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Michael K. Powell
Federal Communications Commission

Before the
California Broadcasters Association
Monterey, California
July 27, 1998

(As prepared for delivery)

Good morning and thank you for inviting me to this beautiful setting to be your Keynote speaker. It is wonderful to breathe the cool ocean breeze instead of the hot air of Washington, D.C.--and I am not talking about Washington's infamous summer weather.

The politics in Washington can, at times, make one as uncomfortable as the humidity. Within the last few months, I have had the privilege of appearing before two different Congressional committees considering reauthorization of the FCC. Reauthorization is an interesting drill. While there is undoubtedly some lengthy legal explanation of it, it basically is a process by which you are asked to justify your existence. This is not a challenge one tends to relish, yet when this question is put to you by your creator you are advised to answer wisely.

Frankly, I do believe that it is important to occasionally justify one's existence. Having to do so causes you to think. I have, therefore, been doing a little soul-searching lately about how to carry out Congress' will and promote the public interest. Let me share with you some of my thoughts.

I tend to think of FCC regulatory efforts on a kind of continuum. There are some regulations that are clearly necessary--safety regulation, for example. On the other hand, there are things that we clearly cannot do--such as things that run counter to the Constitution. Most of our regulations, however, fall somewhere between these extremes and thus leave room for judgment about whether the regulation is nearer to the comfort zone of my continuum or the "don't go there" zone.

With this in mind, I am going to talk a bit this morning about where there is a need for regulatory action, and where we might be better served if Government were to keep its distance.

"Can Do, Should Do" Regulation

I will start with what I consider the easy stuff. Certain FCC regulations are very clearly within the scope of our authority and clearly serve the public interest. You might call these regulations "Can Do, Should Do" regulations. I put tower siting regulations, height and lighting requirements, and emergency alert requirements in this category.

I also put spectrum management regulation in this category. It is clear to me that the FCC must act to preserve the technical integrity of the licenses we hand out. Unless we have active and effective enforcement of spectrum licensing and interference rules, we will undermine the effective use of the airwaves.

For this reason, I am pleased that the FCC has committed substantial resources to enforce our rules against the steadily increasing number of "pirate" radio operations that we have seen. There are still quite a few pirate operations that we know of, including some here in California, and our Compliance and Information Bureau is working to shut them down.

Enforcing against pirate radio operators is not always popular. Indeed, it is relatively easy to cast the FCC as a villain. Even Hollywood has failed to resist. I am sure all of you saw the 1990 film titled Pump Up the Volume. No? The movie starred Christian Slater in his first big role as a pirate deejay who broadcasts from his parents' basement in a bland Arizona suburb. His broadcasts were able to reach his high school classmates way deeper than their parents or guidance counselors ever could. Sure enough, though, just when all those teenage hearts were beginning to be healed, the FCC stormed into town and started chasing down the pirate.

Not to be foiled so easily, the hero strapped his micro-transmitter to his jeep, went mobile, and was chased by big blue Federal vans, with "FCC" stenciled onto the sides. There was even a great scene where an over-weight, bureaucratic Commissioner drove up in a long black limo, and the pirate hero got hauled off to jail.

That, of course, is the fiction of pirate radio. The reality is that pirate operations can and frequently do stray into air traffic channels and other safety channels putting lives and property at risk. They can, as many of you may know, interfere with the operation of licensed facilities. It is entirely appropriate for CIB to be shutting these operations down, and I want to publicly commend Richard Lee, Chief of the Compliance and Information Bureau, and his crew for their efforts.

"Can Do, Should Question" Regulation

As I move away from the traffic cop-type functions of the FCC toward regulation designed more to control the structure and behavior of broadcasting, I find that my own thinking about what regulations are necessary and/or appropriate becomes much more complex. There are FCC broadcast regulations that the Commission traditionally has imposed, and clearly can impose without running afoul of the law, but which afford wide discretion in their application. The question is whether we should continue to impose such regulations.

Examples of this "Can Do, Should Question" regulation include regulation of contracts between networks and their affiliates, regulation of television receiver standards, and various requirements related to main studios.

Structural broadcast ownership regulation also falls into this category. Over the years, Congress and the FCC have placed limits on who may own broadcast outlets, and how many they may own both on the national level and on the local level. In theory, these regulations are designed to enhance competition and diversity without involving the Government directly in content.

I do not believe, however, that analysis of structural regulation should stop at the "Can Do" point. There have been significant changes in the broadcast industry in recent years. Quite apart from the substantial increases in the number of broadcast outlets, there has also been an explosion of competition to traditional broadcasting from other information sources such as cable, direct broadcast satellite and even the Internet. In light of these changes, we should ask whether the traditional rationale underlying broadcast ownership regulations remains valid today.

Generally, I am doubtful that bright-line ownership rules enhance competition. Consolidation can be either pro-competitive or anti-competitive. I learned at the Department of Justice that to determine the difference one must analyze the specific facts and conduct a detailed analysis of market conditions and trends. Under this analysis, we might well find that a transaction that would not pass muster under an arbitrary ownership limit, could, in fact, enhance competition. Thus, I generally believe that mergers must be assessed on a case-by-case basis, rather than be subjected to a necessarily arbitrary prophylactic rule.

There is, of course, a key difference between Department of Justice analysis of mergers and FCC analysis. DOJ considers only competitive factors in its analysis. The FCC looks beyond competition to include other "public interest" considerations--primarily diversity. Truth be told, it is my observation that while "competition" may be cited as a driving force for FCC ownership regulations, more often than not, diversity concerns are their linchpin.

It is difficult to assess whether structural ownership regulations promote diversity because diversity is an ambiguous, almost visceral, concept. Step back for a moment and ask yourself: What is the Government's objective when it talks about diversity in broadcasting? Is it to promote diversity of programming, diversity of ownership, diversity of outlets or some other kind of diversity? If we adopt structural rules to promote diversity, how do we know when there is enough diversity to serve the public interest? Certainly, ownership limits increase the number of individuals owning broadcast properties, but it is difficult to meaningfully articulate what value that is to actual consumers.

I believe the FCC must be able to do so, however, for it to justify continuing to place artificial constraints on the natural functioning of the market. Thus, I think the FCC must overcome a substantial burden to sustain overnment-mandated ownership restrictions. If we cannot offer rigorous defenses of such rules they should fall.

"Should Do, But How" Regulation

A slight variation on the "Can Do, But Should Question" theme comes into play when one considers diversity in the context of minority and female ownership of broadcast facilities. Let me call this: "Should Do, But How?" regulation. In my mind we are right to be concerned when we see trends that suggest that minorities and women may not be enjoying the fruits of economic opportunity in this industry. We should work to find the reasons why this pronounced disparity exists, and where solutions may lie.

The real question is how do we do it? I have opined on several occasions that the answers given to this question in the past are not viable today. The Courts now demand that Government offer more rigorous defenses of its race-based and gender-based policies. We can no longer rely on the obvious worthiness of our objectives to validate the policies we adopt to achieve them.

Moreover, in a competitive free market we cannot employ the same tools we once used to advance the interests of under-represented groups. The rewards of competition are many, but the rules of the game are strict and unforgiving of those who do not abide by them. We need policies designed to work within, not against, a competitive environment. If we fail to develop policies that complement this environment, and instead depend on policies crafted for a regulatory world overseen by benevolent regulators, we fail to achieve anything at all.

Rather than focusing only on Government policies that may or may not be judicially sustainable, I would like to see more efforts to encourage private-sector initiatives. The market is inherently the domain of private actors, not public officials. Often the most creative and beneficial approaches to advancing the interests of minorities and women come from the private sector and not the Government. What Government can do is find and highlight these private initiatives, encourage the industries we regulate to follow the examples set, and look for judicially-sustainable ways to introduce incentives to encourage this activity.

I have had a number of discussions with members of the broadcasting industry about how to create opportunities in broadcasting for minorities and women. One thing that I have heard over and over has been that access to capital is the key.

One way to address the problem is through investment funds specifically targeted to serve the needs of minorities and women. The BROADCAP Fund, which was established by the broadcasting industry with the express mission of increasing ownership opportunities for minorities in the broadcast industry by making financial and technical assistance available, is a good example. According to its literature, between 1979 and 1995, BROADCAP played a role in increasing the number of minority owned broadcast facilities from 40 to nearly 300, while providing the financing for over 50 of those stations.

Efforts like BROADCAP, the cable industry's Walter Kaitz Foundation and other investment funds can help create opportunities for minorities and women--without the need for substantial government involvement. In addition, of late, several broadcasters, including Fox and Paxson Communications, have announced proposals to provide funding tied to FCC regulatory changes. I will consider these proposals carefully. I urge all of you to dedicate some of your creative energy to finding additional ways to further integrate your industry.

Crafting policies that help minorities and women need not be a "zero sum" game. A great deal of the anxiety in our society about race-based policies comes from a perception among the majority that policies designed to help minorities will necessarily harm them. This is nonsense. There are undoubtedly any number of policies that can promote the interests of all Americans.

The abandoned tax certificate policy was one such policy. While it fostered economic opportunity for minorities it also provided a tangible benefit to the majority. I believe we can craft an investment incentive program that will have similar benefits without raising the concerns that prompted Congress to delete this program. To the extent that there were perceived abuses, let us fix them. Make this effort a noble legacy of your industry--something that you can proudly hold up as one of broadcasting's great contributions to the nation.

"Can Do (sometimes), But Should Not Do, Unless. . ." Regulation

Returning to my regulation continuum, let me briefly address the subject of broadcast content regulation. I will call this "Can Do (sometimes), But Should Not Do, Unless..." regulation. The primary category of regulation that falls here is content regulation.

I am of the opinion that the operation of the broadcast and advertising markets allows consumers to choose the programs they value. Some segments of our society and, indeed, the Government may not always be happy with these choices, but they are generally for citizens in a free democracy to make.

There is no question that the Communications Act affords the Commission broad discretion to regulate in the public interest. I am loath, however, to substitute my programming preferences or values for those of consumers in the exercise of that discretion. Like many Americans, I watch a lot of television, but I do not believe I get to take charge of the national remote control simply because I got appointed to a Government commission.

It is a different matter when Congress specifically directs the Commission to take actions that affect programming content. Congress is a representative body. Through the legislative process, the American public expresses its will in the form of a law that has garnered the support of the majority and won the signature of the President. Under these circumstances, the public has chosen to express its preferences through Government, rather than the market, and the Commission is duty-bound to carry out that command up to the limits of the Constitution.

I readily admit that that my skepticism about content regulation is fueled by my belief that the basis upon which such regulation is premised is completely flawed, at best, or manufactured in order to justify content intrusion, at worst. I remain troubled by the notion that the FCC should be free to impose specific content obligations on broadcasters because they, among all the different speakers in our society, are entitled to lesser First Amendment rights. I do not accept the contention that Government ought to involve itself in valuing content as a means for allocating licenses, because spectrum is scarce and not everyone can use the airwaves to express their views.

In our current technological environment, it can reasonably be argued that there is an abundance, not a scarcity of outlets for expressing one's viewpoint. In the traditional broadcasting arena, there are 1,207 commercial TV stations and 367 non-commercial stations. There are also some 5,000 TV translators and 2,000 low power TV stations. In addition, there are almost 12,500 radio stations.

Cable services are available almost everywhere in the country. The average number of cable channels available on these systems is 32, with many systems offering more than 100 channels of programming. Other outlet sources include satellite services, microwave services, and, yes, Internet services. The reality is that outlets for expression are plentiful, not scarce, and will only grow with the advent of digital technology.

In response to these indisputable trends, the scarcity proponents retort that broadcasting remains unique, because people still primarily rely on it for their news and entertainment. And, the argument goes, there are more people who want to use the public spectrum for broadcasting than is available.

I would first point out that, in some sense, everyone does have access to the radio spectrum. Anyone can use a CB radio or apply for an amateur radio license, for example, and send out messages to anyone with the equipment to listen. This form of communication may be less effective than owning a radio or television station, but I am unaware of any precedent holding that Government owes speakers the most effective means for exercising their freedom of speech rights and transmitting their message.

Second, it is not surprising to find that demand exceeds supply when the price of spectrum is zero. Going forward, Congress has chosen auctions as a means for allocating public spectrum to those who value it most, thus, there is little remaining room--to my mind--for the Commission to value content as a means for choosing among competing applicants for spectrum.

There is a troubling circularity in the reasoning that under-girds many content regulations. The Government took control of the spectrum. It then choose to distribute it for free, thereby creating demand that exceeded supply. Having engineered scarcity, some then contend that they must have a means of allocating the spectrum among competing applications for it, and thus it is acceptable to choose more "worthy" applications over others. These content choices are necessitated because of scarcity, thus the First Amendment should bend to accommodate this necessity. Such reasoning is disturbing, and I believe Congress made a wise choice in moving to auctions, which should break the chain of this circular logic.

Our society is right to be concerned about its values and morals and the role television plays in shaping them through the messages it transmits. Yet, we should not subvert our first and most cherished Constitutional right in order to avail ourselves of a convenient weapon to use against the messenger. The ends do not justify the means, especially where the Constitution is concerned.

"Cannot Do, Should Not Do" Regulation

Finally, to close out the line on my continuum, I note that on occasion, the FCC has been asked to think about regulation that I put in a category of "Cannot Do, Should Not Do." Calls for Government censorship of violent programming and calls for Government regulation of advertising rates fall in this category. I need not dwell on these subjects, I will just say that I won't go there.

I am glad, however, that I came here, and it has been a pleasure being with you this morning. Thank you.