REMARKS BY COMMISSIONER JAMES H. QUELLO BEFORE THE BROADCASTING/CABLE INTERFACE VIII CONFERENCE OCTOBER 4, 1994 The proliferation of programming channels available to the public and the advent of the multi-channel, multi-faceted communications superhighway has created a dynamic new telecommunications market environment. That new market environment, in turn, demands a comprehensive review of the existing regulatory environment by both Congress and the FCC. My most important public policy objective as a Commissioner has been, and continues to be, the preservation of universal free, over-the-air broadcasting. Clearly the development of multichannel video program providers like cable, home satellite dishes, DBS and MMDS is producing profound changes to the dynamics of the markets in which broadcasters operate. Also, the coming of new digital telecommunications transmission systems capable of providing even more multiple channels of voice and data as well as video will make it imperative that broadcasters adapt to survive. Considering the future multi-channel economic potential of telco-cable programming, it is imperative that government adapt broadcast regulation to assure incentives to provide universal free service. Telephone entry and cable's use of fiber optics will result in approximately 98% public penetration compared to cable's current 62%. Broadcasters, and particularly networks with newfound production capabilities, might be tempted to lease channels and sell popular programs for a subscription fee. To encourage broadcasting to remain a vital free component of the new information infrastructure, the Commission must look forward to fundamentally changing its regulatory focus. The Commission must stop looking at broadcasting as the centerpiece of the communications infrastructure, and instead realize that it is now becoming one component of a much larger and more complex media marketplace. As a Commission we have, for the past year, "talked the talk" of the changes being made by the new information superhighway. As regulators it's now time for us also to "walk the walk," with advance planning and revising our broadcast rules and policies in recognition of these changes. What revisions to our existing approach to broadcast regulation do the convergence of technologies and the emergence of multichannel, multimedia competition call for? Here are some basic building blocks of what I modestly would refer to as a possible FCC Manifesto for broadcasting: - Revise the national and local television ownership rules. In a multichannel world there is little justification for artificially restricting the number of television stations one entity may own or have an interest in. On the national level, we should substantially increase the number of stations that can be commonly owned, as well as the audience percentage cap. But we must not ignore the pressing need to also rationalize our ownership rules in the all-important local television market. Shrinking the prohibited contour overlap from Grade B to Grade A, allowing the ownership of more than one UHF station in a local market, and liberally allowing ownership of four- station radio and TV combinations in the largest markets with reasonable local percentage caps are changes that, in my view, this Commission must eventually adopt. - Remove the remaining "cross-interest" rules that restrict broadcasters in the same local market from engaging in joint ventures, holding nonattributable equity interests, or employing key individuals, in common with each other. In the current market environment these rules do nothing but keep local broadcasters from making investments in other stations that might otherwise enhance the overall amount and diversity of broadcast programming available. - Facilitate minority ownership in more productive economic ways than by limiting the number of stations that can be commonly owned. The relative dearth of minority-owned stations demands that this Commission be more creative in the methods it uses to enhance minority ownership of broadcast properties. We can do this by providing incentives for financing minorities in communications and by encouraging existing broadcasters to invest in minority-owned stations. Eliminating the remaining cross-interest rules would help. But we should also broaden our tax certificate policy to enable those making upfront investments in minority-owned properties to defer the tax on any reinvestment of back-end profits. - Eliminate content regulation. Broadcasting is no longer the sine qua non of mass entertainment and information. Cable, DBS, MMDS, interactive computers, VCRs, and other media are available to provide programming choices for individuals not satisfied with broadcast fare. Those who wish to express their likes and dislikes in a more direct, activist fashion than by turning the dial can engage in product boycotts, demonstrations and similar activities consistent with the First Amendment. In today's multichannel, multimedia world, broadcast stations monopolize programming options about as much as one lane in the Holland Tunnel monopolizes travel options in and out of Manhattan. In short, it's now time for the Commission to "get right with reality" when it comes to regulating broadcasting. The Commission needs to seize the opportunity, at this critical time, to dispassionately reexamine these and other provisions of its broadcasting rules. And when we look at our existing structural and behavioral rules, reality demands that we change our view of the product and geographic markets in which broadcasting now operates. The Commission need not, and indeed should not, create a place for broadcasting to occupy in the developing information superhighway. But we can, and indeed we must, get rid of rules that wrongly keep broadcasters from adjusting to the new competitive multi-channel reality. ###