**\"What Does \$70 Billion Buy You Anyway?\"**

> **Rethinking Public Interest Requirements at the Dawn of the Digital
> Age**
>
> **Remarks By FCC Chairman William E. Kennard**

####### Museum of Television and Radio

## New York, New York

> **October 10, 2000**

### **(As Prepared for Delivery)**

###  

> Thank you, Frank Bennack, for that kind and generous introduction. It
> is a great honor for me to speak at The Museum of Radio and
> Television. I thank you for the opportunity.
>
> And a special thanks to Mark Lloyd of People for Better TV and Gigi
> Sohn of the Ford Foundation for their assistance and support.
>
> The Museum of Television and Radio serves as an important reminder of
> the critical role that broadcasting plays in our lives.
>
> Thanks to the power of television, we were all eyewitnesses to history
> last week when the people of Yugoslavia rose up against the government
> of Slobodan Milosevic.

Reading about the Serb revolution the next day in the Washington Post, I
was struck by the story's lead. It read, "A vast citizen army of
protesters seized control of key institutions of power in Yugoslavia
today, torching the parliament building and state television
headquarters in Belgrade."

Stop and think about that for a moment. When the Serbian people wanted
to change their destiny, they knew that the "key institution of power"
in their society \-- after Parliament \-- was the television station.

And they were right. Soon after that station was seized, the Milosevic
government capitulated.

The Yugoslavs are not alone. Last summer, I visited a low power radio
station in South Africa, where the station owner had operated as a
"pirate" station, illegally broadcasting news and information to the
black majority during apartheid. He had been jailed and tortured \-- his
oppressors knew as well as he the value of the media in a political
revolution.

To this day, his body is crippled from the torture. But when the new
democratic government defeated apartheid, he went back on the air,
operating with a license \-- providing the news and information -- not
to mention blues and jazz -- so essential to the new democratic society.

> The people of Serbia and South Africa may look to us as exemplars of
> democracy, but they could teach us a thing or two about recognizing
> the critical importance of television and radio to democratic
> government.

We call ourselves the greatest democracy in the history of the world,
and we undoubtedly are. But, frankly, the disarray and disinterest of
our mass media towards fulfilling its crucial democratic commitments
give me serious pause.

For fifty years, the solemn public interest commitment of broadcasters,
borne of their role as public trustees of the airwaves, has deteriorated
in the face of financial pressures and an increasingly competitive
marketplace.

Indeed, we reached a new low last week, when two of the four major
networks -- NBC and Fox \-- chose to preempt the first debate of the
most hotly contested Presidential election in four decades for sports
and entertainment programming.

> Despite the fact that the debate was scheduled not to conflict with
> NBC's coverage of the Olympics, NBC decided to show Game One of the
> American League Division Series instead. After a public outcry, NBC
> eventually passed the buck to their affiliates by offering feeds of
> both the game and the debate.
>
> In an even more brazen decision, Fox preempted this debate to showcase
> the premiere of their dystopic sci-fi show Dark Angel. And Fox showed
> baseball during the vice-presidential debate, and has decided not to
> broadcast any of the other presidential debates this year to boot.
>
> Some may ask, if the debates are available somewhere on the television
> dial, why shouldn't Fox and NBC be able to show what they wish? Simply
> put, broadcasters cannot delegate their obligation to act in the
> public interest. Consider this example: the networks delayed the 2000
> season premieres until after the Olympic games. They knew that their
> viewers did not want to choose between watching Marion Jones go for a
> record five gold medals in a single Olympics and the premiere of their
> favorite show. Fox made that calculus by delaying the premiere of
> *Dark Angel* to maximize its financial interest. The presidential
> debates like the Olympics only air every four years. Shouldn't
> broadcasters make a similar calculus to serve the national interest in
> an informed electorate?

To my mind, this disregard for the American democratic process is
unacceptable. When we've reached the point where the networks feel they
can show baseball and sci-fi flicks in lieu of critical presidential
debates, then I believe it's high time that we rethink the terms of
broadcaster's compact with the American people.

#### The \$70 Billion Compact

What's at stake here? Let's take a look at the numbers. More than 100
million American households -- or over 98% \-- have television sets. On
average, nearly 85% of American TV households watch the top three major
broadcast networks each week, and over 75% watch the fourth. Television
is the most dominant, ubiquitous, and powerful medium of our time.

But, with great power comes great responsibility. What does it truly
mean to be a trustee of the public airwaves? As beneficiaries of this
relationship, what should the American public get in return for
broadcasters' use of this valuable public resource?

Unfortunately, in recent years, broadcasters have increasingly elevated
financial interests above the public interest. This is particularly
galling because Congress recently *gave* the television industry even
more spectrum to offer digital television -- spectrum valued by some
industry experts at over \$70 billion dollars. This gift to broadcasters
stands in stark contrast to other users of the spectrum -- like wireless
providers -- who have paid billions for licenses to use the airwaves.

And when Congress handed broadcasters this very generous gift, Congress
expressly reaffirmed the industry's long-standing compact with the
American people: as broadcasters reap many billions of dollars from
their use of the airwaves, they must also use the airwaves to serve the
public interest.

In short, the American people have allowed the broadcasters use of a
powerful national resource worth \$70 billion dollars, and the public
should get their money's worth.

#### Answering the Broadcasters' Concerns

Now, I am the first to recognize that broadcasters are increasingly
subject to competitive pressures these days, especially from cable
television and direct broadcast satellites (DBS). Unlike many other
countries, we rightly believe in a privately-owned, commercial broadcast
system. And we also believe in competition. Some broadcasters argue that
there just aren't enough hours in the broadcast day to satisfy their
financial interest and the public interest. Some argue, for example,
that the business imperative of serving the widest possible audience is
at odds with the desire to program for narrow or underserved audiences,
such as young children. And that cable and DBS, as multichannel
competitors, have many more hours each day to program to niche
audiences.

I note, however, that cable and DBS themselves have tangible public
interest responsibilities. Cable operators must pay up to a five percent
franchise fee, set aside channels for educational and government use,
lease channels for commercial use by the public, and carry local
broadcast signals. DBS providers must also set aside channel capacity --
currently 4% \-- for noncommercial use.

Now, I'm sure broadcasters dispute the notion that they don't serve the
public interest sufficiently. They will point, as they often do, to a
report issued by the National Association of Broadcasters (NAB) which
states that broadcasters provided \$8.1 billion in community service in
1999 \-- public service announcements, charitable work, and coverage of
political races.

To be sure, \$8.1 billion is a hefty sum. And while this contribution is
commendable, it is somewhat overstated. I have worked in broadcasting
for over twenty years, since my first internship at the NBC affiliate in
San Francisco. I've filled out hundreds of those public interest forms
in my day, and I know how often the concept of "public interest" is
strained in order to label various programs and activities as
contributions to the public interest. I've been there.

Besides, serving the public interest is so much more basic than what
these forms often suggest.

Simply put, television should enhance our democracy.

It should inform the electorate and facilitate the democratic process.
It should serve the needs of our local communities and expedite
democratic deliberation at the community level. It should empower our
parents and educate our children.

Television should appeal not only to our wants as entertainment
consumers, but to our needs as democratic citizens.

And, now, at the dawn of the digital age, the most important question
is: how can broadcasters use the new digital spectrum to achieve these
goals?

#### Enhancing Democracy: Debates and Localism

There are so many ways in which broadcasters could harness the power of
television to enhance its value to America.

Most obviously, the networks should commit from now on to carry every
single presidential debate. Never again should a network's contract with
Major League Baseball or some other entertainment entity trump their
compact with the American people.

But that's only the start. Stations should also carry debates in state
and local races. Due to the high profile of the candidates in the New
York Senate race this year, I doubt the residents of Manhattan have had
much of a problem in this regard.

But, elsewhere in the nation, Americans hear more about Hillary Clinton
and Rick Lazio than they do about their own local candidates. When
Virginia Senate candidates Charles Robb and George Allen debated twice
in two days a few weeks ago, not a single DC-area network affiliate
carried either debate.

How are local candidates to get their positions to voters -- who rely on
broadcast television for their news and information \-- unless local
stations provide coverage? Broadcasters must televise local and
state-race debates and the candidates' major speeches to help inform
citizens of their important democratic choices.

And they should recommit to showing more Public Service Announcements
(PSAs) and more local PSAs during peak viewing hours. When the broadcast
industry commits to a public service campaign, they can literally change
our country. Remember "Buckle Up for Safety?" "Only You Can Prevent
Forest Fires?" Whether it's teen smoking, teen pregnancies, or drunk
driving, PSA campaigns make a huge difference in setting the national
agenda.

> This enhanced commitment to localism could be one of broadcasters'
> greatest competitive strengths. For broadcasters' unique ability to
> localize their content grants them a crucial market advantage over
> cable and DBS in this era of increased multi-channel competition.
>
> And, given the multicasting ability of digital television, I'm
> confident that broadcasters can find a way to air this important
> candidate and community information without unduly harming their
> fiscal interests.
>
> Indeed, the expanded capacity of digital television only facilitates
> stations' fulfillment of their democratic obligations. DTV's extended
> capabilities can be used to provide a \"public space,\" like a cable
> system\'s local access, for citizens and community groups to have
> access to television broadcasting and to provide an additional forum
> for political discourse among and between citizens.

As this political season matures, I am also considering if, in the
interest of enhanced democracy, we should revise and update our
political editorial rules to encourage greater participation by the
networks in political discourse. Last week, the Commission suspended our
political editorial rules through this election season. Broadcasters
have told us that these rules, intended to ensure that voters heard both
sides of every debate, instead had a "chilling effect" on their ability
to editorialize freely.

So, during the period when the FCC's rule is suspended, we will assess
broadcasters' contribution to political discourse, and ways that we
might modify these rules so that they make more sense in the new era of
multimedia political debate.

Enhancing Democracy: Candidate-Centered Discourse

Another crucial way that broadcasters can enhance the democratic process
is by providing time for "candidate-centered discourse" during the last
few weeks of an election season. I call it free time.

> Now, I know this issue has been the Third Rail of Broadcast Politics
> for some time now. I myself was zapped by it two years ago, when I
> proposed that the FCC require broadcasters to give candidates free air
> time.
>
> But today that idea makes more sense than ever as the cost of campaign
> advertising on television continues to spiral upward, and as the
> clamor for campaign finance reform grows around the country. In short,
> free air time is an idea whose time has come, and I believe we should
> now consider a system of broadcaster provided access for political
> candidates.
>
> Indeed, I am pleased that two of the three major networks -- NBC and
> CBS \-- have recognized this and have committed to provide
> unprecedented opportunities for candidates to speak directly to voters
> between now and the November 7 elections.
>
> I also want to commend the other broadcasters - Hearst-Argyle, Scripps
> Howard, Capitol Broadcasting, Fox, Belo, and Bloomberg Television and
> Radio - who are providing similar opportunities for candidates to have
> an "electronic soapbox" and speak directly to voters.

This is an excellent start, but we have miles yet to go.

In a republic founded on the principles of self-government, democracy,
and citizenship, the idea that the financial interests of the broadcast
industry would trump the public\'s interest in educated voting is
sounding more absurd to more ears.

Congress should require broadcasters to provide free time to candidates
as part of a comprehensive campaign finance reform package and as an
important way to lessen the grip of special interest money on politics
in this country.

###### Enhancing Democracy: Children 

Perhaps the most important way in which television can enhance American
democracy is by helping to cultivate our next generation of citizens.

Studies have shown that America's children watch three hours of TV every
day. That's almost half a school day, every day, where children are
learning from the television. TV time can entertain, but it should also
teach about our democracy, our culture and our values. And, for sure, it
should not hurt.

We all know from our experience that what we see as children on
television shapes our consciousness and remains with us for the rest of
our lives. Growing up in Los Angeles, I can vividly remember seeing
Bobby Kennedy shot down before the California primary in 1968, and
watching the frightening riots that followed the murder of Dr. King on
my grandmother's color TV. I know how these seminal events of our
country's political turmoil affected me. I can trace back to those days
my sense of obligation to serve the public.

I recall the excitement of viewing *I Spy* with Bill Cosby, the first
African-American actor on primetime. Before Bill Cosby, I could watch
television all the time and never see the world I lived in, a world in
which there were black architects \-- like my father; black teachers \--
like my mother; black ministers; storeowners; family and friends. I know
how important it is for children today to see people on television who
look like themselves, and who make them feel good about who they are and
who they can be. Primetime television today reflects far more diversity
than television did in the 1960s, but our country is even more diverse
than in my childhood and we have a long way to go until today\'s
children see the wonderful diversity of our society on the small screen.

And diversity isn't the only area in which programming is too often
deficient: Turn on the TV today, and all too often even so-called "kids'
programming" at best has no educational value and at worst is filled
with immature locker room humor and cartoon violence. To say nothing of
the inappropriate content permeating primetime.

I challenge each of you to pick any given night on any given network and
sit down with your preteen children in front of the television set. I
can guarantee that within forty-five minutes of the usual sitcoms and
dramas you'll be blushing, covering your child's ears, or in the midst
of a "big talk" that you weren't planning to conduct for a few years to
come.

It's just common sense. We have insisted that all broadcasters air
educational and informational programming for at least three hours each
week. But their obligations to children should not stop there. In
addition, they should not air inappropriate programming at times when a
significant number of children would reasonably be expected to be in the
audience. And they shouldn't show inappropriate advertising during these
hours either. I can't tell you how many e-mails I've received from irate
parents about that Nike chainsaw killer ad that was shown during the
Olympics. What might be considered harmless if shown during *Saturday
Night Live* is shocking and hurtful during family viewing time.

Broadcasters should exercise their judgement as citizens and parents and
impose some restraint on the content they broadcast at certain hours. In
this regard, I have repeatedly urged the industry to adopt a voluntary
code of conduct for good citizenship by broadcasters.

Broadcasters should also use the flexibility of digital technology to
serve children in dynamic, innovative ways.

Broadcasters can use DTV to serve more educational programming to kids
where specialized education services may be unavailable.

And the multicast capabilities of DTV can provide more age-appropriate
programming for children, so that parents of ten-year-olds do not have
to choose between allowing their children to watch *Buffy the Vampire
Slayer* or *Dawson's Creek* or resigning them to cartoons.

The enhanced capabilities of DTV also permit more extensive ratings
information, creating more opportunities for parents to use the V-Chip.

#### Rent Control and the Bandwidth Blues 

Finally, one of the best ways broadcasters could enhance democracy and
the public interest in this digital era is by speeding up the transition
to DTV and returning the valuable analog spectrum to the American
people.

Since America's founding, one of the keys to our people's remarkable
success and prosperity has been our vast array of natural resources at
hand.

> The United States has always been a country rich in fertile land and
> crucial minerals, in timber and fossil fuels. When other nations faced
> economic scarcities that impeded their growth and stymied innovation,
> America enjoyed a vast abundance of room and resources that fostered
> creativity and entrepreneurship.
>
> But, in the digital age, the tables have turned. For the most valuable
> resource of the Information Age is bandwidth. And, while Europe and
> Japan have successfully unleashed the economic potential of 3G and the
> wireless web, we in America will have to move quickly to stay ahead in
> the New Economy.
>
> This is where the broadcasting industry comes in.
>
> Congress granted the networks this digital spectrum in addition to the
> conventional analog spectrum they already have, effectively giving
> broadcasters twice their allotment of precious bandwidth. And they
> said that the broadcasters could keep the analog portion of the
> spectrum until 2006, or until DTV penetration reached 85% of the
> American market, whichever is [later]{.underline}.

Eighty-five percent? It took color TV 22 years and VCRs 16 years to
reach that level of penetration. And if those are any indication, DTV
conversion will take much, much longer than 2006, particularly given the
way broadcasters are dragging their feet at the moment. We may not see
that level of DTV penetration until 2025.

> Basically, the broadcast networks were the beneficiaries of the
> biggest government giveaway since Peter Stuyvesant bought Manhattan
> from the Indians for \$24. You can barely buy lunch in Manhattan for
> that now.
>
> And, to compound the public damage of this protectionism, the
> broadcasters have decided to sit on these two highly valuable
> properties \-- licensed to them for free by Congress \-- for as long
> as they can.
>
> In a sense, the networks' business model for the next decade can be
> summed up by the slogan of Twix candy bars: "Two for me, none for
> you!"
>
> Indeed, I am reminded of another commercial from a few years back,
> which featured now-Redskin Deion Sanders. When Deion was asked if he'd
> prefer to have \$5 million or \$15 million, he answered, "Both." It's
> no wonder they call him Primetime.
>
> Now, spectrum-squatting may make great business sense for the
> broadcasters, but in terms of the public interest it makes no sense at
> all. Squatting on empty spectrum smothers innovation and endangers
> America's lead in new technologies.
>
> To borrow another analogy which I'm sure many of you New Yorkers are
> familiar with, it's as if Congress donated each broadcaster two
> rent-controlled apartments on the Upper West Side, and the broadcaster
> then proceeded to leave one of them empty.
>
> I say, if you're not going to use this valuable \$70 billion dollar
> resource to benefit the public interest, then perhaps you should give
> it back. And, if you're if going to tie up twice your allotted amount
> of the people's bandwidth, perhaps you should pay some rent on it.

# Solving the Spectrum-Squatter Problem

> The way I see it, there are three things that Congress can do to
> eliminate the waste of spectrum by fence-straddling stations,
> accelerate the national transition to DTV, and buttress the current
> system of affirmative public interest obligations all in one.
>
> First, Congress should reconsider the 85% loophole on the 2006 date,
> so that it doesn't become used as a "trick number" to justify making
> the double dose of spectrum a broadcaster entitlement for the next
> twenty-five years.
>
> Second, Congress should direct the FCC to adopt a requirement that, by
> a given date -- say January 1, 2003 - all new television sets include
> the capability to receive DTV signals. In addition to accelerating DTV
> deployment, this order would make DTV technology much more affordable
> by unleashing market forces and economies of scale to drive down the
> cost of equipment and receiver chips in both sets and converter boxes.
>
> Third, Congress should require that, as of January 1, 2006,
> broadcasters will pay a fee for the use of the analog channel. This
> "spectrum-squatters' fee" would escalate yearly, until broadcasters
> complete their transition to digital and return the analog spectrum to
> the American people.
>
> The proceeds from the squatters' fee could then be used to help fund
> the digital conversion of public television, especially in rural
> areas, or to support educational or informational programming that
> serves the public but is not provided by the market, through the
> Corporation for Public Broadcasting, or through other funding
> mechanism created by Congress.

I intend to forward these suggestions to Congress for their
consideration when the next session of Congress convenes in January.

######## Conclusion 

> In the meantime, we will be holding a Commission hearing next Monday
> to further explore how television can enhance democracy by
> contributing to political discourse, serving local communities, and
> protecting children. I very much hope this hearing will act as another
> important step in rethinking broadcasters\' public interest
> contributions.
>
> I want to cut the Gordian knot of public interest vs. financial
> interests, and outline clear, tangible public interest obligations
> that broadcasters can commit to.

I want to ensure that the American people are suitably compensated for
the use of their valuable spectrum, and that underutilized portions of
this precious resource are returned to them as soon as possible.

And I want to see that the awesome power and remarkable ubiquity of
television is put to the service of our democracy, rather than at the
expense of it.

We are the strongest, most vibrant democracy this world has ever seen.
But we owe it to ourselves and to the nations who view us as a role
model of democratic governance to realize the enormous promise of
communications technologies old and new in serving and enhancing
democracy.

If Yugoslavia can use TV to topple a dictatorship and establish a free
government, and South Africa can use radio to rally against intolerance
and hatred and promote racial harmony, surely we in America can do a
better job of using our broadcasting infrastructure to serve the public
interest.

When we reaffirm that television should not only entertain us as
consumers, but engage and ennoble us as citizens, we will have come a
long way toward establishing the 21^st^ Century's first true Electronic
Democracy.

Thank you.

\- FCC -