**TESTIMONY OF JONATHAN S. ADELSTEIN\
Before the U.S. Senate Committee on Commerce, Science &\
Transportation**

**Full Committee Hearing: S.967, Pre-packaged News Stories**

**May 12, 2005**

\[As prepared for delivery\]

Mr. Chairman, Mr. Co-Chairman, members of the Committee, thank you for
inviting me to testify on a matter of great concern to me and to the
FCC. This hearing is especially timely, because it can help combat the
surprising lack of awareness that the law and FCC rules require
disclosure of who is behind certain paid, political or controversial
programming.

Congress has maintained the principle \-- from the outset of
broadcasting \-- that consumers have a right to know who is trying to
influence them. Sponsorship ID laws date back to the Radio Act of 1927,
meaning that they're older than the FCC itself. Congress has maintained
an unwavering requirement that broadcasters must announce who gave them
valuable consideration to air anything.

In the case of controversial issue or political programming, the FCC's
interpretation of the law has always required that, whenever a third
party provides material to induce its broadcast, the identity of the
source must also be disclosed to viewers.

So the seriousness that you are treating this matter with is entirely
consistent with historical concern of this Committee, and of Congress as
a whole.

Because of the need to highlight our rules, I was especially pleased
that last month, the FCC voted unanimously to remind the industry of
their legal obligations. With the leadership of our new Chairman, Kevin
Martin, we came together \-- on a bipartisan basis \-- to alert the
industry that we take our responsibilities seriously \-- and plan to
enforce the law vigorously. We also sought comment to learn more about
how VNRs are used, and whether we need to refine our rules further.

Many analysts believe the urgency of this issue arises in large measure
because of the increasing commercialization of the media. Pressures on
the bottom line are forcing reductions in resources for news operations.

This creates a void that PR firms are happy to fill with VNRs. They're
cheaper to produce than ads, free to get on the air, and more effective
because they're designed to mimic news stories. This can seriously
mislead viewers, and has probably contributed to the well- documented
loss of public confidence in today's media.

Another symptom of commercialization is seen in reports of a rising tide
of undisclosed product placements in our media. I'm concerned that there
seems to be a lack of awareness of the need for disclosure under our
rules in this area as well. Everyone in the industry would be
well-served to review our public notice on VNRs, since the same rules
can apply to product placements.

The focus of today's hearing is on the use of VNRs by government
agencies. As recently as 2002, the FCC reiterated that disclosure is
particularly important when the government sponsors the broadcast
matter.

You've heard about conflicting interpretations between the Justice
Department and GAO about whether unidentified government VNRs violate
laws against covert propaganda. The Commission has no jurisdiction over
these laws, and has taken no position. But neither Justice nor GAO has
noted that the failure by broadcasters and cable companies to identify
the source of VNRs could violate the FCC's sponsorship ID rules. As we
said in our Public Notice, these companies do have an obligation to
disclose the source of political or controversial issue VNRs.

If Congress seeks to ensure the public is notified about the source of
government-sponsored VNRS, legislation such as S. 967 is necessary to
bolster our existing rules.

It would apply whether or not consideration was exchanged \-- and
whether or not controversial or political issues were involved (it would
also prohibit the removal of the announcement). The bill doesn't specify
the precise nature of the announcement, but instead leaves it to the FCC
to work with broadcasters to determine how to achieve the right balance
between the public's right to know and editorial discretion.

The bill would not impose any new burden on broadcasters or cable
companies. In fact, it would simplify compliance. It would ensure that
those airing these VNRs are aware of the government's role. Most
importantly, it addresses the public's right to know the source of the
broadcasts so they can make up their own minds about the information
being presented.

Again, Mr. Chairman, thank you for inviting me to testify. I am happy to
answer any questions you may have.