SPEECH BY REED HUNDT CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION INDUSTRY LEADERSHIP CONFERENCE INFORMATION TECHNOLOGY ASSOCIATION OF AMERICA NASHVILLE, TENNESSEE (AS PREPARED FOR DELIVERY) 9 OCTOBER 1995 THE BEST MERGER: THE PUBLIC INTEREST AND NEW TECHNOLOGY Thank you, Scott, for that kind introduction. It is a pleasure to be with you this morning at the Information Technology Association of America's Industry Leadership Conference. It is also a pleasure to arrive here from the entertainment capital of the world -- Washington, D.C. Of course as my friend the Vice President always tells me, Nashville is really the entertainment capital of the world. That's because if content is king, country is the emperor. The last time I was here in Nashville was at the Vice President's annual family conference in July. This year the title was "Family and the Media," and Al and Tipper had the President as a surprise guest. It was at that conference that the President called for the V-chip in the TVs of tomorrow. Subsequently, the House broke ranks with its leadership and put the v-chip amendment in the telcom reform bill. That's the power of the public interest when it stakes its claim on cyberspace. The v-chip symbolizes a merger more important than any of the media deals you've read about: The v-chip symbolizes the possible merger of the public interest and new technology in the media age. And today I want to talk to you about how another new invention - a new digital transmission standard called Digital Television - can give us both great new economic possibilities and a new way to realize the public's interest in the communications revolution. You've heard about the direct broadcast satellite that delivers more than a hundred channels digitally to a settop box. Although it hardly means the end of cable, it is the first real sign of competition for cable's upper tier of channels. The price of the dishes needs to come down, and it should as Sony joins Thompson in building the dishes. But just after Sony put several thousand units in the field, it discovered that some of the projectors displayed a thin green line across the picture. Thanks to the wonders of digital transmission down from a satellite, Sony turned this potential lemon into lemonade. The fix for the video decoder was broadcast from the satellite directly to the affected systems. No returns, no service calls, no customer problems. So digital transmission can deliver not just movies, entertainment, and sports, but also software. In the future, will Microsoft's Windows 96 or 97 or 98 be broadcast digitally into every PC that pays the fee for decryption? It could happen. On November 28 I expect to receive the fruits of a seven-year effort to invent a terrestrial over the air digital broadcast transmission signal. With this invention, your local TV tower can send a digital instead of an analog signal. Instead of launching a satellite to broadcast digitally, you need only put up a tower. This invention comes to us from a marvelous public/private initiative called the Grand Alliance. To use it, consumers need a TV that receives a digital signal and the FCC needs to assign spectrum for digital transmission. The receiver and the spectrum are both problems. Now, some people think the conversion of your analog TV to receive digital signals is going to be solved by DBS or cable. They each will sell you a downconverter box. This will be an item that you can lease or buy to install on top of, or behind, your analog TV. If this is the future, the TV will stay analog; and it will stay dumb. It will be essentially a monitor. But if this is the future, there's no need to use the airwaves for local digital transmission. Cable will carry today's analog broadcasters channels via the cable pipe. The only change will be that the programs will be filmed in digital format and sent digitally by the cable company. Then they will be translated to analog in the settop box, and displayed on your TV. An alternative future is for businesses to broadcast digital signals directly to the TV of the future. This is how UHF channels got started. Congress passed the All Channel Receiver Act that required all TV's sold after January 1, 1965 to have UHF channels. To make digital broadcast a reality, Congress could pass a law requiring all TVs sold after July 1, 1997 to have the capability to receive digital transmission. That would raise the price of TVs less than $100 -- and give us a whole new industry. These TVs won't resemble the TV of today. The digital TVs will be chock-a-block with chips -- chips from A to V. These chips will mean a revolution. In the latest issue of The Economist magazine this vision is laid out: "As the transmission of information is increasingly digitized, the boundaries between the telephone, the television, and the computer are blurring. Put the three together and all sorts of unpredictable new products and services start to evolve from the fun of television, the brain and memory of the computer, and the two-or-more-way human contact of the telephone." But neither The Economist nor I know what to call the combined TV, PC, and telephone. -- Omnivision instead of television? -- Super tube instead of boob tube? -- Smart box instead of idiot box? The most common term for the TV, according to my survey in my family of 5, including children age 13, 10, and 6, is "Darn Thing," as in "turn that Darn Thing down," or "are you still watching that Darn Thing?" I suppose when the Darn Thing merges with the Computer and the Telephone, will we be saying, "get your fingers off that Darn Thing and get up to your room!" or "get that Darn Thing out of your ears and come to dinner!" This future Thing will come in more than one variety, and its form will follow function. But whether it connects to our fingers, ears, or eyes, the future Digital Thing - the FDT - may come in all these versions: -- Huge flat-panel, wall-hung, theater-style monitors. These might be compatible with the cable or DBS box behind them. -- Small receivers for the kitchen and bathroom to display business news, recipes, or weather reports. These would be coupled with small mobile phones. The packages would be mobile. -- High resolution, thin display screens that fit in a large purse, or briefcase, and that contain the daily newspaper downloaded from the local digital TV station, but filtered and sorted for your interests. You would read it on the subway, in the car pool, during coffee break. Hypertext would let you go deep into any story, watching videotapes otherwise left on the cutting room floor. These versions of the Digital Thing could receive their digital feed over the air, or through a plug in the wall. Desk top video telephones with keyboards in the office. Again either over the air or through a plug. Nine by 11 inch tablets with keyboards on a cradle in your car that can display a map, or a photograph, or a movie guide, or a restaurant rating. These would have to be over the air reception. These FDTs will be as numerous as radios. How many radios do you have? Isn't there one in the car, the kitchen, every bedroom of your house, the TV room, the den, and a couple of portables in drawers? That's how many of these new Things will fill the house. All will receive broadcast, either over the air or down a pipe. Some will also send messages back. The market will be huge. Last year, for the first time, the total amount spent on personal use computers exceeded the amount spent on televisions. When these products merge, sales will go even higher. And like cars and TVs and PCs, consumers will buy new versions every few years. If Congress makes the right decisions, I see 30 million FDTs sold per year in the U.S. alone. Who will design, manufacture, and market these products? Will it be Sony and Thomson? Will it be Microsoft in alliance with Intel, either through network developments or consumer purchased software? Or will Oracle push FDT as an extension of its smart networks? Or will it be a company, like Netscape before this year, like Microsoft in the 1970s, that we've never heard of? But there's an additional problem. In addition to the receiver, for over the air digital transmission you need spectrum. You have to have a frequency of your own to send a signal, whether you're a ham radio operator or a satellite systems owner or a local digital transmitter. The airwaves belong to the public. Some of the airwaves are leased on certain terms by the FCC to private parties if they serve the "public interest, convenience, and necessity." That's the law. The only spectrum the FCC has got available for local digital transmission lies between today's analog stations. It is unused because if we used it for analog it would interfere with today's TV signals. But for digital transmission there won't be interference. This spectrum is prime beach front property in the air. It would fetch about $40 billion in the market, if we sold it by auction. The new digital transmission of broadcast will be capable of many wondrous services. With one misnamed "channel" of six megahertz of spectrum, a tower here in Nashville could broadcast to every PC, telephone, computer, and television in the city simultaneously four or five TV shows, and a couple of software programs, and a newspaper, and a phone book, and movies for storage in the VCR (if VCR's still exist). If we gave out, say, five blocks of six megahertz each, we could enable five digital broadcasters to deliver 20 to 30 channels of programs. This could be local competition for cable. And with so many channels, TV could go "radio." In other words, there could be so many channels that true narrowcasting, or niche marketing, might develop while using a medium that broadcasts the shows. Congress apparently intends for the FCC to give digital spectrum to today's broadcasters. You might well ask why it should be given to anyone. We have already proved we know how to auction spectrum. Our auction of airwaves for personal communications services, or PCS, jump-started competition in mobile telephony (now a zooming market) and also has raised $9 billion for the taxpayer. That's $90 for every american household. The Wall Street Journal has repeatedly blasted Congress for not auctioning the digital spectrum. But hardly any other newspaper has picked up this issue. I don't understand it but for some reason TV journalists seem reluctant to report about what the Journal calls a multibillion dollar Congressional giveaway to broadcasters. In any event, this isn't my fight. The FCC has no legal authority to auction airwaves to be used for broadcast. And even if Congress tells the FCC to give away the digital broadcast spectrum, still there is the question of what broadcasters would do with the public's property of the airwaves in order to serve the "public interest, convenience, and necessity." That is where we come in. The digital transmission technology is so supple and flexible that the possibilities of serving the public interest are staggering. And the commercial possibilities are beyond the dreams of avarice. If digital broadcast gained just 10% of the advertising business in this country, it would increase today's TV revenues by half! And in return for the right to make untold extra billions per year by digital delivery of entertainment, software, data, and advertising by using $40 billion worth of spectrum, you would think today's broadcasters would leap at the chance to strike a deal in which they get the spectrum in return for really serving the public interest. Of course, I don't mean serving the public with more entertainment. We get plenty of that already. I mean that a digital broadcaster could use its new capacity, at last, to give us, for example, plenty of educational TV for children. For example, a digital broadcaster could, from 7 AM to 8:30 AM give us the "Today Show," and a sitcom, and a cartoon show, and a children's educational TV show. Every day. Now that would give real choice for hassled parents. Parents could even use an e-chip, "e" for education, to program the Digital TV of the future to select the educational show for their kids while the grownups are showering and dressing for work. But today, analog broadcasters are arguing vigorously that the FCC should not require them to deliver any amount of children's educational TV. They claim they will volunteer to do some. I trust them as people but commercial competition can make the best of us less charitable than we'd like to be. And as Max Frankel of the New York Times explained in the Sunday magazine this weekend, volunteering by some broadcasters and no volunteering by others is intrinsically unfair to the good actors. To use the public's airwaves all broadcasters should have to meet or exceed a certain level of commitment to educate kids. The FCC has no one to blame but itself for the absence of educational TV for kids. It has studiously avoided for 61 years creating a fair rule imposing this duty, this honor, on broadcasters. Meanwhile, it has stubbornly asserted that broadcast TV's only purpose is to compete in entertaining us. I love "Murder One" and "E.R.," and I'd like to watch them both every week. But competition for adult entertainment audiences has driven real children's educational shows down to one or two half hours a week, and even that is threatened. To boost the alleged merits of merely volunteering to do educational TV, broadcasters are forced to make outlandish claims of what they already volunteer to do that is educational. NBC says "Inside NBA" is an educational show. Maybe it is for future sportscasters. But the 60 million kids in this country need free over the air television to help teach them to read and write, not to comment on basketball. Fourteen million kids are growing up in poverty in the U.S. And educational TV works to extend the learning day and prepare kids for school. It would help us give all kids in this country, rich as well as poor, real opportunity. But we don't have nearly enough of it. And what we've got, the networks are killing. Last spring ABC was running a terrific educational show called "Cro." It was number one in its time slot. It was a success. So they cancelled it. They replaced it with "Dumb and Dumber." That's not just a title of a show. It's a description of the social impact of the decision. On October 16, broadcasters are obliged to tell the FCC that they will or they will not guarantee at least three hours of children's educational TV a week. The President has asked that broadcasters be under this requirement. According to a recent poll, 80% of the country supports him. Indeed a clear majority wants as much as 7 hours of educational TV from each broadcaster per week. Whether broadcasters will listen to the President and to the American people we will soon know. And then we will discover who the five commissioners of the FCC will be listening to. It's going to take longer to see what happens to the TV. Will it still be in a digital age only the boob tube, the idiot box, the electronic baby-sitter, the oven that cooks the brains of the couch potato? Or will it be something more? Will it be a competitive battleground for cable, satellite, wire, and broadcast to communicate to us at home? And will we be able to use this new TV, whatever we call it, not only to entertain our families, but also to educate our children, participate in political debate, gain knowledge, enrich our lives? One version of the future is found in the summer blockbuster from Time/Warner, "Batman Forever." Jim Carrey, as the evil genius "Riddler," invents a settop box. It looks like a Kitchenaide blender and that's what it does to the minds of TV viewers. This settop box sucks the viewer's brains through the TV, up a cable, and back into a synaptic energy lens directly into the Riddler's mind. The newly brilliant riddler then seeks, naturally, multimedia dominance. Obviously the creators foresaw the Westinghouse, Disney, and Time/Warner deals. Only the Dynamic Duo -- Batman and Robin -- can save the world from the digital settop box and its frightening effects. So are Batman and Robin metaphors for the Antitrust Division or the FCC? But the digital age is not a fiction. And we don't have cartoon characters to guarantee a happy ending. The digital age, like the settop box of "Batman Forever," can dumb us down and empower only a few. Or it can help all of us teach all our children well. It can help guarantee them a bright future in the information age. Today's broadcasters will tell us what choice they're making when, on October 16, they declare whether and how they're willing to guarantee educational TV for kids. Whatever they decide, the rest of us have our own choices to make in deciding whether the information highway will be a bridge to the future for all Americans. At the FCC we need your help and ideas. I'm counting on you all, and I know you won't let us down. Thank you. -FCC-