CHAIRMAN REED HUNDT

FEDERAL COMMUNICATIONS COMMISSION

NATIONAL ASSOCIATION OF BROADCASTERS CONVENTION

LAS VEGAS, NEVADA

APRIL 8, 1997

It is great to be with you here in Vegas.

George Carlin is in town with his routine about the seven dirty words the FCC won't let anyone say on radio or TV.

Everyone operates under limits. Seven words the FCC won't let you say on TV; and two words that the FCC can't get anyone to say on TV: spectrum auctions.

At last we're beyond that.

Surely you are all feeling good about getting these DTV licenses? I hope everyone here has one.

They really are a ticket to 21st century success.

I read in Broadcasting and Cable that Commissioner Ness and I worked out a good cop/bad cop routine for the negotiation with NAB over these licenses.

They're not supposed to figure these things out.

But it is true that to get the DTV deal done I had to promise that next time she could wear the black hat.

Actually, Eddie Fritts and I have a pretty decent version of good cop/bad cop...or at least Laurel and Hardy.

Here's the way it works. I make a reasonable, modest proposal: -- like why don't broadcasters set aside about half of the new DTV programming time for Kids TV and the other half for free political ads?

Then Eddie gives a reasonable, thoughtful response -- like, no way, the industry won't do anything you want ... even if we were planning to do it before you asked.

So I double my demands.

Then Eddie goes to less than zero.

Then we talk.

And eventually we get to a good result.

It wasn't always this way... there was the time, only three years ago when I called Eddie from Argentina to say I was there at an important WTO meeting and I couldn't make it to Las Vegas for the NAB and by the way we didn't have an ambitious agenda for broadcast that year.

Eddie wouldn't let me off the hook.

He made me promise three things: I would address the convention that year by video; I would agree to speak at all future NAB conventions during the crack of dawn time slot, and I would learn as much as I could about the industry.

So folks, in the 3.5 years I've had this job, I've done just what he asked for.

Well maybe not everything he asked for....

Eddie was certainly right about this: in the last three years the broadcast industry has occupied its traditional place at the very heart of the public and political debates in Washington. The issues have included spectrum auctions, kidvid, free time, commercial deregulation such as finsyn and PTAR, procompetition policy, computer/tv convergence, must carry and hard liquor ads. The debates have been in Congress, the Supreme Court, the White House and the FCC.

The debates have been fantastically interesting and the results have been by and large good for the country and positive for this industry.

Of course it's not possible to do my job right and have everyone really "like" everything we do.

But at least I owe you explanations.

I have a two point policy for broadcasting:

First, as a general rule, promote competition and deregulate.

Second, as a specific rule, where competition does not guarantee certain public benefits from the use of the public spectrum, then write fair, clear rules to get those guarantees.

These two points led the Commission to change totally the policies we inherited back in 1993 for what was then called HDTV.

First, we promoted competition in digital receivers by changing the name of the proceeding to DTV -- digital tv -- and expanding the role of the computer industry into the advisory committee process, the testing, and the standard setting process. The result was put before your eyes yesterday: because of our expansion of the standard, you can choose if you wish the electronics industries' home theater vision as your target audience or the computer industry scenario pitched by Microsoft, Compaq and Intel. They describe a convergence of PCs and TVs in which broadcasters become a gateway to the Internet and get to reach almost 20 million DTV receivers -- also called personal computers -- in the marketplace by Christmas 1998. This contrasts to the consumer electronics' plan of selling at most a few hundred thousand $5,000 home theaters.

And we promoted competition in programming diversity by repealing the mandatory high definition requirement. Instead digital broadcast of multiple channels and other content is the new rule.

And we promoted competition in use of the airwaves when our brilliant engineers designed an allocation plan that lets us retrieve 60 megahertz now and 78 megahertz when analog is defunct.

Second, we promoted the public interest by shortening the six year buildout, so that 1/7th of all TV households by Christmas 1998 and 1/2 of all TV households by Christmas 1999 will have at least three digital signals. The purpose is to create a free, universal, local digital medium as fast as possible.

And we promoted the public interest by voting as a Commission to conduct a new proceeding to define the public interest more specifically in a digital age. This will include consideration of free time for political candidates, which ought to be part of a fix to our terrible campaign finance system.

I believe that today's broadcasters have the content and the brand names that are going to drive a significant share of the computer industry's growth during the next decade.

I also believe that today's broadcasters have the medium that will continue to help us build a better America. Often broadcast lobbyists ask me how much do I expect this industry to do. It's not what I expect; it's what Americans need that we should be talking about. Everyone is aware that we need a better educated country; and with one fifth of our children growing up in poverty it is crucial that a free universal medium help educate, as well as entertain, our next generation. That is the reason I pressed for educational TV commitments that competition would not drive off the airwaves.

And everyone is aware that it is the calling of America, the indispensable country, always to be trying to form a more perfect union: increasing voter cynicism; declining voting rates; constant news about fundraising; continuing efforts by both parties to raise more and more money; no one thinks this system is working well.

In the last election cycle Republicans raised almost $500 million; Democrats, almost $300 million, according to the New Republic.

And the overwhelmingly largest reason for the fundraising is the TV buy.

The system is broke and needs fixing.

Of course Washington lobbyists are skeptical that we will have campaign reform.

That's the good news.

They are usually the last to know when something's important to the rest of the country.

The American people want a reduction in the role of money in politics, an equitable way for candidates to have access to the public, a massive increase in the number of people who vote and participate in politics, and broadbased increase in trust in government.

In an information age, TV is part of the solution to every one of these problems.

This is one of the principal reasons why the FCC and the Solicitor General's Office were proud to win the must carry case in the Supreme Court, and the government did that with your help. The must carry win will help us guarantee free local TV in this country, to help entertain, inform, educate, and obtain the participation of all americans in our country's affairs.

Free TV must be digital if it is to survive in the multichannel video competition that is coming across the pipes and down from the sky.

We want vigorous competition, because it will drive better performance, bolster diversity of viewpoints, and maximize free speech.

But no amount of competition should be allowed to compete away public interest obligations.

The market place was driving broadcasters away from doing kids educational television. That's why we needed fair, clear rules which would ensure that everyone did a minimal amount instead of vague rules which would allow some to do none while others carried all the load for the broadcast industry. Such vague rules punish those who truly act as public trustees and reward those who act 100% in response to the market.

The same is true with hard liquor advertising. Most broadcasters don't want to run these ads not because they wouldn't like the extra money but because they feel such ads are contrary to their public interest obligations as public trustees.

But if 50 or 100 broadcasters are running the ads today, the marketplace is going to drive the situation so that 200 will be doing it 6 months from now, and at some point the wall will collapse and all broadcasters will be forced to run the ads. Again, the industry position works to protect the renegades rather than protecting those who want to continue to serve as public trustees.

The same market forces are at work in the decreasing amount of time broadcasters are devoting to PSAs. A couple of weeks ago I expressed the concern that the number and duration of PSAs was going down and suggested that part of the reason for this was the dramatic rise in self promotional advertising broadcasters are doing. It seems to me this is a trend that should worry all of us, but especially those broadcasters that want to run PSAs to serve their community.

In short the broadcast community should decide whether its strategy should be to defend the rights of the few who do not want to serve as public trustees and who in fact want to do nothing other than serve the dictates of whatever is in the best interest of maximizing profits, or whether to seek solutions in which the market place is safe for the many broadcasters who choose to act as public trustees.

Very soon, the Commission will issue a Notice that will allow us to begin to consider these questions regarding the public interest obligations of broadcasters in an increasingly complex and digital marketplace.

All questions should be raised in the Notice; nothing should be foreclosed, just as the Commission promised unanimously in the DTV item.

The President will appoint a panel of broadcasters, public-interest advocates, and others to give him recommendations on what form public-interest obligations should take. The Vice President will chair the Commission.

As Vice President Gore said recently, DTV will afford broadcasters tremendous new opportunities, and "public interest obligations should be clear and commensurate with these new opportunities."

President Clinton and others, including Senator John McCain, Barry Diller and Walter Cronkite and Paul Taylor, have all suggested that broadcasters renew their public interest commitment by providing substantial amounts of air time for direct access by candidates to voters.

You should and could develop a sensible common industry plan on how to make this happen. Your proposal could be among those we consider during the Notice we voted to have in the DTV order.

Why don't you write something up and ask us to include it in the Notice, for open and public debate?

Similarly, why not take the lead in dealing with the issue of liquor advertising on TV?

For decades, the American people took for granted that hard-liquor advertisements wouldn't appear on TV. They didn't know that this ban was the result of responsible policies by broadcasters and the liquor industry. Now, faced with declining brand awareness among the younger generations, the liquor industry wants to pitch their products across the open airwaves. I bet there were a lot of viewers out there who assumed that there was a law prohibiting liquor ads on TV -- like the cigarette law.

The President said last week that,"Liquor has no business with kids, and kids should have no business with liquor. Liquor ads on television would provide a message of encouragement to drink that young people simply don't need. Nothing good can come of it."

Most broadcasters don't want to carry ads for liquor. I have praised, and I'll praise again, all those who have stood up to the siren call of cash to just say no to these ads.

Broadcasters should not take seriously the liquor industry's claim that I and the other FCC Commissioners are threatening anyone's license when we criticize the airing of liquor ads.

But the fact is that a few profit chasing, renegades are willing to pour liquor ads across the airwaves. Seagram led the way. Predictably, Hiram Walker is following, with a bigger, bolder campaign. They plan to spend the bulk of their national advertising budget on Kahlua. The ads for the Kahlua "Mudslide," a premixed, sweet drink -- just perfect for those who don't like the taste of hard liquor -- are airing on the X-Files in 22 local markets, I read, and on other channels as well. It is just not possible that these ads won't reach millions of kids.

As for the X-Files, 15% of its audience is under 18. Some 2.8 million kids, just under age 18, watch across the entire U.S. (again, this doesn't include 18-21). And if these kids are in the 22 markets that carry the Kahlua ads, these kids will also be watching ads for Kahlua.

The decision by some to carry such ads puts pressure on those who don't want to by placing them at a competitive disadvantage. That means that there needs to be an industry-wide solution. Otherwise a few bad apples will ruin the lot.

Last Friday, the head of DISCUS (Distilled Spirits Council of the U.S.) wrote to President Clinton in response to the President's statement. He asked the President to request that distillers, brewers, vintners and broadcasters all meet together to develop a unified code.

For the liquor industry to try to divert attention from its actions by talking about beer and wine is sad. But a code is a good idea.

A potential stumbling block to instituting such a code is that broadcasters right now can reasonably assert that, because of anti-trust concerns, they can't meet and discuss how to set up an industry-wide standard that would protect kids from liquor ads.

All industries have health and safety codes that are applied to all competitors. There is nothing wrong with the same approach to broadcast ads that threaten the health and wellbeing of young viewers.

So I suggest that the NAB should endorse and expand the Television Improvement Act of 1997 recently introduced by Senators Brownback and Lieberman. That bill ought to give a clear legislative exemption to an industry code that protects kids from ads that are dangerous or unsafe to advertise to them, because of their potential impact. Then, if you broadcasters voluntarily decided to turn down liquor ads, you'd have an exemption from any threats of lawsuits by Seagram or anyone else.

This isn't censorship -- it's industry taking responsibility for itself. These are health and safety issues.

When I return to Washington I will ask my colleagues on the Commission to join me in writing a unanimous letter to Congress, to ask that the Brownback/Lieberman bill be expanded to include such an exemption, and be made law.

Why don't you ask them to do this for you?

Meanwhile, the Commission should have a Notice of Inquiry to explore these issues and to make a report to the President, the Congress, and the American people. I'm asking each of you here today to ask each of the FCC's Commissioners to support such a limited and modest proposal.

The reason for a Notice of Inquiry is to let us gather the facts. We don't know even the basic facts here -- to what extent have hard-liquor ads aired on television? At what times, during what shows? What are the numbers of kids that have been exposed to these ads? What do these ads look like -- are they targeted at kids? What can we expect the effect of these ads to be?

Why don't you ask us to do this for you?

Keeping liquor ads off TV is the right thing to do. It's also the prudent thing to do. By keeping such ads off, broadcasters improve your brand name. Broadcast TV should work to keep its reputation as the family-friendly and high-quality presence on TV.

Another trend that threatens this reputation is the drop in PSAs. The networks are branching off into cable, and at the same time they're working to create their own brand identity.

Part of the strategy in reinforcing that identity has been to increase the amount of time spent in self-promotion. The Wall Street Journal reported on April 2 that the big four broadcast networks are each devoting the equivalent of $500 million a year in air time to pitch themselves and their programs. That is about as much as Procter & Gamble or GM spend annually on their network TV advertising.

This increase in time has to come from somewhere. One source has been programming time, which has dropped. Another source for promo time, unfortunately, has been from PSAs. We know that from the impact of such messages as "Just Say No" and "This is your Brain on Drugs" and Smoky the Bear. And we saw in the 60's what an impact cigarette counter-advertising had on smoking. So it's clear that PSAs work.

So what sort of industry code could be developed that would keep competitors from competing away the traditional broadcast commitment to PSAs?

If PSAs cannot be guaranteed in the traditional ways of the past, what new practices need to be developed that would keep this wonderful medium on the side of all the public service goals that PSAs have so nobly and successfully served?

We can't think that denial of a problem about liquor ads or campaign access or PSAs in any way contributes to a solution.

We can't think individual broadcasters or the whole industry is putting its best foot forward when its public reaction to any of these issues is denial.

And we can't for a second think that this country can address these problems effectively in an information age without the active help and creative energy of the TV business.

Not only do I need your constant help and guidance, so the country needs your willingness to participate in solving the country's hardest problems.

You have a long history of responding to every call and I know your future in a digital age will be just as bright and caring.