Thursday, April 20, 1995
Thank you Doug.
I am delighted to be with you this afternoon.
I am particularly pleased to be able to address the Indiana Broadcasters Association -- my first state association visit since becoming an FCC Commissioner last May.
It is so easy to get caught up in the frenzied digital hooplah -- or hype -- about interactive media global communications cyberspace that we tend to forget what it is like in the real world where everyday decisions on programming must be made, spots must be sold, and payroll must be met. Thus for me it is a pleasure -- call it a necessity -- to be "breaking away" to spend time with individual broadcasters so that I can stay in touch with what is happening in the marketplace.
Day in and day out, you provide invaluable service to your community. Through the Children's Miracle Network, you raise vital funds for Riley Children's Hospital. You provide clothing for kids at Christmas. As the waters rose, you rose to the occasion to help families made homeless by the Mississippi flooding.
Your public service campaigns, your local programming and your special activities make a difference for those whose lives are touched by your efforts.
Involvement in the community is not just a licensing requirement to fulfill the public interest; it also makes very good business sense.
And it will become increasingly more important as you face increased competition from national and even global media that may enjoy advantages of size, geographic coverage, advanced technology, and the like, but lack your understanding of the local market and your demonstrated commitment to community.
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 got to know your business from a perspective entirely different from that of an FCC Commissioner.
I worked closely with broadcasters owning stations 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 our station's format. I know how fiercely competitive radio and television markets can be. And I was there during the time of plenty and the time when station values were in a free-fall.
Actually, my involvement in broadcasting predates my banking days. I served on the board of directors of my college radio station in New Brunswick, New Jersey, and produced two weekly shows. Back then WRSU had only an AM carrier current signal. Nonetheless, the station sent me 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 at press briefings, alongside Walter Cronkite and Danish Television.
Even a background in communications finance is scant preparation for the monumental technological and competitive changes taking place in the industry. We are moving at an accelerating pace through the information revolution.
Digital technology has unleashed a new world of communications opportunities, as well as new challenges. No longer is the main competition the other station across town; radio and television programming will be delivered over satellite, over microwave, over computer networks, over fiber optic cable, and over telephone lines. The recent announcement of the sale of a wireless cable system for $120 million to PacTel underscores this trend.
With a barrage of rapidly moving zeros and ones -- digital transmission -- pictures, sounds and data can be mixed, compressed, transported, and decoded. Digital experts say that with six MHz of spectrum -- the present width of the NTSC television signal -- the following could be delivered simultaneously: Live coverage of the Indy 500, a children's program, an interview with Bobby Knight, ten CD quality radio shows, a movie, and the Pacers scores.
The FCC is deeply committed to enabling broadcasters to compete on the communications version of the Indy 500. As we embrace the change that technology presents, we must take care to preserve and expand our wide array of free, universally available programming and the opportunity for entrepreneurs to compete.
As an aside, largely behind the scenes and unheralded, the Commission is plowing through its regulations to determine what the underlying purpose is for each set of rules. Is that purpose still valid in today's changing marketplace? Might there be a simpler, less intrusive way of achieving the same result? We have streamlined or eliminated countless regulations for the benefit of industry and the public.
On a personal note, I care very much about this industry and about the public we all serve. You and I may at times be in agreement, and at times disagree, but I hope that you will find that I am always willing to seriously consider your points of view. My staff and I try to be as accessible as possible, and I have very much enjoyed spending time chatting with many of you last night and this morning.
I'd now like to focus on two major items before the Commission in which we consider the future of broadcasting: digital radio and digital television. I then would like to talk briefly about ownership issues, and if time permits, our most recent children's television proposal. I want to leave plenty of time for questions.
Digital Radio
In January, the Commission voted to allocate 50 MHz of spectrum designated during the 1992 World Radio Conference for satellite delivery of digital mobile radio. At the FCC, the service is known as DARS; broadcasters call it DAB. Our International Bureau is preparing for Commission vote within the next few weeks a Notice of Proposed Rulemaking for DARS service rules and licensing. Many critical issues will be addressed. We look to you to submit information and analysis that will help us to make the right public policy determinations.
Proponents argue that DARS will benefit under-served areas of the country. They also claim that it can deliver narrowly focused programming, such as ethnic or foreign language fare, that requires national market aggregation to achieve a critical mass of audience.
Opponents respond that DARS will merely replicate, and therefore harm, terrestrial radio broadcasting, which already is fiercely competitive. Opponents also note that we already have digital radio signals delivered by cable television and by DBS.
In this rulemaking we will examine the impact of a national satellite service on our existing terrestrial radio service. We will be seeking economic data and financial models that describe the impact.
I hope to structure the DARS service in a way that will maximize its unique benefits yet minimize any negative impact on local broadcasters, especially in smaller markets.
Satellite delivered digital radio also raises in my mind a question of fundamental fairness. Should the Commission license a DARS operator to deliver between thirty and fifty channels in every market in the country? In contrast, our radio ownership rules, which the FCC reaffirmed last October, limit terrestrial broadcasters to three or four stations per market, depending upon market size, and up to twenty stations nationally.
How should the DARS service be structured? Should it be broadcast, with public service obligations, or should it be subscription based? How many channels are necessary for each licensee for DARS to be economically viable? And how many competitive licensees should we authorize?
Is there a compelling need at this time to license all 50 MHz of the allocated spectrum, or would a smaller amount be preferable initially? 50 MHz represents two and a half times the total spectrum allocated all of terrestrial radio. When the 50 MHz was first designated, it was to encompass both satellite and terrestrially delivered digital radio, and to be shared by the U.S. and its neighboring countries.
Also, are there companies wishing to provide DARS service that are financially qualified and which did not file three years ago when the 30 day application window was open? Should the Commission permit new applications once the service and licensing rules are adopted?
Let's look at terrestrial digital:
To avoid creating a competitive quality gap between existing radio broadcasting and newer digital entrants, there must be an industry consensus on the best way for broadcasters to upgrade to digital transmission. I heard a demonstration of in-band/on channel digital AM at the NAB Convention; it was awesome.
I have urged that the Commission proceed promptly to consider authorizing terrestrial digital radio as soon as the transmission technologies suitable for in- band AM and FM have been successfully tested. I hope that developments permit us to consider in-band/on channel digital radio later this year.
Digital Television
Television broadcasters are also at the starting gate of the digital video technology. It began in 1987 as a movement toward high definition analog television, and now has evolved into multiple choices for digital delivery of broadcast television signals.
Digital technology has created opportunities which were unimaginable when the movement began. The Commission established an Advisory Committee to recommend a transition scenario and standard for HDTV. That Committee has done an extraordinary job to generate private sector competition, then cooperation, in designing a digital system that will permit television broadcasters to compete effectively with cable and DBS.
In October, we expect to receive the Advisory Committee's recommendation for a single digital standard for over-the-air broadcast television. This standard should provide the basis for television/computer interoperability and a whole array of new functions and services. The standard will be the keystone to future television services of all kinds.
The standard itself, being the product of industry negotiation and consensus, may not be the most hotly debated aspect of digital conversion. There are many other related issues remaining to be considered that directly affect existing television broadcast licensees. For example:
I know many of these issues were addressed in the Commission's Notices of Proposed Rulemaking in 1992. However, much has changed since then, most notably the full-scale conversion to a digital standard with its inherent flexibility.
Congress is considering legislation that would address some of these issues, as well as the question of whether broadcasters should pay for all or a portion of the additional six MHz of spectrum. Fortunately, that is not for the FCC to decide.
In the meantime, the Commission is moving forward during the summer and fall to establish a workable path for permitting existing licensees to move from analog to digital television. I look forward to discussing these issues with you over the coming months.
I am committed to insuring that broadcasters have the opportunity to compete in the emerging video marketplace. I know that it is an anxiety ridden time. We cannot guarantee success. But your success has less to do with technology -- be it analog or digital -- than with meeting the needs of your audience. You have the brand identity and the know-how to provide a mix of entertainment, news and information and other programming that people want to watch.
As the number of outlets of video programming multiply, your skill at discerning what the public wants should serve you well. When the dust settles, I expect that television broadcasters will be in a strong position to continue serving the public with free, universally available programming.
Broadcast Ownership Issues
Off the technology track, we have other proceedings pending at the Commission that also have far-ranging effects on what broadcasting may look like in the future.
In December we initiated three proceedings in which we address different aspects of our broadcast ownership rules -- whether to change and increase television ownership limits, how to clarify our ownership attribution rules for both radio and television, and how to provide more incentives to increase minority ownership opportunities in both radio and television. In October, we reaffirmed our present radio ownership rules.
In the television ownership item, we ask whether the national ownership limits should be raised by eliminating the station number cap and instead look solely at audience reach. We propose raising the maximum audience reach by five percent every three years, until an operator could own stations that cover up to fifty percent of viewers nationwide.
In the television ownership notice we also consider whether to relax the Commission's duopoly rules. We propose to use the Grade A contour for determining overlap and request comment on whether to permit control of more than one station in the same market.
Although I have an open mind, I am inclined to place the burden of proof on those who advocate permitting ownership of more than one television station in a market to show why such an increase in local ownership concentration would be in the public interest. Today we have a highly competitive market in which owners compete for programming and for audience. If most television stations in a market were to be paired -- and I would not want to own the only unpaired station in the market -- then there is less competition for programming and fewer independent voices will be heard.
Also, if each incumbent broadcaster were to receive an additional six MHz to provide digital television, the imperative for owning a second analog channel in the market is reduced.
Regarding radio, I personally favor further relaxation of the national radio ownership rules. Instead of a cap on the number of stations, we should move toward a national reach cap. And I generally am pleased with the success of radio duopoly in stimulating new, innovative formats. But the necessary predicate to liberalizing ownership restrictions is the prescription of clear rules that define just what is considered to be ownership.
One thing I appreciated as a banker was clear, easily understood rules. Most LMA's are now counted as ownership for radio. But while joint sales agreements and debt relationships with separate stations in the same market may be permitted, combinations of these and other interests, such as shared facilities, raise sticky questions as to who really controls a station.
The combination of the interests is greater than their individual pieces when considered in the context of our ownership restrictions and the intent of our rules. And how is the public interest served by such arrangements?
Children's Television
Broadcasting occupies a special role in our nation's communication system because it is free and available to all, both rich and poor, urban and rural. That special role comes with certain rights and obligations. For example, Congress has afforded broadcasting must-carry status on cable systems and exemption from spectrum auctions. But Congress required television licensees to serve the educational and information needs of our youth under the Children's Television Act.
The Act requires the Commission at renewal time to assess whether the licensee has aired programming that meets the educational and information needs of children. Last week, the FCC issued a notice of proposed rulemaking, building on the record from our June en banc hearing.
We have proposed a clearer definition of the type of programming which meets the goals of the Act. We propose that such programming be labeled in advance so that the public knows to tune in and can assess a station's performance. Finally, the Notice seeks public comment on a range of alternative FCC actions, including additional monitoring, establishing a safe harbor or processing guideline so that a licensee can be certain at renewal time that it has fulfilled its obligations under the Act, and a formal rule requiring a specified number of weekly program hours.
I await your comments on the proposal. As a general matter, I believe that broadcasters are entitled to know what it takes to comply with the Act. For that reason, a "safe harbor," or processing guideline has some appeal.
It means that if a station has aired a threshold amount of programming, the FCC staff will pass on the application for this issue without further investigation or delay. It does not mean that the broadcaster must air the specified hours of programming in order to comply. If the station can show other activities contributing to the pool of educational and information programming, it still would pass muster; it is just more effort.
I care about the programming available to our children. But I am leery of burdensome regulation in this area. The object is not to force a minimum number of hours of marginally acceptable programming that no one watches. Rather, the goal -- and the benefit to our community -- is to promote the availability of quality children's programming that will attract viewers. I intend to keep my eyes on this goal and look forward to any creative ideas you might have.
Conclusion
Broadcasting is at the Brickyard gate. As we race along the digital communications track, we must ensure that broadcasting has the opportunity to compete effectively in a multichannel, multimedia world. We ask no more, and the public deserves no less.
Thank you.