PUBLIC INTEREST OBLIGATIONS OF DIGITAL TELEVISION BROADCASTERS: AN EXAMINATION OF POSSIBLE REGULATORY MODELS

The digital television revolution is well underway. Local television stations are initiating on-air program tests of digital signals and are spending millions of dollars each to upgrade their production and transmission facilities. By the end of this year, network affiliates in the largest markets will begin to transmit DTV signals -- even earlier than the government has required. Although at the end of the transition broadcasters will still provide television programming on a single 6 MHz channel, digital television technology will enable broadcasters to offer a wide array of viewing options -- all with crystal clear pictures and CD quality sound.

The committee is charged with recommending a regulatory framework to be applied to digital television broadcasters. The following is a brief discussion of two possible frameworks for regulation of the television broadcasting industry in the digital age, along with some appropriate rationales for each framework.

• Intense and Ever-Increasing Competition in the Information Marketplace Will Force Broadcasters To Offer High Quality, Original, Locally-Oriented Programming That Serves the Public Interest.

• Greater Competition in the Information Marketplace Eliminates Any Need for Government Intervention -- The information revolution has led to an explosion in information outlets. Television broadcasters today face intense competition from a dazzling array of information providers -- cable television, direct broadcast satellite, wireless cable, the Internet, videocassette sales and rentals, radio, newspapers, magazines, and direct mail. The result is that American citizens have a broader choice of outlets for news, information, and entertainment than ever before. It is this robust, highly competitive information marketplace that ensures TV stations will continue to serve the public interest.

• Localism Is the Biggest Competitive Advantage for TV Stations -- Localism is the single characteristic distinguishing TV stations from competitors such as cable and direct broadcast satellite. The most important aspect of localism is providing programming responsive to community needs and interests. Thus, to compete and thrive in the digital era, broadcasters will have to focus on their principal strength -- the fact that they provide community-oriented television service. The large majority of the 1500 licensed stations in the U.S. presently share this approach.

• Burdensome Government Regulation Is Not Needed Because Television Broadcast Licensees Are Already Champions of Public Interest Programming.

• Broadcasters Today Excel at Providing Quality Non-Entertainment Programming -- Local broadcasters have a great track record of providing news, information, public affairs, instructional, religious, children's, and educational programming to viewers. This rich diversity of program offerings is the result of market forces, not government regulation. Belo looked at non-entertainment program percentages in 17 markets and found that, on average, major network affiliates dedicate about one-quarter of their total broadcast hours to non-entertainment programming. This disproves the premise that only a few "good" broadcasters are attempting to excel at serving their local community. In fact, in most TV markets, there are at least four stations providing ample quantities of public interest programming.

• Percentage of News, Public Affairs, and Other Non-Entertainment Programming Aired By All Network Affiliates (ABC, CBS, NBC, FOX), in Selected Markets:

Dallas-Fort Worth – 32.0%

Charlotte, NC -- 27.7%

Seattle-Tacoma -- 27.1%

Portland, OR -- 26.8%

New Orleans -- 26.4%

St. Louis -- 26.1%

Houston -- 25.9%

Sacramento -- 25.1%

Hampton-Norfolk, VA -- 25.8%

Tulsa -- 24.9%

Boise -- 24.4%

Louisville, KY -- 23.6%

Spokane -- 23.6%

Santa Fe-Albuquerque -- 23.6%

Tucson -- 22.6%

San Antonio -- 22.4%

Honolulu -- 14.8%

• Many individual Belo stations air even larger percentages of non-entertainment programming. For example:

WFAA-TV (ABC) Dallas-Fort Worth -- 37.0%

KING-TV (NBC) Seattle-Tacoma -- 36.0%

KMOV-TV (CBS) St. Louis -- 30.5%

• Some Stations Voluntarily Give Federal Candidates Free Time -- In 1996, Belo voluntarily initiated a program called "It's Your Time," which offers federal candidates five minutes of free air time and provides the program to local PBS stations as well. Many other broadcasters provide similarly innovative programs designed to inform the public, including extensive coverage of state, county, and local elections in special programming and in news and public affairs programs. These public interest initiatives, none of which are required under existing political broadcasting laws, make good business sense and will continue to thrive even in the absence of government regulation. Congress has turned down mandated free air time. The committee should consider ways to encourage broadcasters to provide free air time

• Fees For Ancillary and Supplementary Digital Service Can Help Fund Public Broadcasting -- Fees that the FCC will recover when broadcasters provide pay services should fund an ambitious public broadcasting strategy. This would provide a much needed stream of revenue for educational programming. Under this approach, public broadcast stations would retain their second 6 MHz channel after the transition period to provide primarily educational and instructional programming. PBS stations could also utilize this additional channel for public access and for free air time for political candidates. For more details, see the attached Appendix A: Broadcasting in the Public Interest: A Proposal For Expanded Educational Programming in the Digital Age.

• In This Environment, Continuation of Outdated Regulations Is Not Necessary, and the Committee Should Recommend Eliminating Them.

• TV Stations Must Offer Programming Responsive to Community Needs -- Under existing law, all broadcasters are obligated to provide programming responsive to the needs and interests of the communities they serve. Quarterly community responsive programming reports are required to be kept by all TV stations and filed with their license renewal applications.

• TV Stations Must Comply With Complex Political Broadcasting Rules -- The Commission enforces a myriad of elaborate political broadcasting rules. Stations are required to (i) permit federal candidates to purchase commercial time; (ii) sell time at the "lowest unit charge" for comparable time; and (iii) afford candidates "equal opportunities" to respond when opposing candidates "use" a broadcaster's station.

• The Government Strictly Regulates Children's Programming -- TV stations are obligated to air at least three hours of "core" educational and informational children's television programming per week. Commercial time limits on programs are rigorously enforced -- one station was fined $125,000 for violations. Children's programming reports must be filed with the Commission.

• Closed Captioning – TV stations' new closed captioning requirements are being phased in beginning on January 1, 1998. Under the rules, broadcasters must air 95 percent of all "new" non-exempt programming with closed captioning within eight years. Even sooner, by January 1, 2000, stations must caption about five hours per day of their "new" non-exempt programming.

• Content Restrictions – TV stations may not air indecent material during hours when children are likely to be in the audience, including prime time. The government also required the industry to develop and implement a television ratings system.

1. IN BELO'S VIEW, THERE IS NO IDENTIFIABLE NEED FOR FURTHER BURDENSOME REGULATION OF TELEVISION PROGRAM CONTENT.

• More Public Interest Obligations Will Not Increase the Quality of Public Interest Programming.

• The Government Can't Regulate Program Quality -- Due to First Amendment limitations, the only option to increase public interest obligations on broadcasters is to require a larger number of hours of public interest programming in specified categories. For stations already facing the burden of building DTV facilities, new and unwanted public interest obligations will only result in added low quality fare of marginal public interest value.

• Smaller, Independent Broadcasters Can Ill-Afford Added Public Interest Obligations -- The financial burdens of additional public interest obligations will fall most heavily upon those stations least able to afford them. These stations often operate on shoestring budgets. Unaffiliated stations provide alternative programming -- such as home shopping, informational, or religious programs -- that larger network stations don't offer. These stations serve the public interest, too. There is no need to homogenize television content with mandated program requirements.

• Added Public Interest Obligations Place Broadcasters at a Competitive Disadvantage.

• Multichannel Video Competitors Have the Flexibility To Dynamically Modify Their Program Mix -- Competing information providers are not subject to rigid public interest rules. As a result, these competitors can experiment with programming options and quickly transition to accommodate market conditions. By contrast, broadcasters, especially if constrained by added public interest obligations, will continue to operate at a substantial competitive disadvantage.

• In Light of Changes in the Mass Media Marketplace, Content-Oriented Public Interest Obligations Are Constitutionally Suspect.

• The Scarcity Rationale Is No Longer Viable -- Any government action that proposes to force broadcasters to fulfill content-oriented programming obligations -- such as free time for candidates or educational programming -- raises serious constitutional concerns. The validity of the traditional First Amendment rationale of "spectrum scarcity" is highly suspect and certainly cannot justify an expanded regulatory regime. Two FCC Commissioners have called for a reexamination of the factual underpinnings of the scarcity rationale. Given the explosion of information outlets competing in today's mass-media marketplace, the FCC and the courts may be moving toward a more uniform approach to government regulations impacting speakers. Therefore, any approach that increases broadcasters' public interest programming obligations is shaky.

2. THE DIGITAL SPECTRUM "GIVE-AWAY" IS A MYTH.

• Broadcasters Are Not Being Given Free Second Channels -- Broadcasters are not getting additional spectrum free of charge. The second channels carved from the existing television spectrum are being loaned to broadcasters so they may simulcast analog and digital programming while viewers upgrade to digital television sets. Without this approach, stations would literally be forced to switch to DTV overnight, leaving millions of viewers with dark television sets the next day. When the DTV transition is completed, broadcasters will have one television channel -- exactly what they started with.

• Broadcasters Must Invest Billions to Convert to DTV -- Broadcasters nationwide are spending more than a billion dollars to upgrade studio and transmission facilities. For example, Belo will invest over $150 million in new equipment for its 17 television stations -- $32 million in 1998 alone. The government is not helping broadcasters with the transition -- there are no federal subsidies or tax benefits for DTV expenditures.

• Broadcasters Must Offer Free DTV -- DTV will provide no windfall to broadcasters. Stations will be required to offer free over-the-air services that are at least comparable to today's signal. In addition, if broadcasters decide to offer "ancillary and supplementary" services, the FCC will charge broadcasters fees for the portion of the spectrum used for such pay services. There is no business model that guarantees such services will be profitable.

• DTV Will Not Expand Television Markets or Enlarge the Potential Audience -- DTV does not expand the size of stations' television markets, nor does it deliver a larger viewing audience. To make certain that markets remain the same, the FCC's table of second channel allotments specifies facilities that will create identical "footprints" to those that TV stations now have with their analog stations. After investing millions of dollars in new facilities, broadcasters have no assurance they will profit financially from improved viewership or ratings. Broadcasters will gain only by continuing to provide high-quality programming that serves the public interest.

• No "Give-Away" Should Mean No New Public Interest Obligations -- Since the DTV transition gives TV stations nothing new, there is no justification for imposing new public interest obligations. (High definition or multi-casting could be achieved on the 6 MHz of spectrum currently allocated to broadcasters.) Once the DTV transition is complete, broadcasters will be no better off than under the existing regulatory regime. Any added burden on broadcasters is wholly unwarranted.

• Existing Regulatory Requirements Are Adequate To Ensure the Continuing Availability of Public Interest Programming Responsive to Community Concerns. There is No Evidence to Suggest That the Imposition of Additional Regulatory Burdens Will Have Any Appreciable Impact on TV Stations' Present Incentives To Address the Information Needs of Viewers.

• In most TV markets, at least four network stations -- and other stations -- provide extensive non-entertainment programming to meet the needs of local viewers. Existing regulations are sufficient to ensure that all television station licensees comply with their public interest programming requirements.