June 13, 1995
I also want to recognize the FCC Mass Media Bureau Chief, Roy Stewart, and his deputy, Bob Ratcliff -- both part of our hard working team.
It is a pleasure to be with you today in Atlantic City. In fact, it's sort of a homecoming.
I've called the Mid-Atlantic states home for most of my life. I grew up in New Jersey, and have lived in Maryland for the past twenty years. I was even a "New Jersey Broadcaster" for a time during my college days at Douglass College, where I served on the board of directors of Rutgers' WRSU-AM. I also produced two weekly shows for the station.
Back then, WRSU had only an AM carrier current signal. Nonetheless, I was sent to cover the 1966 election of Spiro Agnew as governor of Maryland (he was the more liberal candidate) and the opening of EXPO '67 in Montreal. There I sat in at press briefings, alongside Walter Cronkite and Danish Television.
The New Jersey Broadcasting Association and the Maryland/D.C./Delaware Broadcasters provide local stations with an invaluable source of information and assistance. I especially want to commend the NJBA for its leadership on the Job Bank, bringing together job applicants with job openings, and thereby helping broadcasters to fulfill their equal employment opportunity commitments. That's a winning combination!
I've also heard about the terrific work Maryland broadcasters are doing with the governor's office in a state-wide effort to curb auto theft.
Day in and day out, you support your communities. Your public service campaigns, local programming, and special activities make a difference to your audience. Community involvement is not just a licensing requirement to serve the public interest; it also makes very good business sense.
I know first-hand of the contribution that radio and television stations make in their communities. For many years I served as a lender to communications companies. My portfolio included radio and television stations, as well as telecommunications. programming, satellite, cable television, and publishing, so I know your business from a unique perspective.
I worked closely with broadcasters in markets large and small. I reviewed hundreds of business plans, sharing both the aspirations and frustrations of station owners. With my radio borrowers, I rejoiced over good Arbitron books and agonized when a company with deeper pockets or a better signal adopted my station's format. I know how fiercely competitive radio and television markets are. And I was there during the time of plenty and the time when station values were in a free-fall.
Your programming plays an important role in informing and entertaining all of the public -- young and old, rich and poor.
Television and radio signals can be received anywhere -- in the car, walking down the street, or at the ballpark. Broadcasting is ubiquitous. I believe very strongly in the continued vitality and viability of free, over-the-air broadcasting.
But, broadcasting is at the threshold of profound challenges and changes. In my conversations with many of you, I hear a recurrent theme -- you are concerned over the future of broadcasting -- what will it look like? What will it mean to you?
This afternoon, I will focus on two new services of intense interest to broadcasters everywhere: Digital Audio Radio Service (which we at the FCC refer to as DARS and you refer to as DAB) and digital television (or DTV). I'd also like to share some of my thoughts on changes in broadcast ownership restrictions. I will close with a few words on the FCC's role in this new digital age in communications.
Digital Audio Radio Service
Radio broadcasting has changed only slowly over the last 60 years. AM was joined by FM, and FM changed from monaural to stereo. But it remained a local service by design; the FCC has retained ownership caps nationally and locally to increase competition and to foster greater diversity of voices. These fundamental tenets will be challenged, however, from the introductions of competition from a new, digital technology.
This week, the Commission will issue a notice of proposed rulemaking to authorize satellite delivery of digital audio radio. Although consumers already can receive satellite delivered compact disk quality radio via some cable systems and DBS, this service is different because it is mobile. The high powered satellite transmissions will be received by a tiny dish about the size of a half-dollar that can be mounted on the windshield of a car.
In contrast to terrestrial broadcasting, DARS is a national radio service, blanketing every market in the country with thirty or more channels per licensee, and four or more licenses -- for a total of 120 or more new signals.
DARS has the potential to expand radio service to areas underserved by terrestrial broadcast stations. It can amass a narrowly focused audience, such as foreign language broadcasts, by aggregating listeners from across the country. These are worthy objectives.
Our job, as I see it, is to draft service rules that will enhance the uniqueness of DARS yet minimize its adverse impact on terrestrial broadcasters.
In its Notice, the Commission will be asking a number of questions. For example: how many channels are needed for a financially viable system? How much bandwidth is needed per channel? Should we license all of the allocated spectrum now? Should we limit providers to those who applied three years ago before the service rules were established, or should we open the door to new applicants?
Should we regulate digital radio as a broadcast service? A common carrier service? Or, should it be subscription based only -- but with the ability to have advertising?
As these questions illustrate, technology is bringing about changes that will dramatically affect the marketplace for existing radio broadcasters. I hope that you will take the time to file comments on the issues raised. Your thoughtful analysis will help the Commission to structure a satellite digital radio service that will complement -- not replace -- local broadcast service.
In the foreseeable future, existing AM and FM broadcasters will join the digital revolution. The industry is testing in-band, on-channel digital terrestrial radio. I heard a demonstration of AM digital at the National Association of Broadcasters' convention and it was awesome. I look forward to more data on the feasibility of this new technology. I will do what I can to move it along as rapidly as possible.
I understand that uncertainty about the future can rattle the nerves. As a former lender, I know that capital markets thrive on stability and certainty. But technology moves forward with new services. Change often presents opportunity for those entrepreneurs willing to take some risks.
Let me turn now to another to another new technology that the Commission will be addressing this summer: digital television.
The digitization of the television signal will be the biggest change in TV broadcasting since the allocation of UHF channels and the selection of a color television standard in the 1950s. And for the first time, we are contemplating a change in TV technical standards which will not be "backward compatible"; that is, the new standard will make unaided existing equipment obsolete.
When the industry first contemplated an advanced television standard in 1987, the discussion was focused on "high definition" television -- TV with twice the resolution, better color, multi-channel compact disc quality sound, freedom from artifacts, and a wider aspect ratio. This standard would have represented a vast improvement over NTSC broadcasting, but still would have been an analog service.
The proponents of various DTV systems have developed a totally digital system, far superior in quality and flexibility of use. It's known as "the Grand Alliance." It is capable of delivering everything that had been predicted for the advanced analog standard, but is much more versatile. It can deliver multiple NTSC-quality video channels. Or it can deliver massive amounts of data. Or hundreds of channels of audio programming. Or all three combined.
Let's examine some of the major public policy questions:
Competitors to video broadcasting already have gone or will go to digital transmission because of quantity and quality benefits. Broadcasters also must be permitted to upgrade their signals and service.
Put another way, when was the last time that you threw out a perfectly good but old television set or VCR? Doesn't it usually wind up in another room in the house? We must look to market-friendly solutions to encourage a rapid conversion to digital. We also need to be practical in our assessment of consumer behavior -- and the time it may take to effectuate a transition. However, I would not be surprised if some enterprising television networks or stations find it advantageous to speed up conversion by subsidizing the cost of simple, digital converter boxes to increase the audience numbers.
For example, a broadcaster could provide multiple channels of more narrowly targeted programming during the day, such as children's television, and then send just one channel of high definition programming during prime time; together with streams of data or maybe a hundred CD quality audio channels . . . .
The transition to digital broadcasting will not come cheaply. I recently toured the ABC network facilities in New York. As I walked through that cavernous studio complex, my hosts described all of the equipment that would have to be replaced or updated when ABC converts to digital television. Local broadcasters will also incur considerable expense, including cameras, routing switches, VTRs, and a new transmitter and antenna, possibly located on a separate tower. Planning today will help to reduce costs later.
Once again, I would like to hear from you as we ask for public comment on these issues.
As you know, Congress is wrestling with a major overhaul of the Federal Communication Act. I look forward to passage of a comprehensive revision of the law; it is long overdue. One highly debated section of the legislation is on broadcast ownership restrictions.
Of course, the FCC will implement whatever rules are required under the legislation if it becomes law. In the meantime, the FCC has out for comment a proposed rulemaking on TV ownership that increases the national reach cap and modestly relaxes multiple ownership restrictions within a market.
We completed our radio ownership rulemaking last year. In general, I think that radio duopoly has worked well. It came at a time when banks were in trouble and when the economy was in recession. Station values were tumbling and duopoly helped cushion that fall. There may be reason to increase the number of stations one entity can own from the current ownership cap of 20 AM and 20 FM through a limit on national reach.
I worry about owners cobbling together an extra four or five stations within a market through a combination of duopoly, joint sales agreements, and financing of competitors' station purchases. These measures, when taken to the extreme, take an owner well beyond the permitted ceilings.
For that reason, the FCC has initiated a proceeding to clarify -- and I hope tighten -- radio and television attribution rules. Then everyone would be on fair and equal footing. The ability to evade the ownership cap with elaborate intertwining relationships would be diminished.
Our ownership rules have fostered both competition and diversity of voices. Widespread ownership of communications media is one of the underpinnings of our democracy. These rules are our country's "insurance policy" against an environment in which control of television and radio rests in the hands of a small number of very large firms.
Small entrepreneurs with big ideas should be able to compete in this marketplace, and I believe our ownership rules should allow healthy competition to happen.
The FCC and the Future of Broadcasting
As we enter this brave new digital world, some argue that there is no need for the FCC.
But I believe that the FCC has a fundamental role to play in managing spectrum; in transitioning our communications infrastructure from monopoly to competition; in helping U.S. industry to compete internationally; and in protecting the freedom and diversity of voices in our communications systems.
Some suggest that the spectrum be privatized -- those currently licensed would get to keep their "ethereal real estate" forever, and any unassigned spectrum would then be auctioned. Owners could use the spectrum for whatever service they desire. I have grave doubts about such proposals.
The airwaves are a scarce and precious resource belonging to the public. Such a proposal would be as though the government were to give away for free all of our beaches to those who happen to own beachfront property. The public would be unable to take long walks on the sand; our children would not be allowed to splash in the waves as they reach the shore.
Allowing private industry to divvy up the spectrum without any concern for the public interest, and to change arbitrarily the use to which any particular frequency is put, would result in chaos. Spectrum reserved for television signals in Baltimore might suddenly be converted to PCS, or satellite program delivery, or ham radio.
The FCC sets fair rules of competition and eliminates bottlenecks so that the promise of competition can be realized. Competition cannot magically be achieved by abolishing all rules of organization and fair play. Adoption of basic rules of the road increases efficiency and the variety of services that can be offered.
Consider how traffic lights and rules of the road improve traffic efficiency and road capacity. What happens when traffic lights are out? Gridlock! Let's not forget that traffic lights are green, not just red.
I for one am not ready to tear down the traffic lights, pull up all of the street signs, erase all road markings and eliminate all traffic officers. Not on the highway. Not on the information superhighway.
Critics would look to the courts, instead of the FCC, to resolve interference problems. That would clog the judicial system and result in undue delay. Just last year alone, the FCC handled over 35,000 interference complaints -- many of them from broadcasters.
These critics would have the remaining FCC functions transferred to an office within the Executive Branch. Should government control over broadcasting and other communications be placed in partisan hands? In my view, it is critically important that the regulatory body charged with licensing the use of the airways be a bipartisan, independent agency.
Ironically, just as there is talk in the U.S. of abolishing the FCC, other nations are considering enacting legislation to create independent regulatory bodies modeled after the FCC!
In my judgment, the FCC has an important role to play in fostering fair and long-term competition in the emerging digital multimedia marketplace.
But in carrying out the responsibilities Congress has entrusted to us, we must continually ask ourselves: Are we accelerating the transition to competition? Is the purpose for our rules still appropriate? Are our rules actually achieving their intended purpose? And is there a less burdensome way to accomplish the same objective? Your timely participation will ensure that the decisions we make comport with the public trust.
So, in this new digital age, with all the hype about the information superhighway, will there be a place for free, over-the-air radio and television? My answer is a resounding yes.
You provide a unique service that the public wants and needs. Never lose sight of that strength. Those who will be the leaders of the future will see these profound changes as opportunities -- opportunities to better serve their marketplace. It will take hard work, vigilance, and ingenuity. I am confident that your special relationship with your communities will stand you in good stead in this new digital era.
Thank you. I would be happy to take questions.