AS PREPARED FOR DELIVERY CHAIRMAN REED E. HUNDT FEDERAL COMMUNICATIONS COMMISSION before the NIEMAN FOUNDATION AT HARVARD UNIVERSITY Cambridge, Massachusetts May 5, 1995 Thank you for that kind introduction. It's a great honor being here today as you debate and ponder the impact the digital age will have on your proud profession. Digital technology promises to be the source of the greatest story in history of communications since the invention of the printing press: the National Information Highway. For the record, that term was coined in the late 1970s by a graduate of the Harvard Class of 1969: a first-term Congressman named Albert Gore Jr. Incidentally, I hope someone's counting my references to Cambridgians: I'm going for a record here. As Henry James said, Harvard is like Europe; you've either been there or haven't. I spent 30 years trying to get here, so I want to make the most of my chance, and I've heard all Harvard people love to talk about their school. By the way, I read a story the other day about a Harvard professor who wrote a very popular book concerning aliens from outerspace who have occupied the bodies of earthlings. Seems that his peers at Harvard have decided to investigate his research. Apparently they believe that the story might not be true. Hmm. Now I might be mischaracterizing this story. I haven't read the book. But that's OK. I'm from Washington. That's a town where you have someone else read the books you talk about; you have someone else work on the speeches you give; you get someone to write the documents you sign; and you have opinions formed by focus groups not yourself. So, if I learned that someone in Washington had learned how to have an alien occupy his body, I'd say, well, that's a guy who is taking the game to a whole new level. By the way, if that Harvard professor wants any evidence of such people, we've got plenty in my town. Now, I do have some bad news for Harvardians. The information highway was invented by a Yale man. Not the term, the thing. I refer to the original strand of the information highway: the telegraph. Invented by the S.E. Morse, class of 1810. Morse was justly impressed by his invention, giving credit to God and not himself with his famous first message "What hath God wrought." Harvard, however, expressed its disdainful attitude through a member of the Class of 1837: H.D. Thoreau. Thoreau graduated from Harvard, spent eight years looking for a job, finally settled into the woods by a pond and declared himself a philosopher king and was naturally accepted as such. Typical Harvard career path. Thoreau wrote in Walden that, "we are in great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas," he sniffed, "it may be, have nothing important to communicate." Journalists reacted to the telegraph as you might have predicted: with absolute certainty they predicted future events that did not in fact occur. What a surprise! Thus, James Gordon Bennett of the New York Herald predicted that with the arrival of telegraph "mere newspapers -- the circulators of intelligence merely -- must submit to destiny, and go out of existence . . . [while] the intellectual, philosophical, and original journalist will have a greater, a more excited, and more thoughtful audience than ever." I don't know about the end of newspapers, but we know that part about a more thoughtful audience never happened. By the way I don't think the Herald ever printed a retraction. We have beat reporters at the FCC. I've never seen one print an article saying, "by the way the things I reported last week turned out not to be true." That would be too much to expect. But, here's an idea. How about a little box in the paper where a reporter could write: when I reported such and such last week, you should know that an alien took control of my body. Now, that would be a form of retraction, without any overture of embarrassing apology. And it would sell papers. And it might really be true. After all, that's what they say at Harvard. In any event, Bennett's starryeyed speculations about the impact of the telegraph are nothing compared to the cyberhype surrounding the digital age. Personally, I love the exaggeration. It makes the FCC news, and gets me invited to Harvard. Where, obviously, you can say anything and have a chance you'll be believed. At any rate, the phenomenon of digitalization means that voice, video, and data brought to us by today's print, radio, and television journalists will converge, making you, as Katherine Fulton (yet another Harvard grad) puts it, "digital, multimedia journalists." If you are like me, you think a digital journalist is someone who knows touch typing. And, multimedia means they show writer's cramp on television. Ugh. But like it or not, you've already taking the first steps toward his digital world. More than 2,700 newspapers -- up from only 42 in 1989 -- are now dabbling in electronic ventures, including telephone delivery of personal ads and sports scores to fax-on-demand for readers interested in restaurant reviews. You are going online in a hurry. Newsweek Interactive is available on Prodigy, Time is offering a service on American Online, and U.S. News & World Report is available on Compuserve. Broadcasters also are expanding beyond their traditional businesses. NBC, for example, is operating "NBC Desktop Video", a service that brings business news, in the form of live or on-demand video, to the desktop computers of traders and brokers in the financial industry. Broadcasters will be going digital. Today's 6 MHz analog broadcast channel delivers a single NTSC-quality picture. Tomorrow's digital broadcaster can use the same channel to deliver movie quality HDTV; 75 CD-quality audio programs; or transmit multiple shows and data services all at the same time. For example, while broadcasting a movie, a TV station could also transmit a Super Teletext Service comprised of news, the TV Guide, sports results, the yellow pages, weather maps, coupons, and the Dow Jones tape and early in the morning, or at any other time of day, transmit a 100-page newspaper to all the homes in its coverage area in 1.6 seconds. Now that's some paperboy. Broadcast TV is going to change over the next 2 to 8 years. Naturally, all this change creates anxiety for journalists. You are entering unchartered territory, with the possibility of fragmented audiences and greater competition from other digital outlets for the advertising dollars that now pay your bills. At least you can console yourselves with the words of Horace Greeley, the great Civil War era newspaperman: "Journalism will kill you, but it will keep you alive while you're at it." While journalist face the challenges of the digital age, so too must the FCC strive to do its job in bringing the Information Highway to America. Our first task is to bring fair competition to every communications market in the country. This requires a wholly different analysis than in the past. Should newspapers, cable companies, telephony companies and television stations all be able to buy each other? For many years we have thought that the media concentration would occur if barriers were not set up among these different industries. In a digital age, these industry labels increasingly will be meaningless. It will help all of us reason through the maze if we start by killing the metaphors that confuse medium message. If a newspaper is distributed to laptop computers by a broadcast signal, what's the meaning of the word 'paper' in that sentence. And if there's no 'paper' what difference does that make for competition in the relevant market? If a telephone company shows you the nightly broadcast news, where's the broadcast in this fact? And does that matter with respect to the question of diversity of voice? The answers are that in every individual geographic market it will be crucial to use tried and true antitrust analysis. The product markets will need definition. The difference between content and conduit must be clear. If the product is the distribution of news and entertainment, then what are the various forms of distribution. If the answers are over the air, down wires, on print carried by trucks to homes, then the next question is how many different distribution forms are necessary to guarantee competition and low prices. You can hire expensive economists to study this, but if you want a rough and ready answer to this question, the best answer is about five. Think of it this way, we want many ways to distribute products. We want open access for those who make the product, meaning journalists, with or without editors, in teams and alone. And we want direct, cheap distribution. So, our crude outline of an answer is that newspapers might safely own TV stations; and telephone companies could buy cable companies; but only if content providers have at least a handful of competitively fungible, interchangeable ways to reach their audience. Today, these conditions do not prevail. If we let telephone companies buy the local cable company, the two prime potential sources of competition in delivering products down pipes would be merged. That's a bad idea of competition and especially for content providers who want cheap, competitive ways to get to their audience. But, tomorrow in a digital age, much change is coming. My bottom line is that the FCC and/or similar federal and state agencies should have a clear mandate for the foreseeable future to make sure content providers -- that's journalists, among others -- have multiple ways to reach their audience over the info highways. This issue is to be determined in Congress this year. If the emerging bill is anticompetitive, make no bones about it, the Administration will veto it. Whatever happens, here is a story that hasn't escaped from the business pages of the newspapers of the country, but it is crucially important to all Americans. Another key job for us at the Commission is to rethink and restate entirely our so-called broadcast regulation. Under the law, the FCC regulates TV and radio to make sure that these services meet the public interest, convenience and necessity, to use the terms of the 1934 Communication Act. This legal framework has led to a host of erroneous beliefs. One such belief is that I personally listen to Howard Stern, and that I fine him or don't depending on what I hear. This isn't true. The current chairman doesn't do this. Actually, with respect to listening to Stern, it is the previous chairman and current Commissioner Jim Quello who have that job. But, all kidding aside, there is a general view that broadcasters obtain scarce spectrum in return for serving the public interest with their programming. Further, it is generally believed that in some material way, the FCC sanctions or reviews broadcasters. This review has been embodied in the past in such rules as the Fairness Doctrine and programming guidelines which called for certain percentage of nonentertainment programming. These particular rules are not on the books now but it is, for example, the case now that by rule broadcasters must provide programming that "responds to issues of concern to their communities" in order to get their licenses renewed. Similarly, they must comply with personal attack and political editorial rules. They must adhere to the prohibition against news staging. I could go on. It's time to ask whether in a digital age there is any need for these rules. Do they have any effect? Is there any meaning to the public interest standard. In reality do broadcasters now do anything much more than show programs that interest the public when it comes to meeting the public interest test. Since they would do that without the test, why not either abolish the test or replace it with concrete, enforceable valuable obligations? In particular, it's also time to question the hoary notion that the Chairman of the FCC is appointed, in order to exercise a sort of bully pulpit role. I was urged soon after I got my job by a U.S. Senator to play that role with respect to violent programming on television. I did. I gave a speech to broadcasters stating what I understood to be the truth; namely, that violent shows on TV affects children's behavior. Broadcasters didn't like that. They said, among other things, that I threatened their First Amendment rights because implicitly I was threatening their licenses if they didn't reduce violence on TV. I said no such thing. But broadcasters were hearing not me but echoes of previous chairmen going all the way back, I presume, to 1961, when Newt Minow, in the most famous speech ever given by an FCC Chairman (other than this one), called television a "vast wasteland." In his speech, he called for more balanced and diverse programming and threatened not to renew broadcasters' licenses if they failed to do so. But what were broadcasters expected to do in response to this renewal threat, which one broadcaster at the time described as "a sneaky kind of censorship which you can't fight"? While TV programming may have been a vast wasteland, a government-imposed quality standard is a vast shadowland. In the Minow Commission, for example, there was no consensus about programming. Minow was a fan of the Fred Astaire Show and CBS Reports. Frederick Ford watched "77 Sunset Strip" and westerns. Robert E. Lee liked horse operas, saying he was not "very eggheady." John Cross and Robert Bartley spoke only of sports programming, while Commissioner Craven said: "I'll tell you what I don't like -- operas and discussion programs with a bunch of longhairs all talking at the same time about something they don't know anything about." With that range of opinions, how were broadcasters supposed to make sure that the Minow Commission renewed their licenses: run news stories about shorthaired cowboys engaged in sporting events? The Minow Commission's consensus view about appropriate broadcasting was apparently national rodeo news. These vague standards remained over the years. In 1973, FCC Chairman Dean Burch told a broadcast industry group: "If I were to pose the question, what are the FCC's renewal policies and what are the controlling guidelines, everyone in this room would be on equal footing. You couldn't tell me. I couldn't tell you - - and no one else at the Commission could do any better." Three years later, Commissioner Glen Robinson, echoing Ronald Coase, a University of Chicago economist and earlier critic of the FCC, described FCC regulation of broadcasting as a charade -- a wrestling match full of fake grunts and groans but signifying nothing. Vague renewal standards either chill First Amendment rights or become the charade Glen Robinson spoke about -- a counterproductive blizzard of paper filed at the Commission and a lot of legal fees expended, yet no value added to our nation's well-being. Broadcasters are just now commencing the process of converting to the digital age. In a few years, broadcasting in most parts of the country will start to be digital transmission. And TV will become fanatically diverse and complex, merging with the computer and communications industry to create the multimedia experience you've all been reading and writing about. This is a good time to state that at least in the digital age we are going to have honest regulation of broadcasting. That starts with the proposition that there's little or no need for any regulation of the content of commercial broadcasting. If we are honest about this, the public won't expect or care whether Jim Quello or I listen to Howard Stern. The public will know that the government isn't censoring, filtering, or more important, protecting them from violence in content. Then, as it says at the end of Portnoy's Complaint, "we may perhaps begin." First, we will be able to realize why it's important to have the v-chip in televisions, and to have program guides that tell viewers what is violent. These are way to empower parents and responsible adults to select show they want kids to watch. The responsibility to prune out the bad and select the acceptable will be more squarely on parents because it clearly will not be assumed by Big Brother FCC. The charade will be over. Second, if we honestly admit that insofar as broadcasting is a commercial enterprise it needs and should have little or no government intervention, we can then candidly assess the degree to which we want to use the public property of airwaves not only for commercial broadcasting but also for certain public uses. Who among us thinks it was a bad idea to set aside 843 acres in Manhattan to create Central Park? Does anyone think Teddy Roosevelt erred in proposing the National Park System that left us the treasures of Yosemite, Yellowstone and so many others? Surely not all the Western Wilderness needs to be turned over to commercial development. As broadcasters build new virtual cities on the hills in the cyberspace wilderness, isn't it a good idea to make sure that in that digital frontier there are going to be some lands set aside for public needs? One example is this: if broadcasters are going to be able to deliver five or six digital tv signals for each one that is carried in today's analog channel, should some amount of the huge new capacity be set aside for free political broadcasting time? We could establish a fund bank of time. Candidates and parties could draw from the bank vouchers for ad time, without payment by them, and cash in those vouchers with broadcasters. Instead of worrying about whether a network is giving the President enough prime time or should give the Speaker any -- intractable questions in today's regulatory scheme -- we could just be very straightforward in saying: Broadcasters, show what you want, but the terms of your lease of public property are that your rent includes the gift of time to political parties and candidates. This is not a new proposal. It is a great idea. It was not and is not practicably achievable in an analog age. One channel is not enough. It is entirely feasible with the capacity and bandwidth explosion of the digital era. Another good idea is that we should be specific and concrete about children's educational TV rules. One of these vital needs is kid's educational TV. The Commission has proposed a new set of rules to implement Congress's mandate that television broadcasters serve the educational needs of children. Since the Children's TV Act was passed in 1990, the Commission has resolutely failed to pass satisfactory rules implementing this act. The current state of affairs with respect to kidvid is that the Commission doesn't ask broadcasters to show any particular number of hours per week and at license renewal they do tell each and every show or activity that is related to children, with no discrimination between the Jetsons and Bill Nye the Science Guy. They have to list everything because in the best case they don't know how much is enough and in the worst case a long document is more likely to deter scrutiny than a short one. Moreover, there is no way for parents or adults on a weekly or daily basis to have any idea whatsoever what shows a broadcaster believes in good faith comply with the spirit and intent of the law. Our new plan is to be honest about the fact that educational and informative television for children is a commercial burden for broadcasters. Quality educational children's TV is, just as broadcasters say, not as commercially beneficial to broadcasters as showing, say, Jenny Jones. Therefore, we can't ask commercial broadcasters to show an unstated and unknowable amount of it. Competition among broadcasters will inevitably drive off the airwaves educational kidvid unless broadcasters each and all share an obligation to carry such shows. That's the way markets work. Next, we can't ask broadcasters to show much of these shows. Competitive conditions won't permit that, but, what they do show, they ought to tell parents and adults about. We propose that if broadcasters want their licenses renewed they should publicize their children's educational programs. They can pick shows. Government isn't the censor here. But, tell the public what has been selected -- and in advance so we can find them in the TV guide. Third, since carrying these shows is a burden, broadcasters should be able to trade the obligation among each other like pollution rights. That way the broadcasters with the greatest incentive to show such shows will attract them. Others, the traders, will fund the shows by paying someone else to carry them. And, the amount and quality of such programming will go up and not down. So, I'm saying I hope three essential things about broadcasting. First, we shouldn't regulate the content of commercial broadcasting. First Amendment values would be furthered by so stating. Second, we should be concerned with antitrust analysis in broadcasting but should otherwise remove cross industry barriers to entry. Third, since the spectrum is public property, it is right and proper to use some of it for noncommercial purposes. If broadcasters lease spectrum for free, they can devote some portion of their licensed rights to such noncommercial purposes. But for those leases to contain anything of real value to the public, the terms and conditions must be clear. Sam Goldwyn said a verbal contract ain't worth the paper it's printed on. The current social contract between broadcasters and government is like that: better it should be clear, simple, minimally burdensome, and real; let's write down the terms of the deal in indelible ink for the digital age. First Amendment values would be furthered by stating clearly that broadcasters are in effect paying for spectrum by either cash, like the current House bill proposes for certain uses, or in kind contributions of time, or a mixture of both. The terms ought to be clear, and clearly enforceable on all broadcasters. In addition, they should be readily bearable under market conditions, taking into account competitive circumstances for the industry. The ultimate reasons are that in law, clarity and fairness is an end in itself, and, furthermore, if we are clear about what broadcasters can and must deliver in the public interest, then we can be clear about what society can expect. This is the necessary reasoning process in order to make sure that Thoreau's ultimate edict is agreed upon. He wrote: "Our inventions are wont to be pretty toys, which distract our attention from serious things. They are but improved means to an unimproved end." The unimproved end is what we can and should be working on as a country. Let's make sure the infomation highway gets us going in that direction. Thank you.