September 24, 1996 CHAIRMAN HUNDT SAYS MORE CAMPAIGN FREE P0LITICAL TIME AND DIRECT COMMUNICATIONS BETWEEN CANDIDATES AND PUBLIC IS NEEDED; PRAISES BELO BROADCASTING INITIATIVE "The role of money in politics, particularly in buying media access, threatens our democracy,"FCC Chairman Reed Hundt said today. In a speech to the Broadcasting & Cable Interface Conference in New York, NY., Hundt said, "One of the troubling stories of this election is the tremendous upsurge in the amount of money spent on TV time." He said, "Local TV news isn't even telling voters about local candidates, focusing almost exclusively on the national race, according to today's New york Times. This only increases the pressure for candidates to pay for access." Hundt compared the U.S. with other countries, and said, "There is nothing wonderful about our current system, and we are the only country in the world that has it. In all others the role of money in elections is substantially reduced by massive amounts of free time on media for direct communications between candidates and the public. That's a key part of campaign reform that our country desperately needs," he said. Hundt said a "key part of the social compact between broadcasters and the public is free time for political debate." He noted, "In a recent order the FCC laid the foundation for broadcasters to allow the major presidential candidates to present themselves to voters, unfiltered by advertising gimmicks or commentary. Already Fox and the other networks, as well as major cable channels, have offered some free time." "And the show of good citizenship on broadcasters' part is starting to prove contagious. I am pleased to report that the seven television stations owned by A.H. Belo Corporation have offered free time to candidates for the Senate, House and Governor in their markets. Belo's stations will provide five-minute blocks of time for unfiltered statements, and they will select candidates using objective safeguards to avoid any favoritism." "Belo owns stations in Dallas, Houston, Seattle, Sacramento, New Orleans, Norfolk and Tulsa. Some are affiliated with ABC, others with CBS, and one with UPN. All will be making much-appreciated contributions to the success of our great experiment in self-government," Hundt said. - more - Hundt said, "The need for direct communication between candidates and voters is widely recognized in this country. A recent poll found that 53% of registered voters favor live coverage of political conventions, while only 20% said they prefer regular network entertainment. And 40% of television viewers favored live coverage of political conventions without commentary, 7% more than those who wanted coverage with commentary," he said. He said, "We're also hearing from the courts on this subject. The courts have reaffirmed that candidates must be able to speak directly to the public without any intermediation by broadcasters." He said in a recent case that "The Court of Appeals said that the political broadcast provisions of the Communications Act are intended to 'permit the full and unrestricted discussion of political issues by candidates' and that the 'reasonable access' provision of the Act forbids broadcasters from standing between candidates and voters." Hundt said, "That is a good statement of the goal. The task ahead of us is how to make this goal a reality not only for paid time but for free time. Only substantial amounts of free time for candidates get us to that goal." "There is an overwhelming consensus that the cost of television ads is corroding not only the process of campaigning but the task of governing. We must work together to change this," Hundt said. - FCC - Chairman Reed Hundt Federal Communications Commission Broadcasting & Cable Interface Conference Grand Hyatt Hotel New York, NY September 24, 1996 REINVENTING THE SOCIAL COMPACT I don't know about you but I was really ticked by the Vanity Fair list of the new elite. I mean all but two or three of those folks are in our offices every week telling us that what we are doing is really important ...and then E. Graydon Carter doesn't list anyone at the FCC as mattering at all. What if Vanity Fair is right? Does that mean our phenomenally hardworking mass media staff could take a day off and not worry about market reaction to the hundreds of pending transactions they are supposed to review? Could the economists relax from their gimlet-eyed scrutiny of forward-looking cost models and their constant worry about promoting investment in infrastructure? If it doesn't matter all that much to the future of communications, could they go for a bike ride instead? If we're not in the decisionmaking elite, could the wireless bureau say that: we've raised $20 billion so far; that's enough; let's postpone future auctions while we go out for lunch. If we aren't really part of the communications revolution, would it be okay if the international bureau just stopped working to open international markets for American companies to promote good, high-paying jobs here at home. And instead of trying to figure out how to network every classroom and revolutionize education through communications, could we go read a book, and leave our children off the information highway after all. Taking a day off. Sounds good. But to quote from the Watergate tapes -- that would be wrong. So we at the FCC will keep working at our current pace with joy and pride and only a little bit of self-pity. And we do have another chance to get the celebrity we deserve. Forget Vanity Fair. As you may have heard,the National Enquirer is setting up a Washington office. I'm sure that they will regularly cover the FCC. Did you know that FCC stands for Flying Caucer Commission? Hey, don't let a little spelling hangup hold you back. Can't you see the Enquirer explaining our kidvid ruling Alien Intruder takes over FCC open meeting; calms Quello-Hundt sparring! Actually, Jim and I have come into agreement on most all issues these days. And I suspect that Jim and I both agree that alien intrusion is one of the better explanations for some of our broadcast rules of the past. Since the National Enquirer will be our James Boswell, our Samuel Pepys, let's get them off to a start by writing some good headlines for them: "How Low Fat Pretzels and Diet Coke kept the common carrier bureau thin and awake for 25 straight weeks of working on the interconnection order!" "EXPOSE: The untold agony of checking the cross-references of footnotes in each of the 32 Telecom Act rulemakings so far and how the commissioners' staffs hide it from the lobbyists." "To Hell and Back: Two Years in the Life of the Cable Bureau" "How Jack Valenti Learned To Stop Worrying And Love the V Chip" "Irresistible Impulse: the International Bureau's Wild Passion for Accounting Rate Reform" I also think the National Enquirer can teach us this much: We do well at the FCC to spell out our policies in big headlines. I'd like to try to do that today with regard to media policy for the future. Let's start with some principals. But first, on a very sad note, I want to acknowledge someone who I very much wish were here today. That is Ralph Gabbard. I was deeply saddened by the death of Ralph Gabbard, who served his community and the broadcasting industry with great dedication and leadership. I personally benefitted from his wisdom and insight in my many conversations with him. Everyone knows we particularly owe him a great debt of gratitude for his most recent contributions to the children's television proceeding. But in his modest, unpublicized way he provided me wise counsel on a number of other issues as well. With his death we have lost a good friend, and the country has lost one of its finest citizens. Broadcasting & Cable had it exactly right when it wrote, "We've always believed that leadership is a free ball, ready to be picked up by those with ability, principles and gumption. Ralph Gabbard was such a man." Indeed, Ralph was a man who had an unshakable belief in and commitment to the notion of public service. He knew that the broadcasting industry does not stand apart from or above the communities it serves. Rather he knew that broadcasters, because of their awesome ability to inform, entertain, inspire and touch the community, have a special duty to consider themselves a part of that community and to serve it. But that special duty is challenged and called upon more than ever as our country moves into the information age. We are the biggest consumers of communications services on the planet; yet we have one of the most serious problems of income inequality of any developed country. We have an ambitious and complex public education system that is the only way to get ahead for 50 million kids; and it's not delivering quality or equality of education for millions of them. Our economy, driven by the communications revolution, has never been stronger; yet we are still showing a tremendous trade deficit. Our political life makes us still the best hope of the world; yet the role of money in politics, particularly in buying media access, threatens our democracy. As always in American history, it seems to be the best of times and the worst of times. In a media age it is the right time to examine how our communications industries can help us perpetuate our successes and remedy our problems. As we enter the 21st century, it is high time and the right time to reexamine, redefine, restate and renew the social compact between the public and the broadcasting industry. First, the social compact with broadcasters must resemble in material terms the same compact that we strike between the public and any other competing media. It isn't fair or sustainable to put obligations on broadcast and cable that cannot be sustained amid the increasing competition among broadcast, cable, DBS, LMDS, wireless cable. Each of these media industries will be selling their wares to 100% of the country, and none should be under a special unfair competitive burden. Second, it is nevertheless reasonable to put all media under some obligation to serve the public interest. Indeed, all media have typically been party to some sort of social compact. The cable industry gets right-of-way, but does PEG, leased access and must carry. Satellite operators get to use spectrum, but have to set aside 4%-7% for educational purposes. So it's on the order of the obvious that broadcasters should have and always have had some social compact with the public. What is not obvious is how to state its terms and conditions in today's competitive conditions. Third, it is going to be necessary to quantify public interest obligations. Only if quantified can these obligations be stated clearly, modified as public needs change, immunized from ad hoc political intervention, and measured so as to assure every one that they are economically bearable. That is the lesson of the public interest experience with cable. It explains Congress's decision to quantify the public interest obligations of DBS providers -- and the court's recent decision to uphold a quantified public interest requirement against a constitutional attack. One of the most important dimensions of the new children's programming rules is that they tell every license holder what amount of educational TV is sufficient for license renewal. If a broadcaster is in a competitive situation that precludes it from doing more than the minimum to educate kids, then we have eased its competitive challenge, and lowered its legal fees, by telling it how much children's television is enough. We also for the first time set up the conditions for marketplace reaction to the quality of children's television. We have given a clear definition without displacing broadcasters' discretion in deciding what educational shows are likely to attract an audience or in deciding what they want to teach or how to teach it. Under our new rule, developed with the close cooperation of the NAB and others, especially including Ralph Gabbard, we trust chiefly in the public to evaluate the quality and opportunity of educational TV. To help steer kids towards the right shows, broadcasters now will be giving advance notice of what shows are educational, telling audiences the target age groups for individual shows, assuring themselves that the shows are specifically designed to teach and not just entertain. Broadcasters, I predict, will arrange to give an Education Emmy to the most popular and truly educational show. They will take full advantage of TV Guide's offer to identify educational shows, for which we do thank Mr. Murdoch quite sincerely. The broadcasting industry is on the right track when it comes to educational TV for children. It deserves our praise. Now the obligation shifts to parents and teachers to help build audiences for the new shows. It will be imperative for PTA's, churches, and others to advise parents on how to build audiences for truly high quality educational TV. The conditions for doing this were never in place before. Starting in the Fall '97 they will be. Educational TV will renew part of the broadcast industry's social compact. Demand for quality children's programming is up. USA Today recently reported that "the FCC ruling started a feeding frenzy among producers and creators of potentially educational programming." Alice Cahn, head of children's programming at PBS said she's been swamped with inquiries about supplying educational programming to networks since the FCC ruling. In fact, the program "Ghostwriter", which teaches 7- to 12-year-olds to read and write but was dropped by PBS, is being picked up and distributed to commercial stations in syndication. The Wall Street Journal reports that the "White House Pact on TV for Kids May Prove a Marketing Bonanza." Bob Meers, CEO of Reebok Brands, said that, "The idea of quality children's programming is directly in line with our company's strategic plans." According to Broadcasting & Cable Magazine, producers are already creating new programs like "PC4U", an educational computer series aimed at 6- to 16-year-olds, and "Chucklewood Critters", which is being produced with the help of elementary school teachers and other experts. ABC has committed itself to increasing from two hours to three hours the amount of educational and informational programming it feeds to its affiliates. Broadcasters are on the right track. Parents and teachers now need to help build audiences for these news shows. Another key part of the new social compact between broadcasters and the public is free time for political debate. One of the troubling stories of this election is the tremendous upsurge in the amount of money spent on TV time. At all levels, candidates are obligated to devote an unthinkable amount of time to raising money. Meanwhile, local TV news isn't even telling voters about local candidates, focusing almost exclusively on the national race, according to today's New York Times. This only increases the pressure for candidates to pay for access. There is nothing wonderful about our current system, and we are the only country in the world that has it. In all others the role of money in elections is substantially reduced by massive amounts of free time on media for direct communication between candidates and the public. That's a key part of campaign reform that our country desperately needs. In a recent order the FCC laid the foundation for broadcasters to allow the major presidential candidates to present themselves to voters, unfiltered by advertising gimmicks or commentary. Already Fox and the other networks, as well as major cable channels, have offered some free time. "We fully understand that our proposal cannot solve all of the problems associated with the financing of political campaigns, or even most of them. But someone has to start somewhere," Rupert Murdoch said in launching Fox's initiative. "Fox Broadcasting is taking one small, very important step forward to do something." Fox deserves major praise for its courage in taking this step. And the show of good citizenship on the networks' part is starting to prove contagious. I am pleased to report that the seven television stations owned by A.H. Belo Corporation have offered free time to candidates for the Senate, House and Governor in their markets. Belo's stations will provide five-minute blocks of time for unfiltered statements, and they will select candidates using objective safeguards to avoid any favoritism. Belo owns stations in Dallas, Houston, Seattle, Sacramento, New Orleans, Norfolk and Tulsa. Some are affiliated with ABC, others with CBS, and one with UPN. All will be making much-appreciated contributions to the success of our great experiment in self-government. The need for direct communication between candidates and voters is widely recognized in this country. A recent poll found that 53% of registered voters favor live coverage of political conventions, while only 20% said they prefer regular network entertainment. And 40% of television viewers favored live coverage of political conventions without commentary, 7% more than those who wanted coverage with commentary. The networks complained that during the convention they divided a small audience -- but I suspect that virtually all registered voters watched at least some of each convention. That's not at all a bad fact for our democracy. We're also hearing from the courts on this subject. The courts have reaffirmed that candidates must be able to speak directly to the public without any intermediation by broadcasters. A recent case involved a candidate who sought to air a graphic ad on abortion at a time selected to reach the broadest audience. The station wanted to air the ad after midnight, and the FCC sided with the broadcaster. But the D.C. Circuit in Becker v. FCC sided with the candidate's right to reach its audience, holding that the "reasonable access" provision of the Communications Act "overrides [broadcasters'] programming discretion" and forbids broadcasters from standing between candidates and voters. The Court of Appeals said that the political broadcast provisions of the Communications Act are intended to "permit the full and unrestricted discussion of political issues by candidates." That is a good statement of the goal. The task ahead of us is how to make this goal a reality not only for paid time but for free time. Only substantial amounts of free time for candidates get us to that goal. There is an overwhelming consensus that the cost of television ads is corroding not only the process of campaigning but the task of governing. We must work together to change this. While defining the minimum public good everyone should expect from the media, we should at the same time operate on the assumption that no commercial rules are necessary, except those that protect against overconcentration or interference. This is the procompetition part of the new social compact. Consistent with this assumption, we repealed the prime-time access rule, also known as the PTAR. We repealed the financial interest and syndication rules -- fin/syn. We repealed a rule preventing networks from owning broadcast stations in small markets. We repealed the secondary affiliation rule. I'd like to see us repeal the station rep rule. That rule prevents networks from representing their affiliates in the sale of their advertising time. The real-world effect of the rule is to protect a small handful of advertising rep firms from competition. Can't TV stations make up their own mind about who should represent them? Does the government need to protect them from their own decisions? Is it really the case that the bargaining relationship between those networks and their affiliates is so out of whack that the government must step in and manage the relationship? I've seen speculation that that's the case, but no persuasive evidence. Rules we adopt or retain should be based on hard evidence, not simple speculation. We should and we will continue to do away with any and all rules that hamper competition and don't serve any public good. In the sunny uplands of deregulation there are no rules, except rules against monopoly and interference. In those cases where we need to keep rules, we're reengineering the process to make it easier and quicker. For example, we have authorized alternative inspection programs in a number of states. Just as one example, under this plan, the Wisconsin Broadcasters Association hired contractors trained by the FCC to inspect all the states' stations for compliance with FCC rules. The stations that participated were able to correct any problems without fines or penalties and were able to avoid drop-in inspections by the FCC for three years. We're adopting the same principles of lean-production as industry. We've cut by one-third the amount of time it takes us to act on routine TV sales to two months from three months. And we've cut two-thirds off the time it takes us to process non-routine TV sales -- from 18 months to 6 months. And, like industry, we're doing more with fewer people: Between 1990 and 1995, our mass media bureau has handled 31% more applications for broadcast station sales with a staff that decreased 33%. Roy Stewart and his staff deserve enormous credit for this accomplishment. We have to be even bolder in the future. Almost all applications for transfer for licenses should be no more burdensome than getting a new driver's license. I lost mine recently when it unfortunately was in a wallet that came into someone else's possession under obscure and unintended circumstances. That's another story. The point is: it took me a couple of hours standing in line at the DMV to get another license. That's about what it normally should take to transfer a license in broadcasting. One problem is that the FCC doesn't yet have an up-to-date electronic filing and database system. The computer databases at the FCC haven't been changed for over a decade. They are long out of date. We are spending more than a million dollars right now to solve this problem -- and I assure you it wasn't easy to allocate that money away from the other demands on the agency at this time. But this spending will result in even more millions saved by the broadcasting industry and other industries with business before us. Today, an FCC employee would still have to enter data manually from your applications into our computers -- a process that has not changed in 15 years. Often, we have to get back in touch with you for further information or clarification. But with our new electronic filing system, you will be able to input the data directly yourself and the computer will automatically check for insufficient or unclear data. Wherever possible, we'll be implementing "smart" machines that you'll be able to use much like a simple cash machine. Today, a licensee who wanted a new call sign would have to call us and ask an employee to check whether a certain call sign was available. Then, the licensee would have to write to request a change. In the future, our system will allow a licensee to determine a call sign's availability, lock it up, pay for it, and notify the Commission of its action -- all in one step. It's kind of like the difference between just picking up a book at Barnes & Noble instead of writing a letter to the author and asking if there are any copies of his book available that you could then put in an order for. We're increasing the amount of information readily available to the public via our World Wide Web page. And we're developing plans to make all our bureau databases readable via the Internet. Eventually, we aim to have a fully electronic system so licensees can file reports electronically and update them on-line whenever your situation changes. Delay in licensing also is caused by the compliance checks at the time of a license transfer: For example, we check for compliance with EEO rules, indecency rules, and ownership rules. We can and should greatly simplify and, where we can, eliminate our processes. That is the mission I have given Roy Stewart and his capable team. And they will be presenting a proposal to this effect to the Commission by the end of the year. Your input is very very welcome. A straightforward focus on public benefits from and private deregulated competition in communications will give us the right answers to the digital TV questions. You all know that the issue of digital TV licenses has entered the Presidential debate. And you know that the President has said he favors awarding these licenses to today's broadcasters. If Congress allows us to issue these licenses early next year, as I expect it will, then we have a chance to extend our worldwide lead in digital terrestrial broadcast. That's what we should aim for. But who will digital broadcasters be broadcasting to? The computer industry is saying: broadcast to our PCs and especially to our laptops. That's why they prefer a progressive format and the base line-enhanced standard instead of the Grand Alliance standard. Meanwhile Michael Jordan of Westinghouse last week spoke out firmly against that approach and said the target receiving device was not computers but 60-inch home theaters. The problem, of course, is that while both computers and digital TV home theaters will cost about $3,000, one third of American homes already have computers and none have a digital TV receiver. Now in the PCS industry, because we knew we could not predict the future, the FCC decided to set no standard and let the market pick one. As a result CDMA is flourishing in this country and is a rival to the European government-selected standard. That seems to have worked. So why should the government mandate a digital TV standard and forbid others? Or should the FCC be picking standards for these other industries? What's the theory here? And is it possible that those who advocate a government standard, whether TV manufacturers or computer software groups, are seeking some sort of business advantage? That could happen. Now the software people are plainly interested in selling future software applications to the PC- TV that soon is coming down the marketing pike. And the broadcasters are locked in at least a rhetorical alliance with the bigscreen HDTV people. The cinematographers and the TV manufacturers have their own interests and concerns. With these varied interests compromise may be hard to achieve. But a good start would be to lock all of the relevant industries in a room until they created a de facto standard that will accommodate each of the legitimate issues that have been raised -- and that is good for consumers. I might even provide the room and the lock if that's what it takes. As to why, if they succeeded in finding common ground, they would still need the government to mandate their de facto standard, we could discuss that later. By far the more important thing is that we try to avoid having government pick winners and losers in fights that ought to be settled in the market or in the boardroom. Meanwhile, our focus at the FCC needs to be on guaranteeing that the public good of digital TV be guaranteed to all Americans. I am not willing to assume that all Americans can afford a $3,000 personal computer or a $3,000 home theater to watch digital terrestrial broadcast. In fact most are probably going to watch digital TV the same way they watch analog TV: by cable or satellite. Doesn't it concern anyone that we're debating with such vigor a digital broadcast transmission standard when most viewers will be watching digital TV received through digital cable or satellite set-top boxes that aren't compatible with the Grand Alliance standard or the preferred computer industry standard? And won't the digital cable boxes join the digital satellite boxes in the market long before digital broadcast towers are built? Isn't this a problem in terms of driving quick and widespread consumer acceptance of receivers compatible with either the Grand Alliance or the computer industry standards? I'm not saying that the FCC should mandate a digital cable or satellite transmission standard. As I said, I'm leery of all government-mandated standards. But maybe in that locked room the computer industry, the cinematographers, the broadcasters and the TV manufacturers can talk about how the digital cable and satellite standards play into the digital TV discussion. Maybe the cable and satellite industries ought to be in the room too. After all, at the FCC we need to focus on guaranteeing the public good of free digital broadcast. This will be hard to do if there isn't a clear plan for promoting 100 percent penetration for receivers that display digital broadcast signals. So what's the plan? As the FCC and the broadcasting and cable and satellite industries move forward into the digital age we have to remember that our goal is to have no rules except those necessary to guard against overconcentration in the media and that guarantee public benefits from the media. If we get to that goal, then you can forget Vanity Fair and the National Enquirer. We'd be ready for Prime Time. - FCC -