year's end. The Grand Alliance was a wonderful coming together. And, in our uniquely American way, we have put the emphasis on the competitive marketplace and private sector initiatives. At a time so many in Congress and elsewhere were clamoring for the U.S. government to initiate and fund an HDTV industrial policy to compete with Japan and Europe, the FCC opted instead to challenge private industry to lead the way. And so they did. The dynamics of the marketplace -- in which systems competed against one another and eventually combined the front-runners' best features -- speeded the invention of digital compression technologies for television. Likewise, the FCC's visionary establishment of the Advisory Committee Advanced Television Service, headed by Chairman Dick Wiley, has resulted in thousands upon thousands of hours of effort and accomplishments by an all-volunteer army of involved industry representatives -- work which the FCC would not have had the resources to duplicate and which, in turn, is speeding the U.S. process toward the digital television era. This process is not over yet -- and we have many and tough decisions ahead. It appears that some broadcasters are wondering whether they want to commit to change over to high definition television given the high costs associated with it. Currently, the FCC's decisions assume that broadcasters would be required to convert to HDTV. If broadcasters decide that HDTV is not something they wish to commit to provide, then it is possible that the FCC may reconsider its ATV decisions to date. Chairman Hundt has signalled that he may be willing to revisit some of its earlier assumptions regarding the use and benefits of this technology. He has asked the following 5 questions in January at the Consumer Electronics Show: 1. How can we make sure that broadcasters can continue to reach their audiences' analog TVs during the digital conversion? 2. How long should be allowed for the transition to digital TV to take place? 3. Is there a good reason to set a national standard for digital broadcast transmission and reception? 4. Would the public interest be served better if broadcasters had to pay spectrum fees or had to compete for spectrum in an auction, especially if they used a digital signal to provide subscription services? 5. Would it be in the public interest to ask the new generation of digital broadcasters to pay for the spectrum -- not with money but with commitments to devote time to public service programming such as children's educational programming, national and local news, and political debate? I welcome the Chairman's invitation to bring the debate forward on digital TV. One reason I am here at the National Broadcasters Convention is to hear from broadcasters directly about this important topic and find out their thoughts. Other important issues to be addressed in the months to come include whether the Commission should adopt a technical ATV standard, and if so, what it ought to include. Also, to what extent should the FCC allow a broadcaster's ATV channel to be used for purposes in addition to HDTV or in alternatives to HDTV? Should the FCC locate ATV channels only in the UHF TV spectrum or also use some VHF TV channels? How should the FCC allot ATV channels and assign them to specific licensees? I believe it is useful to remind ourselves how we have come this far. And I hope we can extend our free and universal television system into future generations of technical quality and service to the American people. Legislative Update Onwards to my final topic: a legislative update on broadcasting. The spotlight is on the Hill these days with the comprehensive telecom reform bills that are wending their way through the Senate and the House this year. As I'm sure you know, last year's efforts to get new telecom reform bills to update our 1934 Communications Act came to naught. As to this year's efforts, the text of the House bill is not released yet. I spoke to Congressman Fields, Chairman of the House telecom subcommittee, on Wednesday night and he told me that he expects to release the text of his bipartisan bill in early May. On the Senate side, the telecom reform bill, S. 652 or the Pressler bill, has been voted out of the Commerce Committee and is awaiting floor time for a hearing by the full Senate. This bill proposes some significant broadcast reform, and I thought it might be useful if I briefly highlighted these provisions. Advanced TV We were just talking about advanced TV issues. The bill defines "advanced television service" as "television services provided using digital or other advanced technology to enhance audio quality and video resolution." The bill states that if the FCC permits a broadcaster to provide advanced television services, it shall permit the broadcaster to make use of the advanced television spectrum for ancillary and supplementary services if the licensee provides the public at least one free advanced program service. And, if the broadcaster charges the public for an ancillary or supplementary service, the FCC is granted the authority to require the licensee to pay an annual spectrum fee, not to exceed the fee paid for a competing service or spectrum subject to auction. The bill also deals with spectrum flexibility issues. It permits broadcasters to use their spectrum for new services so long as they continue to provide broadcast programming that meets their public interest obligation. Multiple Ownership The Pressler bill also proposes to change our current multiple ownership rules. It would require that the FCC modify its current multiple ownership rules for commercial TV stations by changing the maximum percentage one party can own from 25% to 35% of the aggregate national audience. The bill would require the Commission to review its ownership rules every two years. License Renewal Term The bill also proposes to extend the current broadcast license terms which currently are at 7 years for radio stations and 5 years for television stations. The bill would increase the terms for both TV and radio to 10 years. Renewal Application Reform The bill also would amend the current broadcast license renewal procedure. A new two-step process is proposed to replace it. It appears that the rationale behind the proposed two step process is to minimize the delay that can result when petitions to deny are filed against a broadcaster's renewal application. Under this proposed two-step process, during the first step, the Commission would grant a renewal application if it finds, after notice and opportunity for comment, that the station has served the public interest, convenience and necessity, and there have been no serious violations or pattern of abuse by the licensee of the Act or FCC rules. The FCC may deny or grant the application during this first step, but the FCC may NOT consider the applications of others during this timeframe. If the FCC denies the licensee's renewal application, only then during this second step, may the Commission accept and consider applications from third parties besides the renewal applicant for the channel. Those are the broadcast reforms contained in the bill. What the bill's chances? Well, heck if I know; I'm reading the press reports and gazing into a crystal ball same as the rest of you. But I will say this: While individual Congress members who serve on the telecom committees have told me of their strong support for a bill, the devil is always in the details. Already, we have seen a bill fail last year as the details were being worked out. It's certainly possible that this could happen again. The Administration has also put markers down that it does not care for portions of the Pressler bill, namely portions relating to cable regulation, the role of the DOJ, and cable/telco ownership within a market. Finally, just getting floor time will be very difficult this year, with so much on the agenda with an election year coming up. On the other hand, there is indeed strong bipartisan support for an updated telecom bill. I would personally like to see the bill pass, so that the Commission will be able to introduce additional competition into more markets as quickly as possible. Thank you very much.