Friday, December 5, 1997


Meeting Transcript

[Skip to the afternoon session]

 2                                                      (9:20 a.m.)
 3                  MR. MOONVES:  Good morning, ladies and
 4        gentlemen.  Welcome back to our second meeting of our
 5        advisory committee.  I think we had a very successful
 6        first meeting, and we look forward to continuing
 7        discussions today.
 8                  I think we are going to have a really
 9        interesting day, with two panels in the morning -- we will
10        have a public interest panel.  We would like to thank you,
11        Gigi Sohn, for putting this panel together.  Then later
12        this afternoon there's a panel of broadcasters put
13        together by Robert Hecker, and I think today we can get a
14        lot of the important issues on the table that are facing
15        all of us.
16                  A couple of housekeeping notes.  I will
17        introduce Jose Luis Ruiz, our newest member, but he is not
18        here yet to introduce, but he has been appointed as a new
19        member of our commission, as well as I would like to
20        introduce Jonathan Cohen, a gentleman right over there,
21        who has been detailed to the advisory committee from the
22        FCC, and he will be with us during the course of our year
23        together here.
24                  As you may have seen in your packet -- a little
25        housekeeping -- we have set up our dates for the next four

 1        meetings.  The first meeting, Friday, January 15, the
 2        next, Monday, March 2, the next, Tuesday, April 14, and
 3        finally, Monday, June 8.  The June 8 meeting, obviously we
 4        will need an extension from the Government on our
 5        commission, as we are supposed to end June 1.
 6                  I think we all agreed at the last meeting that
 7        trying to finish this  by the beginning of June or early
 8        July was going to be impossible, and we are going to
 9        officially request in the next few weeks an extension on
10        this time.
11                  You were all kind enough to send in your
12        calendars, and obviously some of these meetings can't be
13        attended by everyone, but we feel like we did the best we
14        could and by and large there are only a couple of people
15        who will be missing from each one of those meetings.
16                  Today I am very pleased to report that outside
17        of Richard Masur the entire committee is here.
18                  Before going on, I would like to turn it over to
19        my cochairman who will discuss some of the ideas for what
20        we would like to accomplish at the next group of meetings
21        and open that up to discussion this morning, so Norman,
22        please take it.
23                  MR. ORNSTEIN:  Thanks, Les.
24                  We not only have set dates, we also have to
25        consider what we're going to be doing at these meetings,

 1        and we clearly are starting a course now getting
 2        perspectives from the public interest community, from the
 3        broadcast industry itself.
 4                  We're moving towards an end goal in our
 5        meetings, and of course a little bit further down the road
 6        discussing specifically what options we want to pursue and
 7        recommendations we would make, and these several meetings
 8        ahead in the interim are going to be additional
 9        opportunities for us to gather information and discuss
10        some of the particular substantive areas we had originally
11        designed.
12                  You will remember from our last meeting this
13        meeting to have three sessions, including one on a variety
14        of technology issues that Rob Glaser was putting together,
15        and we have decided to delay that and, if it makes
16        sense -- we'll double check with Rob when he arrives -- to
17        do that at the beginning of the next session, which would
18        be our January meeting, take the morning on that.
19                  What Les and I would propose for discussion
20        purposes at the moment is the following.  I think we
21        basically have three major substantive areas that we want
22        to spend some time on.  One is the broad question of
23        education, including children.  A second is the question
24        of free time, or time in the political arena, and then
25        there is an array of other issues, from closed captioning

 1        and public service announcements to emergency broadcast.
 2                  We have, if you'll notice in your packets, a
 3        very interesting letter from a Federal advisory group on
 4        emergencies about where the technology might be able to
 5        take us there.  It is something we're going to have to
 6        discuss a little bit more.
 7                  Those are areas where we need some, at least
 8        extended time for direct discussion and deliberation, I
 9        think.  What makes sense to me, perhaps, is that we focus,
10        in part because it will flow from some of the discussion
11        of the technology we will be considering, including the
12        computer area, into a discussion of education on the
13        afternoon of January 16.
14                  We then turn on March 2 to the question of free
15        TV time for political candidates and the whole
16        relationship that the public interest issue has to
17        campaigns.  Then we move to a discussion in April of these
18        other issues, from the closed captioning question to the
19        public service announcements, emergencies, and so on, and
20        then focus very specifically on what we're going to do, or
21        what we would recommend as we move into June and whatever
22        would flow from that.
23                  Let me throw that open as a likely agenda ahead,
24        recognizing we will stay flexible if something intervenes
25        and see what people think.

 1                  Peggy.
 2                  MS. CHARREN:  Are you suggesting that public
 3        input in these areas follow this agenda?
 4                  MR. ORNSTEIN:  I think what we do during these
 5        sessions is very much open and doesn't have to follow the
 6        same format that we're following today.  Yes, absolutely,
 7        and I think when we -- either now or at the end of the day
 8        we will want to discuss very specifically what format we
 9        pursue next time.  I'm assuming we're talking about having
10        the panel that you are going to do at the beginning of the
11        next session that we have.  The date now set is
12        January 16.
13                  MR. GLASER:  The next one.
14                  MR. ORNSTEIN:  I assume we can follow the same
15        format that we're going to do here.  For the discussion on
16        education and children there is no particular driving
17        necessity to follow that format.  If it works, great, but
18        if there are other suggestions, why not, and just as with
19        any of these areas we may want to bring in outsiders.  We
20        may want to discuss them among ourselves.  We may want to
21        do it a different way.
22                  Gigi.
23                  MS. SOHN:  The Vice President talked about the
24        possibility of some sort of reservation of capacity for
25        civic discourse.  I think that is an important topic, and

 1        something that will be raised by one of the panelists, or
 2        several of the panelists on my panel today.  I was
 3        wondering if you see that being folded into the discussion
 4        on political free time, because it's not exactly the same
 5        time.  I don't know if you see that being folded into the
 6        same discussion or something separate.
 7                  MR. ORNSTEIN:  I would see that as we will have
 8        a day for that subject, and to me it is a subject broadly
 9        defined.  It basically includes discourse in the public
10        square as it relates to politics and issues, and so I
11        would certainly see a specific focus there as well.
12                  MR. MOONVES:  Gigi, I think there's going to be
13        obviously in every single panel cross-over between all
14        these various issues.  I think a lot of things we'll talk
15        about today clearly will involve free time for candidates. 
16        There will be certain repetitions in that, and I think
17        there is no reason why each panel has to be just cut and
18        dried.
19                  MR. ORNSTEIN:  And I would also -- you know,
20        we're going to focus on these issues and then turn to
21        solutions.  That doesn't mean that we will avoid
22        discussion of alternatives, innovative ideas, ways for us
23        to go generally as we go along, too.
24                  Erin.
25                  MS. STRAUSS:  I just wanted to just briefly

 1        throw on the table another issue that will be coming up. 
 2        Closed captioning has been mentioned a lot, but video
 3        description has not, and I would like to put forth the
 4        possibility that at one of our future meetings I be
 5        permitted to make a very brief presentation on video
 6        description.  I have a tape that shows it.
 7                  The presentation could be brief, like I say
 8        around 15, 20 minutes, but I think it would help for
 9        people to understand what this new form of access is.
10                  MR. MOONVES:  Although we haven't gone into it
11        specifically, absolutely, on the April 14 panel you
12        certainly will be given that time to make that
13        presentation, as will any other issues that anybody wants
14        to bring up, which will include all of the potpourri of
15        other significant things.
16                  MR. BENTON:  It says here on the agenda there
17        will be discussion of future agenda.  Do we come back to
18        this at the end of the day, after we've thought about all
19        of this all again, and revisit the suggestions?
20                  MR. ORNSTEIN:  I think we need to revisit it,
21        including a discussion of the specific format we want to
22        follow in the next meeting.
23                  We also -- this may be a good time to talk about
24        some of the issues that were raised in our public
25        outreach, including whether we can do this simultaneous

 1        broadcast of our meetings on our Web site, and we have the
 2        world's leading expert here, and we had a brief discussion
 3        of that last time.  What do you think, Rob?
 4                  MR. GLASER:  We would love to do it, starting
 5        with the technology panel.  That might make good sense if
 6        we can kick it off by then.
 7                  I think at the last meeting we discussed whether
 8        anybody thought there were any policy matters associated
 9        with doing it.  I know it's been done in the past with
10        congressional hearings and the like.  I don't imagine
11        there are.  I don't recall.
12                  MR. ORNSTEIN:  I can't imagine any.  If anybody
13        has any objections or reasons for us not to do it -- it
14        seems like a logical and pretty exciting thing for us to
15        do, and it's a good way to reach out for those who can't
16        be here with us.
17                  MR. DUHAMEL:  I have a question.  Last time we
18        talked about getting an extension beyond June into the
19        fall.  It seems to me like we have a pretty full agenda
20        here for the next three meetings.
21                  MR. ORNSTEIN:  We do, and as Les mentioned we
22        were supposed to have our report done June 1 and then have
23        a month to wrap up all of our other business.  It is
24        fairly obvious from the schedule that we are not going to
25        be able to meet that timetable.

 1                  We're going to make it -- we have not made a
 2        formal request.  I think the White House wanted us to stay
 3        flexible for a while in that regard, and since this is not
 4        anything that has to be done by legislation that will take
 5        a sizeable period of time, it can be done first, I think,
 6        directly by OMB, and then you could formally revise the
 7        executive order, we are under no rush to do that.
 8                  I mean, we're going to follow the timetable that
 9        makes sense for us, and then we can feel confident we will
10        have the time we need to finish our work, but we will
11        begin the formal process within the next couple of weeks
12        of getting that done formally.
13                  We're going to move expeditiously.  I don't
14        think we need to say, well, we're going to take till
15        October and therefore we will take till October.
16                  And we also need to be mindful of something
17        else.  The FCC will begin very likely and fairly soon its
18        own proceedings.  In what fashion, it has not been set. 
19        We just have in effect a newly constituted FCC that held
20        its first meeting last week, and they may move through a
21        very slow process with the notice of inquiry and then on
22        forward to the proposed rulemaking, or they may just move
23        to the rulemaking.  Either way, it takes some time.
24                  But while our recommendations, they go in the
25        executive order to the Vice President, they are clearly

 1        out there for policymakers and Congress, and the Federal
 2        Communications Commission and elsewhere to be mindful of,
 3        we want to be sure that we mesh in some fashion rather
 4        than clash with their schedule, so we will keep them
 5        abreast of that, too.
 6                  MR. CRUMP:  Having the four dates here, have you
 7        discussed locations?  Will we stay in Washington, or as
 8        was expressed the last time, will we be allowed to move
 9        around the countryside?
10                  MR. MOONVES:  We have not come to any conclusion
11        on that.  As well, there are certain problems with moving
12        out.  I don't think there's any reason why we couldn't try
13        to do one of them away.
14                  Karen, would you agree with that?  Is that
15        possible?
16                  MS. EDWARDS:  I think that's possible.  Of
17        course, the agency doesn't want to be a stumbling block to
18        the committee meeting in other States or cities, so if
19        there are a couple of meetings you want to do elsewhere I
20        think we can scare up the money, and Anne and I will be
21        there.
22                  MR. ORNSTEIN:  This much we can tell you, we
23        will not be meeting in St. Paul in January.
24                  (Laughter.)
25                  MR. CRUMP:  May I say thank you?

 1                  (Laughter.)
 2                  MR. MOONVES:  Harold, I think we can establish
 3        right now the January meeting will be in Washington. 
 4        However, we're willing to take certainly, and it probably
 5        would be best done by memo, any other suggestions for
 6        future meetings, or any proposals, and we will look at
 7        those.
 8                  MR. ORNSTEIN:  We may want to take a couple of
 9        minutes at the end of the day to talk about alternative
10        sites and certainly we both -- there are a couple of
11        things that would be served by meeting out of the city. 
12        We can reach a broader range of people who otherwise can't
13        come to Washington, the public, and accommodate members
14        who have to travel a sizeable difference, although we want
15        to be mindful of the cost of travel to other places as
16        well.
17                  So we ought to think about that, and clearly we
18        also need to have, if we're going to go to other places,
19        willing hosts, as Harold has been willing to help us out
20        in that regard,  but let's discuss that for at least a
21        little bit at the end of the day and point towards the
22        possibility of having either the March or April meeting
23        somewhere else.
24                  MR. CRUMP:  And if we are going to do two outs,
25        I'd perhaps, since we're on the East Coast here, one in

 1        the middle and one on the West, just to give the public a
 2        wider range of choice.
 3                  MR. MOONVES:  The good news is within a few
 4        weeks we should know exactly how long our extension is and
 5        probably be able to plan out the rest of them and possibly
 6        plan two trips, one in the middle of the country and one
 7        in California for us California people.
 8                  MS. SOHN:  Norm, one of the things Peggy raised
 9        at the last meeting was our need to educate the public,
10        and that may be having the passive Web site just wasn't
11        enough.  In fact, I've gotten a couple of letters from
12        members of the public saying how can we get the
13        information faster, and that sort of thing.
14                  Has any thought been given to how that can be
15        facilitated better?  Is that something we need to discuss? 
16        I think there are some people on this committee who would
17        like to see the public more educated about this process
18        and why it's important.
19                  MR. ORNSTEIN:  We need to focus a little bit
20        more on outreach.  I had hoped that C-Span would be here,
21        and I was going to start by saying that literally dozens
22        of people from around the country will be watching us.
23                  (Laughter.)
24                  MR. ORNSTEIN:  It turns out it will be literally
25        dozens of people at the NAB who will be watching us.

 1                  (Laughter.)
 2                  MR. ORNSTEIN:  Along with many of their outside
 3        representatives to reach a larger number.
 4                  MR. MOONVES:  I think there is a CBS cameraman
 5        here, which is watched by lots of people.
 6                  MR. ORNSTEIN:  Then, in fact, the largest
 7        audience in the country will be watching us.
 8                  But we need a more effective means of outreach. 
 9        I think an active Web site, where we let lots of people
10        know that there's a lot more there than just a bunch of
11        documents, may be a very good way, and I suspect that many
12        in the public who are interested in these issues are going
13        to be very familiar with how to reach them on the Web
14        site, but we ought to think about other ways that we can
15        get our deliberations out there and reach out to more
16        people.
17                  Peggy.
18                  MS. CHARREN:  One way that works is that there
19        are organizations who work with other organizations that
20        are very interested in these issues, like the PTA, the
21        American Psychological Association.  There are groups that
22        focus on media concerns, and we can use them to help get
23        the message out, too.  I mean, there are people who really
24        get involved in outreach, and at least the message that we
25        are interested in hearing from people.

 1                  I think that the Web is a terrific way to get
 2        what we are doing out to people, but we have to make them
 3        want to look at it so that they understand that there is a
 4        process happening, and a very open process, and we could
 5        use organizations to help make that happen.
 6                  MR. ORNSTEIN:  Let me also -- I think we should
 7        all be out talking to as many people as we possibly can
 8        and as many groups, and pulling in ideas, and let me
 9        suggest -- I mean, what I tend to get is, I suspect what
10        most of you tend to get is people pleading for more of the
11        piece of the public interest pie with ideas about
12        additional things to load in.
13                  We also should be thinking not just about what
14        areas encompass a public interest obligation but how we
15        achieve these goals, where we are really talking about a
16        very tricky set of issues with the technology changing
17        minute by minute, and where we don't know exactly where it
18        is heading, and we have to come up with innovative means
19        of being flexible, looking to a future that none of us can
20        absolutely predict.
21                  So we should be reaching out and encouraging
22        others to give us some ideas about how we achieve our
23        goals, not just how we slice up the pie or add on new
24        layers of obligations.
25                  MR. MOONVES:  Once again, forgive me, but a word

 1        of caution.  I do want the public to be aware of what
 2        we're doing.  By the same token, we are in an exploratory
 3        process right now.  I don't want us to be grandstanding
 4        for the press, or be dealing with a specific point of view
 5        when dealing with the press until we have examined the
 6        issues a lot further.
 7                  I know I and Norm have received a number of
 8        calls from the press wanting comments on where we are,
 9        where we're going, and I have avoided that by and large,
10        because I think it is not necessarily a positive thing to
11        do right now, so that's my only caution.
12                  Any other issues?
13                  MR. ORNSTEIN:  I don't know if we have any other
14        initial business that we need to deal with.  We may, in
15        fact, want to expedite our timetable.  I don't see any
16        need for a break right now.
17                  MR. MOONVES:  Gigi, is your group all ready?
18                  MS. SOHN:  Yes, I guess we're ready.
19                  MR. ORNSTEIN:  Karen is saying we need a moment
20        or two to set up -- oh, Jose Luis Ruiz, welcome to our
21        commission.  We're glad to have you with us.
22                  MR. ORNSTEIN:  We need to have the cameras moved
23        so we can get our panelists set up, and maybe we need to
24        take 5 minutes.  I hate to have everybody get up.
25                  (Recess.)

 1                  MR. MOONVES:  Before we get to our panel, I was
 2        remiss in not welcoming Barry Diller, as well as Jean
 3        White.
 4                  We are going to begin, as I mentioned before,
 5        with our two panels.  The first panel is, Perspectives
 6        from the Public Interest Community.  I would urge all of
 7        us, each one of the panel members will be making a short
 8        introductory remark, or semi-short, and at which point we
 9        will be open to questions, comments, and I hope we will
10        have a lively discussion with both panels, so please work
11        on that.
12                  So Gigi, I would like to turn it over to you to
13        introduce your panelists.  It's all yours.
14                  MS. SOHN:  Thanks, Les.  I wanted to thank you. 
15        I know this was your idea, and I think it was a terrific
16        one to get on the table, what we're thinking about what we
17        would like to see come out of this committee.
18                  Also, I know we have all gotten tons of stuff to
19        read, but I think this is a very nicely organized packet
20        of materials, and you should have also gotten an extra
21        couple of sheets that were just passed around.  I think it
22        would be helpful not to read now, but to sort of follow up
23        on some of the discussion.  Our panelists will be
24        referring to it.  So happy reading.
25                  Let me introduce our distinguished panel, and I

 1        want to thank them for coming as well.  The first speaker
 2        is going to be Paul Taylor, to my immediate right.  Paul
 3        is the faculty director of the Free TV For Straight Talk
 4        Coalition, a public interest group dedicated to improving
 5        the conduct and discourse of politics, especially on
 6        television.
 7                  The coalition's chairman is Walter Cronkite. 
 8        Our major funding comes from the Pew Charitable Trusts and
 9        the Annenberg Policy Center of the University of
10        Pennsylvania.
11                  Paul was a newspaper reporter for 25 years, the
12        last 14 with the Washington Post, where he covered
13        national politics and social issues, and he's written
14        several books on the issue of political journalism and
15        presidential campaigns.
16                  Paul graduated with a B.A. in American Studies
17        from Yale and he was the executive director of the Yale
18        Daily News, and Paul will present the legal and policy
19        arguments in favor of a requirement that broadcasters
20        provide free time for political candidates.
21                  Right next to Paul is Mark Lloyd.  Mark is the
22        director of the Civil Rights Telecommunications Forum, a
23        project created to bring civil rights principles and
24        advocacy to the policy debate.  Mark is a jack of all
25        trades.  He previously worked as a communications attorney

 1        at the D.C. law firm of Dow, Lohnes, & Albertson, and
 2        represented both commercial and noncommercial
 3        communications companies.  He also had nearly 20 years of
 4        experience as a print and broadcast journalist, and has
 5        been honored for some of his work.
 6                  Mark is chairman of the board of directors of
 7        the Center for Strategic Communications, a New York-based
 8        nonprofit, providing communications support to community-
 9        based organizations, and he is also a member of the board
10        of the Independent Television Service, of which Jim is the
11        executive director, Jim Yee.
12                  Mark received his bachelor's degree from the
13        University of Michigan and his law degree from Georgetown
14        University, and Mark will make the case for the need for
15        digital broadcasters to provide greater opportunity for
16        discussion of critical issues of importance to their local
17        communities.
18                  Finally, next to Mark is my colleague, Andrew J.
19        Schwartzman, who is the president and CEO of Media Access
20        Project, where he has directed that organization since
21        1978, and he is recognized as one of the Nation's foremost
22        experts on telecommunications law and public policy, and
23        he's taught me everything I know.
24                  MAP is a nonprofit public interest
25        telecommunications law firm which represents the public in

 1        promoting the First Amendment rights to speak and hear. 
 2        Over its 25 years, MAP has represented scores of
 3        consumers, civil rights, civil liberty, children's,
 4        educational, religious, and labor organizations.
 5                  On the issue of digital television alone, MAP
 6        has worked for dozens of organizations, including the
 7        American Library Association, Common Cause, Consumer
 8        Federation of America, Consumers Union, the NAACP, the
 9        National Federation of Community Broadcasters, the
10        National Education Association, and the United States
11        Catholic Conference.
12                  Andy has been published in numerous magazines
13        and newspapers.  He has also been on radio and television
14        numerous times.  He graduated from the University of
15        Pennsylvania undergraduate and law school, and Andy will
16        discuss the legal and policy arguments for new and
17        different public interest obligations for digital TV
18        broadcasters.
19                  So with that, I turn it over to Paul.
22                  MR. TAYLOR:  Thank you, Gigi, and thank you to
23        this panel for providing this forum.  How can digital
24        broadcasting enhance democratic processes?  That is one of
25        the central questions that President Clinton and Vice

 1        President Gore have asked you to address.
 2                  It seems to me your inquiry could hardly have
 3        come at a more pregnant moment, and I would like to take a
 4        few moments to set the political context in which you will
 5        be deliberating and then offer a few ideas for you to chew
 6        on.
 7                  In our last election, as everybody knows, our
 8        campaign finance system experienced something pretty close
 9        to a total systems failure.  Money and politics is now a
10        relationship covered more by loophole than by law.  The
11        media, the Congress, and the Justice Department have spent
12        all of 1997 and will doubtless spend a good portion of
13        1998 poring over the multiple abuses of 1996.
14                  We have had a year of headlines.  We have had
15        months of hearings.  Just this week we've had the Attorney
16        General and the FBI Director disagreeing in public over
17        whether an independent counsel is needed to clean up some
18        of this mess.
19                  But with all of the spectacle and drama there
20        has been one ingredient notably missing from the stew. 
21        The public.  The sound we've heard from the grassroots on
22        this issue this year has not been an angry roar.  It's
23        really been more of, kind of like a resigned sigh.  The
24        message from out there seems to be they all do it.  They
25        have always done it.  If they pass new laws, they will

 1        just figure out new ways to keep on doing it.
 2                  This is a message that Congress, believe me,
 3        hears loud and clear, for it's precisely the message they
 4        hope to hear on an issue like this.  Campaign finance is
 5        the last issue on earth that Congress wants to tackle, for
 6        two diametrically opposite reasons.
 7                  The first is that it is an issue on which it is
 8        genuinely difficult to forge a policy consensus in
 9        Congress.  Politics is a pretty tough business, and what
10        you have in Congress are 535 politicians who cannot help
11        but view campaign finance reform through the prism of
12        their own fundraising needs and experiences.
13                  Do they come from a rich district, or a poor
14        district?  Do they come from a big State or a small one? 
15        Are they Republican or Democrat?  Do they serve in the
16        House or the Senate?  Are they supported by labor or by
17        business?  Would they fare better with low limits or high
18        limits or no limits?  Are they wealthy?  Do they have
19        wealthy supporters?  Do they have wealthy opponents?  The
20        permutations add up to 535.
21                  But at the same time, this is an issue on which
22        all 535 lawmakers share one common perspective that's more
23        potent than all of these differences.  Every single one of
24        them is an incumbent, and under the current rules of the
25        game incumbent Members of Congress out-raise challengers

 1        by a ratio of roughly 5 to 2.
 2                  Now, ask yourselves, how enthusiastic would you
 3        be to change a status quo that gave you that sort of edge
 4        over the person who wants your job, and who is prepared to
 5        say some pretty nasty things about you in order to get it?
 6                  So the bottom line here is, don't expect
 7        comprehensive campaign finance reform from this Congress. 
 8        It might enact a narrowly drawn fig leaf of a bill in 1998
 9        to get out from under some of the publicity that's been
10        generated over the last year or two, but absent a great
11        deal more public pressure than we have seen thus far, it
12        is not going to go for fundamental change, certainly not
13        in this go-round, and in particular, don't expect any
14        provision that would provide free air time for political
15        candidates.
16                  Those of you who have followed the fate of the
17        McCain-Feingold bill in the Senate this fall know that its
18        free air time provision was the first ones the sponsors
19        tossed overboard in their unsuccessful effort to win the
20        60 votes that they would need to invoke cloture to move
21        that bill along.
22                  That's pretty much been the fate of free air
23        time in Congress over the decade.  163 free air time bills
24        have been introduced in Congress since 1960.  This is a
25        testament both to what an enduring good idea this is, and

 1        how difficult it is to move this particular good idea
 2        through a Congress that perceives quite correctly, that
 3        it's a better idea for challengers in the end than it is
 4        for incumbents.
 5                  So where does that leave us?  Well, it seems to
 6        me free air time remains today what it has always been, a
 7        great idea for citizens and for democracy.  I believe it
 8        is the most promising, the most potentially transforming
 9        way to fix what ails our electoral system.  I think it
10        would work well all by itself as a stand-alone political
11        reform.
12                  I think it would work even better if paired with
13        a provision to ban soft money from politics, those
14        unlimited five, six, and seven-figure checks to political
15        parties that have been at the heart of nearly all of the
16        scandal stories that we have been reading about and
17        watching unfold over the past year.
18                  I think actually both reforms are politically
19        achievable, perhaps not this month or next, but in the
20        not-too-distant future, but it's clear that Congress is
21        going to need a shove from the outside.  At the moment,
22        that shove is not coming from the broad public.
23                  If this committee and even more if this Nation's
24        broadcast industry were to step forward and start the
25        processes of applying this kind of shove it seems to me

 1        you will indeed be serving the public interest.
 2                  Why is free air time so attractive and so
 3        powerful?  Let me suggest four reasons.  First, and this
 4        is a very important reason in the context of the current
 5        political situation on campaign reform, free air time
 6        offers a way to change the paradigm for reform from an
 7        approach based on limiting the supply of money to an
 8        approach based on relieving the demand for money, or, put
 9        another way, from a reform based on ceilings to a reform
10        based on floors.
11                  Some of this paradigm shift actually is already
12        beginning to occur.  Again, those of you who followed
13        McCain-Feingold know that the other thing that the
14        sponsors dropped from their bill in an effort to make it
15        work were spending limits.
16                  That move was a fairly dramatic one and made a
17        lot of traditional reformers very unhappy, because
18        spending limits had been the heart of most reform
19        proposals over the last few decades, but I think that
20        shift is the beginning of a rethink that one day is going
21        to lead to a meaningful package of reforms.
22                  The problem with spending limits is that the
23        courts have told us that they are unconstitutional if
24        mandatory, and experience has taught us that they are
25        porous if voluntary.

 1                  Floors, on the other hand, present no such
 2        constitutional impediment, nor do they offer such an
 3        inviting target for loopholes, and if you want to build a
 4        floor in the political system, in political campaigns, by
 5        far your best and most efficient building material, it
 6        seems to me, is free air time.
 7                  The cost of political ads is the largest single
 8        expense in electoral politics.  It accounts for roughly 30
 9        percent of the expenditures in congressional campaigns, 40
10        percent in Senate campaigns, and 50 percent in
11        presidential campaigns, and if you were just to restrict 
12        your universe to the competitive races, those numbers
13        would rise significantly.
14                  Now, this cost, the cost of political ads, has
15        risen more than five times the rate of inflation over the
16        past generation.  We spent $25 million on political
17        advertising in 1972.  We spent an estimated $500 million
18        in 1996.
19                  If you were to provide that much air time for
20        free, you would substantially relieve the demand for
21        campaign contributions.  No, you would not completely
22        eliminate the money chase.  My own guess is that in our 
23        political culture, where money and politics will always
24        mix to some degree, you will never completely eliminate
25        the money chase, but you can surely slow it down, and a

 1        floor will do that.
 2                  Second, free air time will make political
 3        campaigns more competitive.  Floors, by their very nature,
 4        are more beneficial to underfunded challengers than they
 5        are to well-funded incumbents.
 6                  The research on campaign spending tell us that
 7        the figure that best determines whether or not a political
 8        campaign is competitive is not how much the incumbent has
 9        raised, but how much the challenger has raised and, in
10        particular, whether that challenger has raised enough to
11        begin to get a message out.
12                  Why is it so important to have competitive
13        races?  Electoral competition is at the very core of the
14        ideal of democratic self-government.  It is quite
15        literally what makes the citizenry sovereign.
16                  I was in Pennsylvania the day before yesterday,
17        where I used to be a political reporter, and I asked all
18        my old buddies, what's going to happen with the political
19        races there next year.  Their Governor Tom Ridge is up for
20        reelection, and he has a $10 million war chest, and no
21        opponent in sight.  It's only 11 months away from that
22        next election.  No Democrat has come forward.
23                  A somewhat similar situation pertains in New
24        York, where its Governor is up for reelection, and a not-
25        too-dissimilar situation pertains in Texas.  These are the

 1        three biggest States in the country where we're going to
 2        have an incumbent up for reelection as Governor, and the
 3        incumbent has raised an enormous sum of money, and there
 4        is virtually no challenger.
 5                  There's an announced Democrat in Texas.   He's
 6        52 points behind in the polls.
 7                  Now, some of this may be, you have three very
 8        successful, popular incumbent Governors, but if you don't
 9        have that competition before the public, you're not
10        serving it.
11                  In addition, robust competition in political
12        races is what enables political campaigns to be what they
13        need to be, which is a meaningful forum for policy debate,
14        a place where the outs can test their ideas against the
15        ins, a time when citizens can come to new collective
16        judgments or reaffirm old ones, a platform on which
17        popular mandates can be built, and from which Government
18        policies can be launched.
19                  But in order for competitive races to confer all
20        these benefits, campaigns have to be waged in a
21        responsible and substantive manner.  Unfortunately, modern
22        campaign discourse has come to be dominated by the
23        familiar, trivialized mud-slinging politics of 30-second
24        attack ads and 7-second sound bites.
25                  This is the sort of discourse that doesn't

 1        nourish, it repels.  It helps explain why our turnout
 2        levels are so dismal, and why our citizens have become so
 3        cynical and disengaged that in this season of political
 4        scandal they haven't summoned the energy to demand a
 5        campaign finance fix.
 6                  This brings us to the third potential benefit of
 7        free air time.  If we provide the air time to candidates
 8        for free, we are in a position, either by law or by
 9        stigma, to require that the time be used in a format
10        designed to induce candidates to engage in more
11        substantive discourse about issues.
12                  By my lights, that means encouraging candidates
13        to the greatest extent possible to appear in their own
14        free time spots.  This would increase accountability, and
15        the record shows that when you increase accountability,
16        you produce more accurate and more substantive political
17        discourse.
18                  The fourth reason for free air time is such an
19        important idea is that it will help ensure that candidates
20        remain the most robust communicators in their own
21        campaigns.
22                  In this past election cycle we saw the beginning
23        of an important shift in the nature of campaigning.  Large
24        sums of campaign dollars no longer passed in the coffers
25        of the candidates, or even to parties.

 1                  Instead, we had well-established groups such as
 2        the AFL-CIO or the chamber of commerce, and much less
 3        well-known groups such as the Citizens Flag Alliance, or
 4        the Coalition for our Children's Future, sort of fuzzily
 5        named groups, and dozens of others like them, that spent
 6        tens of millions of dollars in 1996 airing their own TV
 7        ads, ads that in the eyes of the law are so-called issue
 8        advocacy ads, but that for all practical intents and
 9        purposes are campaign ads.
10                  These groups are exploiting a loophole that
11        allows them to run such ads without any meaningful
12        disclosure requirements, and to pay for them without the
13        limits on contributions that would apply if they were to
14        give their money to candidates or parties.
15                  This is going to be an extremely difficult
16        loophole to close, for a combination of constitutional and
17        political reasons, but free air time again is at least a
18        partial solution.  It assures that the voices of the
19        candidates will not be drowned out by this new cacophony
20        of electoral voices on television.  The public should be
21        free to hear from everybody during campaigns, but it has a
22        special need to hear from the candidates.
23                  Now, how would you go about crafting a plan that
24        achieves some of these worthy goals?  Over the years, most
25        free time proposals have been structured around one of two

 1        formulas.  Either all broadcasters are required to offer X
 2        amount of free air time per election cycle, or all
 3        candidates are guaranteed X amount of free media per
 4        election cycle.
 5                  The trouble with these approaches is that one
 6        size doesn't fit all, not in politics, and not in media
 7        markets.  Heavy air time makes sense in some districts,
 8        not in others.  It's needed in some races, not in others.
 9                  Under a rigid allocation system, how do you
10        handle the New York media market, where you have more than
11        3-dozen congressional seats up every 2 years?  There would
12        be nothing but political spots morning, noon and night in
13        the even-numbered fall of those years.
14                  The solution to this dilemma, it seems to me, is
15        surprisingly simple.  All broadcasters could be required,
16        as a part of their public interest obligation, to pay into
17        a special fund for democratic discourse.  This payment
18        could be made in money or minutes, and it could be
19        assessed on each broadcaster as a small percentage of
20        revenues.
21                  The fund would then distribute the air time to
22        the political parties, both the major ones and any
23        qualifying minor ones, in the form of vouchers, and then
24        you let the parties sort out all of the messy questions
25        about which candidates get how much time in which media

 1        market.
 2                  This brings marketplace flexibility and
 3        efficiency to the allocation system.  It also enhances
 4        electoral competition, for the parties are the one
 5        political institution in our system that has an equal
 6        interest in electing challengers as in electing
 7        incumbents.
 8                  Moreover, if you provide these free
 9        communication resources to parties, you are in a stronger
10        position to do away with the soft money that parties have
11        grown so addicted to, so if you get free air time into the
12        system, you can get soft money out of the system, it seems
13        to me that's a formula for reform that is both within
14        constitutional bounds and ultimately is going to be within
15        political reach.
16                  How much free air time should there be?  Well,
17        one target might be that $500 million that candidates
18        spent on television in 1995 and '96.  That's very big
19        money in politics, but it is not a great deal to the
20        television industry.  Over a typical 2-year cycle, that's
21        less than 1 percent of gross advertising revenues.
22                  Still, $500 million I fully understand is not
23        pocket change to anybody, and perhaps there are ways to
24        ease the bite.  It seems to me one way might be to do away
25        with the existing broadcast subsidy for political

 1        communication that has been on the books for the past 25
 2        years.  Lowest unit rate.
 3                  Without going into its many complexities, it
 4        seems to me lowest unit rate doesn't work for two reasons. 
 5        One of them is operational.  It's based on a rate card
 6        system, when in fact air time is sold on some combination
 7        of a rate card system and a sort of running auction.  As a
 8        result, lowest unit rate is burdensome for broadcasters to
 9        keep track of, and it's burdensome for candidates to take
10        advantage of.
11                  But secondly, lowest unit rate doesn't work
12        because it targets the subsidy in the wrong place.  It
13        gives the greatest benefit to the best-funded candidate,
14        and if the goal of campaign reform and providing
15        communication resources is to make races more competitive,
16        lowest unit rate is really working at cross-purposes.
17                  Let me conclude by saying I'm offering all of
18        these ideas in the spirit of promoting a discussion.  In
19        the end, it seems to me, any change is only going to work
20        if it works within the broadcast industry, and you know
21        your industry much better than I do.
22                  But let me close with one last question on a
23        subject about which we may be all equally in the dark, and
24        that is, how do we provide for democratic discourse in the
25        digital future, when no one is quite sure yet what the

 1        contours of that future are going to look like?
 2                  As you ponder that question, I would urge you to
 3        keep in mind the very thing that has been so unique and
 4        powerful about broadcast television for the last 50 years. 
 5        It provides a space for a shared national experience.
 6                  In an ideal world, our election campaigns should
 7        unfold as shared national experiences, unification
 8        ceremonies where we affirm and celebrate our core
 9        democratic values.  They ought to be places where we can
10        forge the most important working relationship in America,
11        the relationship between citizen and elected official.
12                  Sadly, modern campaigns have fallen short of
13        this goal, witness the turnout rates of fewer than half of
14        the adult population in the last presidential election.
15                  As we think about the digital future, it seems
16        to me safe to predict that we are not going to reverse
17        this steep decline merely if we open up new opportunities
18        for political discourse on some new niche channel in a
19        multiplexed broadcast universe.  That approach will only
20        make those who are already rich in political information
21        even richer.  It will build a high-class ghetto for
22        political junkies.
23                  The citizens we really need to capture are the
24        political drop-outs, the information-poor.  The place we
25        are going to find them in the digital future is likely to

 1        be the place we now find them in the analogue present, on
 2        the big channels, watching the most popular entertainment
 3        programs.  Our challenge, it seems to me, is to find a way
 4        to deliver to that semi-captive audience a better brand of
 5        political communication, ideally, in short, efficient,
 6        substantive, and entertaining segments that they will want
 7        to watch.
 8                  In the first 50 years of television we haven't
 9        quite figured out that formula.  Perhaps in the digital
10        era, either through the time voucher system I've talked
11        about today or perhaps some other innovation you can come
12        up with, I hope we can do better.  If we can come up with
13        a way to cut the cost of politics while increasing the
14        quality of political discourse, we will have gone a long
15        way, indeed, to bringing the missing citizens back into
16        our democracy, and I urge you all Godspeed.
17          Thanks.
18                     MARK LLOYD, DIRECTOR
20                  MR. LLOYD:  Good morning.  Thanks to you all for
21        the opportunity to come here.  My thanks especially to
22        Gigi Sohn and the other members of the advisory committee. 
23        It is an honor to sit here and join my friend and mentor,
24        Andy Schwartzman, and to join Paul Taylor, who has done so
25        much to advance the debate about free broadcast time for

 1        political candidates.
 2                  I should also recognize my friend Charles Benton
 3        and Louise and Jim Yee, and I would be ashamed not to
 4        acknowledge the great intellectual debt I owe to Cass
 5        Sunstein and Newton Minow.  Professor Sunstein has helped
 6        form much of my understanding of constitutional law, and
 7        Professor Minow has informed much of my understanding
 8        about the important role of communications policies.
 9                  Paul has talked about the special public
10        interest obligations of broadcasters in the political
11        process, and I would like to frame my remarks around a
12        political relationship between broadcasters and viewers
13        and what public interest obligations that political
14        relationship suggests, and I would like to focus your
15        attention on the needs and interests of the local
16        communities of broadcasters you are licensed to serve.
17                  I direct a modest project dedicated to the
18        proposition that the work which engages this committee,
19        communications policy, will determine whether all citizens
20        will be able to participate effectively in the political
21        process, have access to public space, share in the fruits
22        of publicly funded research, or maintain the privacy that
23        we take for granted.  In other words, we believe that
24        communications policy is a civil rights issue.
25                  I am proud to lend my voice to this morning's

 1        session on public interest views before becoming a "public
 2        interest advocate" I was a lawyer representing mainly
 3        commercial broadcasters, and proud to do that, and before
 4        that I was a commercial broadcaster, and proud to do that
 5        as well.
 6                  I reported on floods and fires in Toledo, Ohio,
 7        produced local and national news programs here in
 8        Washington, D.C., and I even produced local and national
 9        public affairs programs.  Some aired on Sunday morning,
10        but some even aired on prime time.
11                  I am a member of a growing number of former
12        broadcast journalists concerned about the direction of the
13        industry we love.  We know that television is not a
14        toaster with pictures, and we know that it could be more
15        than a mass entertainment machine making profit for few. 
16        Television can be a powerful tool for democracy and civil
17        society, and that is what I think the public interest
18        obligations of broadcasters really boils down to.
19                  I would also like to share with you my
20        particular perspective as one of a very few minorities
21        allowed to produce local and national news and public
22        affairs programs, and let me start by saying that I owe my
23        opportunities to the civil rights movement, and perhaps
24        especially to the work of a living civil rights legend,
25        Dr. Everett C. Parker of the United Church of Christ, and

 1        permit me just a few moments to tell this story.
 2                  In March of 1964, Reverend Parker took a group
 3        of idealistic students from the North down to Jackson,
 4        Mississippi.  They began to record the practices of the
 5        local television stations there, WLBT and WTVJ, or JTV,
 6        and they found the result of an unregulated market
 7        southern-style.
 8                  Though blacks comprised 45 percent of the
 9        audience, the stations ignored them.  The white citizens'
10        council could get on the air to express its opinion, but
11        the local black ministers couldn't buy time.  What local
12        news there was either ignored or insulted the black
13        community.
14                  When the networks ran a documentary about the
15        civil rights movement, or an interview with Thurgood
16        Marshall, or Martin Luther King, the network transmission
17        was replaced with a sign indicating network signal
18        problems.
19                  Parker joined with the NAACP and challenged the
20        license of the Jackson stations.  While the FCC expressed
21        regret at the actions of the television stations, they
22        approved their licenses anyway.  Among other things, the
23        FCC argued that the local viewers did not have the right
24        to challenge the license of the local television station.
25                  Parker then took the FCC to court.  In a

 1        thunderous opinion, written by Warren Burger, soon to
 2        become Chief Justice of the Supreme Court, the Court ruled
 3        that the FCC failed in its duty to protect the interest of
 4        the community.  Burger rightly noted that by not fully
 5        airing issues of public importance, the stations failed
 6        both the black and the white citizens of Jackson,
 7        Mississippi.
 8                  I began this story by saying that I owe my
 9        career to these civil rights leaders.  You see, once the
10        courts made clear that the local stations had to serve the
11        entire community, even the blacks, and Latinos, and
12        Asians, and women, and the disabled, the local stations
13        began to hire more of us.  Some of us actually were
14        assigned to talk to those community people who might not
15        be found on the golf course.
16                  I was hired to talk to some of those people, and
17        to compile the reports of all the interviews -- they were
18        called ascertainments -- and then to report to the FCC and
19        to place in our public file how local, or how our local
20        CBS affiliate actually went into the community with a
21        license to serve, found out about what the local important
22        issues were, and created television programs about those
23        issues.  It was 1978.  Imagine.
24                  I know community leaders felt empowered because
25        they knocked on my door.  Local stations finally had to

 1        listen to us.  This led directly to an increase in local
 2        television programming, much of it channeled to Sunday
 3        morning, but sometimes not.
 4                  My ascertainment work in fact led to
 5        documentaries I produced for prime time, some on the
 6        disabled, some on the Asian community in Toledo, Ohio, and
 7        other places.  The burden of ascertainment and program log
 8        requirements generated the benefit of creative programs
 9        and loyal engaged viewers.
10                  I believe the cost of not doing ascertainment is
11        simple-minded blood and guts news and angry viewers, but
12        the Reagan-Fowler FCC eliminated ascertainments in 1984
13        with little more than faith to support their arguments. 
14        They claimed that the market would protect the interest of
15        the local communities.  The result has been the death,
16        frankly, of a great deal of local public interest
17        programming.
18                  News programming, noncontroversial except for
19        the violence, may have increased, but reports on issues of
20        importance to local communities is in many places around
21        the country difficult to find.  For example, we just had
22        an election here in the Nation's capital.  Issues were
23        important on the ballot.  You wouldn't really know that by
24        the local news coverage, and the single digit turnout was
25        a result.

 1                  In addition to this harm to democratic
 2        deliberation and participation, women, minorities, and the
 3        disabled continue to be badly stereotyped and
 4        underrepresented in decisionmaking positions in local
 5        television.  I come, however, not to belabor the obvious
 6        problems with local television.  As Professor Minow said
 7        35 years ago, just sit down in front of your television
 8        set and watch for yourself.
 9                  No, I don't want to waste this opportunity
10        complaining about the past or the present, and I come to
11        propose a future.  As the Government prepares to give
12        public space to existing broadcasters, this committee
13        should recommend that the broadcast license be conditioned
14        upon at least two obligations.
15                  One, at a bare minimum, as a start, the local
16        broadcasters should be obligated to find out, record, and
17        report to the FCC what all segments of the local community
18        are interested in.
19                  And two, the local stations should find the
20        director of the local senior center, and head of the local
21        YWCA, and the local union leader, and the director of the
22        local medical center, and other community leaders, and
23        give them the microphone.  Authentic community voices need
24        to be given an opportunity to speak to issues of concern
25        to the local community.

 1                  The national dialogue on race, for just one
 2        example, will not succeed if it is not first a local
 3        dialogue.
 4                  Licenses are freely given to local stations to
 5        serve local communities.  In exchange, those stations make
 6        millions.  Community service cannot be measured in
 7        advertising revenues and Nielsen ratings alone, and to let
 8        the local broadcaster get away with empty claims of
 9        knowing and serving their local community is worse than
10        letting the fox guard the chicken coop.
11                  Yes, I'm talking about bringing back the
12        ascertainment requirement.  This is, I think, the
13        baseline, and yes, I'm talking about forcing broadcasters
14        to get real community people on the air to talk about
15        something other than crime.
16                  No, I'm not talking about content regulation. 
17        The new digital multichannel environment in computer-
18        based interactive communications technologies ought to
19        make it much easier to accomplish these things than ever
20        before.
21                  Service should improve for the disabled beyond
22        closed captioning.  Increased channel capacity should
23        create opportunities to put more voices on the air. 
24        Broadcasters have proven marvelously inventive with the
25        proper incentives.

 1                  As I said earlier, broadcaster journalists
 2        understand that television is more than a toaster with
 3        pictures.  We understand that it can be a powerful tool
 4        for democratic deliberation.  It will not be that tool if
 5        ordinary citizens are not empowered in their political
 6        relationship with local broadcasters and given some
 7        opportunity to take the microphone and speak their minds.
 8                  As Professor Sunstein reminds us, while we
 9        purport to honor free speech we have left it mostly to a
10        system of unregulated markets.  The Federal Government 
11        has the power to correct this.  Under the First Amendment,
12        with regard to broadcasting, it is the free speech rights
13        of citizens which are paramount, not the free speech
14        rights of private industry.
15                  The free speech rights of viewers is harmed if
16        the Government continues to leave diversity of expression
17        to the prerogative of broadcasters.  If spectrum is no
18        longer scarce, surely there is room for local community
19        activists to find a broadcast platform.  If spectrum is
20        scarce, as I believe it is, the broadcasters should be
21        obligated to put a priority on creating a vital place for
22        public discussion.
23                  That means setting aside time periods where
24        large numbers of viewers are watching, devoting production
25        time and creative producers to make those programs

 1        watchable, and promoting those programs.
 2                  Broadcasters will undoubtedly follow this panel
 3        and moan about the great cost of free time to candidates
 4        and the needless burden of interviewing community leaders,
 5        and the impossibility of making interesting programs by
 6        providing a platform to local leaders.
 7                  I urge you to remember what Newton Minow said in
 8        1961.  Never have so few owed so much to so many.  It was
 9        true in 1961.  It is definitely true today, and the debt
10        will grow when broadcasters get even more public space
11        tomorrow.
12                  I urge this committee to look to the local
13        community as you develop public interest obligations.
14                  Thank you.
16                     MEDIA ACCESS PROJECT
17                  MR. SCHWARTZMAN:  Thank you, Gigi.  I am going
18        to complicate everyone's life here by seeing if we can try
19        to address the high technology future with a low
20        technology problem, which is to say I'm going to direct
21        your attention to the screen in the corner of the room
22        where the overhead has been set up on the opposite side of
23        the room from me, and encourage you to watch the screen
24        and pay no attention to what I look like, and just kind of
25        look away from me.

 1                  I will accept the back of your heads as a paean
 2        to the old technology, and I'm sure you will be able to
 3        follow my presentation better if you just don't look at
 4        me.  If I'm making a really appropriate gesture I will
 5        tell you and you can turn around.
 6                  With that said, thank you very much, Gigi, and
 7        thank you to everybody on the committee for agreeing to
 8        serve.  I understand the kind of disruption and the
 9        difficulties and the personal expenses involved in this,
10        and it is service to the country for which we all should
11        be appreciative.
12                  I would also like to thank the staff of the
13        Commerce Department.  They've just been wonderful.  And I
14        would also like to thank Joe Piccell, the Access Project
15        staff attorney who performs with marvelous professionalism
16        and has done a tremendous amount of the important work
17        that we've done, the legal work, and done so with great
18        sophistication, but today has been dragooned to operate
19        the overhead projector, and I can assure you it is the
20        least sophisticated of his talents.
21                  I'm going to address commercial broadcasting for
22        the most part this morning.  PBS and NPR do magnificent
23        work.  Public broadcasting stands on a special footing,
24        and what we should be expecting of public broadcasting
25        deserves discussion by this committee, just not by me here

 1        today.  There's just not enough time.
 2                  I've got a lot of thoughts about that, and I
 3        would be happy to share them.  Gigi and I had a wonderful
 4        meeting with Bob Coonrod at CPB the other day, and we've
 5        had a wonderful dialogue with Irvin Duncan over time. 
 6        This is an important mission for the committee, and I
 7        encourage you to pursue it, just not with me this morning.
 8                  The framework for my discussion is the Red Lion
 9        case, the Supreme Court's Red Lion decision.
10                  (Vugraph.)
11                  MR. SCHWARTZMAN:  The quotation from Justice
12        White, and there will be several more as I go on on the
13        screen, is central to the principle about how the FCC
14        administers the public interest standard of the
15        Communications Act.  This case was about the public
16        interest standard of the Communications Act.  The emphasis
17        was that as between the two it is the rights of the
18        viewers and the listeners, and not the broadcasters, which
19        are paramount.
20                  We have included a lot of materials to lay this
21        out.  There is no one who has written more eloquently or
22        more persuasively about this than Professor Sunstein, and
23        those of us who work in the mass media area are blessed
24        atypically for a field in having some academic writers who
25        write wonderfully excessively, Eric Brenner's histories,

 1        which many of you may be familiar with, for example, and
 2        also Professor Sunstein's work, and also Newton Minow's
 3        work.
 4                  We have included some chapters from their books. 
 5        We have included some articles in these presentations. 
 6        It's not painful.  I would encourage you to take a look at
 7        this stuff, and in particular I encourage my broadcaster
 8        friends to sit down and try to rethink things with, and
 9        look at those writings with that in mind.
10                  One of the things that I think would be very
11        important for this committee is for people who have been
12        working a long time, as have I, on one side of the game,
13        to try to hear what the other side is saying, to rethink
14        the arguments and see if maybe there isn't room for some
15        common ground and there isn't some merit in arguments that
16        have been not thought about or instinctively reacted to
17        rather than evaluated, and I would urge you to take a look
18        at those materials with that in mind.
19                  Okay.  That's the point.  It is the right of the
20        viewers and listeners.
21                  Can I have the next overhead, please?
22                  (Vugraph.)
23                  MR. SCHWARTZMAN:  America has the best system of
24        broadcasting in the world.  This is because of and not in
25        spite of the regulatory scheme established by the

 1        Communications Act of 1934.  That is not Justice White,
 2        that's me, and that's true.
 3                  We have a wonderful system.  The question is not
 4        are broadcasters doing a good job.  Most broadcasters are. 
 5        The question is whether broadcasters are doing a good
 6        enough job.  There's a question whether all broadcasters
 7        are doing a good job, and it's a question about what kind
 8        of expectations we should have for an industry that is
 9        receiving vast new opportunities to use public spectrum
10        for personal profit.
11                  Is the commercial broadcasting industry
12        successful?   Yes.
13                  Next overhead, please.
14                  (Vugraph.)
15                  MR. SCHWARTZMAN:  It is an immensely successful
16        and profitable industry with a great future.  What do I
17        mean?  Profits and revenues are skyrocketing.  There's --
18        I think it was left out of the materials, and it's in a
19        separate handout.  Some of the Veronis stuff which
20        summarizes what I think the broadcast industry people here
21        happily know, which is that these are great times.
22                  TV group owners' revenue up 16.6 percent in 1996
23        alone.  '97 is going far better than that.  Cash flow,
24        which is even more important, is up even more.
25                  I know it's cyclical.  I remember 1990-'91, when

 1        values went down and things looked tough, but the outlook
 2        for the long-term is stunning.  That is what Wall Street
 3        thinks.
 4                  Sales prices reflect an understanding of the
 5        coming of digital.  The valuations put on broadcasting
 6        stations are based on knowing that there's going to be
 7        capital investment for digital, and the revenue streams
 8        that it's going to bring in are taken into account, and
 9        what do we have?
10                  Traditional cash flow valuations for stations
11        were 10 times cash flow, and now they're going at 12, 13,
12        even 15 times cash flow, and some of the people in this
13        room have made a couple of deals reflecting that of late. 
14        Prices are doubling and tripling.  People are making, 200,
15        300 percent on stations that they bought just a couple of
16        years ago.  People are investing because digital is going
17        to be a great business.  The future is good.
18                  Next overhead, please.
19                  (Vugraph.)
20                  MR. SCHWARTZMAN:  Broadcasters receive many
21        special privileges, most notably the free use of spectrum
22        others must now buy.  The '96 Telecom Act allowed
23        incumbent broadcasters, and only incumbent broadcasters,
24        to receive digital licenses.
25                  Until now, broadcast spectrum when it became

 1        available was put up for competition, initially through
 2        competition by offering better programming and localism. 
 3        Now, for bid.  Either way, there was competition.
 4                  There's no competition here.  If you have a
 5        license today, you get twice as much digital spectrum. 
 6        You, and only you get it.  The value of the exclusivity
 7        alone is very significant.
 8                  Next overhead, please.
 9                  (Vugraph.)
10                  MR. SCHWARTZMAN:  Back to the Red Lion case.  A
11        license permits broadcasting, but the licensee has no
12        constitutional right to be the one who holds the license
13        or to monopolize the frequency to the exclusion of his
14        fellow citizens.
15                  There's nothing in the First Amendment which
16        prevents the Government from requiring a licensee to share
17        his frequency with others and to conduct himself as a
18        proxy or a fiduciary with obligations to present those
19        views and voices which are representative of his community
20        and which would otherwise, by necessity, be barred from
21        the airwaves.  In other words, the FCC has the power to
22        require that which does not happen by itself.
23                  The digital spectrum is not the only benefit. 
24        Broadcasters have been allowed to receive and retain the
25        old spectrum indefinitely.  Call it a loan, call it

 1        whatever, but for a long period of time twice as much
 2        spectrum as before is being warehoused and kept out of the
 3        hands of other potential competitors.
 4                  Must carry.  My organization and other citizens
 5        groups went all the way to the Supreme Court with the
 6        broadcasting industry on the principle, which the Supreme
 7        Court upheld, that broadcasters should receive free
 8        carriage on cable systems because they are serving the
 9        local communities, providing service in the public
10        interest.  That was the basis upon which the must-carry
11        privilege was accorded broadcasters.
12                  Their copyright benefits, far too complicated
13        for me to understand, much less explain license terms,
14        have been extended from 3 years to 5 years and now 8
15        years, 250-percent extension that effectively increases
16        protection from any possibility of loss of license by two-
17        and-a-half times.
18                  There is Federal preemption of local zoning and
19        environmental regulations in order to make sure that
20        towers can get up.  There is all manner of other kinds of
21        benefits that broadcasters are now receiving.
22                  Next overhead.
23                  (Vugraph.)
24                  MR. SCHWARTZMAN:  Many broadcasters have done
25        little to provide service which is not financially self

 1        sustaining.  Again, the quotations from Professor Sunstein
 2        and Mr. Minow -- I guess that's Professor Minow, too.
 3                  Next overhead.
 4                  (Vugraph.)
 5                  MR. SCHWARTZMAN:  The Office of Communication
 6        case -- Mark referred to Justice Burger.  By whatever
 7        name, broadcasters are temporary fiduciaries of a great
 8        public resource and they must meet the highest standards
 9        which embrace the public interest concept.
10                  Now, I point to every broadcaster.  The core
11        problem today is that the good guys are here.  I have been
12        going up to testify on the hill for 25 years, and I see
13        the best broadcasters in the industry time and time again
14        coming up with fabulous demonstrations of the kind of work
15        that they do.
16                  Here we have Belo, which has been a leader in
17        free time, WRAL, which is famous for its public service,
18        which has been a leader in terms of the high definition,
19        its special involvement with sports.  It's one of the
20        great broadcasters in this country.
21                  Mr. Duhamel is a path-breaker on early broadcast
22        tradition, which they demonstrated how to address needs of
23        rural communities and bring people who are physically
24        distant and apart closer together, and Barry Diller is
25        converting 24-hour home shopping stations into all local

 1        news, sports, and service programming.
 2                  If everybody was like the people on this
 3        subcommittee, if everybody was like the broadcasters who
 4        come up to the Hill to testify, we would be having a
 5        different discussion.
 6                  Where are the owners who do no local news, who
 7        don't even have a local production facility?  Where are
 8        the people who run 24-hours of home shopping off of
 9        satellites just like a translator?  They never come to
10        these hearings, and the broadcasters who come here, and
11        the trade associations who come and say how good
12        broadcasters do are letting the worst people off of the
13        hook.
14                  I find that most unfortunate.  We need
15        regulation for the ones who won't do it by themselves.  We
16        don't need it for the people who are going to do it, and
17        that is what we're talking about.  We're talking about a
18        mandate for the broadcasters who don't show up here.  You
19        do it already, but you are the ones who are going to argue
20        about whether or not it should be done.
21                  Next overhead, please.
22                  (Vugraph.)
23                  MR. SCHWARTZMAN:  The law requires every
24        broadcaster to provide service in the public interest, and
25        the FCC can and should define this to include discussion

 1        of local issues, sharing publicly owned spectrum with
 2        members of the public, meeting the needs of children, the
 3        disabled, and of those who are too old, too poor, too
 4        young to be demographically attractive.  That's where the
 5        market has failed.  That's why we had to have a Children's
 6        Television Act, and that's what even the best broadcasters
 7        don't always do.
 8                  Now, public interest is not a synonym for what
 9        the public relations industry now calls cause-related
10        marketing.  Signing up with a charity, collecting toys for
11        tots is great.  Safeway and Wal-Mart do that, too, and
12        they don't have licenses, and that's not a reason to get a
13        license.
14                  Sending Bozo the Clown to the hospital, which
15        was offered as a justification, as part of public service
16        that should be counted as part of broadcasters' public
17        services obligations to children, as opposed to
18        programming, is not what this is about.
19                  I've seen stacks and stacks of letters from
20        charities thanking broadcasters for thousands of dollars
21        worth of free time.  Whose time is it?  What it really is
22        is unsold inventory in many cases, and PSA's have become
23        promos.  You don't see a lot of PSA's that don't now
24        feature network figures, including now, increasingly, news
25        figures, and at the local level it's always your local

 1        news anchor on with a promo.  It's being turned into a
 2        business opportunity.
 3                  That's fine.  It's great to help local
 4        charities, but that's not news, that's not information,
 5        that is not debate, that is not controversy, and that's
 6        what we're talking about.
 7                  Next overhead, please.
 8                  (Vugraph.)
 9                  MR. SCHWARTZMAN:  We didn't have to do it this
10        way.  As Justice White said, Government surely could have
11        decreed that a frequency could have been shared among many
12        people.
13                  In the U.K. they had weekend television.  We
14        could have the same channel 7-days-a-week, one person each
15        day sharing the same transmitter, seven voices, diversity. 
16        We didn't do it.  We gave an exclusive monopoly right
17        protected by the criminal law.  If somebody jumps on your
18        frequency, the U.S. Attorney sends the FBI in to arrest
19        them, and the FCC has been doing that a lot lately.  This
20        is the kind of protection that broadcasters get, an
21        exclusive monopoly.
22                  Next overhead, please.
23                  (Vugraph.)
24                  MR. SCHWARTZMAN:  What are we talking about? 
25        The public -- again the Supreme Court -- the public

 1        interest in broadcasting clearly encompasses the
 2        presentation of vigorous debate of controversial issues of
 3        public importance and concern to the public -- not PSA's.
 4                  Next overhead, please.
 5                  (Vugraph.)
 6                  MR. SCHWARTZMAN:  This is a quote within a quote
 7        from a different Supreme Court case.  Was this Garrison,
 8        Professor Sunstein?  Speech concerning public affairs is
 9        more than self-expression, it is the essence of self-
10        government.  It is the right of the public to receive
11        suitable access to social, political, aesthetic, moral,
12        and other ideas and experiences which is crucial here.
13                  That's a discussion of the public interest
14        standard of the Communications Act.
15                  Next.
16                  (Vugraph.)
17                  MR. SCHWARTZMAN:  News makes money, especially
18        when it's not really news, when it's promoting your own
19        show and when it's doing service pieces involving
20        advertisers' products, but what the law requires is that
21        broadcasters also serve those who are not served by the
22        marketplace.  Too old, too young, too poor.  For them, the
23        coverage might actually cost broadcasters money.
24                  In particular, service to the hearing impaired,
25        video descriptors, this has great relevance to meeting

 1        those needs.
 2                  The theory of program deregulation at the FCC
 3        wasn't that these things are unimportant.  It wasn't that
 4        broadcasters no longer had to do them.  The theory was
 5        that broadcasters would do them anyway.  There was no need
 6        to require it.
 7                  It didn't work.  It hasn't worked for children. 
 8        Congress had to pass a law.  It hasn't worked for coverage
 9        of local issues.  A lot of stations no longer have any.
10                  Broadcasters, including some of the broadcasters
11        in this room, now routinely refuse to sell -- not give,
12        sell -- time to candidates for public office.  There's a
13        requirement in the law that Federal candidates have a
14        reasonable access right.  Increasingly, broadcasters are
15        refusing to sell time to candidates standing there, check
16        in hand, its lowest unit rate.  If they can squeeze an
17        extra dollar out of the Chevrolet dealer, that's what they
18        do.  That's not service in the public interest.  That's
19        not addressing the needs of the local community.
20                  Digital television provides multiple revenue
21        streams, long-term access to twice as much spectrum as
22        before.  We've got a lot of materials in here.  Certainly
23        the broadcasters are familiar with some of this, and
24        there's a lot of debate.  I urge the other members of the
25        committee to take a look at it, because this is one of the

 1        things that's going to have to be doped out.
 2                  If you're doing multiple channels you've got new
 3        revenue streams, you've got new advertising, you've got
 4        opportunities, through clicking on on a mouse, or punching
 5        a remote control and getting additional advertiser
 6        information, getting the sports scores with an additional
 7        logo that will come up on the bottom of the screen, so
 8        there's lots of revenue opportunities, and on the cost
 9        side, who knows?
10                  What I do know is, the same people who make the
11        computers that cost less and less -- HP Today is
12        announcing a 233 megahertz PC for under $1,000.  Those are
13        the people making the transmitters and antennas, and we've
14        included some materials.  There's increasing indications
15        that you're going to be able to put a second transmitter
16        on the same tower.
17                  I'm telling broadcasters things they know, but
18        the cost is going down.  We need to get some more
19        information about what's involved here, but what I see is
20        costs going down, revenue going up.
21                  The next overhead.
22                  (Vugraph.)
23                  MR. SCHWARTZMAN:  Free access to twice as much
24        spectrum and other new benefits justify commensurate
25        increases in public service.

 1                  The next overhead, please.
 2                  (Vugraph.)
 3                  MR. SCHWARTZMAN:  Again from Justice Burger, a
 4        broadcaster seeks and is granted the free and exclusive
 5        use of a limited and valuable part of the public domain. 
 6        when he accepts that franchise, it is burdened by
 7        enforceable public obligations.
 8                  A newspaper can be operated at the whim or
 9        caprice of its owners.  A broadcast station cannot.  After
10        five decades -- we can now say after nearly seven decades
11        of operation the broadcast industry does not seem to have
12        grasped the simple fact that a broadcast license is a
13        public trust, subject to termination for breach of duty.
14                  Thank you.
15                  MR. MOONVES:  Thank you, gentlemen, all three of
16        you.  We appreciate your remarks.  I would like to now
17        open it up to the rest of the panel for comments,
18        questions.  Peggy.
19                  MS. CHARREN:  Andrew -- 
20                  MR. SCHWARTZMAN:  You only call me Andrew when
21        you're mad at me.  Usually it's Pumpkin.  Everybody knows
22        this, of course.
23                  (Laughter.)
24                  MS. CHARREN:  The history that came out from
25        both of your presentations, Mark and you, is the history

 1        on which the Children's Television Act was based.  It is
 2        no accident that the rulemaking that caused that to happen
 3        was 1970, and all these nice quotes were 1969.  Without
 4        that attitude from the courts, there would have been no
 5        children's rulemaking.
 6                  The result in that law applies to broadcasting,
 7        commercial broadcasting, and it's more than existed
 8        before, when obviously the marketplace didn't work.  What
 9        do you think can happen in terms of children with this new
10        opportunity?  Do you think that the digital spectrum
11        issues will be limited to what broadcasters had to do in
12        these last hearings?
13                  MR. SCHWARTZMAN:  Well, this is as good a time
14        as any for me to say that I'm a big fan of multicasting,
15        and I'm highly skeptical about the vitality and future of
16        high definition except for some very limited purposes, and
17        I will wait for Mr. Goodman to go mug me in the hall
18        later, but certainly there are going to be parts of the
19        day, and I think close to 24-hours of the day when I think
20        broadcasters are going to be doing multiple feeds, and
21        it's not unreasonable to talk about having a lot more
22        programming for children.
23                  In that connection, Peggy, I think that that is
24        a real opportunity, and the digital technology will offer
25        lots more opportunities for kids by providing supplemental

 1        information, by providing additional kinds of graphics, by
 2        providing some semblance of interactivity with telephone-
 3        back calls, so there's a lot of creative ways that
 4        distance learning can be done, education can be done, not
 5        just by the public broadcasters, and this, of course, is
 6        something that you know better than anyone.
 7                  We need every broadcaster to contribute to this. 
 8        Unless we have a competitive environment in which
 9        everybody takes their cut at trying to deal with the
10        problem of raising our children, rather than just leaving
11        it to a few, we're not going to get the right solutions.
12                  MR. ORNSTEIN:  Frank.
13                  MR. BLYTHE:  Thank you.  Andy, Mark, and Paul, I
14        appreciate your presentations.  As this panel hears more
15        and more of these presentations I'm beginning to feel the
16        depth of the issues that we're looking at is going to be
17        quite immense and cut out a lot of work for us at future
18        meetings.
19                  I was wondering, nobody has really -- I don't
20        think we really got into the depth and the impact of the
21        recent Telecommunications Act of 1996, which opened up
22        ownership, multiple ownership of stations in single
23        markets, whereas before it was one ownership per market.
24                  Do any of you have any comments on how that
25        impacts on -- how you see ownership in those markets

 1        impacting on public service in those markets, whether
 2        there's -- in some markets, I know there's one marketing
 3        plan for all stations.
 4                  I don't know if there's one public service plan
 5        for all the stations or anything like that, but do you see
 6        a dilution, public service eroding even more, in view of
 7        some of the comments you've made so far at this point?
 8                  MR. SCHWARTZMAN:  I would say that justification
 9        for permitting relaxed ownership rules -- and this is an
10        ongoing process at the FCC -- is efficiencies.  That is,
11        it is more profitable to operate more than one station in
12        a market.  You could combine sales forces and the like. 
13        If there's more profit, there's more opportunity for
14        reinvestment in the public.
15                  Second, there's greater obligation, because
16        where the goal is diversity, if there is, by definition,
17        less diversity, fewer owners, each of those owners has a
18        far greater obligation, and again I go back to what I
19        emphasized, to share their frequencies, to give the
20        microphone to someone else.
21                  News reportage, we're going to hear a lot, I
22        know, about, we do all of this news coverage.  It's not
23        the same thing as handing the microphone to the candidate. 
24        It's not the same thing as giving voice to people in the
25        community.

 1                  The best reporter and the most experienced
 2        editor's news judgment is not the same thing.  They're
 3        complementary.  They're both important, but it's not the
 4        same thing as direct access, and the multicasting
 5        capabilities of digital television, the opportunity to
 6        provide this access, are manifest, and it's appropriate
 7        for the FCC to take some steps to make that happen.
 8                  MR. LLOYD:  If I can just very quickly respond
 9        to that, a lot of what -- we're doing some research to see
10        if we can understand better the impact of the
11        Telecommunications Act, particularly on diversity of
12        ownership.
13                  We have not, I don't think, well-enough
14        established the link between ownership and expression of
15        views.  I think there are a number of us who are fairly
16        certain that there is a link, but I don't know if we've
17        made that strong case yet.
18                  A lot of what we have found is that the
19        Telecommunications Act seems to have a great impact on
20        ownership of radio operations.  I don't know if it's had
21        the same sort of impact on television, quite yet.
22                  That's certainly possible, but just to repeat
23        what Andy says, I think the lengthening of license terms,
24        particularly under the Telecommunications Act, and I think
25        the opportunity for multiple ownerships in the same market

 1        I think suggest that there are increased obligations of
 2        broadcasters in this particular time, not fewer.
 3                  MR. MINOW:  My question is for Paul Taylor.  As
 4        you know, Paul, I support what you're doing.  My question
 5        is about your proposal.  If you have this bank, would you
 6        still permit the purchase and sale of time by candidates?
 7                  MR. TAYLOR:  Yes.  I would emphasize there are
 8        lots of different ways to do this, but under what I
 9        envision as the most practical and politically achievable
10        approach to this that doesn't get you in trouble with the
11        First Amendment, that you would still allow -- there is
12        still going to be privately raised money in the political
13        system.
14                  It seems to me it's very difficult to ban
15        candidates who raise that money from wanting to use it any
16        way they wish, which would certainly continue to include
17        putting their own ads on television, and is likely to
18        include direct mail and all the other ways candidates
19        appeal for votes.
20                  Now, that is a frustration to a lot of people. 
21        A lot of people say, well, if you're only providing free
22        air time, but then on top of that you're still allowing
23        candidates to raise money and go on the air, what have you
24        accomplished?
25                  It seems to me you have accomplished a number of

 1        things in terms of promoting competition, in terms of
 2        removing a barrier to entry to politicians, or would-be
 3        politicians who are not particularly well-funded.  There
 4        are a lot of good things you do just by providing this
 5        floor.
 6                  I think the effort to provide a ceiling in the
 7        end is going to be unavailing.  If you say you can't raise
 8        private money, you can't go on television, we're going to
 9        see more of what we've already begun to see.  Those
10        messages will still get out.  We will have outside groups
11        that will convey those messages.  We will find loopholes. 
12        The market will plug away and plug away.
13                  And so my suggestion is, let's provide the
14        floor.  It seems to me there are ways you can do it.  If
15        you provide the floor and eliminate the current subsidy of
16        lowest unit rate, you're making it more expensive for them
17        to go on the air with the private dollars you raise.
18                  It seems to me in this conception you might also
19        do away with reasonable access.  Again, you've already
20        provided an enormous subsidy for discourse.  Why, then,
21        should you provide an additional subsidy for private
22        dollars for this discourse?  Why shouldn't they have to
23        line up with the Chevy dealer?  It may be possible to
24        crowd out the private messages.  The messages funded by
25        private dollars will make them less attractive.

 1                  I don't know exactly how you get that market
 2        balance right, but it seems to me it's worth the effort. 
 3        It's probably the most promising way to go.
 4                  MR. CRUZ:  A couple of questions, one for Mark
 5        and one for Paul, and let me ask Mark's first, and then,
 6        Paul, I will ask you second, but you answer first on this
 7        one.
 8                  Mark, did I hear you perhaps suggest that the
 9        commission come up with the set of recommendations in
10        reference to diversity of ownership, as has existed in the
11        past, where there was encouragement of minority ownership? 
12        Do I hear you correctly saying that with multiplexing
13        possibilities perhaps that might be a recommendation in
14        terms of encouragement again of minority ownership of VHS
15        and UHF stations in this country?
16                  And Paul, your question.  Have you given any
17        thought to the suggestion by Congressman Tauzin that free
18        political air time be offered by public broadcasting,
19        taking away, if you will, the duty and obligation of the
20        regular commercial broadcasters to have to carry the
21        commercial air time on political ads, and what that would
22        mean, and that suggestion of letting public broadcasting
23        carry that responsibility in exchange for the commercial,
24        and creating some kind of a trust fund in terms of then
25        funding public broadcasting as a way of doing it?

 1                  MR. TAYLOR:  It seems to me that is a promising
 2        piece of a solution.  It is a way one might go, either
 3        through public broadcasting or perhaps in a new multiplex
 4        world, where you have lots of new channels of
 5        communication open, you can open up the airwaves of lots
 6        of candidates, of lots of levels in the way that public
 7        access does now, and it seems to me there's room for that,
 8        and we ought to explore ways of doing that, whether by
 9        creating a trust fund, or through other mechanisms.
10                  But I go back to what I said in my remarks.  You
11        don't want to lose the opportunity, the most important
12        opportunity that television has given us for 50 years, and
13        that it will continue to give us in whatever the digital
14        future is, to gather large aggregations of people around
15        vitally important democratic processes.
16                  And that's where it seems to me the Tauzin
17        approach doesn't offer a solution, and that's frankly
18        where the biggest problem is.  We are losing our citizens
19        from our democracy.  The way we conduct that discourse now
20        on the big channels it seems to me drives them away.  We
21        owe it to ourselves to think about ways to recapture them.
22                  Secondly, if you wind up giving the
23        communication resources to the candidates, but it is off
24        on a public channel, it is not going to be what the
25        candidates want.  The candidates are in the business of

 1        appealing to the greatest number of citizens they can, and
 2        so they will continue to search for ways to go back on the
 3        channels that continue to aggregate the biggest audience. 
 4        That's where it seems to me you've got to target the most
 5        important part of the fix, but this could be also a
 6        portion of it.
 7                  MR. SCHWARTZMAN:  Frank, can I speak to that,
 8        because I have some disagreement with Paul on this.
 9                  First, it would require legislation to create
10        the trust fund that you're talking about, because, as I've
11        stressed, under current law every broadcaster is charged
12        with fulfilling part of that responsibility, so every
13        broadcaster in the community has a different take, and you
14        get the benefit of each of those editorial perspectives.
15                  I would vehemently oppose any notion of feeding
16        into a fund in exchange for being relieved of that
17        obligation, because it would deprive the community of that
18        diversity.
19                  I would analogize it to buying one's way out of
20        the draft and hiring somebody to go to war for you.  that
21        is the highest calling of the broadcaster, and I would
22        vehemently oppose trying to save public broadcasting by
23        simply destroying the value that commercial broadcasting
24        brings to the public debate.
25                  As I said, we have the best system in the world. 

 1        It is a thoroughbred.  Why take it out of the race?
 2                  MR. LLOYD:  Let me see if I can respond in two
 3        ways.  One is a little perspective.  African Americans,
 4        Asian Americans, Native Americans, Latinos own less than 3
 5        percent, combined, of the stations that are licensed to
 6        broadcast in this country.  Diversity of ownership is a
 7        very serious and important issue, and I believe needs to
 8        be addressed very seriously by the Commission.
 9                  There have been some recent balloons raised that
10        perhaps tax certificates need to be reinstituted.  And I
11        certainly prefer incentives rather than sticks for the
12        broadcast industry.  I believe diversity of ownership is a
13        serious problem and issue in this question.  I know
14        Chairman Kennard has been encouraging diversity of
15        ownership not just to broadcast operations, but cable and
16        emerging technologies, and is suggesting incubator
17        programs and other things, as well.  I think those efforts
18        need to be supported.
19                  I am really here to make a very small argument
20        that I, along with Andy, think that multiplexing is a
21        wonderful avenue for the broadcasters, perhaps
22        particularly in those non-prime time periods, where
23        diverse audiences might be more properly niched.
24                  I am, though, concerned that, along with Paul,
25        that there be one place for all Americans to go to,

 1        particularly in a local community, for programs that they
 2        are interested in.  And I would feel that we were doing a
 3        disservice to communities if somehow we had channels that
 4        were specifically segregated for African Americans and
 5        Latino Americans only.
 6                  My argument, again, is that we need to think
 7        very seriously about allowing all the diversity of local
 8        communities and how people combine, to combine in their
 9        local YWCA's or their senior centers, or all the different
10        places that they combine, you know, or their -- in all
11        their diversity, I think they should be allowed to combine
12        and to present their views to the majority of folks in
13        their community.
14                  I hope that does not slip your question too
15        much.
16                  PROFESSOR SUNSTEIN:  Here is a proposed
17        principle.  It is that any regulatory requirements imposed
18        in the name of the public interest ought, as an
19        aspiration, to leave all or most broadcasters at least as
20        well off as they are now.  That would be great if we could
21        have that as an aspiration -- that any regulatory
22        restrictions would not make broadcasters worse off than
23        they are now.  That may be impossible, but it is a nice
24        goal.
25                  And, Paul, you suggested a couple of points that

 1        bear on this, and I want to ask for some details.  One is
 2        this lowest unit rate idea, which you suggested be
 3        abolished.  And, offhand, it sounds like that is a pretty
 4        intrusive requirement, which is very expensive for
 5        broadcasters, and the relationship between that and the
 6        public interest is ambiguous.
 7                  And the other point you suggested was, in the
 8        nature of this at least as well off now idea, is money or
 9        time as a possibility.  And I know, with respect to the
10        children's educational requirements, some people have
11        said, at least informally, that they do not like its
12        rigidity.  That they would rather pay money than have the
13        3 hours.
14                  Now, children's TV may have some special
15        characteristics that make rigidity worthwhile, but it is
16        less clear for free candidates.  So I am trying to think
17        how would the non-rigid flexible mechanism work.
18                  One way would be the government would set a
19        dollar amount which broadcasters would have to pay.  Which
20        sounds very crude.  Because how would the government know?
21                  Another possibility that would be modelled on
22        the environmental area is that each broadcaster would,
23        let's say presumptively, have to pay, have to provide 2
24        hours of air time a year.  And then, other broadcasters
25        could -- and you could sell it.  For 2 hours, you could

 1        sell it, if you gave money, along with the 2 hours.  It
 2        would be like a hot potato for some, but it would -- is
 3        this clear? -- it would work out in market-driven deals
 4        that might make most people better off.
 5                  Like one network might say, look, I will take an
 6        hour off your hands if you pay me enough.  And then both
 7        parties could be better off.  That would be a more market
 8        model, like the environmental area.
 9                  Now, my two questions for you are basically
10        simple.  First, a question of law:  Is the lowest unit
11        rate requirement statutory or a regulation?  If it is a
12        regulation, then it sounds like the FCC ought to get rid
13        of it in return for something better tailored.
14                  The second question is, can you say a little
15        more on the mechanics of this money instead of time? 
16        Andrew Schwartzman raises a nice question about how this
17        worked at the local area.
18                  MR. TAYLOR:  The lowest unit rate is statutory. 
19        I leave it to my legal betters to determine whether,
20        because it is statutory, whether you could remove it only
21        through regulation.  And then, politically, let's be
22        frank.  The political scientists can agree, the lowest
23        unit rate does not quite get it for you, in terms of
24        targeting your incentives, but members of Congress who
25        passed that law like it.  So it is not going to be an easy

 1        one to do away with for that reason.
 2                  As for your question of money or time and how do
 3        you achieve that and what is the model, it seems to me 
 4        that the most important thing you want to achieve, in
 5        terms of the flexibility of this time into the marketplace
 6        is to acknowledge the fact that every campaign cycle there
 7        is need for more time in different places and in ways it
 8        is very difficult to predict.
 9                  Take a media market like Raleigh.  You know, one
10        year it may have a very hot congressional race and a hot
11        gubernatorial race and a hot senatorial race, and the
12        money wants to pour in.  The political market wants to get
13        a lot of air time there.  The next year the issues are not
14        there, for whatever -- the combination of candidates has
15        not come forward -- and so there is much less demand for
16        political time.
17                  The most important thing you want to do is build
18        a model that allows the political system to move the time
19        and the places where political competition need it the
20        most.
21                  Now, let's back up to how you do that in an
22        equitable way to the broadcast industry.  And it seems to
23        me it is this notion of asking an equal contribution from
24        all broadcasters.  So even though some broadcasters might
25        sell 8 or 9 or 10 percent of their time in a political

 1        season to races, whereas others might sell only 1 or 2,
 2        everybody contributes equally according to gross revenues
 3        or some other common criteria.
 4                  You then create money-denominated vouchers that
 5        are sort of like in-store credits that the political
 6        system can spend.  If they want to spend it for 30 seconds
 7        in New York, it is going to cost them 10 times more than
 8        for 30 seconds in Raleigh.  The political system has to
 9        make all of those judgments.
10                  And in the end, some stations will have had to
11        redeem more than 2 hours worth of these vouchers.  Others
12        will have redeemed fewer than 2 hours.  And you have an
13        accounting mechanism that evens it up and takes all
14        broadcasters back to the notion that they have all made an
15        equal contribution.
16                  Now, I think that model creates the need for a
17        bank, a central bureaucracy, that I think has basically an
18        accounting function.  In the end, it has to tote up who
19        spent where, who cashed in these vouchers in what
20        stations, and make the necessary adjustments.  But at the
21        end of the cycle, all 1,600 television broadcasters have
22        come out even.
23                  MR. SCHWARTZMAN:  Professor Sunstein, if I may
24        briefly speak to this.  First, it is statutory.  And Paul
25        is quite right -- he is the political expert here -- it is

 1        not reasonable to expect members of Congress to vote to
 2        take away a discount they have voted themselves.  However,
 3        the time bank model that Paul and Norman Ornstein have
 4        devised is elegant and I think quite workable and a very,
 5        very important contribution and something that should be
 6        looked at very closely -- this trading of the credits.
 7                  And I do think that there is a great deal that
 8        can be done with it.  And I certainly would be willing to
 9        go up, together with the broadcasters, to join in seeking
10        repeal of the lowest unit rate.  I just do not think it is
11        going to happen.  But where I would draw the line is, in
12        your EPA model, again, the time bank works along -- it is
13        market based.  But this is not broadcasters trading rights
14        to pollute, which is what the EPA sells with the air
15        bubble rights.  This is trading a first amendment
16        obligation to inform.
17                  And I would point out that there is yet another
18        first amendment right that comes into play here. 
19        Candidates have rights.  Federal candidates have a
20        statutory confirmation of this right in Section 312(a)(7),
21        which gives Federal candidates reasonable access.
22                  And the FCC has interpreted it, in the CBS v.
23        DNC case -- CBS v. FCC case, excuse me -- the Supreme
24        Court upheld Section 312(a)(7) against a constitutional
25        challenge by stressing the candidate's right to be able to

 1        determine to whom the candidate wishes to speak, how the
 2        candidate may engage in the highest form of discourse
 3        under the Constitution of the United States, one citizen
 4        asking another citizen for their vote, and to say, you
 5        cannot have that channel because that channel chooses not
 6        to carry political speech, I think undermines the essence
 7        of the broadcasting system.
 8                  I do not want one or two stations to say, okay,
 9        I will take it on.  I want every broadcaster to share that
10        obligation.  And the time bank system works equally well
11        with every broadcaster participating.
12                  MR. MOONVES:  Thank you.
13                  Lois.
14                  MS. WHITE:  Good morning.  My name is Lois Jean
15        White, and I am with the National PTA.
16                  I certainly agree with Peggy that we will have
17        to insist upon more quality programs for children.  But I
18        would like to go beyond that, and have each panelist
19        address my concern.  Certainly, with digital television,
20        we will have more fee-based services.  Is it reasonable
21        for us to insist upon some of the benefits from these
22        services going to community efforts, education, health, or
23        other children's projects?  And how do you feel about
24        that?
25                  MR. LLOYD:  I would hope that, whatever this

 1        committee insists upon, that it is not secondary to
 2        broadcast work.  That the work that broadcasters do and
 3        the public service they provide in the community should be
 4        in the form of broadcasting.
 5                  I think when Andy makes the point that Wal-Mart
 6        and other organizations and communities engage in a
 7        variety of public service activity, that is very different
 8        than the first amendment duties of broadcasters to protect
 9        the interests of local communities, to make sure that
10        there is a diversity of views and controversial opinion
11        expressed on the airways.
12                  Frankly, we do not have that now.  I would hope
13        that if there is some fee-based, or subscription, service
14        established, that if there is money derived from that,
15        that there be some sort of funds set aside to make sure
16        that local voices can speak in local communities about
17        local concerns.
18                  But, again, it sort of touches on the last
19        conversation.  I am very skeptical of elegant economic
20        models imposed by the Nation.  I would hope that
21        broadcasters can engage the folks in the local community,
22        and make some decision about how they are going to serve
23        that community.  And I would imagine that it would be very
24        different from community to community.  I cannot imagine
25        that conversation that folks in Albuquerque, New Mexico,

 1        would be the same as the conversation in Los Angeles or in
 2        New York City.
 3                  There is a strength to that diversity.  We also
 4        must be aware that different things work in different
 5        communities.  The same thing does not always work in the
 6        same communities.
 7                  So, again, I would be very skeptical of trying
 8        to impose one solution on every community about what ought
 9        to be done, except that the local communities need to be
10        consulted.
11                  MR. MOONVES:  Thank you.
12                  Paul LaCamera.
13                  MR. LACAMERA:  Mr. Taylor, I just wanted to
14        follow up a bit on your model.  And I realize it is but a
15        model.
16                  Does its value and viability, though, depend
17        upon market size?  And I am asking for a practical
18        perspective.  I am talking about a 2-hour time bank.  And,
19        again, I will take the extreme of the New York City
20        market, the tri-state area, in any 2-year period, among
21        those three States.  There will be two Senate elections
22        probably.  And I am not sure how many congressional
23        districts are covered, but it might be 15 or 20 within
24        their grade A and grade B contours.
25                  Now, if we are to accept your premise that this

 1        concept is going to provide greater engagement in the
 2        political process -- in other words, spur more competitors
 3        and challengers and whatever -- there should be more races
 4        and more heated races.  However, what is accomplished by
 5        distributing 2 hours of time to what might be 15, 20, 25
 6        races, including perhaps some important local races as
 7        well?  And however is that going to affect the current
 8        process?
 9                  A congressional candidate may wind up with 1
10        minute from this time bank on a Manhattan station.  It
11        will have absolutely no affect, won't it, on the general
12        fundraising?
13                  MR. TAYLOR:  More likely, he will wind up with
14        what he now winds up with, which is zero minutes.  It does
15        not make sense for a congressional candidate in the New
16        York City media market to go on television.  He is
17        advertising to 95 or 98 percent of the recipients of that
18        advertisement who cannot vote for him.  So the political
19        marketplace has already made that adjustment.  And in most
20        urban districts, candidates choose not to go on
21        television.  They use other means of getting their message
22        out, whether by direct mail or good, old-fashioned
23        doorbell ringing or whatever.
24                  This system tries to accommodate to that
25        reality.  It does not try to plug a system that says that

 1        candidate must have X minutes of time in that media
 2        market.  I just do not think that will work.
 3                  What this system does do is provide the
 4        political marketplace, through the parties, the freedom
 5        and flexibility to say, you know, we have a particularly
 6        hot race in an urban district in New York, where we have a
 7        very promising challenger.  And we think, maybe, with a
 8        little air time, in addition to other resources, we can
 9        get that challenger over the hump.
10                  That creates a more robust kind of
11        communication.  But, again, you let the people who
12        understand the world of politics make those allocation
13        decisions.
14                  MR. LACAMERA:  But, conversely, you can also
15        have a very seriously challenged incumbent, and the
16        political party may make that same decision -- that the
17        resources need to be invested in the protection of this
18        incumbent.
19                  MR. TAYLOR:  Absolutely.  And that is fine as
20        well.
21                  MR. LACAMERA:  Let me ask you to address one
22        other issue.  And that is so-called viable or meaningful
23        third-party challengers, and where they fit into your
24        model.
25                  MR. TAYLOR:  They would.  That is a tension that

 1        we have in this country for two centuries.  How do you
 2        draw the line?  Where do you create the threshold?  And
 3        that would be a challenge with this model.
 4                  Let me just go back and make one other point
 5        about the existing system of television and politics. 
 6        About one-quarter of all congressional races do not
 7        advertise on television at all.  It is one of the reasons
 8        why the numbers, the aggregate numbers, of what percentage
 9        of the expense of politics goes on television are lower
10        than a lot of people think.  Most people, when they think
11        of political campaigns, they think of the high-profile
12        races, the heavily contested races, the ones that wind up
13        on television.
14                  MR. LACAMERA:  But that may be because there
15        were no serious challengers.  And, again, coming back to
16        your premise, more challengers should emerge under this
17        system.
18                  MR. TAYLOR:  That is correct.
19                  MR. MOONVES:  Paul, let me follow up a little
20        bit with a question for you.  Because, to agree with
21        Andrew, some broadcasters, are better than others.  Some
22        broadcasters want to do the right thing.  Some are less
23        inclined so.
24                  You mentioned the people on the panel.  The
25        people on this panel were chosen specifically because they

 1        were people who believed that it was important to do this.
 2                  MR. SCHWARTZMAN:  If I may take this opportunity
 3        along the way, I did not mean to slight Mr. LaCamera and
 4        WCVB.  I realized, when I went through my throwing out for
 5        instances extemporaneously, and then part way through I
 6        looked over there.  And this is a station that has had a
 7        local commitment, literally, from the day it went on the
 8        air, in the circumstances it went on the air.
 9                  MR. MOONVES:  Andy, may I compliment you as
10        being a very clever advocate, to compliment every
11        broadcaster on the panel.
12                  (Laughter.)
13                  MR. SCHWARTZMAN:  I really do like Brooklyn
14        South.
15                  MR. MOONVES:  Thank you very much.
16                  (Laughter.)
17                  MR. MOONVES:  I was going to say, you did not
18        plug CBS enough in your introductory remarks.
19                  (Laughter.)
20                  MR. SCHWARTZMAN:  And Hubbard, my goodness.
21                  MR. MOONVES:  And I was quite offended by that.
22                  (Laughter.)
23                  MR. SCHWARTZMAN:  And while we are at it,
24        Hubbard, how could I forget Stanley Hubbard.
25                  MR. MOONVES:  Let me finish my question,

 1        Charles, if I may.
 2                  Given the acknowledgement that there are some
 3        broadcasters that are better than others.  And obviously,
 4        this subject has come up quite a bit over the last few
 5        months with me and my fellow broadcasters.  There is an
 6        inherent feeling on the part of many broadcasters that
 7        yes, we are part of the system.  And it is very important
 8        for us to contribute to this process.  Yet, at the same
 9        time, when Congress cannot pass a bill that has campaign
10        finance reform, the broadcaster has a tendency to feel,
11        hey, I am the Lone Ranger.  They are asking me to do
12        something that no one else can do.
13                  The question that I want to pose to you is, with
14        the acceptance that they can continue to buy time, you
15        said that the negativity will go down.  Right now, on
16        television, Coke cannot say that Pepsi is a bad drink. 
17        The rules for candidates are a lot more free.  I do not
18        know how we will change that.
19                  And the second part of my question is, do you
20        really feel the public cares about free time for
21        candidates?
22                  MR. TAYLOR:  Let me start with your first
23        remark.  I think you are right:  broadcasters should be
24        part of the solution, but they should not be the only ones
25        who have to pony up to the bar.  And if you come up with a

 1        proposal that is, in effect, in the form of a challenge to
 2        the political system, "Here is what we think the broadcast
 3        industry should be prepared to do to resolve what we all
 4        acknowledge is a problem, here is what we think in order
 5        for it to work, you know, the political system must do," I
 6        think you will be serving the interests extremely well.
 7                  Does the public care about improving political
 8        discourse through free air time?  I can cite you a bunch
 9        of statistics and polls that say yes, they think it is a
10        great idea.  But let's acknowledge where we are in the
11        country in the last few years of this century.  The public
12        has checked out of the political system.  It is a great
13        anomaly.  And part of it is because times are pretty good,
14        and if it ain't broke, don't fix it.  And I think that is
15        where the public is and we ought to accept that.
16                  But I do believe that the way to get the
17        public -- we are in a vicious cycle here.  One of the
18        reasons that the public has checked out is not nearly the
19        happy apathy and the good times.  It seems to me one of
20        the reasons it that every time the political system rolls
21        around into the laps of the public, every 2 years, with
22        another campaign, what the public gets is the worst of it. 
23        It gets the "You are a liar," "No.  You're a liar."  It
24        gets the equivalent of Coke and Pepsi saying the most
25        nasty, nasty things about each other.

 1                  Now, why don't Coke and Pepsi say the most nasty
 2        things about each other?  Part of it is because they have
 3        to live under a system of regulation.  But part of it is
 4        it is not in their interest.  In the end, they know that
 5        if they keep on doing this, fewer and fewer people will
 6        drink soft drinks.  And that is not in anybody's interest.
 7                  The calculation for the candidate is quite
 8        different.  They do not care about the total number of
 9        customers.  They just need one more customer than the
10        other guy.
11                  And in the kind of cynical and corrosive
12        environment we are in now, the fastest way for them to get
13        more -- to win a race is not to drive up their number of
14        customers, it is to drive down their opponents.  And that
15        is why you have this incentive of scratching each other's
16        eyes out in these 30-second segments.
17                  Some of that has been politics since time
18        immemorial.  We all understand that.  But there is
19        something particularly intrusive about this form of
20        communication.  It is exacerbated by the fact that, in
21        most countries, and, indeed, in our own political past, we
22        had political parties that attracted people to the public
23        square, that organized politics around coherent messages. 
24        People felt attached.  They were proud partisans.  We do
25        not have that anymore.

 1                  So campaigns have to carry an inordinate burden
 2        of democracy.  They are not doing that.  They are stuck in
 3        this vicious cycle that are driving people away.
 4                  I think we owe it to ourselves to try to change
 5        the dynamics of that.  You do not mess around, however,
 6        with telling people, the candidates, they cannot say nasty
 7        things about their opponents.  That is part of what
 8        politics is and ought to be about.  But it seems to me
 9        that the notion of saying, well, let's at least hear from
10        the candidate.
11                  Many of these ads that the public finds so
12        offensive, the candidate paying for the ad does not
13        appear.  He does not want to get his fingernails dirty. 
14        So he has some surrogate doing it or he has some tricky
15        visual.
16                  I think getting the candidate on screen goes
17        some of the way towards moving us to a higher level of
18        discourse.  The campaign consultants, who I used to cover
19        for 20 years as a political reporter, do not like it. 
20        They say the public -- you know, if you just have
21        candidate on camera, even for 1 minute, even for 30
22        seconds, this is deadly television.  We live in a world
23        where everybody wants to be entertained and everybody
24        wants to be entertained within 3 seconds.  And it is not
25        going to work.  And your vision of a more deliberative

 1        democracy is sort of pie in the sky.
 2                  And, listen, a piece of me has to acknowledge
 3        that reality.  But I think we need, and frankly, I think
 4        it is the television industry that is better positioned to
 5        take us there than anywhere else, to try to intercede into
 6        a culture that, at the moment, is heavily driven by
 7        entertainment values, has a very short attention span,
 8        does not care that much, and say:  Can we invent a new way
 9        of talking in political campaigns?  So when they roll
10        around every 2 years, instead of driving everybody out and
11        saying, "Uh-uh, sorry, not interested," they say, "Hey,
12        wait a minute, this does have something to do with my life
13        and I do need to pay attention.
14                  And if you can use free time as a wedge to
15        invent something new, God bless you; you will have served
16        your country.
17                  MR. MOONVES:  A tough task.  Thank you, Paul.
18                  Rob Glaser.
19                  MR. GLASER:  A couple of questions for all the
20        panelists, but probably most notably Paul.
21                  The presentations you all gave were very
22        compelling.  And, on a personal basis, I agree with many
23        of the recommendations.  But it was not obvious to me what
24        elements of the recommendations were particular to digital
25        broadcasting versus other broadcasting.  And so the

 1        question is:  What is special in your mind about this,
 2        other than that it is sort of an opportunity to get
 3        another bite at the apple for things that you think ought
 4        to be done for existing spectrum-based broadcasting?
 5                  And then the second question is sort of the flip
 6        side of that, which is:  What of the principles that you
 7        espouse with regard to public interest obligations ought
 8        to apply to other transmission methods that may not be
 9        based on use of public spectrum but that may, in the
10        relevant time frame, actually be more popular or pervasive
11        than digital TV?
12                  MR. TAYLOR:  Well, to your first question, I
13        confess I tend to think of this as we have an amazing
14        technological revolution that is about to happen, and it
15        does give us the opportunity to reexamine existing public
16        interest obligations.  So, in your words, it seems to me
17        it is a chance to take another bite at the apple, but it
18        is the chance of taking an intelligent bite of the apple
19        and say:  Where are we?  What is and is not working about
20        the way we do our communication?
21                  So I do not think there is anything inherently
22        different about digital from analog in the sense of public
23        interest obligations for this kind of discourse.  I think
24        I will leave it to others to tackle the question of how
25        these applications, these public interest applications,

 1        should move into other means of communication.
 2                  MR. ORNSTEIN:  Paul, let me just follow that
 3        question with a little more specificity.  I worked with
 4        you on the time bank, with an eye towards analogy
 5        broadcasting, where advertising works the way we know it
 6        works.  We now have to look ahead to a very different
 7        world, though, where if you have six channels or 12
 8        channels at different times, advertising is not going to
 9        be the same thing.  So saying 2 hours of time is not going
10        to apply in the same way.
11                  We do not know what advertising is going to be
12        like, looking 10 or 12 years down the road.  Is this a
13        model, in terms of a discrete amount of time put in, one
14        that has to be rethought, perhaps, when we look to a very
15        different advertising marketplace?
16                  MR. TAYLOR:  Absolutely.  And whether or not you
17        do it all on a main channel or you allow opportunities to
18        go to multiplex channels, it is hard to draw that
19        prescription, because we do not know what the world looks
20        like.  I start from a premise that whatever the world
21        looks like, there is going to be an attractive place where
22        Ford and Anheuser-Busch and McDonalds and Coke want to go.
23                  There may be many attractive places, but there
24        is still going to be a place where they need to have
25        eyeballs aggregated.  That is the way it has worked.  That

 1        is the way this relationship has worked, both in print and
 2        in broadcast, for a long, long time.  I suspect it is
 3        going to survive this transition somehow.  And as it does
 4        make this transition, let's figure out ways to get quality
 5        discourse as a part of that mix.
 6                  MR. MOONVES:  Barry Diller.
 7                  MR. SCHWARTZMAN:  Excuse me, can I speak briefly
 8        to the new technologies issue.  Because there is something
 9        that I hope this committee will not overlook.  I will do
10        it real fast, but it is not unimportant.
11                  Certainly, the mandate of this committee can be
12        read digital television, to include not just over-the-air
13        broadcasting, broadcasters licensed under Title III, to do
14        terrestrial broadcasting.  And, specifically, I would
15        point out that the FCC is in the process of adopting rules
16        to implement the direct broadcast satellite provisions of
17        the 1992 Cable Act.  It is a live issue now.
18                  The 1992 Cable Act provides two separate
19        provisions, one of which has particular salience to the
20        terrestrial discussion as well.  First, it directs the
21        direct broadcast satellites -- this is DirectTV, EcoStar,
22        PrimeStar, DishTV -- which is EcoStar -- USSB.  I
23        certainly would not leave out USSB this morning.
24                  It requires that they provide service in the
25        public interest -- the very same question that the

 1        committee has been discussing here with respect to
 2        terrestrial.  And I think it is entirely appropriate for
 3        this committee to make some recommendations with respect
 4        to the public interest obligations for direct broadcast
 5        satellite operators.  And that is a live issue now.
 6                  Second, Section 25(b) of the 1992
 7        Telecommunications Act provides a reservation of capacity
 8        for noncommercial use.  It directs the FCC to take a chunk
 9        of the spectrum, between 1 and 4 percent of the spectrum,
10        and set it aside, outside of the editorial control of the
11        direct broadcast satellite operator, and turned over for
12        noncommercial uses.
13                  Now, certainly, we have argued and said that, in
14        the political context, this can be used for national
15        political campaigns, and should be.  But the model,
16        instead of going through some of the exercise here, or at
17        least part of this exercise, is rather than argue about
18        how the broadcasters is going to find some spot time,
19        implement the time bank by simply saying, Okay, we are
20        going to relieve you of certain public interest
21        obligations in exchange for which we are just going to ask
22        you to give over a chunk of your time to be turned over to
23        the community and administered by others.
24                  You will be relieved of the responsibility for
25        it.  You will relieved of the defamation and libel issues. 

 1        Just turn it over.  And that is a very viable model, which
 2        has great application in the multi-casting environment for
 3        community discussion and community discourse.
 4                  So it is not at all out of the question to look
 5        to DBS as an important model on how some of the
 6        committee's deliberations should be reflected on
 7        terrestrial as well.
 8                  MR. MOONVES:  Thank you.
 9                  Barry.
10                  MR. DILLER:  Thank you, Les.
11                  I am curious, Mr. Taylor, would you advocate
12        giving free political time without it being limited to
13        real, true campaign finance reform?
14                  MR. TAYLOR:  I think it works all by itself.  I
15        think it works much better as a wedge to induce genuine
16        reform.  And in the ideal system, it seems to me, as I
17        talked about, it offers a very constructive way to get
18        soft money out of the political system.  Soft money, $260
19        million worth, this is what has produced all the scandals
20        we have read about in the last couple of years.
21                  The history of soft money is that it was allowed
22        in the late seventies for party building.  So it was
23        recognized that parties have to exist in our culture.  And
24        if we put too many limits on what parties can raise, they
25        will go out of business.  So the notion was they need

 1        money to keep their lights on, they need money to get out
 2        of the vote and classic sort of activities.  That has
 3        grown threefold every year.  And it is now a pool of money
 4        that the parties use just the same as candidates use.
 5                  I think you need to get that money out of the
 6        system.  I think it undermines public confidence in
 7        politics.
 8                  MR. DILLER:  Why, per force, would that happen
 9        simply by having more free political time?  I mean, what
10        is the point of adding time to the process, unless its
11        effect to reform the system that is so messy and that
12        causes the issues?  I mean, all you would end up really
13        doing is probably, I would think, unless you linked it to
14        real campaign finance reform, free political time makes
15        utterly no sense.
16                  MR. TAYLOR:  Well, I think adding free time, for
17        reasons I talked about earlier, does make sense.  It
18        enhances competition and it can enhance discourse.  I
19        agree with you:  we should attach it to meaningful
20        campaign reform.  And I think that you ought to issue that
21        challenge, and the broadcast industry ought to issue that
22        challenge.  But we probably have a difference about how
23        far you can go, in terms of getting money out of the
24        system.
25                  I think you can get the worst and the biggest of

 1        the money out of the system.  I do not think you can get
 2        all private money out of the system.
 3                  MR. DILLER:  Well, can you do it unless you make
 4        a direct linkage from one proposal, which is for
 5        broadcasters and others to offer time in ways that
 6        therefore manifestly change the campaign finance system
 7        for the better?  You said earlier that you had thought
 8        that if broadcasters offered it as a challenge, it would
 9        be greeted well on the other side.  But that seems -- what
10        does "well" mean in that context?  I mean, you would not
11        go so far, clearly, as to link it?
12                  MR. TAYLOR:  No.  I think, as a matter of public
13        policy, it absolutely ought to be linked.  This body, the
14        broadcast industry, does not have the power to construct
15        that model.  What you do have the power to do is introduce
16        an idea, suggest to the political system:  We are willing
17        to do this part; you have got to do your part.
18                  I am all for that linkage.  It is just
19        recognizing it is not your purview here to solve the
20        campaign finance problem.
21                  MR. DILLER:  No, but you mean as an absolute
22        challenge grant?
23                  MR. TAYLOR:  Listen, I think that has
24        possibilities.  I absolutely do.  I mean, this is not a
25        body that is going to pass laws.  This is a body that is

 1        going to make recommendations and hope, stir and provoke
 2        better policy discussions.
 3                  One of the reasons you do not get comprehensive
 4        campaign finance reform is that the members of Congress
 5        are frightened of the broadcast industry.  They understand
 6        its power.  They are very important people to members of
 7        Congress, the news director and the station manager back
 8        home in particular.  So they are loathe to say, "We are
 9        going to take some of your time."
10                  They also do not like to do it because they know
11        that the public does not like them.  And this looks like,
12        as Trent Lott likes to say, this looks like food stamps
13        for politicians, that they are doing something for
14        themselves.  They need a push from the outside.  If the
15        industry was willing to send a signal, "We will be a part
16        of the solution; you must do your part," I think we are
17        completed agreed that is the way to go.
18                  MR. MOONVES:  Robert Decherd, please.
19                  MR. DECHERD:  Les, thank you.
20                  Mark mentioned earlier cable and emerging
21        technologies.  And I would like to posit an idea, and then
22        follow up on Rob's question.
23                  I think one of our first and perhaps most
24        important tasks as a committee will be to define who is a
25        digital television broadcaster.  And that in turn will

 1        influence much of this discourse as we go forward.
 2                  But in anticipation of that and taking to heart
 3        the points made already about emerging technologies, I
 4        would be very interested and I think it would be useful
 5        for the committee if each of the panelists could tell us
 6        what you believe today -- even if it is an off-the-cuff
 7        reaction -- what the mandatory -- mandatory -- public
 8        interest, or political, requirements are of WebTV.
 9                  MR. SCHWARTZMAN:  You do not need a license to
10        put something out on the Internet.  And, therefore, there
11        is no obligation on WebTV, nor should there be.
12                  MR. LLOYD:  That is clearly the answer.  There
13        is no license required to put something out on the
14        Internet.  The challenge, I think, with WebTV probably is
15        complicated by virtue of the fact that, at least in most
16        communities, it comes via cable, which is franchised in
17        the local community.  And the franchisee may create some
18        obligations on the part of what filtering systems are
19        established and any number of things can occur.
20                  I think a number of us would prefer that what
21        goes out on the Internet is not regulated; that it is a
22        form of communication between citizens.  Whether or not it
23        is entirely outside the scope of regulation, I am not sure
24        that is true.  I think we have to be mindful of what
25        happens in local communities, particularly what happens

 1        with franchise obligations and how they are set forth.
 2                  MR. TAYLOR:  I think I agree with my fellow
 3        panelists, but on this one I am a layman, with a
 4        capital L.  I am not sure you need to hear from me on it.
 5                  MR. DECHERD:  Well, if I may follow up.
 6                  MR. MOONVES:  Yes.
 7                  MR. DECHERD:  I think that is the whole point
 8        right there.  It is we are making enormous assumptions
 9        about the future.  And picking up on Mark's point, WebTV
10        proposes to be a direct competitor with the traditional
11        television industry.  And it is delivered today
12        exclusively through regulated industries.
13                  MR. SCHWARTZMAN:  Since you have delivered a
14        straight line for me, Mr. Decherd, let me take it up.
15                  MR. DECHERD:  I would hoping I would.
16                  MR. SCHWARTZMAN:  Somewhere I have an overhead
17        that I took out, because there just was not time, and
18        maybe I can fish it out and pop it up.  But it is in your
19        materials on page 160.  And I will read you selected
20        portions.  I was hoping this opportunity would arise.
21                  This is a guest commentary by Neil Braun, the
22        President of the NBC Television Network.  The question is: 
23        What is special about over-the-air television?  What is it
24        that you have that nobody else has and nobody else is
25        going to have?

 1                  You are a mass market.  WebTV is -- and I will
 2        defer to Mr. Diller, as one of the great international
 3        experts on this -- is the ultimate individual niche
 4        market.  It is run by the user and not by the broadcaster. 
 5        It is controlled in the opposite direction.
 6                  Mr. Braun was saying why cable has not killed
 7        broadcasting, but the points are absolutely salient here. 
 8        He says, first, cable has come to be viewed by savvy
 9        marketers not as a competitor to broadcast television.  It
10        is niche advertising.  It is niche audiences.
11                  Second, with increased choices in everything,
12        not just television, only strong brands will prosper. 
13        A.P. Belo is a strong brand.
14                  Third, the notion of broadcast television's
15        declining share has obscured the reality of tremendous
16        growth.  The size of the audience pie continues to expand. 
17        In 1976, one rating point equalled 710,000 homes.  In
18        1996, it was 960,000 homes.  If NBC's current Thursday
19        lineup had captured the same number of viewers in the
20        early 1970's that it does today -- it would be CBS,
21        Mr. Moonves -- it would have resulted in a 30 rating and a
22        50 share.
23                  Fourth, the increasing fragmentation of society
24        and the audience makes broadcast television even more
25        valuable.  To make the next sale, an advertiser has to

 1        reach all the ready-to-buy consumers.  Broadcast
 2        television reaches 97 percent of U.S. homes every week.
 3                  And that is the difference.  You are the channel
 4        into the home.  If I am going to introduce a new car, I am
 5        not going to advertise it on the Internet, certainly not
 6        as my principal way to introduce a product.  I am going to
 7        roadblock it or I am going to buy 30 seconds on the Super
 8        Bowl.  That is something you have that no one else has.
 9                  MR. GLASER:  Aren't you making an assumption
10        that the almost 60-year-old broadcast standard that it has
11        that 98 percent share, if broadcasters were going to be
12        using that in the digital era, that would be a fair
13        assumption.
14                  But given that we are talking about a brand-new
15        standard that has an installed base of zero systems out
16        there and there will be some adaptation curve associated
17        with that, while it certainly is plausible to envision a
18        scenario of universality, this technology is going to have
19        to compete in the marketplace with other technologies that
20        are already, in some cases, further along than their
21        ubiquity curves.  And it is not obvious that, because this
22        broadcaster is not entering a clean slate, like NTSC
23        entered, the outcome will be as universal for digital as
24        has been the case here.
25                  What is your assessment of that?

 1                  MR. SCHWARTZMAN:  The point is very well taken,
 2        Rob.  First of all, anybody who sits here -- certainly
 3        me -- and tells you what is going to happen in the future
 4        is just making it up.  We do not know.  And you and
 5        Mr. Diller and some of the other people here who work on
 6        these things have a much better sense about what the
 7        leading-edge thinkers are thinking about, but they do not
 8        know either for sure.  It is just I want to bet on them
 9        and not me.
10                  But, nonetheless, there are going to be changes. 
11        There is going to be fragmentation.  The nature of
12        advertising is going to change.  And a lot more
13        advertising can be a lot more direct.  No question.  But
14        for the foreseeable future, as long as there is a Super
15        Bowl, there is going to be free, over-the-air television. 
16        There is no reason to see the Super Bowl in 85 different
17        places.
18                  As long as there is CableVision buying the
19        Rockettes and Radio City Music Hall, there is a certain
20        kind of entertainment package, there is a certain kind of
21        product that is unique to a mass market, that is not going
22        to be niche marketed.   This is what broadcasting excels
23        at.
24                  When people go to make up their mind about for
25        whom they are going to vote, they base their judgments on

 1        what is on television.  That may change.  It may alter. 
 2        It may diminish.  We hope all of the new media will
 3        flourish.  But for the foreseeable future, we certainly
 4        need to act on the assumption that broadcasting is going
 5        to be the first place to go, and it is always going to be
 6        a major player.  And, as I said, all you have to do is
 7        look at what Wall Street is valuing the stations at to see
 8        that Wall Street agrees with me.
 9                  MR. LLOYD:  Can I take just a small crack at
10        this line of questioning and perhaps another?
11                  I think one of the important things about the
12        work of the committee has to do with the framework and
13        context into which you consider these questions.  Are the
14        decisions that you make decisions based upon the
15        marketplace and what is going to happen in the
16        marketplace?
17                  Are the decisions that you make based upon the
18        technology and the impact that technology is going to have
19        on society or the marketplace?  Or are the decisions that
20        you make based upon what sort of society we want to live
21        in:  how to improve democratic discourse, how to get
22        information out to folks who do not have it, how to
23        encourage voices that are not being expressed currently to
24        be expressed?
25                  As long as your questions are focused on

 1        technology and how it is going to change, then I think you
 2        miss an opportunity to focus technology in directions that
 3        you want it to go.  As long as your questions are focused
 4        on the priorities of the marketplace, I think you miss an
 5        opportunity to regulate the marketplace so that it serves
 6        all citizens.
 7                  Now, I would be very concerned that you not
 8        think only about the marketplace, that you not think only
 9        about technology, but you also think about I think the
10        very important fundamental questions that Paul is raising
11        about the nature of our political system and our discourse
12        and the fundamental questions that Andy is raising about
13        the nature of the relationship of one large and important
14        business in society to the rest of us as citizens.
15                  MR. MOONVES:  Charles Benton.
16                  MR. BENTON:  A short comment, then a question.
17                  I was really not in favor of this notion about
18        the public interest in the panel and the broadcast panel,
19        and said so at the last meeting.  But I was wrong.  This
20        is really terrific.  And I am just sorry, in line with the
21        earlier comments, that a wider audience is not seeing this
22        discussion.  Because this is a very good discussion.
23                  MR. MOONVES:  I guarantee you the ratings would
24        be rather low.
25                  (Laughter.)

 1                  MR. MOONVES:  No offense to our distinguished
 2        panel.
 3                  (Laughter.)
 4                  MR. ORNSTEIN:  Our first recommendation is that
 5        there is a public interest obligation to carry us.
 6                  (Laughter.)
 7                  MR. SCHWARTZMAN:  If we were on CBS, you would
 8        put us on Thursday?
 9                  (Laughter.)
10                  MR. MOONVES:  No, you would not be on CBS.
11                  (Laughter.)
12                  MR. BENTON:  Anyway, I want to focus my question
13        to Mark, because I am really delighted, Mark, you have
14        based your comments on the WLBT case.  I was fascinated,
15        in the presentation of the public interest broadcast
16        history by the communications lawyer we had last time,
17        that he completely omitted the WLBT case, which, in my
18        view -- not being an expert at this at all, but having
19        cared about this area for a long time -- is the central
20        case that helped to establish the public's right and
21        interest as a party in broadcast license renewals.
22                  So this is really a fundamental case, and we
23        should perhaps communicate back to our lawyer expert from
24        last time that he needs to go back to the books and
25        enlarge his view.

 1                  MR. MOONVES:  We will be happy to tell him.
 2                  (Laughter.)
 3                  MR. BENTON:  In any event, the central point
 4        here is, as Mark pointed out, the WLBT, and the FCC
 5        overturning that license renewal, was based upon community
 6        ascertainment and the broadcaster's obligation to serve in
 7        the public interest, convenience and necessity.  Of
 8        course, the environment with the new media has changed
 9        greatly now.
10                  But, Mark, I have two questions for you.  Number
11        one, why did the FCC do away with the ascertainment
12        procedure in 1984?  And is there any legal rationale that
13        contradicts the work of Everette Parker, which I cited and
14        which is seminal in the public interest arena vis-a-vis
15        broadcasting?  That is the first question:  Why did the
16        FCC do this and your thoughts about that.
17                  And then, number two, why do we have a public
18        policy dedicated to ensuring local broadcast outlets but
19        not complementary policy to ensure local content? 
20        Because, I agree with Gigi's point earlier, that we have
21        got to get the community -- one of the powers of
22        broadcasting is its community base.
23                  And, with all due respect to your comments
24        earlier, Mr. Co-Chair, I do not think that this community
25        should be simply folded into the political discussion.  I

 1        think we need a separate day on the community discussion. 
 2        Because this is really fundamental and very different from
 3        access for candidates.
 4                  So I am really interested, Mark, in your
 5        reactions to these two questions.
 6                  MR. LLOYD:  Well, let me try to take the first
 7        one.  Gigi has warned me not to speak in too legalistic
 8        fashion.  It would not serve my purposes or the purposes
 9        of the panel.
10                  But let me just say that there was a rulemaking
11        in 1984.  There were a variety of options before the
12        Commission.  And one option was to do away entirely with
13        the ascertainment requirement, in addition to the program
14        log requirement.  One option was to allow the broadcasters
15        to report how they met the ascertainment requirement
16        generally.
17                  The ascertainment process was cumbersome.  It
18        was probably too technical.  It involved too much, I
19        think, manipulation of how forms are reported to the FCC. 
20        It was, as you warned me in our meetings, maybe too
21        legalistic and too focused on setting minutia, in terms of
22        the process.
23                  I think because the FCC, in the requirements
24        that were set out, were not only burdensome, but they were
25        full of minutia and probably improper detail in the

 1        oversight.  The FCC, at the time, took that as an
 2        opportunity to simply do away with the ascertainment
 3        requirement.  Instead of saying, let's allow the stations
 4        to figure out what is best, in terms of ascertainment in
 5        their communities and report to us about what they are
 6        doing, they decided just to get rid of it altogether.
 7                  Again, I was very involved in ascertainment.  I
 8        was a public affairs director.  And I had to make those
 9        reports.  I know what was required.  I know how much
10        detail it was.  And it was a lot and seemed very picayune. 
11        But the principle is right.  The principle was right.
12                  I think we have a much better opportunity now,
13        with interactive communications, to make ascertainment
14        work in a way that it was cumbersome and too picky before. 
15        I do not think the FCC was correct in making a
16        determination, frankly, that the marketplace will simply
17        handle all the concerns of the community.  I just think
18        that is nonsense.
19                  And Andy is absolutely right in Belo, you know,
20        what Barry Diller is doing, some of the other folks on
21        this panel.  The station that I worked for, and a number
22        of stations that I have worked for, were wonderful
23        broadcasters, but there were other stations who were not
24        wonderful broadcasters.  There were other stations who did
25        not do a good job of figuring out how to get voices that

 1        were not on the air on the air.
 2                  I think the requirements for our station were
 3        fairly easy to report, because we were doing what it was
 4        that we were supposed to do.  And it did not pose a
 5        problem.  I think there are broadcasters today who
 6        voluntarily go out into their communities, find out what
 7        is going on, who would very easily meet a reasonable
 8        ascertainment requirement.
 9                  So I do not think that requirement would impose
10        something to good broadcasters.  And I think, by and
11        large, good broadcasters make money, stay in their
12        community and do a good job.  And they stay in touch with
13        their community and they let their community voices on the
14        air.
15                  So to answer your question in as little legalese
16        as I can, the Commission, frankly, simply determined that
17        the way to go was to get rid of it, because it was too
18        burdensome.  It was burdensome.  They took a drastic
19        approach.  They were wrong.
20                  MR. SCHWARTZMAN:  Can I add a tiny bit of
21        historical perspective to that?
22                  At the time the United Church of Christ case was
23        brought, there was no formal ascertainment requirement. 
24        The FCC simply required that broadcasters show that they
25        had met with important segments of their community.  It

 1        was the Federal Communications Bar Association which
 2        petitioned the FCC to adopt the formal ascertainment
 3        requirements -- the Federal Communications Bar
 4        Association.
 5                  And then, for years after that, I would go to
 6        congressional hearings, and some of the broadcasters here
 7        and their colleagues would bring in wheelbarrows full of
 8        paper generated by the ascertainment process and complain
 9        about it.  This is not something citizens groups asked
10        for, this rigid, structured, formalized procedure.
11                  The FCC  then went and said, this stinks; we are
12        going to abolish the whole thing because we know that
13        broadcasters walk down Main Street and know who their
14        community is.  They could not stay in business if they did
15        not.  That is part right.
16                  The problem is that some broadcasters stopped
17        walking at the point when the paved road end and the dirt
18        road began.  And ascertainment is to make sure that they
19        see some of the people who live down the dirt roads.  And
20        that can be done in a simple way.  It can be done without
21        a lot of mandates and a lot of requirements, but a
22        requirement that broadcasters have some touch with their
23        community.
24                  It means nothing to the people in this room. 
25        They do it all the time.  It means a great deal for

 1        broadcasters, who I will name if need be, but we all know
 2        who they are, who do not care -- operate out of one city,
 3        one broadcaster who is promising he is going to run 60
 4        stations with an average of 18 employees in each
 5        station -- that is what I am talking about.
 6                  MR. MOONVES:  Charles, you want to do a
 7        follow-up.
 8                  MR. BENTON:  A very quick comment on this.  I
 9        think we have now a liaison with the FCC here with us that
10        will be on the committee.  And maybe one of the things we
11        could think about -- because, as Mark said, this is not
12        content regulation, but this is looking at process here --
13        and one of the recommendations we might start thinking
14        about and start researching and gathering some evidence on
15        is how to revisit the ascertainment process in the digital
16        age.
17                  And that might be one contribution we could
18        make, but we need research.  We need some expertise on
19        this that probably none of us on the committee have.  And
20        maybe we can get some help from the FCC as we think about
21        our recommendations.
22                  It just seems to me this is one very good idea
23        that we should not let pass before we go on to the next
24        point.
25                  MR. MOONVES:  I think it is a little early to

 1        make our conclusions yet.  But I think we can do some
 2        research.  It sounds like we should not make up our minds
 3        quite yet.  We are only on our second meeting.
 4                  MR. BENTON:  Oh, no, no, no.  Just an idea for
 5        more research.
 6                  MR. MOONVES:  Jose.
 7                  MR. RUIZ:  Thank you, Mr. Chairman.
 8                  Gigi, I want to thank you and thank the
 9        individuals for taking time out of their schedules to be
10        here today.
11                  Like Mark, I, too, came out of that era.  And as
12        I look around the table, I notice that numerous other
13        people here came out of that same struggle.  And we are
14        obviously here because of the struggle, not because of
15        someone's desire to have us participate.  And I think the
16        interesting thing about the ascertainment, it was
17        probably, in many cases, the first-time stations,
18        especially station managers, ever visited diverse
19        communities that they were supposedly serving.  And I
20        think they have gone back to not visiting them anymore.
21                  My question is more a hypothetical question. 
22        Because I am concerned that we cannot get on CBS.  And
23        perhaps, for me, this is the crux of the whole issue
24        here -- is intellectual discourse that affects our society
25        and our civics versus ratings and commercialization of how

 1        to operate and be successful.  At the same time, how do we
 2        serve and create a better society in the United States?
 3                  Why should citizens of this country care about
 4        this committee?  What is so important?  What kind of
 5        important decisions will this committee be making that
 6        will affect America and the populace of America, whether
 7        it is done in the electoral process, whether it is in the
 8        access process, the civil rights process?  It is an
 9        important one for me to understand at this point, because
10        I am hearing a lot of different viewpoints.
11                  But we do not have access to those communities,
12        to that citizenship that we are supposed to be serving. 
13        And I do not think they are going to really be
14        knowledgeable and informed about the decisions or the
15        questions that we are tossing around at this table.  How
16        is it going to affect them?
17                  And let us keep in mind that there are those
18        right now in positions of power that would like to have no
19        regulations, would like to have totally deregulated,
20        laissez-faire, let business go where it wants to go. 
21        Let's say that happens.
22                  Let's say that the ownership of stations fall
23        into the hands of 25 individuals or families or
24        corporations that somewhat look the same, somewhat think
25        the same, somewhat have the same desires, whether it is

 1        one political party or another.  What does that do to our
 2        country?  What happens if there is no regulation?  How
 3        does this affect us as a country?  Where does it lead us?
 4                  I would like to hear from all three of you.  Why
 5        should we have regulation in the first place?
 6                  MR. TAYLOR:  Well, to respond, from what I have
 7        talked about on the political system, it seems to me that
 8        we have a system of campaign discourse that, the cost of
 9        it and the quality of it, is leaving our citizens where
10        you describe them:  not engaged and not interested.
11                  I think that leads to bad politics, and bad
12        politics leads to bad governance.  I think most people, at
13        some level, understand that connection.
14                  I will tell you that in the many, many years I
15        spent as a political reporter, the most interesting
16        political exercise I always went through was to go out,
17        get away from the candidates and go on knock on people's
18        doors in average communities, and say across the screen
19        door, I am Paul Taylor, I am a reporter from the
20        Washington Post, and I am here to find out what do you
21        think about this campaign or that.  And they would look at
22        me and their jaw would drop.  They would say, "What are
23        you here for?  I don't pay attention to this stuff; I
24        don't care about this stuff."
25                  "Well, I am just interested in hearing what you

 1        think; can we talk?"  And, inevitably, people who do not
 2        think about this, who cannot give you a rational
 3        explanation about social security or about the defense
 4        budget or about whatever is the issue of the day.  People
 5        have very nuanced opinions about things.  We live in this
 6        extraordinary culture where, somehow, a lot of information
 7        gets out.  Their behavior says they do not care.  In fact,
 8        they do care.  They do care about their government.  They
 9        do care about their bureaucracy and about their politics. 
10        They understand its importance to their lives.
11                  It seems to me it is the system that has failed
12        the people.  We do not arrange our politics in ways that
13        engages them.  We arrange it in ways that turns them off. 
14        And that ultimately results in policies that do not serve
15        them.  So I think this could not be more fundamental to
16        what self-governance is all about.
17                  MR. MOONVES:  Jim Goodman.
18                  MR. RUIZ:  Excuse me, I wanted to hear how does
19        it affect our civil rights?  It is not only one
20        electorally; it has a wider impact.
21                  MR. SCHWARTZMAN:  Let me just say briefly that
22        it affects all manner of civic discourse.  We made a
23        choice.  Congress was invited to award digital television
24        licenses by auction.  Congress was invited to throw
25        digital spectrum open to all comers.  Congress chose, at

 1        the urging of the broadcasting industry, to provide this
 2        digital spectrum exclusively to incumbent broadcasters. 
 3        And they accepted language which said they shall serve in
 4        the public interest.
 5                  So why the public should care is because
 6        Congress has made a judgment that government has a role in
 7        creating a marketplace of ideas in creating civil
 8        discourse.  And the public should care because Congress
 9        has chosen a road which, in theory, is designed to provide
10        service to all Americans in all communities.  That is the
11        choice that was made.  And it is this committee's job to
12        try to implement that choice.
13                  MR. LLOYD:  Let me just add -- and I will see if
14        I can be brief -- two things.  As we struggle with the
15        questions of how this new communications information
16        technology is going to have an impact on our society, the
17        struggle, I do not think, fundamentally different than the
18        struggles that led to the Great Lakes Broadcasting case in
19        the 1920's.
20                  And in that case, the old Federal Radio
21        Commission made a determination about whether or not
22        institutional broadcasters, like universities or labor
23        unions or others, whether they should be given preference
24        or whether or not they should be given less of a priority
25        vis-a-vis commercial broadcasters -- so-called non-special

 1        interest, general broadcasters.  The decision was made to
 2        prefer commercial general broadcasters over these other
 3        so-called special interest broadcasters because general
 4        interest broadcasters could speak to the entire community.
 5                  We have completely flipped that around, so that
 6        we are having a discussion now about whether or not
 7        general interest broadcasters ought to do anything for
 8        anybody other than commercial interests.  It was said in
 9        that case that if public interest means anything, it means
10        the public's interest over individual of groups of
11        individuals' interest.
12                  I think as we begin to reallocate spectrum space
13        to rethink what are the public interest obligations of
14        broadcasters, that we have an opportunity here to go back
15        to first principles and try to understand that the debate
16        is not only about advertising and advertising time, it is
17        not only about the health of a community's economy.  It is
18        about the health of that community's public discourse.
19                  And I think, Mr. Chairman, you are absolutely
20        right -- this is the second meeting, and decisions cannot
21        be made here.  But I would encourage all of you to please
22        keep in mind that we live in a society that is not only
23        driven by technology, but that is driven by the market. 
24        And it is also driven by the decisions we make as human
25        beings, about our relationships with each other, that

 1        these are civic decisions and social decisions, that we
 2        are not automatons, that we are not economic beings
 3        primarily or only, and that I think it is important for
 4        us.
 5                  It was a wonderful editorial that was written
 6        many, many months ago.  And I should have brought it with
 7        me.  But it said that, in effect, there is no such thing
 8        as not regulating media in a society; that we will have
 9        regulation.  That unfortunately we tend toward regulation
10        that is about content.  We are concerned about
11        pornography.  We are concerned about those sorts of
12        things.
13                  I think we have an opportunity to say, as a
14        society, we are concerned not only about whether or not we
15        show nude people on the air, but we are also concerned
16        about whether or not we can communicate with each other in
17        an effective manner and whether or not people who do not
18        have the money to get on the air also have an opportunity
19        to participate in our public debate.
20                  MR. MOONVES:  Jim.
21                  MR. GOODMON:  Paul, I hope you come back when we
22        have our session on politics and political ties.
23                  Let me just mention a couple of things to you. 
24        My view is -- and I hope, at a minimum, if we do not do
25        anything else on this committee in this area, that we take

 1        a look at the lowest unit rate -- my view of the lowest
 2        unit rate is that the candidates are paying more, not
 3        less.  And that is because of the way we have changed in
 4        terms of how we sell time and the fact that candidates buy
 5        time so late and they do not just want time, they want the
 6        third break in the 6 o'clock news on a certain night,
 7        which means the price gets higher and higher and higher.
 8                  And I wanted to see if you could help on this. 
 9        I am of the notion that we actually ran fewer political
10        spots last time, even though the cost was way up, and that
11        the increase in the number of political events comes from
12        the third party issue advertising notion which, in my
13        view, has completely distorted the process.  I mean, we
14        were okay with candidate A and candidate B buying time and
15        raising money.  What happens is then an outside party
16        comes in and, on top of that, spends more money than the
17        two candidates combined.
18                  And I am asking you for a suggestion as to what
19        we should do about this third party issue advertising, and
20        suggesting to you that I have two ideas about it.  One is
21        you cannot do it 90 days before an election.  Another is,
22        if you do it, you cannot mention a party or a candidate. 
23        Or, thirdly, maybe the solution to all of this is to
24        return to the Fairness Doctrine, which, as difficult as it
25        is to work with, means that nobody is going to come in and

 1        buy up the station with one point of view.  Okay, this is
 2        for the meeting that we are talking about.
 3                  But one other thing is that I hope you will
 4        spend some time thinking about free time in a program
 5        forum rather than a commercial, 30 or 60 seconds.  I mean,
 6        program time, it seems to me, makes sense.  Commercial
 7        time does not make sense.
 8                  MR. TAYLOR:  I hope to come back to that.  And I
 9        will just be very brief, because these are very complex
10        issues.  But on your last comment, I could not agree more. 
11        I think we have to think of a whole variety of ways to do
12        this.
13                  It happens that the political system has decided
14        that the most valued way to communicate on television is
15        in the short spots.  I think we have to start from that,
16        but then go beyond it.
17                  Very briefly on what you do about these outside
18        groups that come in, it is extraordinarily difficult. 
19        Norm and I have put together some suggestions on this that
20        work their way, in part, into some of the legislation that
21        is on the Hill that goes to some of what you are talking
22        about.
23                  It does not restrict groups from advertising in
24        the last 60 to 90 days, but it says if you, as an outside
25        party, advertise in the last 60 or 90 days and you mention

 1        the name of a candidate for office or put the likeness of
 2        that candidate in your ad, you must live under the same
 3        regime of disclosure requirements and contribution limits
 4        that the parties and the candidates do.  So it simply
 5        says, yeah, you can play, but play by the same rules that
 6        the candidates do.
 7                  Now, even that -- which, it strikes me, is sort
 8        of the soul of fairness -- is highly controversial.  And
 9        you have these advocacy groups on the left and the
10        right -- ACLU on one side, National Right to Life
11        Committee on the other -- which are vehemently opposed to
12        this.  And my guess is this is going to be very tough to
13        draw a line around.  But it is certainly worth the effort.
14                  MR. SCHWARTZMAN:  Can I just briefly comment?  I
15        cannot resist this opportunity, first of all, to express
16        appreciation for your support for the Fairness Doctrine,
17        which is something that I think should be given some
18        consideration here.  And certainly, we are going to make
19        sure it is given consideration at the FCC.  In fact, we
20        think it is statutorily mandated.
21                  I do believe that your suggestions, many of
22        which I agree with, pose some constitutional problems. 
23        Because of the Buckley v. Vallejo decision, you cannot ban
24        a whole lot.  There are some small things that can be done
25        at the FCC, which this committee could recommend, to

 1        address these problems, or at least minimize them a little
 2        bit -- a few, little, simple things.  Increasing the
 3        identification of these independent party committees and
 4        making sure that everybody knows who is really paying for
 5        it would be a helpful little thing to do.
 6                  And I would like to talk to you about joining
 7        with us on that.  And I also would encourage you to join
 8        us in one other little thing that has been pending at the
 9        FCC a long time.  The NAB received a decision from the
10        former FCC, in the Bush administration, permitting
11        broadcasters to refuse to sell air time in lengths not
12        regularly available to other commercial advertisers.  In
13        other words, unless the Chevrolet dealers buys 60-second
14        spots, broadcasters do not have to sell 60-second spots to
15        candidates.  They will sell 10's and 15's.
16                  And we have been unable to get any broadcasters
17        to come along and join with us in getting that changed so
18        that candidates have a right to buy longer spots.  If you
19        want to join me, Jim, let's talk later.
20                  MR. LLOYD:  If I can just add very quickly to
21        that.  It was stated before that the lowest unit rate is
22        statutory, but it requires regulations.  And the
23        regulations decide what that means.  And I think what Andy
24        is talking about can be changed through regulation.  So I
25        do not think, to change that, you need to go to Congress.

 1                  MR. MOONVES:  Paul.
 2                  MR. LACAMERA:  If I can just follow up on a
 3        response to a question that had been directed to you
 4        earlier.  And that is, you expressed a concern within your
 5        model, again, whether if a candidate sits there for 60
 6        seconds and addresses the camera on what hopefully is one
 7        of the preeminent issues of the race, whether people would
 8        have any interest.  Might the danger might not be the
 9        antithesis of that, though?  Might not we be subjected to,
10        at the hands of the parties and the candidates, highly
11        packaged, highly produced 60-second, 5-minute, 30-minute
12        infomercials?
13                  And if that is the case, does that undermine
14        these principles that you cite of ensuring that the
15        candidates are the most robust communicators, that the
16        political discourse is enhanced, and that we are
17        increasing candidate accountability?
18                  MR. TAYLOR:  Sure, there is that danger.  But I
19        will put my money on the American public.  I mean, if
20        there is one thing that they are experts at it is looking
21        at somebody on television and making a judgement.  And if
22        you get the spin, the public picks upon it like that.  If
23        you get the deceit, the public picks up on it like that.
24                  But the point is you have arranged the
25        transaction in the best possible way, and you are letting

 1        the public be the judge.
 2                  Now, having said that, I spent a lot of years as
 3        a political journalist.  I think the role of journalism,
 4        the role of other kinds of programming in this --
 5        interview shows, debates -- I think is all terrific.  And
 6        I do not mean to suggest one over the other.  I think what
 7        has tended to happen as more entertainment values have
 8        driven our news values on television and all over is that
 9        the candidate has tended to get squeezed out of the
10        equation.
11                  And you see this particularly in local coverage
12        of local races.  Local coverage of local races, by and
13        large, has disappeared.  You know, when is the last time
14        anybody saw a story, even in September and October of the
15        campaign year, about a race for city council or mayor or
16        Congress?  They are increasingly rare.
17                  So I think, by all means, we ought to encourage
18        the journalist to play the scrutinizing role that the
19        journalist does.  But let's also carve out chances for the
20        candidate to communicate.  Now, if we can also get it in a
21        format --
22                  MR. LACAMERA:  Regardless of what that forum
23        might be?
24                  MR. TAYLOR:  Well, actually, I must tell you I
25        do not know the answer.  I mean, there I really do defer

 1        to the television industry.  You guys know how to engage
 2        viewers.
 3                  MR. LACAMERA:  But you are not going to be
 4        deferring to television, you are going to be deferring to
 5        the candidate and the political parties.
 6                  MR. TAYLOR:  Well, but to the extent that -- I
 7        mean, ultimately, what you are trying to do -- ultimately,
 8        laws are not going to change this.  You are trying to push
 9        the political culture in a better direction.  And I am not
10        sure how far we can go to legislate that, to force the
11        candidate to say that.  You get very quickly very close to
12        content rules.
13                  But I do believe that providing a lot of free
14        air time would be such an important change, it would send
15        such an important message about how much we value
16        political communication that I think, just in and of
17        itself, it would have a very salutary effect on the way
18        the communication is held.
19                  MR. ORNSTEIN:  Paul, you should note, one of the
20        things we kicked around and indeed suggested is that for
21        candidates to accept free time, there would be one
22        obligation imposed.  And that is that they give the
23        message themselves.  Because we certainly know that there
24        is a difference in the tone of communication when a
25        candidate delivers the message compared to when an

 1        insidious voice, unknown to anybody, is talking.
 2                  MR. LACAMERA:  I understand that.  But still,
 3        you package that candidate and it is what the candidate is
 4        addressing.  And it is going to be interesting.
 5                  MR. MOONVES:  Harold.
 6                  MR. CRUMP:  I would like to bring up one point
 7        here that I think maybe is of interest to comment.  And I
 8        would like to hear your comment, if you have some, on
 9        this.
10                  After the last election, there was published
11        national research showing the public reaction and exactly
12        how efficient all of the media had been used by various
13        politicians.  And the lowest ranking area for any
14        advertising, the one that the public said that had the
15        least to do with how I voted was the 30-second spot on
16        television.  And it was a single digit number that these
17        people said, yes, that influenced me.
18                  I thought that was a remarkable saying here as
19        to what would particularly drive perhaps in the next
20        election, because I think that surely all the consultants
21        are looking at what happened.  And we get to the
22        negativism of what is going on into the number of spots
23        that were purchased, that perhaps this will help a bit. 
24        And I am wondering if any of you had seen that.
25                  The other thought that I would like to express

 1        here, a comment I have, is the fact that in all the years
 2        I have been in broadcasting -- and if you look at my white
 3        hair and you can tell it has been a few -- I do not
 4        believe I have ever, in any year, when we have gone to the
 5        various candidates and said, Hey, we are going to give you
 6        some free time, guys, we would like to have some debates
 7        or we are just going to set you up where you will have
 8        this much time, you will have this and you will have this,
 9        that each time you approached an incumbent -- not 100
10        percent, but let's say 99 percent of the time -- the first
11        question they asked -- or the comment back was -- gee,
12        that is wonderful.  That is certainly great of you to do
13        this.  And then the comment was, now, I will see if I can
14        fit this in.  But if I cannot do it, you are not going to
15        do this, are you?  You are not going to let the others on
16        there?
17                  Because, of course, their opposition usually
18        does not have the name identification.  I mean, they are
19        always trying to close them out.  And now we are talking
20        about giving them free time, where we are going to put all
21        these guys to come in together, to shoot at the fellow
22        that is sitting in the seat now -- I find this
23        fascinating.
24                  Thank you.
25                  MR. MOONVES:  Thank you.

 1                  MR. SCHWARTZMAN:  I would say that there is a
 2        relationship between your two observations.  I think that
 3        the campaign consultants, who are the ones who buy the
 4        30-second commercials and think they work, will tell you
 5        that they do work, and they are exulted at the fact that
 6        the audience to whom they are directed do not realize they
 7        work, and that they do not think that is what they are
 8        basing their vote on, but, believe you me, the people I
 9        talk to in this town -- and I do not talk to as many as
10        some of the other people here do -- they all think they
11        work.  And that is how they want to do it.
12                  And that is why your incumbent candidates do not
13        want to appear this way.  They know that they can do
14        better with the 30-seconds spots and the 15-second spots,
15        because they work.  And people say they hate the negative
16        commercials, but then you ask them about the information
17        in the commercials and whether they have seen them and the
18        credibility they attach, the fact is it works.
19                  MR. MOONVES:  Cass.
20                  PROFESSOR SUNSTEIN:  Yes, this has been a very
21        good discussion.  And I thought one of the high points,
22        really, was Barry Diller's exchange with Paul Taylor.  And
23        though Paul was extremely polite, there was a clear
24        disagreement between them, where Barry's suggestion was
25        free air time by itself is maybe senseless and unfair

 1        unless accompanied by campaign finance.
 2                  And if, Paul, your answer is agreement, then we
 3        have a really tough problem.  Because we are not the
 4        campaign finance overhaul committee.
 5                  So, in the subsequent remarks, three kinds of
 6        ideas have come out in defense of a free air time
 7        requirement by itself.  One is it relieves the pressure
 8        for campaign finance.  Second is it leads to more
 9        substantive discussion -- Norman's point.  And the third
10        is it gives a better chance for non-incumbents.
11                  Now, can you be a little more specific in
12        suggesting which of those three would carry the weight of
13        a free air time requirement by itself unaccompanied by
14        campaign finance?  Or do you, in the end, agree with Barry
15        Diller, thinking that free air time by itself really does
16        not do much?
17                  MR. TAYLOR:  No, I think free air time by itself
18        does do good things.  I think free air time attached to
19        comprehensive reform does even better things.  And I think
20        it is perfectly appropriate for this body to suggest it as
21        a wedge into bigger things.
22                  I want to have my cake and eat it, too.  I think
23        it works in almost any way you introduce it.  And for the
24        three reasons that you just described, it works all by
25        itself.

 1                  In terms of the pressing need to start to
 2        restore some public confidence in our system and to start
 3        to reduce the impact of money, and in particular big
 4        money, in the political process, it works a whole lot
 5        better if attached to more comprehensive campaign finance
 6        reform.
 7                  But I think you get the discourse benefits if
 8        you did it all by yourself, and you could get the making
 9        the electoral competition more robust benefits all by
10        itself, as well.
11                  MR. MOONVES:  Paul, if you were sitting on this
12        committee and this was June or July -- and clearly you are
13        in favor of free time for candidates -- would you
14        incorporate that as part of a larger issue?  Would you
15        incorporate it, making the recommendation that yes, there
16        is a validity to giving free time for candidates, but it
17        should be part of a larger issue?
18                  MR. TAYLOR:  Absolutely.  I mean, I think that
19        would be a very, very helpful way to go.  And, ultimately,
20        if this committee is able to engage the broadcast industry
21        in a similar kind of message to the political system, I
22        think you will have done a terrific year's work.
23                  MR. MOONVES:  We are running out of time. 
24        Robert, this will be the last question.  We already have
25        had 15 minutes more, fortunately, because we started

 1        earlier, but this will be it.  And then, gentlemen,
 2        anything you want to close with, please feel free after
 3        Robert's question.
 4                  MR. DECHERD:  My question may actually be a good
 5        segue to closing comments, because I think all of us agree
 6        it is very valuable to have your observations as part of
 7        the baselining process here.  And I think it would be
 8        helpful, in that context, for you to comment on whether
 9        you see the broadcast industry, largely defined, in 1997,
10        as being more competitive or less so than in the past and
11        whether it is indeed true that viewers have more choices
12        through all of these different delivery systems about what
13        they choose to view.
14                  I think that is an issue where we need to have
15        at least a general understanding on this committee of
16        whether or not, whichever answer it is, whether it is
17        valid -- more, less, same -- and what is the prospect for
18        the future.
19                  MR. SCHWARTZMAN:  With the concentration of
20        ownership of programming, with the concentration of
21        ownership in the broadcast area, with increasing
22        cross-ownership, with much greater attention to branding
23        and tie-ins and merchandising relationships, I see less
24        choice.  I see a keiretsu of a small number of large
25        companies developing.

 1                  In the programming area, for example, I see
 2        distributors taking all sorts of additional roles in the
 3        downstream and syndication and distribution back-end as a
 4        function of it.  I see this reducing choice.
 5                  Now, I break down the media and the choices
 6        differently.  I treat media differently.  They are not
 7        fungible.  When I am trying to decide how I vote in a
 8        local election, watching a nationally distributed
 9        satellite-delivered cable channel does not do me any good. 
10        So when I look at choices for local news and information,
11        with daily newspapers diminishing and radio doing nothing,
12        courtesy of the FCC -- in the Washington, D.C. market,
13        there is one company that started out doing traffic
14        reports -- it is now doing radio newscasts on 25
15        stations -- there is no editorial diversity there.  There
16        is a lot of stations; there is not a lot of choice.  I see
17        much less diversity.
18                  We used to have a news cast on the UHF stations
19        in this city.  We do not anymore.  Briefly, we had the
20        newscast provided by the NBC O&O.  That was better than
21        nothing.  Now we have nothing.  So I see less.
22                  MR. LLOYD:  I think WebTV and digital broadcast
23        and cable and more radio stations certainly than we had 20
24        years ago, more opportunity for television stations than
25        we had before, I think there is for Americans who can

 1        afford it a great deal of increased diversity.
 2                  I am concerned about those Americans who cannot
 3        afford it.  I am concerned about those Americans who have
 4        pretty much only over-the-air television.  And I think for
 5        those Americans there is decreased diversity and fewer
 6        choices for them than they had before.
 7                  And I would hope that in your discussions that
 8        you think not only about the wonderful choices that many
 9        of us have in terms of our access to news and information
10        and public affairs and vital public opinion and
11        entertainment sources -- because many of us have a great
12        number of choices -- more than we have ever had before --
13        but there are too many Americans who do not have those
14        choices.  And I think part of what this panel has to try
15        to keep in mind are those Americans who do not have the
16        same choices, those Americans who have over-the-air
17        television to rely upon for their news and information and
18        for their opportunity to speak to their fellow Americans.
19                  So, please keep them in mind.  Whether they are
20        on reservations or in urban ghettoes or whether they do
21        not have telephones or whether they cannot afford cable or
22        they cannot afford satellite, please keep them in mind as
23        you determine what the obligations are of the broadcasters
24        who can reach all of them.
25                  MR. TAYLOR:  I think we are heading into a

 1        golden era of choice and a golden era of competition.  And
 2        I think that is almost entirely to the good.  My guess is
 3        that the big boys will win a lot of that competition. 
 4        That has been the history.  But lots of other people will
 5        win, too.  And there are lots of benefits to this
 6        communication revolution to society.
 7                  I think we ought to think, as we go through this
 8        revolution, about preserving those spaces for our core
 9        democratic processes.  They have not fared particularly
10        well in recent years.  They are precious to us.  And the
11        marketplace, by itself, will not always necessarily take
12        care of it.  But it is important enough to move in and
13        help.
14                  MR. MOONVES:  Gentlemen, on behalf of the
15        committee, I would like to thank all three of you for your
16        time, your eloquence.  You have given us a terrific point
17        of view on the issues.  And thank you very much.
18                  (Applause.)
19                  MR. MOONVES:  I think we will take an
20        adjournment now for lunch.
21                  (Whereupon, at 12:30 p.m., the committee
22        recessed for lunch.)

 1                      AFTERNOON SESSION
 2                                                 (1:35 p.m.)
 3                  CO-CHAIR ORNSTEIN:  If you could take your
 4        seats, please, we're going to get started.  
 5                  I'd like to welcome our panelists for our second
 6        session, on perspectives from different elements of the
 7        broadcast industry.  Let me just turn to Robert Decherd to
 8        introduce our panelists.
 9                  MR. DECHERD:  Norm, thank you very much.  I
10        appreciate being asked to help organize this panel this
11        afternoon, and I thought I might try to lay some
12        groundwork for this discussion of digital broadcasters'
13        public interest obligations.  Some of this I'd like to do
14        from our own company's perspective and hope that my fellow
15        committee members will indulge me, because some of the
16        same ideas have already been presented in some other
17        testimony and documents presented, but in the context of
18        our discussion this morning I think we have here, I know
19        we do, from the commercial broadcast side three companies
20        that represent aligned perspectives, but very different
21        histories and experiences.
22                  Our company, for example, began in the
23        broadcasting business in 1922, when we built one of the
24        first AM radio stations in the country, WFAA-AM in Dallas. 
25        28 years later we entered the television business when we

 1        acquired a television station in Dallas and signed on as
 2        WFAA-TV, which is now an ABC affiliate.  
 3                  Since then, as this consolidation of our
 4        businesses has accelerated, we have come to own 17
 5        television stations.  We reach percent of U.S. households,
 6        and the only importance of that is to say that we're not
 7        alone in having groups of that size and penetration of
 8        that level.
 9                  For our part, we invest the resources necessary
10        to provide quality local news, public affairs, and
11        community-oriented coverage, and, very importantly, to
12        develop our properties into durable news and information
13        franchises, which will be extremely important in an
14        increasingly competitive broadcast environment. 
15                  We talked this morning about the compact between
16        the government and licensees.  In beginning in the radio
17        business, as many television broadcasters did, we accepted
18        the terms of that social compact as far back as the
19        1920's.  In return for the government eschewing any role
20        as an owner, programmer, or censor of broadcast
21        facilities, we and other radio licensees agreed to provide
22        programming responsive to our communities of license.
23                  We believe that Belo, along with almost all of
24        the television broadcasting community, has continued to
25        honor this compact with the government, and you will hear

 1        that theme in the testimony this afternoon.  The most
 2        important aspect of that commitment is that American
 3        television viewers have by far the finest broadcasting
 4        system in the world today and I believe are by far the
 5        best informed electorate.
 6                  High definition television and the emergency of
 7        technology, as Mark reminded us this morning, has a lot to
 8        do with why we're here today.  For us and I think for most
 9        broadcasters, television broadcasters, HDTV is a
10        competitive necessity.  That's because if our competitors
11        in cable or satellite or whatever businesses may evolve
12        are going to broadcast signals in HDTV to American homes,
13        we obviously have to match that capability in order to
14        preserve or even expand our news and information
15        franchises.
16                  That's why we at least believe that at this
17        juncture television broadcasters should not be distracted
18        by multicasting and the very unpredictable complexities of
19        programming three or four or five additional channels in
20        what is already a more fractionalized television universe. 
21        Instead, we think we should concentrate on providing more
22        creative, higher quality programming which addresses many
23        of the issues we discussed this morning.  We should do
24        that over our one channel initially, and we should deliver
25        it in the most attractive technical form possible, namely

 1        HDTV.
 2                  You've heard from various sources that HDTV will
 3        come with a large price tag.  In our case, with 17
 4        television stations, when they are fully operational with
 5        HDTV studio and transmission facilities, our total capital
 6        investment will exceed $150 million.  Now, that's an
 7        enormous amount of money for us and I want to say it only
 8        by way of underscoring that there is costs associated with
 9        the transition for any broadcaster, no matter how large or
10        small that company may be.
11                  It also prompts me to address what I think is
12        the single biggest misunderstanding about the television
13        industry's transition from analog to digital television. 
14        That is the so-called "great give-away" of an additional
15        channel to television broadcasters.  So as a backdrop for
16        the comments you're going to hear from our panel, let me
17        just make a few points.
18                  The digital transition is being undertaken by
19        the television industry at the initiative and direction of
20        Congress and the FCC.  It's a process that began over 10
21        years ago, as you heard at our first meeting, and it has
22        certainly been supported by and encouraged by
23        broadcasters. 
24                  Have said that, every television station in the
25        United States could switch right now from analog to

 1        digital transmission using its existing channel, without
 2        receiving any additional spectrum from the government. 
 3        There is no such thing as an analog television channel or
 4        a digital television channel.  Every television channel
 5        has the same physical properties.
 6                  The FCC's transition period from 1998 to 2006 is
 7        designed with one primary purpose in mind -- to make it
 8        less burdensome and more economical for the American
 9        people, the people that Mark was talking about this
10        morning especially, to purchase digital television sets or
11        digital television converters over an extended period of
12        time.  Employing digital technology, every television
13        station could multiplex its existing television channel,
14        splitting the spectrum into three or four or even five
15        channels.
16                  The television industry is not, however,
17        receiving from the government any new capacity to
18        multiplex this channel as a result of a loaned second
19        channel.  In addition to our investment in capital, all
20        broadcasters are going to spend in this transition, and
21        the result is an investment of billions of dollars to
22        rebuild facilities while at the same time shouldering the
23        significant operating costs of broadcasting on both of
24        these channels.  One would be analog and one would be
25        digital.

 1                  This format of dual transmission will last for
 2        at least eight years.  At the end of this period, the
 3        loaned channel will be returned to the government and we,
 4        like every other television broadcaster, will end up where
 5        we were before, with 6 megahertz of spectrum.
 6                  Now, in spite of the additional capital expense
 7        and the expenses of operating two channels during this
 8        transition, I know of know broadcaster who is planning any
 9        changes in their public interest programming commitments. 
10        At our company, for example, we are eager to fulfil those
11        commitments.  We feel we've done that over a long period
12        of time.  What we are more worried about is the notion
13        that there are additional responsibilities warranted
14        simply because of the digital transition.  Said another
15        way, this transition is not a pretext for additional
16        government mandates.
17                  Let me turn to public interest programming
18        itself for a moment.  We and I think the very large
19        majority of television station licensees are highly
20        attuned to our public interest obligations, and I think
21        it's important to note here the idea of television station
22        licensees.  These licenses are issued to individual
23        television stations and, while their ownership is
24        attributed to group owners, they are not issued to our
25        company as a group or to the networks or to any third

 1        party.
 2                  In today's environment, my belief is that any
 3        television broadcaster intending to be in the television
 4        business for the long term needs no mandate to provide
 5        responsive public interest programming.  For us to
 6        flourish in the digital age, television broadcasters need
 7        to preserve and expand local news and information
 8        franchises, not reduce their commitments.  This of course
 9        includes providing coverage of our political system and
10        especially public affairs programming and debates.
11                  Some of you know that in the last election cycle
12        we initiated a program that Paul and we've talked about a
13        great deal, called "It's Your Time."  It offered every
14        federal candidate in our stations' ADI's five minutes of
15        free air time unfiltered.  We then provided those programs
16        free of charge to our local PBS stations.  The result was
17        that on a voluntary basis Belo's viewers received over 12
18        hours of additional air time concerning their
19        Congressional races, and no one mandated that. 
20                  Indeed, what we believe and I think you'll hear
21        in the discussion this afternoon is that the government
22        and the broadcast industry should focus on ways to
23        encourage voluntary and creative programming initiatives
24        like "It's Your Time."
25                  It's also important to note a theme that you

 1        will certainly hear this afternoon and in the future, and
 2        that is localism.  Localism is the single characteristic
 3        distinguishing television broadcasters in the video
 4        marketplace.  And the most important aspect of localism is
 5        programming that is responsive to communities' needs and
 6        interests.
 7                  We estimate that approximately one-third of the
 8        typical broadcast week of a Belo television station -- and
 9        I suspect this would be true for Harold's or Paul's or
10        Jim's stations as well -- is devoted to non-entertainment
11        programming, which consists of local, state, national news
12        and public affairs, instructional, educational,
13        children's, and religious programming.  These programming
14        priorities are not only good service to our communities as
15        a public trustee, they represent very good business. 
16        Audiences and investors recognize that this commitment is
17        a major contributor to our success in ratings, the success
18        of any broadcaster in ratings, and also contributes to our
19        financial results.
20                  We've heard a lot about technology.  We're going
21        to talk more about it in months to come.  Needless to say,
22        everyone agrees that the technological barriers separating
23        previously distinct communications businesses, such as
24        computers and television, and even electrical utilities
25        and telephones and television, are disappearing.  The

 1        lines are already blurred, and television stations which
 2        build strong local franchises with attractive news and
 3        community programming are the ones that will thrive.  The
 4        economic imperative for television broadcasters is to
 5        concentrate on building and extending those local
 6        franchises, and a key component is public interest
 7        programming.
 8                  The only certain result of imposing additional
 9        public interest responsibilities on digital broadcasters
10        will be to burden marginal television station operators,
11        those least able or least inclined to produce expensive
12        competitive news and other non-entertainment programming.
13                  Let me now introduce this very distinguished
14        panel and express my personal appreciation for their
15        taking time to be with us today.  We have distributed at
16        each of your places hard copies of lengthier testimony
17        which we're submitting as part of this presentation.  In
18        order from left to right as we look at our panelists, Don
19        Cornwell, Bob Wright, and Bob Coonrod will present
20        summaries of that testimony, and I would encourage you to
21        read their longer submissions at your leisure.
22                  Don Cornwell has served as Chairman of the Board
23        and Chief Executive Officer of Granite Broadcasting
24        Corporation since the company's founding in 1988.  Granite
25        is headquartered in New York City and owns and operates 11

 1        television stations of various size in disparate markets. 
 2        Prior to forming Granite, Mr. Cornwell was a vice
 3        president of Goldman Sachs and Company.
 4                  Bob Wright joined the National Broadcasting
 5        Company as President and Chief Executive Officer in 1986. 
 6        Under his leadership, NBC has become a broad-based global
 7        leader in the media business.  In addition to 11
 8        television stations across the country, Mr. Wright has
 9        extended NBC's businesses into cable with MSNBC and CNBC. 
10        In multimedia, NBC has launched two new businesses, NBC
11        Interactive and MSNBC Desktop Video.
12                  In fairness to Bob, I would hope that we would
13        concentrate on our agenda today and leave discussion of
14        rating systems to more appropriate forums.  As you know,
15        he's been out front on that question.  Maybe we should
16        direct those questions to Leslie so that we can stay on
17        our agenda.
18                  Bob Coonrod was elected President and Chief
19        Executive Officer of the Corporation for Public
20        Broadcasting on October 1st of this year.  He served as
21        Executive Vice President of CPB from 1992 until 1997, when
22        he was named Acting President.  Prior to his tenure at
23        CPB, Mr. Coonrod served as Deputy Director of the Voice of
24        America and before that as a foreign service officer with
25        the U.S. Information Agency.

 1                  Don, welcome.
 3                     GRANITE BROADCASTING
 4                  MR. CORNWELL:  Thank you. 
 5                  I'm assuming that this microphone is working? 
 6        Thank you. 
 7                  I want to express my appreciate to Chairman
 8        Moonves and Chairman Ornstein and members of the committee
 9        for the opportunity to appear before you today.  I should
10        point out that I'm privileged and honored to be here. 
11        This is important work that you're doing.
12                  As Robert Decherd pointed out, Granite was
13        founded just 9 years ago and is now the largest minority-
14        controlled owner of major market television stations and
15        also is the eighth largest non-network television station
16        group in the United States.  We all have to find something
17        to brag about.
18                  Granite operates 11 network-affiliated stations
19        and currently reaches approximately 8 percent of all
20        television households in the country.
21                  My testimony today will focus on three issues of
22        concern to this commission:  the public interest
23        obligations of television broadcasters in the digital era;
24        political broadcasting; and the implementation of digital
25        broadcasting as it affects a company like ours.  I offer

 1        these remarks from the vantage point of being the Chairman
 2        and CEO of a publicly owned corporation that owns and
 3        operates television stations in widely divergent markets
 4        in terms of size and character, from Detroit, which as you
 5        know ranks ninth, to Duluth, which is the 134th market. 
 6                  I also believe my remarks about the importance
 7        of public service are shared by the vast majority of
 8        broadcasters and I feel it important to reinforce that
 9        notion.
10                  Let me start by saying that I believe that
11        broadcasters are the trustees of a powerful public
12        resource, the airwaves, and as trustees we have a
13        responsibility to use the airwaves in the public interest. 
14        In my role as CEO of Granite, I seek to ensure that,
15        through our corporate philosophy and our operations, that
16        we fulfil that commitment every day.  Broadcasting in the
17        interest of the viewing public is not only governmentally
18        mandated, but is also good business. 
19                  Above all, I think it's important to note that
20        broadcast television from our perspective is essentially a
21        local endeavor, and yet that limitation is also our
22        strongest asset.  Individual broadcast television stations
23        are received by a geographically limited community of
24        households.  For this reason, television broadcasters are
25        ideally positioned to understand and respond to the unique

 1        cultural, educational, informational, and entertainment
 2        needs and desires of the communities we serve.
 3                  Free over-the-air television is under siege from
 4        a variety of highly competitive mass media sources, so to
 5        survive we have to offer a service of substantial value to
 6        our viewers that they cannot obtain elsewhere.  In my
 7        view, broadcasters have excelled in this endeavor.
 8                  Each of the broadcast television stations
 9        operated by Granite is distinctly community-oriented.  The
10        backbone of our local service is the strength of our local
11        daily news operations.  For many in our markets, local
12        television news is the primary source of accurate and up
13        to date information about the people, trends, and events
14        in their communities.  In response to this need, the
15        majority of Granite's stations broadcast 20 or more hours
16        of news programming per week, almost all of which
17        originates from our stations.
18                  In order to reach the widest possible audience,
19        each Granite station also offers closed captioning of most
20        of this new programming.  In addition, each Granite
21        station independently produces and broadcasts a regularly
22        schedule of public affairs programs addressing numerous
23        and diverse issues of local and national importance, and
24        in our written testimony we have given you a lot of
25        examples of that, which you can read at your leisure.

 1                  Granite's commitment to its various communities
 2        of viewers goes far beyond the provision of quality local
 3        news and public affairs programming.  Through involvement
 4        in local charities, community groups, health programs,
 5        public education campaigns, and community educational
 6        programs, our stations support our communities and in turn
 7        encourage our communities to support us.  These programs
 8        extend the reach of our stations beyond our viewers'
 9        television sets and into their daily lives.
10                  At Granite we do not dictate from our corporate
11        offices which issues our stations should address in their
12        local programming efforts or how stations should involve
13        themselves in their respective communities.  To do so
14        would be fundamentally inconsistent with our emphasis on
15        identifying and serving local needs and interests at the
16        local level.  People in our corporate offices in New York
17        simply can't be as attuned to the needs and interests of
18        viewers in Peoria, as an example, as the staff of our
19        Peoria station.
20                  Similarly, we believe that, no matter how well
21        intentioned, regulators in the Nation's capital cannot be
22        as attuned to the needs of thousands of individual
23        communities served by broadcast television stations across
24        the Nation as the people who run those stations.  Local
25        broadcast television stations understand the needs,

 1        interests and concerns of their viewing communities far
 2        better than the Federal Government and local broadcast
 3        television stations must offer programming and other
 4        services that meet those needs in order to survive.  For
 5        this reason, we fully believe that broadcasters have all
 6        the incentives they need to serve the public interest and
 7        that the goal of this committee should be to reinforce the
 8        vital importance of the public interest believe
 9        obligations of broadcasters in a digital world, without
10        attempting to quantify such obligations.
11                  New regulatory mandates, although intended to
12        benefit the public, in my opinion will merely prevent
13        broadcasters from most effectively competing in the mass
14        media marketplace, and in addition it will prevent is from
15        effectively serving our communities.
16                  Let me make a few brief remarks about political
17        broadcasting.  We feel that requiring broadcasters to
18        provide free air time to political candidates is
19        unwarranted.  Although we know there is a bipartisan
20        consensus building that the American system of financing
21        political campaigns needs to be reformed, compelling
22        broadcasters to give free air time to political candidates
23        will not fix the campaign finance system and in our
24        opinion will certainly not lead to a better informed
25        electorate.

 1                  At Granite we respond to the parallel demands in
 2        our democracy of voters for information and of candidates
 3        for access by broadcasting special election coverage,
 4        candidate debates, and forums such as town hall meetings
 5        and public affairs programs in which candidates have an
 6        opportunity to discuss their views on issues of concern to
 7        the public.
 8                  We believe that this type of programming
 9        provides the most meaningful form of dialogue and does
10        more to educate the voters and stimulate them, hopefully,
11        to get out and vote than any number of paid spots that
12        present only one candidate's views of an issue or aim
13        potentially to disparage other candidates.
14                  I would have to say, as a company that carries a
15        lot of leverage, I should also point out that mandating
16        free time for political advertising would deprive
17        broadcasters of an important source of badly needed
18        revenues as they embark on the total rebuilding of the
19        American television infrastructure, and that turns now to
20        the implementation of digital television. 
21                  Television broadcasters are now embarking on one
22        of the most comprehensive and expensive privately funded
23        experiments in history.  The conversion to digital
24        television transmission and reception involves nothing
25        less than the complete rebuilding of America's terrestrial

 1        television infrastructure within a very compressed time
 2        frame and at a cost that is estimated by the National
 3        Association of Broadcasters, as one source, to exceed $16
 4        billion.
 5                  For this reason, I must confess that I share
 6        Robert Decherd's view and I become distressed when I hear
 7        people criticize the government for a give-away with
 8        regard to the spectrum or view the allocation of new
 9        channels as a justification for new regulation.  As the
10        person at Granite who ultimately must approve our
11        stations' capital budgets and justify these budgets to our
12        directors, our lenders, and, most importantly, our
13        stockholders, I can assure the distinguished members of
14        this committee that there is no free ride in the
15        conversion to digital television. 
16                  Moreover, the costs of this conversion will
17        affect smaller stations disproportionately, because the
18        capital expenditures required to effect the conversion are
19        wholly unrelated to station revenues or the size of the
20        market.  This poses, I submit, a grave danger to the
21        concept of equal access to news and information in our
22        smallest communities.
23                  For instance, we currently estimate that we will
24        be required to spend as much as $8 million to complete a
25        full digital conversion of our smallest market station,

 1        which serves Duluth, Minnesota.  This market is currently
 2        served by only three stations and they compete for
 3        approximately $15 million in advertising.  As a former
 4        person who spent a little time on Wall Street, I can tell
 5        you those are not very good economics.
 6                  More fundamentally, I think it's important to
 7        note that there is no spectrum give-away because the FCC
 8        rules mandate a return of the analog spectrum at the end
 9        of the conversion process.  When analog broadcasting
10        ceases, television stations in the United States will have
11        the right to use only 6 megahertz of spectrum, just as
12        they do today.
13                  I'd like to conclude by saying that I hope you
14        won't interpret my remarks as reluctance on the part of
15        Granite to undertake this massive project.  Granite is
16        committed to achieving a truly first class conversion of
17        all of its television stations to a digital format, from
18        Buffalo, New York, to San Jose, California, and all of the
19        markets in between.  However, it won't be easy and it
20        certainly won't be cheap.  Our current budget estimates
21        per station for our 11 stations run from $3 million to as
22        high as $10 million.
23                  Because there is no clear consensus on the
24        services and technologies that will be most desirable to
25        the American public -- some would call that the business

 1        plan -- we at Granite have not made any hard and fast
 2        decisions about programming formats on our digital
 3        channels.  Yet we are excited about the tremendous
 4        flexibility and suppleness offered by digital television
 5        technology and we look forward to bringing all of the
 6        benefits of that technology to our viewers.
 7                  I thank you again for the opportunity to appear
 8        here today and present the views of Granite Broadcasting
 9        on this exciting transition to digital broadcasting.  I'd
10        be pleased to answer any questions.
11                  MR. DECHERD:  Don, we're going to handle
12        questions after we've gone through the presentations. 
13        Thank you very much.
14                  Bob Wright, welcome.
16                  MR. WRIGHT:  Thank you, Robert.
17                  I appreciate the opportunity to provide NBC's
18        views on the public interest obligations of digital
19        television broadcasters.  There is a need for all
20        interested parties to reason together to develop a common
21        understanding of the possibilities and limitations of
22        digital broadcasting as they relate to public interest
23        obligations.  I'd like to make two major points on that
24        subject at the beginning here and then go into it in a
25        little detail.

 1                  First, I do not believe it is even possible to
 2        have a meaningful dialogue about broadcasters' public
 3        interest obligations in the digital age until we all go
 4        beyond the extremely general discussion which has
 5        characterized the debate today.  I ask the committee to
 6        delve deeply into the business and technological realities
 7        of digital broadcasting, attempt to understand what
 8        digital broadcasters will actually be doing in this new
 9        era, and only thereafter grapple with any specific changes
10        to the public interest obligations.
11                  The historic business reality is that each
12        broadcaster will spend millions of dollars to convert from
13        analog to digital, but only one of three business models
14        even holds out any reasonable business prospects in a
15        discussion of changes to public interest obligations.  Let
16        me just summarize the three models here.
17                  The simulcast model, this is the first one: 
18        broadcasters transmitting essentially the same programming
19        simultaneously in analog and digital format.  It entails
20        increased cost to the broadcaster with no matching revenue
21        and offers no reasonable basis for changing public
22        interest obligations. 
23                  The second model, the pay services model:  In
24        this model the broadcaster supplements one free over-the-
25        air broadcast service with additional subscription-based

 1        services.  This triggers an obligation to pay fees to the
 2        government in accordance with the Telecommunications Act
 3        of 1996 and is not the basis for changing or charging
 4        additional public interest obligations.
 5                  The third model, only the multiple free over-
 6        the-air broadcast services model.  In this model the
 7        broadcasters are providing as yet undefined additional
 8        free services over an indeterminate number of channels
 9        during as yet unknown day parts, creating a theoretical
10        basis for possibly sustaining changes to public interest
11        obligations.  But during the times that broadcasters are
12        broadcasting high resolution television, no such scenario
13        is possible because the spectrum is totally consumed. 
14        Even for those times when a broadcaster is not
15        broadcasting in HDTV, there is no current business
16        scenario that would suggest this approach.
17                  It certainly would be unwise and premature to
18        predict changes in the public interest obligations on a
19        business case which may never materialize or be very
20        short-lived.
21                  The second point is that any recommendations
22        which the committee may make regarding changes in the
23        public interest obligations should be guided by the
24        principles of breadth, inclusiveness, flexibility, and
25        innovation.  For example, if a broadcaster determines to

 1        run a free all-news broadcast service, that should be
 2        counted as fulfilling any altered public interest
 3        obligation.  It is imperative that broadcasters not be
 4        hamstrung by new narrow quantitative, one size fits all,
 5        public interest obligations. 
 6                  Digital broadcast technology is in its very
 7        infancy.  It would be extremely unwise to write specific
 8        public interest obligations into narrow, inflexible
 9        regulatory language without knowing much more about how
10        this marvelous technology will develop and how its
11        potential to serve the public interest might be most
12        wisely tapped.  Rather, a broad public interest mandate
13        that encourages innovative and creative approaches that
14        meet the needs of the viewing public should be favored.
15                  Robert spoke a little bit, and so did Don, on
16        public interest service and the history of it, and I guess
17        I would mention some from our standpoint.  I think the
18        purpose of this is just to refresh our recollection of
19        what we do and many members of this commission do and what
20        is generally done throughout the industry, because it is
21        often lost track of when you're inside the Beltway, where
22        people are advocating a point that has some peculiar
23        impact on a group that they favor and tend to ignore what
24        is already being done throughout the Nation.
25                  Service to the community at both the national

 1        and local levels is the very essence of broadcasters'
 2        public interest obligations.  NBC devotes approximately 65
 3        hours of programming during an average week to news,
 4        information, qualifying children's programming throughout
 5        the stations that we own and operate.  The more well-
 6        known programs -- the Nightly News, the Today Show,
 7        Dateline, and Meet the Press -- are supplemented with
 8        numerous local shows that run two and three hours in the
 9        early mornings and late at night, in periods in many cases
10        from 4:00 to 7:00 o'clock at night or 5:00 to 7:00 o'clock
11        at night -- an extensive, extensive amount of programming.
12                  On a periodic but recurring basis, NBC provides
13        extensive coverage of significant national political
14        events -- the Democratic and Republican Party conventions,
15        presidential debates, State of the Union Message and
16        opposition reply, things that you're all very familiar
17        with. 
18                  The broadcast networks serve a vital unifying
19        function in times of national crisis, challenge, or
20        disaster -- the Persian War, Oklahoma City bombing, and
21        many, many other events of that ilk.
22                  Community-based television stations, our
23        stations, provide local news, weather, traffic, school
24        closing information, giving viewers up to the minute
25        information about conditions in their communities which

 1        affect their daily lives.  In times of natural disasters,
 2        such as hurricanes, snowstorms, earthquakes, local
 3        broadcasters work together with police, fire, and
 4        emergency health agencies to provide viewers life-saving
 5        information.
 6                  There also is extensive coverage of political
 7        campaigns, races at all levels from local school districts
 8        to mayoralty campaigns to governors to Federal elections,
 9        an endless number, in larger markets almost an impossible
10        number of elections to cover and provide in our opinion as
11        much coverage as we would actually like in every one of
12        those typical election campaigns.
13                  The business realities.  The transition from
14        analog to digital transmission is not optional for
15        broadcasters if they want to remain in business.  It is
16        mandatory, both as a matter, a legal matter and as a
17        marketplace reality.  The broadcast industry must
18        transition from analog to digital if it is going to stay
19        competitive with cable, satellite, and telephone
20        industries, all providing video services digitally.
21                  The broadcast industry is devoting enormous
22        financial and human resources to this mandatory transition
23        from analog to digital transmission.  Remember that
24        broadcasters' current spectrum is being sold at auction in
25        2002.  From there on in, the only spectrum that broadcast

 1        have any real claim to in terms of future ownership is the
 2        digital spectrum. 
 3                  Broadcasters and TV set manufacturers have spent
 4        more than a half a billion dollars on the research,
 5        testing, and development of digital video.  NBC itself has
 6        expended more than $55 million on the creation of digital
 7        studio facilities at our headquarters in New York.  Each
 8        station will have to spend a minimum of $2 million just to
 9        pass a digital signal feed.  The cost of conversion to
10        full digital television transmission capability for each
11        station is likely to be closer to $10 million.  The cost
12        of training a new generation of broadcast engineers is
13        high and there are ongoing significant technical
14        challenges -- interference problems, tower construction
15        problems, and things of that sort.
16                  Now, in the backdrop of this, in comments that I
17        offered to our own board of directors, rather than dodge
18        the issue, I told them quite frankly essentially what I'm
19        going to say to you here:  that there are no immediate
20        prospects for broadcasters to realize increased revenues
21        to offset the enormous costs of digital conversion.  Quite
22        frankly, as I explained it to them, it's a cost of staying
23        in business.  It's a cost of being in business.  But I
24        can't provide any near-term credible source of revenue to
25        support it.

 2                  Free over-the-air digital broadcasting will
 3        still be dependent on advertising.  There is no guarantee
 4        of increased advertising revenue when broadcasters go
 5        digital.  There are no digital television sets on the
 6        market today.  Programming costs, essentially sports
 7        rights and others, have skyrocketed.
 8                  Two of the three most realistic business models
 9        for digital broadcasting, as I said earlier, really don't
10        lend themselves at all to additional public interest
11        obligations, because they involve no change in programming
12        or economic structure of universally free, available,
13        over-the-air broadcasting.  In that first instance, we
14        have simulcasting, which is what most broadcasters will
15        elect to do in the beginning.  You're simply providing the
16        very same programming to the hoped-for digital customer
17        and you're hoping that during that period, probably over
18        the next 5 years when there are going to be some sets in
19        use, that that programming is going to look clearer,
20        sharper, and be more attractive to the public.  But you're
21        really broadcasting exactly the same programming.
22                  When a broadcaster uses digital transmission
23        capability to provide supplementary subscription services,
24        as in the second example, the payment of those fees are
25        already required under the Telecommunications Act.  So

 1        there's no give-away, there's no room for additional
 2        public interest obligations, because you're actually
 3        falling into a whole different section of the
 4        Telecommunications Act.
 5                  The use of digital technology to provide the
 6        multiple free over-the-air broadcast services, which is
 7        often talked about, is the one foreseeable business model
 8        which might justify a realistic appraisal of the
 9        appropriateness of changed public interest obligations. 
10        However, I point out that programming multiple channels
11        presents a significant business problems.  If the
12        programming is that good, you probably can't afford to put
13        it on on a multiple basis to so few homes.  
14                  If you elect to go to a pay format, then you
15        fall into the Telecommunications Act where you have to go
16        in and apply for specific tariffs.  There are very
17        significant issues as to how that would be done.  It's not
18        obvious to me that broadcasters could really make a go of
19        supplying converter boxes to homes to monitor the receipt
20        of the programming.  I think the ship has sailed on that
21        issue.  Cable basically is the service provider of choice
22        when it comes to pay television.  They have the equipment,
23        they have the infrastructure.
24                  I point out that many people say:  Well, won't
25        this be a great idea; you'll introduce pay television.  I

 1        don't think so.  I think if you look back most recently,
 2        the most recent example of that was TeleTV, a combination
 3        of several of the strongest and best funded Baby Bells,
 4        made up of Nynex, Bell Atlantic, and PacTel at that time,
 5        and they took a writeoff of about $500 million on a
 6        venture to provide pay television over the air into the
 7        home.
 8                  It simply isn't practical.  You're dealing with
 9        70 million homes that have cable boxes of one sort or
10        another.  I think the ship has sailed on that issue.  It's
11        an option, but it's not one in my opinion that's very
12        viable.
13                  So we get to the multiple free channels that
14        don't need converter boxes and have no revenue other than
15        advertising.  Well, you better have a lot of programming
16        to do that.  You better not value that programming too
17        much in the near term, because it's going to be very hard
18        to get enough viewership to justify its use.  I think
19        what's going to happen is that broadcasters are going to
20        experiment with that, but they're also going to realize
21        what we have realized, that under no circumstances can you
22        afford to lose the flexibility to broadcast over the
23        entire 6 megahertz that we've been granted.
24                  There is a lot of confusion about the formats
25        that are going to be brought into play here, and it was

 1        hoped when this process was begun that we could fit into
 2        the spectrum that's being allocated to broadcasters, the 6
 3        megahertz of spectrum, that we would be able to fit into
 4        that spectrum most, if not all, of the most advanced forms
 5        of television which are likely to be marketed over the
 6        next 20 or 30 years.  Now, that's speculative and it was a
 7        good worthy objective, and it may well be correct.  But
 8        it's not a sure thing.
 9                  There are already several forms of resolution
10        delivery which require all 6 megahertz of spectrum, and I
11        think a broadcaster -- we'll use ourselves.  I don't have
12        to use the hypothetical.  There is no circumstances that I
13        could envision under which NBC would want to restrict its
14        ability to use all 6 megahertz.  
15                  If we were to enter into some scheme where we
16        only used a portion of that and made it impossible for us
17        not to use it all, then we would run the risk of having
18        the industry, "the industry" meaning cable, the PC
19        industry, the television receiver industry, and the
20        broadcast industry, that that industry would determine
21        that one of the very high resolution formats became what
22        viewers really wanted to watch, and we would have to
23        immediately move in that direction or be left out.
24                  One thing broadcasters can't afford to do is to
25        be left out visually, because that's all we have.  If we

 1        aren't compatible or capable of offering the best or
 2        apparently the best video service, then we relegate
 3        ourselves to a second class cable product.
 4                  So I think that flexibility is critical.  So
 5        while some broadcasters may elect to experiment in the
 6        upcoming years with more than one free over-the-air
 7        service, I think you'll find that they'll do so only on
 8        the basis that they can quickly go to full use of the
 9        spectrum if in fact that's where the market's going. And
10        we won't know that for 5 years.  
11                  We're 5 years too early, quite frankly, for this
12        discussion.  Nobody has any sets.  There are no viewers. 
13        The services are not going to be widely seen for several
14        years, and I think the whole issue here is flexibility. 
15        We don't know how that's going to play out.  The thing I
16        would argue the most for here is flexibility.  However we
17        might view the nature of the views on public interest,
18        anything that is to be implemented which suggests that we
19        reserve specific amounts of spectrum with the theory that
20        there are going to be multiple channels coming over here I
21        think would be a mistake at this point in time.  It may
22        turn out in several years that that isn't such a bad
23        thing, but clearly today we don't have anywhere -- we
24        don't have any ability to make that commitment.
25                  Additional public interest obligations should

 1        not be limited by a particular subject matter that may be
 2        currently popular, such as free political time or more
 3        children's programming.  New means of fulfilling public
 4        interest responsibilities through innovations in digital
 5        should be left very open.  This is a brand new technology.
 6                  New services, such as data broadcasting and
 7        certain interactive applications, may yield substantial
 8        public interest benefits by greatly enhancing the
 9        informational and educational value of programming.  It
10        would be a mistake to limit artificially the potential of
11        digital technology to serve the public interest by
12        imposing new specific public interest obligations before
13        digital technology has even had an opportunity to evolve.
14                  Thank you very much.
15                  MR. DECHERD:  Bob, thank you.  
16                  Just as we anticipate the question and answer
17        session, I'd like to point out that Bob has a dinner
18        obligation in New England this evening and can be with us
19        until 3:30, maybe a little bit afterwards.  So in terms of
20        sequencing, if this begs any questions, you might want to
21        direct them to Bob earlier on.
22                  Bob Coonrod, thank you for being here.
25                  MR. COONROD:  Thank you, Robert, and thanks to

 1        the Co-Chairs for inviting us to participate in this
 2        discussion.
 3                  I'm from the Corporation for Public
 4        Broadcasting.  The Corporation is the primary means by
 5        which Federal support for the roughly 1,000 public radio
 6        and television stations in this country is provided. 
 7        We'll be talking now about the television portion of that,
 8        the 200 licensees around the country that provide public
 9        television services.
10                  Much of what I'm about to say echoes what you
11        just heard, but there are some very distinct differences
12        that I would like to identify up front to inform the
13        questions later on.  When we're talking about public
14        broadcasting, we're talking about people who are in the
15        public service business.  Our mission is public service. 
16        Educational programming is a very important part of that
17        service.
18                  120 stations currently provide 6 to 8 hours per
19        day of preschool programming, what we call our Ready to
20        Learn service.  In addition, there are 23 state networks
21        and a number of individual public television stations
22        around the country that provide daily instructional
23        television.  About 600,000 students are registered in
24        higher education courses, college level higher education
25        courses, through the PBS Adult Learning service.

 1                  The prospects of digital television for us are
 2        very interesting because of the multiple educational
 3        services that we are currently providing.  But we are
 4        often -- the stations are often constrained by the
 5        technology that they work with.  
 6                  When it comes to offering free time for
 7        political candidates, public broadcasting, sometimes in
 8        cooperation with the commercial broadcasters, sometimes on
 9        its own, has been a leader in providing that kind of
10        access.  Last year during the debate night, there was a
11        national debate that was scheduled for the Republican and
12        Democratic leaders of the House and Senate, and then there
13        were 212 debates for Congressional races that were
14        broadcast around the country.  70 or so public television
15        stations participated in that sort of -- in that kind of
16        endeavor.  It gives you some sense of the scope and the
17        commitment of public broadcasters to the public service
18        that we're talking about.
19                  So any vision of a digital future must include a
20        strong and vibrant public radio and public television
21        system.  Public broadcasters have been leaders in
22        developing closed captioning, video description,
23        descriptive video.  Public television was involved with
24        the development of the standards, the grand alliance
25        standards that eventually led to DTV.

 1                  We are committed to high definition television. 
 2        We think that the prime time schedule on PBS is very well
 3        suited to the kind of pictures and sound that you can
 4        achieve through high definition television.
 5                  We're also very interested in the possibility of
 6        multiplexing or multicasting, because it will provide
 7        stations, especially during day parts, an opportunity to
 8        provide the multiple educational services that they're now
 9        constrained from providing because of the technology.  I'd
10        also mention the possibility of data.  Additional data
11        streams would offer ways to supplement those educational
12        services.  We are experimenting as to how that might be
13        done, but clearly we could be providing much more than
14        simply the video by using the multiple data streams.
15                  Now, we are in part supported by Federal funding
16        and we will need assistance to make the transition to
17        digital.  Public broadcasters have spent the last year
18        examining the costs and how the structure would work in
19        the digital environment.  Our best guess is that we're
20        looking at a total cost of converting public television of
21        about, public television and radio, of about $1.7 billion,
22        and we are going to be asking the Federal Government for
23        45 percent of that total.  We will commit to raise the
24        other 55 percent from other sources.
25                  What would it be important -- why is it

 1        important for the committee to make sure that it keeps the
 2        public broadcasting issues, the public broadcasting
 3        concerns, on its agenda as it considers the mandate that
 4        it was given by the President and the Vice President? 
 5        Well, first of all I'd say that the public appreciates the
 6        services that public broadcasters provide.  You may have
 7        seen reference to a recent Roper poll in the New York
 8        Times last week.  After the national defense, the public
 9        rates public radio and public television as two and three
10        in the things that their tax dollars are most worthwhile.
11                  You'll note, too, in the written testimony that
12        was provided to you by American public television stations
13        and the public broadcasting service the variety and the
14        exciting variety, I would say, of services, of community
15        services, educational services, that public broadcasters
16        are currently providing around the country.  That
17        testimony concludes with a brief paragraph which I will
18        read:
19                  "Some would ask why a renewed government
20        commitment to public television is necessary in the
21        digital age, when an unprecedented capability for
22        expansion of commercial channels may be promised.  The
23        answer is simple:  Only public television has as its core
24        and mission to assure that all Americans have access to
25        high quality educational and cultural services, regardless

 1        of their appeal to the commercial marketplace.  With the
 2        potential of increasing the number of available channels
 3        exponentially, it is imperative that public television's
 4        unique noncommercial voice does not become diluted."
 5                  We've also provided to you a history, a
 6        legislative history of public broadcasting, both so that
 7        you can see the consistent pattern both from the
 8        Congressional side and from the Federal Communications
 9        side of the support for the educational, informational
10        services, that the public should have access to those
11        educational and informational services without regard to
12        the technology that is used to deliver them. 
13                  I would also commend another piece of testimony
14        that we've provided to you.  It describes a particular
15        state network, West Virginia, because it's a rural,
16        isolated state, and how in one particular state the
17        education services and the other noncommercial services
18        that the station provides are providing, we believe,
19        extraordinarily effective services to the state.  The
20        Executive Director of West Virginia Public Television is
21        Rita Ray, and Rita tells the story of a single mother who
22        was struggling to raise two young children in rural West
23        Virginia.  She was, quite simply, overwhelmed by the
24        challenges of parenthood and she felt an increasing
25        desperation that her parenting skills were inadequate. 

 1        She had no one to turn to.
 2                  This young mother writes that one night, with
 3        the children put to bed, she lay exhausted in front of the
 4        television and happened on a program on her local public
 5        broadcasting station that featured a professor from West
 6        Virginia University who discussed, of all things, how to
 7        handle the common problems parents face in raising
 8        children.
 9                  She was mesmerized.  She watched every week
10        after that, and to this day she is thankful to public
11        broadcasting for showing the kind of programming that
12        simply is not available anywhere else.  22 years later,
13        this young mother runs West Virginia public television. 
14        Rita Ray was that person, and that is her sort of personal
15        testimony to the value that the public broadcasting has
16        provided over the years.
17                  To conclude, I'd like to offer three thoughts on
18        your deliberations.  When you look at all of this, I would
19        encourage you to look at public broadcasting's 30-year
20        track record, and whatever guidelines you eventually
21        recommend we think should take into account the fact that
22        public broadcasters already do the things you want done. 
23        The more flexibility we have as public broadcasters in
24        carrying out our mission, the better we will be able to
25        execute that mission.

 1                  Secondly, the law of unintended consequences is
 2        something that we really need to look at here. 
 3        Prescriptive regulation often leads to consequences that
 4        are unintended.  That we think will be the thing that will
 5        challenge the wisdom of this committee more than anything
 6        else as it goes forward.
 7                  The only sort of specific recommendation is one
 8        that you have heard already, and that is community,
 9        community, community.  In other words, to the extent that
10        we can focus on the needs of the community and how the
11        locally licensed broadcasters can serve those needs we
12        would be providing an important and lasting service to
13        those communities.
14                  Digital television offers the prospect of
15        narrowing the gap between the information-rich and the
16        information-poor because it is universally available and
17        because it is available at virtually no cost.  That's an
18        important element that you need to consider, we think, as
19        you go forward.  But it's also important, as I was reading
20        in preparing for this meeting, to keep in mind I think
21        something that the Vice President said in his opening
22        remarks to you when you had your first meeting:
23                  "You must strive to design rules and principles
24        that are flexible enough for a technology that will change
25        very rapidly and is still wildly unpredictable."

 1                  Certainly as we've looked at this and as you've
 2        heard from the other panelists, we really don't know where
 3        this technology is going to go.  We don't know for sure
 4        how it's going to evolve, and it is very important that
 5        the recommendations that you make take that into account.
 6                  Thank you.
 7                  MR. DECHERD:  Bob, thank you very much.  Norm is
 8        going to conduct the rest of the meeting.  I want to say
 9        thank you again to each of you and, as a handoff to Norm,
10        ask each of you to address a question we posed this
11        morning to the other panel, and that is:  What is your
12        view of competition in the television and broadcast
13        industry going forward?  What are the sources of
14        competition, and what's your speculation about diversity
15        of programming sources in the future?  Don?
16                  MR. CORNWELL:  That's quite a question.  I just
17        observe that our essential view within our company is that
18        we exist and compete in a business that is essentially
19        losing share, there are enormous other sources of
20        competition affecting us every day, and that they are
21        virtually unpredictable in terms of their impact on our
22        business.
23                  So we have to conduct our business with the
24        assumption that we will be competing for a smaller pie, as
25        opposed to a larger pie.  I'm not sure if that's

 1        responsive.
 3                  MR. DECHERD:  That's very responsive.
 4                  Bob or Bob?
 5                  MR. WRIGHT:  Well, that's a question, Robert,
 6        that we agonize a lot about.  We've had the good fortune
 7        of being successful, but it's not without a lot of
 8        competition.  I follow something that has a lot of meaning
 9        to us and I grabbed a copy of it coming down here.  This
10        is the list that I look at in the course of a week, and
11        it's a list published by the Nielsen Company that measures
12        television viewing networks as they define them in the
13        country.
14                  They now are measuring -- this doesn't
15        necessarily mean every network is in here.  These are the
16        ones that have elected to become measured.  They have
17        either paid for the right to be measured or they have been
18        selected to be measured.  There are now 260 network
19        television services recognized by Nielsen.  Many of these
20        are regional, many of these do not go over the whole
21        country.  Some of them are time-shifted versions of the
22        same.  But there are 260 different measured networks.
23                  Every day I get a list of 40 of the most popular
24        networks.  Now, these are non-broadcast networks.  I
25        should have prefaced that.  These are all cable networks. 

 1        They're available on satellite and they're available on
 2        cable television systems.
 3                  Just to refresh you, cable passes by about 90
 4        percent of the homes in this country and they feed, they
 5        are actually subscribed to by, something over 70 percent. 
 6        Direct TV is theoretically available to 100 percent of the
 7        homes and has a penetration of, I guess between the two
 8        services, of about 6 million today.  Well, if you add the
 9        older dishes it's probably about 8 million.
10                  Nielsen publishes a list of the 40 most popular
11        services that are on cable and DBS and they rate them
12        every day.  In other words, they're rated every morning I
13        get a list of these services.  I think the answer to the
14        question is that there is an inevitability here that we
15        are going to see more and more fragmentation of the
16        audience.  Many of these services are very narrowly cast,
17        as you have to be to be successful in this world.
18                  So I think we're in a very, very fragmented
19        world, and broadcasters have to continue to reach out, to
20        try to reach as large a portion of the communities they
21        serve as possible.  And I think more and more we are in
22        the information -- we're always in the entertainment
23        business.  We're in the information and news business on a
24        primary basis.  They'll all be hard niches for us to hold
25        onto in the world going forward.

 1                  These are all subscriber-supported services. 
 2        They receive advertising and they receive subscriber
 3        support, which you need in cable.  Broadcasters, of
 4        course, only have advertiser support.
 5                  MR. COONROD:  In public television the national
 6        audience, the audience for broadcast television, is
 7        holding.  It's going up slightly.  But clearly the
 8        competition is coming from the non-broadcast areas, and
 9        not just cable and direct satellite, but also increasingly
10        services that are available over the Internet, and that's
11        certainly something that everyone is looking at.
12                  MR. DECHERD:  Thank you. 
13                  Norm.
14                  CO-CHAIR ORNSTEIN:  We will open up to our panel
15        as a whole.  Let me suggest just one small variation of
16        the format from this morning, which is, to keep our
17        discussion focused, if you have a question that's a direct
18        follow-on to something that has just happened, if you can
19        -- you probably can't reach your cards -- lift a couple of
20        fingers, so that we can keep ourselves focused since we
21        have a very short amount of time.
22                  Newt.
23                  MR. MINOW:  For Bob Wright:  Bob, in your decade
24        at NBC you very wisely diversified.  You're in cable as
25        well as over-the-air broadcasting.  Do you think the same

 1        public interest obligations, whatever they are, should
 2        apply to both cable and over-the-air broadcasting?
 3                  MR. WRIGHT:  In some form, yes.  There's no
 4        reason, there really is no -- the distinction is
 5        artificial.  They're all licensed.  Every cable system is
 6        a licensed service.  It's a government-licensed service. 
 7        It's licensed generally locally, but it's regulated under
 8        Congressional mandate, the same as broadcasting.  So that
 9        the distinctions are more historical than they are real.
10                  There's no fundamental reason why a discussion
11        like this should just be on the basis of broadcasting.  As
12        a matter of fact, to make a point more clearly, if this is
13        a Willie Sutton issue, you know, if the issue is to find
14        the bank with the money as the one you're going to rob,
15        then you're seeing -- you're only dealing with part of the
16        audience when you're talking to us.
17                  There is a very large and quickly growing part
18        of the audience that's not sitting at the table, which is
19        represented by the cable television industry and its
20        services.  So whatever your conclusions are, I would think
21        that you'd want to get the maximum impact.  If you're
22        going to get the maximum impact, you've got to get to the
23        services that reach all the viewers.
24                  We have recently gone through a long period with
25        children's television.  I personally found that to be very

 1        distressing, not because children's television isn't
 2        important, but because it was untimely.  We have lost our
 3        lock on children's audiences some time ago.  That trend
 4        line was obvious 10 years ago, and there are simply a
 5        number of cable services that do nothing but children's
 6        programming and they're very popular, and they should be
 7        very popular.  And they have mixed programming.  Some of
 8        it's very good and some of it's not.
 9                  But the point of it is that when we look back,
10        even today -- I just looked back coming down here -- the
11        fall programming that the networks are offering, which is
12        now under the guide of the FCC regulations in terms of
13        formatting and timing and so forth, there's -- and I
14        compare it to 1993 when we began this debate -- that
15        programming is more or less -- everything isn't perfectly
16        identical.  The audience has slipped about 42 percent
17        between 1993 and today.  And basic cable, which has the
18        largest audience of children's programming, is up 70
19        percent. 
20                  I don't think that's -- that's just a reality. 
21        It isn't right or it isn't wrong.  It's just a reality. 
22        Whole new networks are coming on with children's
23        programming.
24                  So I ask you to consider.  You have to look at
25        the totality of what people that are watching television

 1        are looking at, how they get it, if you want these
 2        conversations, I think, to be as effective as you hope
 3        they will be.
 4                  CO-CHAIR ORNSTEIN:  Peggy.
 5                  MS. CHARREN:  I hesitate to really get into how
 6        I feel about those last comments, because I don't want
 7        this process to re-argue a debate that consumed the last
 8        30 years.  We don't have that much time here. 
 9                  I'm sort of breath-struck by the fact that you
10        brought up children's television.  I really thought there
11        wouldn't be even an opportunity to even mention it to you,
12        because it was sort of not quite what we were doing here
13        specifically.  But since you came on it that way, I think
14        I have to say that the only reason that you have to deal
15        with the Children's Television Act, Bob, is that over 30
16        years it was obvious to a lot of people that children's
17        television issues weren't getting solved except when
18        Washington opened its mouth, and the issues I'm talking
19        about are not sex and violence, but choice and diversity,
20        which is the only way I think you can define the public
21        interest, enough choices.  The same is true with adults, I
22        think.
23                  And in the seventies, after the FCC opened its
24        mouth very carefully under another Chairman than the one
25        that just left, there were some very interesting things

 1        happening in children's television.  And when Ronald
 2        Reagan got elected, and that was the famous "they're just
 3        a toaster with pictures" -- I was in the Waldorf when that
 4        happened -- 20 people in CBS' news department who were
 5        working just on children's television got fired almost in
 6        one week.  They called me and said:  Can you save our
 7        jobs?
 8                  So that what this has taught a lot of people is
 9        that when Washington talks people in broadcasting circles
10        listen.  If they had been more public interest-oriented
11        when it came to children in the first place, they never
12        would have had the Children's Television Act now.
13                  Maybe that's enough to say.  But if there's any
14        experience that convinced me that this is a reasonable
15        panel to at least consider the issues that digital will
16        bring up, this is the time to do it.  That doesn't mean
17        that we can't be flexible.  That doesn't mean that we say
18        you have to do this versus that.  
19                  But this is very much like the issues in 1934,
20        when broadcasting in this country was sort of created as
21        an institution, and we didn't know how television was
22        going to work.  We didn't know that it was going to be a
23        kind of license to print money.  But we said:  You have a
24        public interest obligation.  
25                  If it weren't for those seven words in the

 1        Communications Act, which broadcasters think of sometimes,
 2        I think -- I don't mean all broadcasters, just some
 3        broadcasters -- as the seven dirty words -- "to serve the
 4        public interest, convenience, and necessity" -- then I
 5        wouldn't have had anything to hang this whole campaign on
 6        and we would still be at the point where what works in the
 7        marketplace works for children, to say nothing of the fact
 8        that children who don't have cable don't have any of the
 9        nice things that you just talked about at the end.
10                  And the whole purpose of the Communications Act
11        is to guarantee that with the license, that license to
12        serve all children, and all adults too, comes an
13        obligation.  And I do not think that the broadcast
14        industry has proved that it's ready to do that kind of
15        thing without some comment from the government.
16                  I wasn't going to do that at all in this
17        proceeding, but I felt I had to after those comments.
18                  CO-CHAIR ORNSTEIN:  Do you want to reconsider
19        those remarks, Bob?
20                  MR. WRIGHT:  No, but I would ask you:  Don't
21        forget; if you want to seriously engage in this process,
22        you have to familiarize yourself with current viewing
23        patterns, who's watching, how do they watch it, how
24        popular are certain networks and shows, how do they get
25        into the home.

 1                  I mean, it's very important to deal with that,
 2        with that issue, to have an effective dialogue.
 3                  CO-CHAIR ORNSTEIN:  Cass.
 4                  MR. SUNSTEIN:  These were very informative and
 5        excellent presentations, and I'm thinking how to bring it
 6        into contact with this morning's panel, which was mostly
 7        about the relationship between broadcasting and democracy. 
 8        Now, there's some evidence that local news has an
 9        increasingly high percentage of coverage of gruesome
10        events -- in Chicago that's very popular -- and discussion
11        of the real world events that underlay the prime time
12        movie that preceded the news.  And there's also data
13        suggesting that national news is increasingly dominated by
14        sensationalistic accusations, sound bites, and in the
15        context of political campaigns horse race issues rather
16        than substantive discussion, like who's ahead and who's
17        behind, rather than what people are actually saying.
18                  This is really a question for Bob Wright.  His
19        presentation I thought was really quite wonderful.  But
20        let's assume that something like the account just given is
21        true, that is that local news is dominated increasingly by
22        this kind of material and national news is fulfilling the
23        aspiration of journalists, who went to school to be
24        journalists in news.  If something like this is true and
25        something should be done about it -- let's assume both of

 1        those -- what could be done about it?
 2                  MR. WRIGHT:  I guess you're going to have to
 3        wrestle with that one by yourself, because I can't make
 4        those assumptions.  I mean, those are hypotheticals that
 5        create -- that put yourself in a situation where
 6        everything is a problem and drastic change is necessary.
 7                  I think one of the things that broadcasters have
 8        been good at and will have to be very good at to survive
 9        is to adapt.  We have to adapt to the larger world of how
10        people receive information, news and information.  We have
11        to adapt to their views of what they expect video to be
12        versus print or versus other forms of receiving news and
13        information.  We can't really be behind on that.  We have
14        to be current.  
15                  And we have to know how to reach different kinds
16        of audiences.  Broadcasting by its nature goes into every
17        home, so we have to deal with people that have higher
18        education, people that have very limited education, people
19        that are living in ghettoes, and people that are living in
20        very affluent neighborhoods, people who are extremely
21        literate in news issues, and other people who aren't and
22        we wish were a little more interested. 
23                  So yes, we have to homogenize a lot.  We have to
24        offer it in a way which is going to entice as many people
25        as possible to become involved.  And that itself I think

 1        creates a problem in the sense of trying to critically
 2        analyze it.
 3                  But that's what we do.  That's what we do with
 4        entertainment and news and sports.  We offer a product
 5        that is basically designed to be attractive to as many
 6        people as possible in ever growing more and more diverse
 7        communities. 
 8                  I give you an example.  I could do New York,
 9        which is very easy, but I'll give you one that's even more
10        pointed.  In Los Angeles, in the city of Los Angeles,
11        television viewers inside the city, the population is
12        reaching near 40 percent Hispanic.  Now, we reach greater
13        -- our signal goes way beyond Los Angeles, even though Los
14        Angeles is very large, and it goes into largely white
15        communities on the outside.
16                  So we have great differences of audience.  We
17        don't want to alienate those Hispanic viewers.  They range
18        from people that don't speak English well to people that
19        are very, very bilingual.  And yet we're still trying to
20        reach people out in the suburbs.
21                  So our news product, the information, which is
22        the most popular in Los Angeles, I'm happy to say, for
23        this moment -- these things change -- it's a real
24        challenge, how to put those programs out every day, those
25        hours of programs, in such a way that somebody in the

 1        center city of Los Angeles would be interested and
 2        hopefully informed and somebody out in the suburbs that
 3        says, well, I can't deal with that, I have no interest in
 4        it -- you try and do that balance.  I think that causes a
 5        lot of the -- well, some of the apprehension that you're
 6        expressing in your hypotheticals.
 7                  CO-CHAIR ORNSTEIN:  Bill, then Bob.
 8                  MR. DUHAMEL:  I just wanted to follow up on that
 9        with the multicasting possibilities of digital, because
10        I've heard where they're talking about possibly on a
11        newscast isolating it geographically, but it also could be
12        on an ethnic basis, as you mentioned in L.A.
13                  MR. WRIGHT:  Yes.
14                  MR. DUHAMEL:  Or else you could get into maybe
15        where you start trying to cover the same story, but in
16        different levels.  I'd assume there would be some
17        possibilities that could come from this that would expand
18        broadcasters' options available.
19                  MR. WRIGHT:  Yes.  What I was trying to say in
20        my earlier remarks, though -- and this is where it sounds
21        like we're not sure, and the answer is we aren't sure. 
22        The whole idea for advanced television originally was to
23        make sure -- it was a Congressional initiative that dates
24        back to 1985, when there was a view that somehow America
25        was losing its ability to have the best television. 

 1                  When we got into it, the issue was to make sure
 2        that broadcasting in this country was offering the highest
 3        quality picture that was economically possible to be put
 4        out, and that's how we got into advanced television. 
 5        Digital came along and became an integral part of it.
 6                  But the difficulty or the awkwardness here is
 7        that digital has got so much capability that the
 8        resolution levels are potentially so high, that the upper
 9        resolution levels, HDTV and so forth, will chew up all of
10        the spectrum available.  We don't know if people are
11        really going to buy sets designed primarily for that
12        viewing.  In some respects we hope they will. 
13                  At this juncture it seems likely we're going to
14        see an ever-escalating need to apply spectrum for the
15        single picture.  Now, the Corporation for Public
16        Broadcasting has looked at it and said:  Listen, we're
17        going to try during the day to offer multiple, multiple
18        channels of programming, and possibly at night or other
19        we'll offer the full, we'll occupy the whole screen, in
20        which case during that whole screen process there is no
21        opportunity to do what you're talking about.
22                  So I think we're going to experiment in that
23        area.  But I caution you that I couldn't make a
24        commitment, I wouldn't commit to anything, whether it's
25        entertainment or news, that we would do four channels of

 1        programming going forward, because it may turn out to be
 2        that our future is in one channel of programming and it's
 3        driven by the marketplace which says that the high quality
 4        pictures are very, very popular and you'd better be there. 
 5        That's one of the issues that you can't pin down today.
 6                  CO-CHAIR ORNSTEIN:  We've tapped into veins of
 7        some interest with this one, so let me.  There are a
 8        couple follow-ons here.  Let me start with Rob Glaser --
 9        was yours a follow-on to this, Karen?
10                  MS. PELTZ STRAUSS:  This was something earlier.
11                  CO-CHAIR ORNSTEIN:  We'll come back to that if
12        we can, and I'll turn to Gigi after Rob.
13                  MR. GLASER:  The question I have relates to your
14        comments about not wanting to incur any -- I think you
15        said, most of the time you said not incur any new
16        obligations to the public interest, and at times you said
17        not have any impediments at all.  Would your view be
18        different or modified of there was some weighing criterion
19        to establish a set of requirements on any digital
20        broadcast, whether using spectrum or going through a
21        coaxial cable or through satellite delivery?
22                  In other words, is the issue having consistent
23        rules for any transmission method as long as those rules
24        were sufficiently flexible to enable the kind of
25        innovation that we all believe and hope is going to happen

 1        in the next several years?  Or is it different than that? 
 2                  MR. WRIGHT:  I think the answer to that is yes. 
 3        But I think the point I was trying to make is, if you want
 4        to deal with the impact of digital television in this
 5        country and try to look for guidelines, then you ought to
 6        try to capture all the delivery mechanisms and the way
 7        it's going to be received.  That was the second.  We only
 8        represent, we only represent part of that.
 9                  But the other point I was making earlier is, if
10        it turns out that all digital is, or not all it is, but
11        that it goes primarily, it's the same service we have
12        today, offered in a much more exciting format, one
13        service, there in theory is no need for additional --
14        there is no occasion to create additional obligations,
15        because the obligations we already have are the same. 
16        They go into this -- it's the same service.  That was the
17        first point.
18                  MR. GLASER:  And the follow-up for that is: 
19        Stipulating the point that in a world where consumers want
20        the greatest possible signal quality you'll want to use as
21        much of that 6 megahertz as possible for a great signal,
22        surely under almost any scenario when it's a digital
23        system, when there's all kinds of opportunities for
24        interactivity and ties to the various interactive or web
25        offers you have, it would seem to be there will be

 1        additional services and features.  It might be in a single
 2        channel paradigm.
 3                  So there's no scenario I can envision --
 4                  MR. WRIGHT:  I think that's correct.
 5                  MR. GLASER:  Okay.  I just want to make sure we
 6        agree that there will be new services.  It's just it's far
 7        too early to say what the channel paradigm will be.
 8                  MR. WRIGHT:  But the services, when you use the
 9        word "services" in this debate, it sounds like economic
10        services.  Services may just be providing more data
11        support for video.
12                  I give you an example even today.  For those of
13        you that watch sports, if you look back at sports on
14        network television 10 years ago, you would have seen a
15        screen largely filled with the sport, baseball or football
16        or basketball.  That's all you would have seen.  You look
17        today and we have lots of other things on that screen
18        today.  We have the local station identification, we have
19        the network identification, we may have scoreboards up on
20        the side.  We may have -- we may have electronic tickers
21        showing the scores in other games and so forth.
22                  If you want to go one step further and go to
23        ESPN2, you'll see that the actual screen, the picture, is
24        reduced to only about half of the size of the screen, and
25        it's filled with other, what I'll call services, which is

 1        other kinds of data -- games coming in regionally,
 2        overnight information, and so forth.
 3                  For those of you that ever watch Bloomberg
 4        Television, a competing service of ours, they've taken
 5        that to the point where the picture in the screen is only
 6        a tiny portion of the screen and the whole rest of it is
 7        filled with data, which is changing in front of you all
 8        the time.  Now, that isn't for everybody.
 9                  But those are services that in the digital
10        world, they'll be easier to do.  My guess is that we will
11        all be doing a lot of that, which is throwing a lot of
12        other information, hopefully trying to be a producer, if
13        you will, for people who, rather than sending them to
14        their PC to go to the web to figure out, to get some data,
15        we're going to try to get smart people to think fast
16        enough to be able to provide that, anticipate what people
17        would want and provide it on the screen.
18                  That will be more informative.  If we didn't
19        know what happened in the last 10 years, though, and I
20        think if we ran into somebody's home and we just showed
21        them that, they would be frightened by it.  But we've
22        gradually moved into a data supplementing video service,
23        and I think more and more that is going to happen.
24                  CO-CHAIR ORNSTEIN:  Let me just suggest, Bob or
25        Don, if you have anything to add to these responses, just

 1        chime in. 
 2                  Gigi.
 3                  MS. SOHN:  I just, I nearly jumped out of my
 4        seat at this impression that the government, the FCC and
 5        Congress, forced broadcasters to transfer to digital.  Mr.
 6        Wright, you're wrong.  If you have read -- and I suggest
 7        this to everybody, to read the first couple chapters of
 8        Joel Brinkley's book, "Defining Vision."
 9                  The reason that we are in this debate is because
10        broadcasters wanted to keep the adjacent channels out of
11        the hands of land-mobile operators, and they asked. 
12        Broadcasters petitioned the FCC in 1987 to have the use of
13        these channels for high definition television.  That's the
14        history.  And nothing, absolutely nothing in the
15        Telecommunications Act of 1996, requires the FCC to give
16        these channels to the broadcasters.  Congress did not
17        require it, the FCC did not require it.  The broadcasters
18        asked for it.  So let's get past that right now.
19                  I've got two questions on cost I'd like to ask
20        of Mr. Wright, but if that's not appropriate now --
21                  CO-CHAIR ORNSTEIN:  We'll hold other questions
22        for now.
23                  MS. SOHN:  Okay.
24                  MR. WRIGHT:  I don't think that's an accurate
25        statement, but I'm not so sure debating at this point is

 1        helpful to the committee.
 2                  CO-CHAIR ORNSTEIN:  Okay.
 3                  Charles, did you have -- was this a follow-up?
 4                  MR. BENTON:  No.
 5                  CO-CHAIR ORNSTEIN:  All right.  Then let me turn
 6        to Karen.
 7                  MS. PELTZ STRAUSS:  This question is for Mr.
 8        Cornwell.  In your testimony, your oral and your written
 9        testimony, you said that you don't believe that the
10        Nation's regulators are in a position to dictate to the
11        local stations how to serve the local communities.  This
12        morning one of the subjects they came up with was bringing
13        back the ascertainment requirements.
14                  How do your stations currently ascertain these
15        needs, since you say that you are addressing them, and
16        would you be in favor of bringing back those requirements?
17                  MR. CORNWELL:  I'm not sure if I have an answer,
18        quite frankly, to the latter question, which is would I be
19        in favor of bringing them back.  I guess I'm not really in
20        favor of lots of additional requirements, and I guess you
21        can understand why I have that viewpoint.
22                  But with regard to the first question, which I
23        think is the more important one, which is how do we
24        ascertain, I think we really do it in the old-fashioned
25        way that broadcasters have done for many years, which is

 1        that we get out and we get to know our community and we
 2        make sure that we know the community leaders from all
 3        walks of life.
 4                  We even have a requirement in our company, and
 5        we're a relatively small company, a relatively new
 6        company, but we insist that corporate officials also
 7        occasionally visit our communities of service, so that we
 8        too can get to know what's going on in the communities and
 9        what people are thinking about.
10                  So the process is really not different than the
11        way it would have been done when there was a requirement
12        to do it.
13                  MS. PELTZ STRAUSS:  If I could just throw in one
14        or two quick captioning questions, I work for the National
15        Association for the Deaf and I just have two quick
16        captioning questions, one for Mr. Cornwell and one for Mr.
17        Coonrod.
18                  Also in your testimony, you mentioned that you
19        broadcast candidates' debates, and I wondered about the
20        commitment to captioning those debates and, similarly, to
21        a commitment -- in your testimony you spoke, Mr. Coonrod,
22        of public television serving the needs of the K through 12
23        population.  And I'm wondering if you can comment on
24        captioning instructional television. 
25                  MR. CORNWELL:  I'll talk about the captioning of

 1        the debates question.  We with our stations, they all
 2        closed caption.  Only two of our stations at this point
 3        are closed captioning in a live sense, which as you know
 4        is more expensive.  We have that commitment internally to
 5        move towards being a 100 percent live closed captioning
 6        over time, but it will take a little longer for us to get
 7        to that perspective or to that point.
 8                  I'm not sure, to be honest with you, whether we
 9        closed caption debates or not.  I wish I could answer the
10        question, but I don't know the answer.  I would suspect
11        that in our Austin station, just because of some
12        technology they have and the way they approach things,
13        that they do.  But I don't know the answer in other
14        markets. 
15                  MR. COONROD:  In the K-12 area, that's one of
16        the areas where the additional data, the additional data
17        capability, would come in very useful to this sort of
18        thing.  Since most of these courses are text-based,
19        they're syllabus-based, it would be possible to provide
20        some version of closed captioning along with the program
21        itself, and that's certainly something that the
22        broadcasters are looking at.
23                  I just might add one thing on the ascertainment
24        issue.  One of the ways that public broadcasting has done
25        it traditionally is that all noncommercial educational

 1        licensees who qualify for support from CPB must maintain a
 2        community advisory board, and it is said in the law what
 3        the community advisory board does.  It basically is a way
 4        that the community can comment on the programming that is
 5        on the public radio or television station, and that's a
 6        direct means of getting community input.
 7                  CO-CHAIR ORNSTEIN:  Is this a follow-on?
 8                  MR. CRUMP:  Yes.
 9                  CO-CHAIR ORNSTEIN:  Okay, please.
10                  MR. CRUMP:  I would like to add a little bit
11        more to this ascertainment situation, too, to Don's
12        answer, in that during the lunch break Jim Goodmon and I
13        were talking about this same subject and pointing out to
14        each other that, for instance in the Twin Cities market,
15        we still as a market do community ascertainment.  Once
16        every quarter all of the stations come together.  We do it
17        for an entire day.  We invite community leaders in.
18                  And in our other markets where we have Hubbard
19        stations, either the stations or the markets do that, and
20        we have continued to do this all the way along from the
21        time that supposedly the obligation was abolished.  We
22        just never have stopped because we think this is the way
23        to find out what the interest level is on various subjects
24        within the community. 
25                  I think this is pretty widespread.

 1                  CO-CHAIR ORNSTEIN:  Okay, Charles.
 2                  MR. BENTON:  Sort of following on Peggy's
 3        comments, I'd like to take just a minute on broadcasting
 4        and education.  I think it's clear that education
 5        represents a great opportunity for broadcasting that has
 6        by and large not been addressed.  My old friend Nick
 7        Johnson said that all films are educational; you may not
 8        like what they're teaching, but they're educational. 
 9                  But in the sense of broadcasting for school and
10        for life-long learning and for daytime -- I'm not talking
11        prime time; I'm talking daytime -- with the opportunity of
12        the new channels that are there, and essentially the
13        collapse of audiovisual materials produced specifically
14        for education, which I know of very well, having spent
15        much of my life in that arena, caused by the down-pricing
16        of home video and the avalanche of the $60 billion
17        business that is upon us for home video, there is a great
18        opportunity here for meeting educational needs.
19                  In the U.K. the budget for broadcasting for
20        schools, not home education, not the university, not
21        anything like that, but for schools, is $50 million. 
22        Here's a country that's one-fourth our size.  That's both
23        BBC and Channel 4, commercial television, $50 million.  If
24        we spend $10 million in this country on schools
25        programming, that's probably more than we are spending. 

 1        So we have a huge resource problem and a big gap.
 2                  PBS, while they talk a lot about education, from
 3        the standpoint of programming specifically produced for
 4        in-school use, they're doing almost none of it.  That
 5        doesn't address Sesame Street and all the wonderful other
 6        things that they're doing.
 7                  But I'd like to hear from each of the panelists
 8        because there are some opportunities here.  The commercial
 9        networks used to do Sunrise Semester, 6:00 o'clock in the
10        morning, the opportunity for English as a second language
11        programming for the tens of millions of people that don't
12        and can't speak English but will watch television, and the
13        opportunities for schools programming which PBS simply has
14        by and large ignored.
15                  I'd like to just -- I'm not trying to be
16        confrontational here, but I would like to have some
17        constructive and creative response to the challenge to
18        broadcasting in a digital age that's provided by education
19        and the needs of education, the needs of education both in
20        school and life-long.
21                  MR. CORNWELL:  I'll leap in, with temerity.  I
22        would say that to some degree your question for me
23        captures one of the difficulties here, and Bob and others
24        have talked about it.  That's that in a digital
25        environment where we will have multiple channels, arguably

 1        people will have digital receivers, but at this point in
 2        time people don't have those receivers.  So, given the
 3        business model that we have, what we can do with regard to
 4        educational programming tends to be using our television
 5        stations as leverage to try to enhance the notion that
 6        it's important.
 7                  Now, what we've tried to do as a company -- and
 8        it's just something that is of interest to us; there's no
 9        particular -- we're not patting ourselves on the back for
10        doing it.  But as we have observed the growth of the
11        Internet and the fact that the PC is becoming ubiquitous
12        and is at least available to some children, if not all,
13        we've attempted to use the Internet and the power of our
14        television stations to -- and I'm sorry, Bob, but we do
15        drive people in a sense away from television occasionally
16        -- to go to our web sites, where we provide such things as
17        homework, home pages, and other ways in which younger
18        people, children, can help themselves in their educational
19        endeavors.
20                  But we're not in the educational programming
21        business at this point.
22                  MR. COONROD:  A couple of comments.  One of them
23        I think is sort of the general one about the revenue
24        models.  It's very difficult.  We're doing a lot of this
25        right now, coming up with -- we're noncommercial

 1        broadcasters -- coming up with revenue models that work in
 2        this area, which is not to say that we won't come up with
 3        them.  But that is a challenge and that's part of what we
 4        need to explore.
 5                  So it isn't easy to come up with revenue models
 6        for education that can work.  That said, there are a
 7        number of things that I think you'll be seeing soon from
 8        PBS that will be going directly along the lines that
 9        you're suggesting.  These are going to be unveiled first
10        on PBS services, but then they would be available in a
11        multicast environment for broadcast.
12                  Part of it will come from the Annenberg-CPB
13        projects we're putting together, the Annenberg-CPB
14        channel.  But PBS is also putting together, for lack of a
15        better word, an E channel, an education channel, and a
16        life-long learning channel.  Those kinds of things are
17        currently in development. 
18                  In addition to that, I would refer you to the
19        commitment that public broadcasters, both at the national
20        level and at the local level, are making using the
21        Internet and the joint cooperative project that was
22        announced earlier this week between PBS, IBM, and CBS
23        Sports to use the Olympics as a means of teaching science
24        and physics in schools over the Internet, but the video
25        would be supplied by CBS Sports, the technology would be

 1        supplied by IBM, and the mediating of all of that would be
 2        done by PBS.
 3                  So there are some rather exciting initiatives
 4        under way right now.
 5                  MR. WRIGHT:  I don't have a great answer to
 6        that, either.  You describe a real issue, but I think we
 7        are in the middle of a lot of technological change.  If I
 8        had to guess, I'd say that you're going to have an awful
 9        lot of educational product coming through the Internet
10        over the next few years.  
11                  Today it's at the high end.  It's at the
12        university level or at least it's at the out of school
13        level of training.  If you look to the front page of the
14        MSN network, you'll see there's something different all
15        the time.  It's the University of Phoenix, one of the
16        great virtual schools, offering a full line of college-
17        accredited programs.  And we're going to see a lot of
18        that. 
19                  How long is it going to talk to get down to the
20        lower grades and to have -- you'll have full motion video
21        on the Internet within a couple of years, depending upon
22        the capacity.  Most schools are wired with cable, so they
23        have in theory the right transmission capacity with the
24        cable modem, and I think that's probably what you're going
25        to see.  You're going to see downloading of educational

 1        video coming from Internet services to schools that are by
 2        and large cabled today, and they're going to take that off
 3        there, store it, reuse it, either in a hard form or in a
 4        taped form.
 5                  We're not there yet, but I think that's probably
 6        what's going to happen, and it'll happen very quickly when
 7        it finally does, because once you open the capacity you
 8        can pump through so much.  But it still isn't there today.
 9                  MR. BENTON:  Just one final thought here.  I
10        agree about the Internet and I understand that's another
11        delivery mechanism and I appreciate that, and I know Rob
12        is working on that very hard and others as well.  But
13        there's no substitute for making new programs and making
14        new programs costs money.  So we can't just say, well, the
15        Internet will take care of it.  It will not take care of
16        this.
17                  In terms of, I think, the example, Bob, about
18        the Olympics, that's very interesting.  That's real and
19        that is something concrete.  But we need 100 examples like
20        that, not just one.  And we're not talking about a
21        national curriculum.  We're talking about putting some
22        resources into educational programming, and that means
23        talent and using the unique powers of film and video,
24        moving pictures with color and sound.
25                  There are things that that medium can do best,

 1        better than textbooks, better than other, better than
 2        software.  Let's use the full powers of the medium for
 3        educational purposes, not simply for entertainment.
 4                  CO-CHAIR ORNSTEIN:  Jose.
 5                  MR. RUIZ:  This is along the earlier lines of
 6        the panel this morning.  This morning we heard about how,
 7        without some kind of political finance reform that
 8        included the commercial broadcasters' involvement, that we
 9        would have a decay of our current political system.  We
10        also heard that without better public affairs programming
11        at the local level we would a cease to any discourse in
12        civics.  And I want to make sure I understand where we're
13        at on this. 
14                  For the commercial broadcast, as far as giving
15        away any time for campaigns, you object to that; is that
16        what I understood?
17                  MR. WRIGHT:  I don't think it's feasible.  It's
18        not feasible at all, and I'll explain it in the simplest
19        terms.  Our markets tend to be large, but in a year there
20        are literally hundreds, of not thousands, of political
21        campaigns going, from the public school level all the way
22        through to senatorial campaigns.
23                  Today, as you know, we have obligations to
24        provide equal access to people who are running for office,
25        and that's a very hard obligation to maintain.  We don't

 1        shy away from it, but we're trying to make sure that if
 2        you give access to one person you give it to others.  Just
 3        trying to know, from our own ascertainment and our own
 4        selfish motives of wanting to reach communities, we have
 5        to provide information on those campaigns that we think
 6        are of the highest interest. 
 7                  It would just not be feasible under any
 8        circumstances for us to just provide free advertising for
 9        all candidates.  So what happens is you say, okay, we
10        won't do it for all; we'll just do it for some.  Well,
11        right now we have a discounted service just for Federal
12        races.  Well, you know, that sounds good when you're in
13        Washington, but when I go back to New York or I go to Los
14        Angeles that means that the governor of New York is not in
15        that, that means that the supervisor of the town of
16        Hempstead, the county executive of Nassau County, which
17        has got two and a half million people, is not in there. 
18                  You start making that cut about who's important
19        enough to subsidize or who should get it for free and who
20        should pay for it, I just think it's an impossible
21        situation.  It's not one that we can really deal with and,
22        fortunately or unfortunately, it ends up in the hands of
23        Congress as a Congressional issue.
24                  But it's a very, very -- our issue is to try to
25        cover, provide coverage that we think the audiences are

 1        interested in, and I don't know how we could ever deal
 2        with free time for all candidates.  It just would be so
 3        impractical.
 4                  CO-CHAIR ORNSTEIN:  Bob, let me follow up just
 5        with a couple of questions.  What you're suggesting, then,
 6        is that your objection is not a philosophical one, it's
 7        just a practical one, that it's unworkable?
 8                  MR. WRIGHT:  I don't philosophically object to
 9        having exposure of candidates.  We do that.  That's the
10        bulk of our news programming during campaign periods.  But
11        what I would object to is a philosophical approach that
12        says that all candidates get free air time just devoted to
13        themselves.  We would never be able to deal with that
14        issue.
15                  CO-CHAIR ORNSTEIN:  If you had a practical way
16        of providing time that might work, say through the
17        parties, where they would make the allocation and you'd
18        have very limited, it would be a limited amount, you
19        wouldn't have to provide it to everybody, and the parties
20        would make those decisions, if you could do that in a
21        practical way, are you suggesting then you wouldn't object
22        to that? 
23                  MR. WRIGHT:  You know, it's always the details. 
24        I don't know.  All I know is that for everybody that you
25        provide help for, there are another hundred who are

 1        standing out there saying:  Well, why not me?  And those
 2        are hard issues.  Those are issues when all this is over
 3        we face when we go home.
 4                  CO-CHAIR ORNSTEIN:  Let me ask you all --
 5        actually, let me focus on Don and Bob Wright for this
 6        question as well.
 7                  MR. RUIZ:  Norm --
 8                  CO-CHAIR ORNSTEIN:  I'm sorry, go ahead.
 9                  MR. RUIZ:  Just a second point.  I want to make
10        sure I understand.  On local public affairs programming or
11        public affairs programming, is it my understanding that
12        you feel you're already doing the job and you don't mind
13        doing it?  You just don't want to be mandated to do it; is
14        that my understanding? 
15                  MR. WRIGHT:  Something like that.  We do a lot
16        of that, and we don't object to being directed to doing
17        things like that.  But what happens is these issues
18        usually get bogged down into so much detail.  That's what
19        we object to.  We do it.  We do it anyway.  We do it
20        because it's what we do, and we're going to continue to do
21        it.  Whether you have rules and regulations on that or
22        not, we're going to continue to do it.
23                  So I guess I can't object to something unless I
24        know what it is.  But we do it anyway and we will be doing
25        it.

 1                  MR. RUIZ:  So you are objecting to it because
 2        you feel you already do it.  You don't want to be legally
 3        bound to it, is what I'm trying to understand.
 4                  MR. WRIGHT:  You get down to the question of you
 5        go from generality to specifics, and that's where the
 6        problems usually start to come in.  Who is it?  How often? 
 7        What about this group, what about that group?  We've done
 8        this group twice; do you have to do that group six times? 
 9        That's where the problems start to come in.
10                  We have to have some judgmental issues in this
11        as to how to do this in a way that's practical and
12        workable, that we can communicate to people in the
13        community.
14                  MR. RUIZ:  But it's total trust and faith that
15        we're asked to deal with this? 
16                  MR. WRIGHT:  But when we do it it's on tape and
17        it's on record.  Our constituents are not hesitant to come
18        in and point out to us when they don't think we've done
19        very well, or they're not hesitant to come in and tell us
20        where they don't feel they've had access which they feel
21        is important.
22                  We deal with complaints all the time and people
23        coming in telling us frankly, with no uncertain terms, how
24        they feel they've been treated or not treated.
25                  MR. RUIZ:  But without regulation, what is their

 1        recourse?
 2                  MR. WRIGHT:  Well, that's part of the license
 3        process.  We have to file complaints, we have to file
 4        information on complaints.  People that have objections
 5        about our service have all kinds of methods that are
 6        mandated by the Commission to lodge those complaints. 
 7        It's a very open process.
 8                  MR. RUIZ:  So you're objecting to any new add-
 9        on?
10                  MR. WRIGHT:  Right, yes.
11                  CO-CHAIR ORNSTEIN:  I want a quick follow-up on
12        the campaign issue.  Harold, I think?
13                  MR. CRUMP:  No.
14                  CO-CHAIR ORNSTEIN:  We have a couple follow-
15        ups.  We have Frank and we have Robert, and then we'll
16        turn to some of these other issues.
17                  The follow-up on the campaign issue is, we had
18        some considerable discussion this morning about the lowest
19        unit rate, which you mentioned, Bob, which has often been
20        viewed in the past by broadcasters as a tremendous onus,
21        both in terms of the loss of money and administrative
22        burden.  Several years ago the National Association of
23        Broadcasters had representatives testify in front of
24        Congress that if lowest unit rate were repealed they would
25        be willing to provide one minute of free time in return

 1        for every two minutes of paid political advertising time.
 2                  How do you gentlemen feel generally about the
 3        lowest unit rate?  Would it be worth something
 4        considerable to have it repealed?  And does that sort of
 5        offer which was made by the NAB itself appeal to you?
 6                  MR. CORNWELL:  Let me think about that question
 7        a little bit.  
 8                  I would say that at the working level of
 9        managers they hate the lowest unit rate.  They find it to
10        be very cumbersome and administratively burdensome.  So I
11        suppose that if you were going to take a vote of our
12        managers, they would all want to find some way to get rid
13        of it, and they probably would make that trade that the
14        NAB suggested.
15                  MR. WRIGHT:  I don't know, Norm.  Possibly.  I
16        mean, I don't feel that -- I'm not particularly opposed to
17        the current situation.  We've lived with it, we've learned
18        how to deal with it.  It's complicated.  Unfortunately, I
19        think many broadcasters objected, but in certain states
20        it's really the subject of a lot of litigation and it
21        creates potential liabilities for broadcasters. 
22                  There is a body of the bar, of which I am a
23        member, that has earned considerable fees from this.  So
24        there is sort of a side business of going around suing
25        broadcasters on whether they have given the lowest unit

 1        rate.  It's an enormously difficult system to keep track
 2        of.
 3                  I think, if I go to my local hat, our managers
 4        would say:  Gee, if you could get me out of that one, just
 5        so I don't have the issue of the tabulation, I would be
 6        happy to trade something for it.  I don't know if that's a
 7        good answer.
 8                  CO-CHAIR ORNSTEIN:  That's helpful.
 9                  Frank.
10                  MR. CRUZ:  Thanks, Norm.
11                  Let me ask the three of you, but perhaps, Mr.
12        Wright can address it first.  If giving away free air time
13        to political candidates is a very cumbersome and difficult
14        thing for you to do because of the complexities of the
15        markets and the different needs, and that you have oodles
16        of candidates, if you will, asking for time and that it
17        would be hard to manage, have you given any thought, aside
18        from the unit rate reduction and other factors, have you
19        given any thought to the idea, what would happen if you
20        were liberated from that responsibility completely and the
21        commercial broadcasters didn't have to do that and you let
22        public broadcasting do it; however, you were to kick in a
23        fund so that public broadcasting would be supported, but
24        no political candidates would appear at all on the
25        commercial stations and people would say, you've got to

 1        watch them only on public broadcasting? 
 2                  MR. WRIGHT:  I would be opposed to that, and the
 3        reason I would be opposed is a lot of that is what we do,
 4        and a lot of the reason that people watch us.  You can't
 5        say you're a news reporting service if you can't report on
 6        elections and politics and if you can't constantly have
 7        candidates and elected officials on your air explaining
 8        their policies and practices.
 9                  MR. CRUZ:  Through ads, commercial time?
10                  MR. WRIGHT:  No, through our reporting.  We're
11        reporting -- I was getting to the issue.  We have to be in
12        the reporting of politics, its consequences, its
13        personalities, and its people.  You know, that's what we
14        do.
15                  I thought you were suggesting just don't do
16        that, let all of that happen on PBS.  You must meant the
17        advertising?
18                  MR. CRUZ:  The ads, the soft money and others
19        that the Vice President told us when we first gathered
20        here as a commission, that he asked us to look hard at
21        what he called the steeplechase after money, time after
22        time, election after election, and that we heard about
23        extensively this morning.
24                  I meant liberating the commercial side of any
25        advertising, not covering news or public affairs.  That's

 1        another matter.
 2                  MR. WRIGHT:  I don't know.  Perhaps I would be -
 3        - I think the candidates wouldn't be, though, because the
 4        candidates are going to want to be -- they're going to
 5        want to place their advertising in programs or on stations
 6        that have demographic coverage which they feel is
 7        attractive to them or have shows that have an audience
 8        that they feel is attractive to them.  So you're going to
 9        be restricting their rights to position themselves.  I
10        think they probably would not support that, would be my
11        guess, regardless of whether we wanted to do that or not.
12                  CO-CHAIR ORNSTEIN:  Newt, you had a follow-up?
13                  MR. MINOW:  When Congress passed the
14        Communications Act more than 63 years ago, it took care of
15        one class of citizens, politicians, with the equal time
16        element.  It did the same thing with the lowest unit rate. 
17        Nobody else has that, only politicians.  Based on that
18        record and the current debate on campaign finance reform,
19        it seems unlikely that Congress, unless it's pushed, is
20        going to do much about this. 
21                  What if it were -- maybe it's dreamy to think
22        that the industry and this committee could come up with a
23        challenge to Congress with a reform involving free time
24        and say, put up or shut up?  Would the industry be willing
25        to do that? 

 1                  MR. WRIGHT:  Newt, I'm sorry.  To put up or shut
 2        up in what respect?
 3                  MR. MINOW:  With some basic reform proposal
 4        involving free time.
 5                  MR. WRIGHT:  Well, quite frankly, I don't think
 6        this is an issue that we can -- this is such a complicated
 7        issue and it's all going to be governed by Congressional
 8        action, and I just don't see how we can really be the
 9        driver one way or the other on this one.  
10                  MR. MINOW:  Congress is not going to be the
11        driver.
12                  MR. WRIGHT:  No, but it's in their bailiwick,
13        though.
14                  CO-CHAIR ORNSTEIN:  Paul, you've been waiting
15        for a while.
16                  MR. LA CAMERA:  I'm going to drift back a bit to
17        broader public service matters with Don and Bob.  As was
18        suggested, this morning we spent some time in the past,
19        romanticizing it a bit, but some very good things were
20        said and discussed.  And even before your testimony, I'm
21        well aware of both of your station groups and the good
22        work that they do, including WRC here, which I've always
23        admired from afar.
24                  But in the past 10 to 15 years it has been the
25        competition that's emerged, that Robert suggested.  There

 1        have been the competitive forces, Bob, that you've
 2        discussed.  There's been the consolidation that we all
 3        know about.  There's been the emergence of local news and
 4        the importance of that franchise to local stations and the
 5        promotion coming up with that. 
 6                  From all that, are local stations today from
 7        your perspective less good corporate citizens than they
 8        were 10 or 15 years ago?
 9                  MR. WRIGHT:  Well, from my perspective, no, I
10        don't think so at all.  As a matter of fact, I think this
11        is an area of substantial flux right now and the pendulum
12        is going more and more towards local-local than it has, if
13        it has ever strayed from that. 
14                  I think this goes almost to the question
15        somebody asked about ascertainment.  20 years ago -- and
16        you know this as well as anybody here -- 20 years ago
17        ascertainment was a bit of a check and balance on whether
18        broadcasters, who had little if no competition, were
19        really serving communities where they were making what we
20        perceived to be a lot of money, and they could kind of
21        reach plenty of people and so they didn't have to really
22        bother dealing with a lot of specific parts of the
23        community. 
24                  I think today broadcasters don't have that
25        luxury.  If you want to be successful in this business and

 1        survive with 260 channels, you'd better be reaching
 2        communities, the discrete communities within your
 3        community.  And with more and more communities, especially
 4        in the larger cities, we are now running around like mad. 
 5        We don't call it ascertainment in the traditional sense. 
 6        We're running around in every community we can find to
 7        find out what's important to people, what is it going to
 8        take for them to watch, what are they interested in, what
 9        aren't they interested in.
10                  I think you're going to see a reoccurrence of
11        local programming.  You I happen to know, because I know
12        that station well, you have one of the more successful
13        local programs in the Nation that's not a news program
14        specifically.  It's a program on every night.  I think
15        you're going to see more of that, because we're all
16        desperate to figure out how to connect ourselves with our
17        communities, and that means you have to deal with the
18        diversity in the community.
19                  I think that means you're going to go in there
20        and you're going to find out what is going on in that
21        Hispanic section, can we connect, is there a way for us,
22        is it our shows, is it our newscasts, is it public
23        affairs?  What is it?  Is it entertainment events, is it
24        sports events? 
25                  I think that pendulum is going in that direction

 1        very quickly right now.
 2                  MR. RUIZ:  Can I just follow up?
 3                  CO-CHAIR ORNSTEIN:  We have some follow-ups on
 4        this specific point.  Okay, Robert's been waiting here,
 5        too.  Okay, Don, go ahead.
 6                  MR. CORNWELL:  I just wanted to say I couldn't
 7        agree more with what Bob said.  I really think that in a
 8        sense it goes back to this gentleman's question about
 9        public affairs programming.  The ascertainment process,
10        which is one of those things that happened before I came
11        into this industry, quite frankly, and was on the rule
12        books at that time, is now really, one might describe it
13        as, market research.
14                  We have even found with our public affairs
15        programming -- and I can cite a specific example in our
16        San Jose station -- where, because community groups made
17        it clear to us that they were not happy with what we were
18        doing in public affairs programming, we changed it.  I
19        just think that that's what broadcasters are faced with
20        today.
21                  So that I really think as a necessity to survive
22        in the future broadcasters have to be better.  But I
23        wasn't around 10 or 15 years ago, so I can't compare.
24                  CO-CHAIR ORNSTEIN:  Thank you. 
25                  Jose.

 1                  MR. RUIZ:  My dilemma in all of this, I think,
 2        is that I came into television because of community
 3        pressure, and I started in the public affairs area and I
 4        saw how the prime time access 7:30 to 8:00 was lost and
 5        replaced by the local broadcaster, by syndicated game
 6        shows.  That is heavy revenue and we're never going to get
 7        it back.
 8                  I saw how after-school specials were eventually
 9        lost, that time slot, to Oprah and others.  We'll never
10        get that back.  I saw how early morning children's
11        programming on the networks was lost to Good Morning
12        America and the AM Show, et cetera, et cetera.  Those are
13        now big revenue streams.  They'll never return to service.
14                  I think time through that schedule is becoming
15        more and more at a premium, and you're trying to squeeze
16        more out of every time slot.
17                  The thing that never happened in the early
18        seventies was that nobody ever tried to commercialize
19        public affairs programming, primarily because they didn't
20        believe that -- the first groups were African Americans -
21        - that people wanted to do business, that there were
22        advertisers that wanted to reach that population. 
23        Latinos, the same thing.  Asians, women.  Ironically, even
24        women's programming; nobody at those stations said, hey,
25        I'm sure there are advertisers who want to reach that

 1        population and we could commercialize that, we could make
 2        a revenue stream out of this. 
 3                  So eventually those local stations were glad to
 4        get rid of it.  What I see on my local stations, including
 5        KNBC, is that they produce a very good half-hour news, and
 6        then for the most part, 90 percent of it or 95 percent,
 7        it's repeated four, five, six, seven, eight times during
 8        the day.
 9                  CO-CHAIR ORNSTEIN:  Peggy.
10                  MS. CHARREN:  Just a question.  This morning we
11        talked about how some stations, most of them represented
12        here or at least the stations of people represented here,
13        do serve the public interest, that stations perform
14        differently.  How would especially you, Bob, and you, Don,
15        feel about a requirement for those stations that don't
16        serve the localism as a concept, which supposedly came
17        with the license, a requirement for some minimum, because
18        there are some stations in this country that don't do
19        anything at all versus some stations that are really very
20        service-oriented?
21                  MR. WRIGHT:  I have no objection to that.  I
22        think I have no objection to that. 
23                  MR. CORNWELL:  I'd say the same.  I would
24        observe that I'm always uncomfortable with telling others
25        how to run their stations and so that is an issue.  We've

 1        always felt, quite frankly, that serving the public is in
 2        our best business interest, however.  So we almost like
 3        the fact that some don't.
 4                  MR. WRIGHT:  One of the issues here -- I'd only
 5        suggest this because it's a way.  When we're trying to
 6        make investments, we're trying to think about where this
 7        is going to be 4 or 5 years from now or 3 years from now,
 8        rather than tomorrow.  I've tried to offer some comments
 9        here about trend lines that I see, as opposed to
10        necessarily exactly where we are at this moment.
11                  Going back, you were just talking about some of
12        those day parts.  I'd say that the trend line in access,
13        for instance, most stations aren't making money on access. 
14        They pay so much money for these popular shows, they don't
15        make any money.  I think you're going to find a trend line
16        developing there; this is going to revert back to local,
17        local types of shows.  Not on all the other day parts
18        necessarily, but clearly on that one.
19                  I think that there are trends here.  The FCC in
20        some respects has actually been ahead of this, and maybe
21        criticized for it.  I was upset that Home Shopping Network
22        doesn't have any, doesn't seem to have any public interest
23        obligations.  But then they went to a hearing, and I
24        wasn't there, but I got back.  And basically the
25        Commission's view was -- and you go back and you read it

 1        and you say, well, I can't really find fault.  They said: 
 2        Well, providing shopping services to people in their homes
 3        is a public service.  It may not be for everybody and it
 4        may not be -- it may not be what everybody thinks of it,
 5        but it's a service.  It's beneficial.  There are lots of
 6        people who are in homes who have written us or called or
 7        said that really this is an important part of their life,
 8        for their interest. 
 9                  And the Commission said, if every station did
10        that then it wouldn't make any sense.  But since we have X
11        number of stations, we don't think that having some doing
12        that is --
13                  MS. CHARREN:  But do you think that --
14                  MR. WRIGHT:  That's part of the issue, though.
15                  MS. CHARREN:  Everything's complicated, but do
16        you think that's the community, serving the community
17        local interests?  I mean, I hear what you're saying.
18                  MR. WRIGHT:  Well, I was on the other side of
19        this one, so I'm kind of with you here.
20                  MS. CHARREN:  I understand that, Bob.  But
21        community is different from public interest.  Some people
22        define the public interest as what the public is
23        interested in.  That's really not the point I was trying
24        to make.
25                  MR. WRIGHT:  I think there's an inevitability

 1        here in broadcasting, that these cable services, the 260
 2        today -- it'll be 272 or something -- they offer basically
 3        packaged entertainment and not packaged sports, but local
 4        or regional sports.  Many of these programs were programs
 5        that were unique when they were on broadcast and their
 6        formats now aren't unique any more.  They look very much
 7        alike.
 8                  It's one of the reasons why our programs don't
 9        do as well as you would like, because you've seen it, been
10        there, heard that, or whatever.  I think that broadcasters
11        are having to reach now for different, for
12        differentiation.  And it isn't going to be just different
13        actors or performers.  
14                  That's why I believe the trend line is going to
15        be for broadcasters who can do this, as opposed to cable
16        services, which are nationally or regionally delivered. 
17        They're going to go into local and regional communities to
18        try to find exciting and interesting beneficial things to
19        offer people.  That isn't there today demonstrably.
20                  I'm saying -- if you had asked me the question,
21        how do broadcasters really survive -- turn the tables on
22        me and say:  Well, you've got 260 channels, you guys have
23        no subscriber revenue, you only have advertising, so how's
24        this going to work 5 or 10 years from now -- and the
25        futurists, I mean the true futurists, the Internet

 1        futurists, think we're all dead.  There are lots of them
 2        that have written a lot of good books that'll say that
 3        broadcasting doesn't belong after the year 2000, it's
 4        over; we don't need it; we have the Internet.
 5                  And I think the answer to that is that many of
 6        us are either stumbling into or being pulled into or
 7        forced into or are discovering is that you better do a lot
 8        of things that are local, and you better reach out into
 9        that community.  It isn't exactly a mainstream thought
10        right this minute, but I think that's where we're going.
11                  CO-CHAIR ORNSTEIN:  We had Cass who wanted to
12        make a quick intervention.  Then Robert has been waiting,
13        and then we'll turn to Gigi for some of the cost
14        questions.
15                  MR. SUNSTEIN:  A very quick point.  In Europe
16        it's customary to draw a distinction between the public
17        interest and what interests the public in the context of
18        talking about sensationalistic stories about movie stars
19        and so forth.  And these may be two different concepts. 
20        What it would be very good to have some help on -- I think
21        the trend line today has been toward ways of helping
22        broadcasters in an era of tremendous competitive pressures
23        to find ways to promote the public interest rather than
24        just what interests the public, in a way that doesn't cut
25        into competition.

 1                  And to repeat some version of Mark Fowler's
 2        suggestion that competitive pressures are adequate, that
 3        may be the best we can do.  But it would be better if we
 4        can do something that aspires a little higher.
 5                  MR. DECHERD:  I want to respect Bob's timetable. 
 6        Do you want to ask a question?  
 7                  MS. SOHN:  I do, yes.
 8                  MR. DECHERD:  I have a general comment.
 9                  MS. SOHN:  I want to get to the cost, because
10        there's a lot of numbers being thrown around, and to the
11        realities of the business that Mr. Wright talked about. 
12        This is either for Mr. Cornwell or Mr. Wright.  My
13        understanding is that the costs of conversion -- and
14        there's a lot of numbers being thrown around, but really
15        people don't know how much it's going to cost.  We heard
16        this morning that the technology is changing so rapidly it
17        may cost a lot less in 2 years or 5 years than it does
18        today.
19                  But isn't the cost of conversion going to be
20        over a number of years?  Bob said that the spectrum's
21        going to have to be given back in the year 2006, but, as
22        we learned in the first meeting, because of the budget
23        bill that timetable could be extended for quite some time.
24                  So nobody's putting up the millions of dollars
25        right up front, right?  They're going to be paying it over

 1        a number of years.
 2                  MR. WRIGHT:  Well, that's not accurate.  There
 3        are some -- sort of the first-line tool kit for digital
 4        requires you to buy an antenna that has got to go on a
 5        tower, and that is roughly a half a million dollars. 
 6        There's just no way to avoid that.  If you don't have one
 7        of those things, you have to go out and buy one.
 8                  You may have to lease a position on a tower from
 9        somebody.  If you're fortunate enough to own your own
10        tower and it's modern enough or strong enough, you're
11        probably okay.  Most people are going to have to make some
12        economic combination.  But the worst case is you have to
13        go to a new tower.  That can be either build one yourself
14        or share it with somebody else.  That can be an investment
15        of up to $4 or $5 million, shared in some form or another. 
16        You have to do that now, because it takes time to get
17        these things done.
18                  If you are simply going to a commercial site,
19        you're going to have to pay rent, which could be quite
20        substantial to get this thing up there.  That's an
21        immediate cost.  You have to buy -- you have to put in
22        digital equipment in your station which is probably in the
23        neighborhood of a couple, $300,000 right off the bat, to
24        be able to bring a signal in and to bring a signal out.
25                  As soon as you want to get into the situation of

 1        doing any production at all, you're going to have to start
 2        getting onto the line of equipment.  That's the one you
 3        probably can defer a little bit.  But you defer at your
 4        own risk, because if digital starts to be attractive and
 5        you're not -- if your local newses aren't in it or you're
 6        not able to do that, then you're going to run that. 
 7        You're going to have to decide whether that's a risk you
 8        want to run.
 9                  But I would say -- and then all of your portable
10        equipment, all of your, if you do news and information,
11        all that equipment is obsolete in that game.  So in a big
12        city the cost could be well in excess of $10 million, like
13        New York.  It could be $20 million if we turned all of our
14        news equipment into digital format.  That'll happen. 
15        That's over time.
16                  But there is an up-front cost which we estimate
17        in our stations is about $2 million per station just to
18        get going on the timetables that we're on.  Most of our
19        stations click in in '98 or '99.  So that's out of pocket.
20                  But I said it's expensive and it is expensive,
21        and I also told you that I told our board, you can't get
22        that money back now.  I'm not complaining about that.  I'm
23        not saying that that's unfair or that the government
24        forced me to do it and I hate it.  I'm saying it's a cost
25        of doing business, of protecting what we have, to allow us

 1        to get to the type of technology that is absolutely
 2        necessary for us to have to survive.
 3                  But I don't want it to be confused with there is
 4        a moneymaking scheme here, that somehow or other in a year
 5        and a half we're going to make a lot of money and it's not
 6        going to cost anything.  You're going to have to make the
 7        investment and you're going to have to hope that over
 8        time, that you're going to have revenues coming in which
 9        are going to amortize that investment.
10                  For smaller stations, as Don said, it's very
11        difficult. 
12                  MS. SOHN:  So there some tax benefits, though,
13        if you can amortize it over time?
14                  MR. WRIGHT:  Well, not for cash.  You still have
15        to borrow the money today and pay the interest.  If you're
16        borrowing it, you get some tax deductibility on it, but
17        you've got to go out -- if you don't have a balance sheet
18        that banks are willing to lend under, you're going to pay
19        some pretty high rates for that. 
20                  There are a lot of people, a lot of our
21        affiliates -- we have 214 NBC affiliates and we only own
22        11, so all the others are owned by other people.  A lot of
23        these smaller companies are raising their hands to us and
24        they're saying:  Hey, lend us the money.  What can we do? 
25        How can we?  We can't -- our balance sheet won't accept

 1        this because I can't show the bankers any revenue coming. 
 2        Send us the letter, Bob, that points out to them, that
 3        corrects their misunderstanding about revenue, show them
 4        how the revenue's coming in.
 5                  I write them back and I said:  I can't do that. 
 6        You don't have it.  You're not going to have any revenue. 
 7        So they come in and say:  Well then, lend us the money.
 8                  That all has to get sorted out.  We'll all
 9        survive that issue, but it's not -- it's just not a walk
10        in the park.
11                  MS. SOHN:  Just one more quick follow-up.  I
12        guess I'm less concerned about GE than I am about maybe
13        Mr. Cornwell's station or maybe Mr. Duhamel's station. 
14        But my sense is is that if you're a network affiliate --
15        and some of our materials reflect that -- the network will
16        help in some of the transition costs.  Is that correct?
17                  MR. WRIGHT:  Well, that's yet to be determined. 
18        We become a bank like other banks.  My point is that if
19        it's that easy people don't ask us to borrow money from
20        us.  They borrow it from somebody else and they don't ask. 
21        So this is a rare occurrence, which tells me that some of
22        these people legitimately are strained, or they wouldn't
23        be asking.
24                  MR. CORNWELL:  Gigi, that was my point earlier
25        in my remarks when I said that I thought this was an issue

 1        of equal access potentially in small markets, because
 2        we're a big enough company -- I mean, I cry poor about
 3        balance sheet and what have you, but we will be able to
 4        afford to do this.  If our station continued to be owned
 5        by the gentleman whom we bought it from, I'm not sure what
 6        he would do, because this is a very difficult dilemma, to
 7        make that kind of an investment.  And even if I've
 8        overstated the amount, which I said was $8 million
 9        potentially, if you pulled it down, even if it was $3
10        million, it's still an awful lot of money for a market
11        that size.
12                  MR. WRIGHT:  Just one thing.  Digital is
13        important for broadcasters, but it does serve a lot of
14        other issues.  If you don't have -- and I made these
15        arguments when we were into the issue of why should
16        broadcasters, should they be lent this channel to develop
17        digital as opposed to just staying analog, in which case
18        you're basically out of business over time.  
19                  The point was that broadcasters by and large
20        have many popular programs that appear in people's homes,
21        most of whom receive it by cable, and broadcasting is the
22        only thing free in that package.  And if you cease the
23        broadcasting business -- and broadcasting reaches
24        relatively 100 percent of the population and cable reaches
25        70, and if you cease broadcasting you're turning off --

 1        basically, it's like universal telephone service.  You're
 2        turning off a service that does have a reach of the entire
 3        country, and it provides meaningful, entertaining, not
 4        always the perfect format for everybody, but basically
 5        entertaining things for people in their homes.  And it's
 6        free and it's part of that cable service.
 7                  If you shut that down and you stop that, then
 8        basically you're turning the whole country into pay
 9        television delivery service, and you're doing it sort of
10        accidentally.  And I said at least, if you're going to do
11        it, do it on purpose.  Don't wake up one day and say you
12        did it accidentally.
13                  The Congress went the other way and said:  No,
14        we're not going to do that.  You guys go in here, develop
15        a modern service, be competitive.  We know it's going to
16        take some time.  If you're willing to make the investment
17        to do it over that period of time, we'll lend you the
18        spectrum to do it.  And that's the trade.  The trade is we
19        have to make that investment, and it's going to take some
20        time.
21                  CO-CHAIR ORNSTEIN:  Bob, I know you have to
22        leave.  I'd like to follow up that particular issue and
23        also one other related thing in your statement, where you
24        offered your models and this notion of the trade,
25        suggesting that if indeed we went from one analog channel

 1        to one HDTV channel that it was a wash and therefore no
 2        additional obligations would accrue.
 3                  Some would suggest that the simple process of
 4        keeping competitors from even being able to bid for this
 5        particularly valuable part of the spectrum is worth a
 6        considerable benefit, and that it isn't, even if you do go
 7        one for one, it's not an even trade.  How would you
 8        respond to that? 
 9                  MR. WRIGHT:  Well, I'd say all we're doing is
10        staying in business.  The opposite is sort of the Fidel
11        Castro approach, where you say:  Well, gee, you have a
12        nice looking business over there; we think we're going to
13        sell your business to somebody else.  You say:  Wait a
14        second; we've been in this business a long time.  Yeah, I
15        know, but we can make a lot of money if we just kind of
16        sold your business to somebody else.
17                  That raises a whole bunch of other issues.  So
18        all we're doing here is, we can't today go to digital
19        because there are no people with digital televisions, so
20        you have to do it somewhere else other than on this
21        service.  So you're simply trying to migrate this national
22        free service from one set to another, and you can't do it
23        until people have the sets.
24                  That's all that's going on here.  There isn't
25        any other, there isn't any other sleight of hand.  So I

 1        don't know why that would generate additional obligations.
 2                  CO-CHAIR ORNSTEIN:  Then you basically suggested
 3        that you felt that the future would lie predominantly in
 4        high definition television.  Certainly the buzz from the
 5        industry is exactly the opposite.  It started with what
 6        Preston Patton suggests, and then he stepped back from it
 7        a little bit.  But what I hear is, privately, great
 8        skepticism that high definition television will dominate
 9        in a lot of places.
10                  There are certainly those who are moving ahead
11        in that direction smartly and terrifically well, like Jim
12        Goodmon.  But others are saying:  Well, really, we
13        probably won't be able to do that at all.  What makes you
14        think that the model will be overwhelmingly HDTV?
15                  MR. WRIGHT:  Well, what I really said was that
16        higher resolution forms of picture are clearly going to be
17        coming faster and faster.  I think a lot of people
18        probably will experiment over the next several years, when
19        there are very few sets out there and there isn't any high
20        resolution programming.  They'll experiment with more
21        traditional resolution, three and four.  I don't think
22        that will last.
23                  I think by the time when you really get digital
24        television out there -- and cable will go.  HBO has
25        announced they will go high definition or high resolution,

 1        if you will, because high definition has a one-format kind
 2        of a view and high resolution means all kinds of different
 3        levels that eat up a lot of spectrum.
 4                  I think it's just an inevitable process, and I
 5        think a broadcaster can sit back only so long.  In the
 6        next few years it almost doesn't make any difference what
 7        we do, because there aren't any sets there.  But when it
 8        does make a difference, then I think the highest quality
 9        picture, if it's really distinctive and if consumers
10        really go for it, will win.  And it won't make any
11        difference how much we loved our three or four different
12        channels.  If that's what people want, the better one,
13        we're not going to be in second place.
14                  MR. DECHERD:  Norm, I am 13 minutes into my
15        goodwill bank with Bob Wright.  His team is looking very
16        anxious over here.
17                  MR. WRIGHT:  I want the record to note that I'm
18        going to a college board of trustees dinner, so I'm trying
19        my educational part of this. 
20                  (Laughter.)
21                  CO-CHAIR ORNSTEIN:  Bob, we rate your testimony
22        PG.  There was no sex, no violence.
23                  (Laughter.)
24                  CO-CHAIR ORNSTEIN:  Well, maybe PG-13, not
25        suitable for young children.  But thank you.

 1                  MR. DECHERD:  Bob, thank you.
 2                  MR. WRIGHT:  Thank you.  I'm sorry, if you could
 3        excuse me.
 4                  CO-CHAIR ORNSTEIN:  I wanted to ask Don Cornwell
 5        a follow-on question in the same way.  In your testimony
 6        you said:  "Many experts contend that the government will
 7        realize more revenues from the auction of the analog
 8        spectrum than it would have realized from the auction of
 9        the spectrum set aside for digital transmissions."
10                  So in effect, if you follow the logic from that,
11        you've traded something of more value for something of
12        less value.  How do you justify that to your shareholders?
13                  MR. CORNWELL:  I'm not sure I can respond
14        specifically to that, just simply to say that I think what
15        we all believe here on this panel, based on the comments
16        that have been made, is that we really don't know how
17        these business models will unfold in the future.  And I
18        think that our basic belief is that once we've made this
19        transition from the channel allocations that we currently
20        have to new channel allocations, and assuming that there
21        is penetration of markets with digital television sets,
22        then we will have a business and that business will look
23        either in a multicasting form or, as Bob talked about,
24        high resolution or high definition or what have you.
25                  Then the other spectrum that we currently have

 1        goes back to the FCC.  Since there clearly is now an end
 2        date in sight, our belief has been that you will find more
 3        potential bidders, which tends to raise the prices, and in
 4        fight you might even potentially find some broadcasters in
 5        their markets who would bid because, as I recall the
 6        legislation, I believe it allows that.  So that would add
 7        one additional, in effect, demand for that spectrum in the
 8        market, which would raise the price.
 9                  So I'm not sure I can respond to the first part
10        of the question, which is how do I justify it to my
11        shareholders.
12                  CO-CHAIR ORNSTEIN:  But I mean, if in fact
13        that's the case, it would suggest that broadcasters would
14        have been extremely reluctant to make this trade because
15        they'd be trading something that they know is of value and
16        seems to be worth even more down the road for something
17        that's worth less.  
18                  But that of course wasn't the phenomenon out
19        there.  So why did it work the way that it did?
20                  MR. CORNWELL:  I'm not sure that I understand
21        the question.  Say that again?
22                  CO-CHAIR ORNSTEIN:  If the marketplace is such
23        that what you have, the analog channel, is in fact more
24        valuable than the digital channel, broadcasters wouldn't
25        have wanted to make this one for one trade.  They would

 1        have demanded something else in return.
 2                  MR. CORNWELL:  I don't think the broadcasters
 3        have said that one is more valuable than the other.  If
 4        that's what I said, then I misspoke.
 5                  MR. COONROD:  It's not the value of the 6
 6        megahertz.  In other words, if the FCC is able to repack
 7        and auction a larger block of spectrum, that larger block
 8        of spectrum will be more valuable than individual blocks
 9        of 6 megahertz, because there's more flexibility.  So it
10        becomes more valuable when it's repacked.
11                  MR. DUHAMEL:  Norm, I think the thing they're
12        getting to is my stockholders ask me:  Why are our AM
13        stations getting the heck beat out of them?  And I said: 
14        15 years ago the AM audience in Rapid City was two-thirds
15        of people listened to AM, a third to FM; now it's like 20
16        percent.  I said:  The AM is doing very well with the AM
17        audience; they're just dying.
18                  That's what scares us.  If we don't go to
19        digital, we're going to be left with AM and black and
20        white television.  It's not that any of us is running out
21        and saying:  Please, can we spend $10 million.  It's just
22        we don't have any choice, or we're gone.
23                  MR. RUIZ:  Bob, I wasn't clear.  Are you saying
24        that if it had more megahertz instead of 6?
25                  MR. COONROD:  No.  In other words, if you can

 1        auction a larger block, that has more value than a series
 2        of individual blocks of 6 megahertz each.  In other words,
 3        18 megahertz as a block is more valuable than three 6
 4        megahertz blocks.  That's just because it gives you the -
 5        -
 6                  MR. GOODMON:  You get the contiguous block.
 7                  MR. COONROD:  Yes.
 8                  CO-CHAIR ORNSTEIN:  We have three comments here,
 9        Karen and Robert and then Frank, and then I think we'll
10        wrap.
11                  MS. PELTZ STRAUSS:  You can't just say that
12        we're migrating from one free service in one format to
13        another.  The fact is that there are different
14        technological capabilities in this new service.  So it's
15        not only -- I see our function as not only a question of
16        whether we're going to be creating new obligations.  We're
17        going to be creating also different obligations.  I mean,
18        it's different services.  It's different channel streams. 
19        I don't think that we should lose sight of that. 
20                  CO-CHAIR MOONVES:  The only problem is that, as
21        everybody has said, this panel would be better off being
22        in existence 3 years from now so we can tell what the
23        economic models are no what the technological models are. 
24        We're forced to make recommendations in the blind in a lot
25        of ways.

 1                  MS. PELTZ STRAUSS:  To a certain extent I think
 2        you're right, some of our recommendations may be
 3        premature.  We may have to reconvene in three years.  But
 4        at least it's a start.
 5                  CO-CHAIR MOONVES:  No thanks.  I won't be here.
 6                  (Laughter.)
 7                  MR. GLASER:  If I might on that point, I would
 8        just like to say that I'm not so sure that a meeting 3
 9        years from now, having some successor group meeting 3
10        years from now, is not a good idea.  But I also think that
11        the foundation that we lay now is tremendously important
12        to set the right framework.
13                  If you know you live in a zone where there's a
14        high earthquake capacity, it doesn't mean you don't build
15        a building; it means you build it to good earthquake code. 
16        And I think --
17                  MS. PELTZ STRAUSS:  I agree with that as well.
18                  MR. GLASER:  I think that it seems to me that
19        we've teased out some of the dimensions of what could
20        happen.  That's one of the reasons I asked Bob Wright the
21        question about in a world where everyone plays by a set of
22        digital rules, how do you feel about that?  And I guess
23        I'm interested in directing this back to our panel here.
24                  The question I've had -- PBS has been among the
25        most energetic advocates of the idea of multiplexing.  Do

 1        you see a commercial model, not to say a profit model
 2        because that's not your charter, but a commercial model in
 3        terms of audience, that allows you all to get more share
 4        in aggregate or mind share than you get in a channel-
 5        locked broadcast world?  And if so, what does that mean in
 6        terms of the economics as you go into that multicasting?
 7                  MR. COONROD:  Well, the second part of it is the
 8        part that we're struggling with right now.  The revenue
 9        models are very fuzzy, in part because of what we said
10        earlier:  There are no TV sets.  Nobody can actually do
11        it, so it's all speculative.
12                  But, recognizing that we're in a speculative
13        realm here, a number of public television stations provide
14        instructional television services.  They generate revenue
15        from those services.  They generate revenue that they're
16        able to use for expenditures.  Those same stations cannot
17        now carry a ready-to-learn service that they could raise
18        money around, because they're constrained by the single
19        channel.
20                  If they could multiplex, they could begin, they
21        could begin to also provide a ready-to-learn service,
22        which would be for the pre-school audience.  We know that
23        programming for pre-school audiences is something that
24        public television stations can raise money around, so they
25        could develop yet another stream of revenue.

 1                  Now, that programming is already available.  It
 2        is already being distributed.  So the marginal cost of
 3        adding that additional program stream is minimal and there
 4        is some possibility of generating additional revenue.
 5                  Once you go beyond the traditional services and
 6        you try to look at new service models, then it becomes
 7        even more speculative.  But there are current services now
 8        where the technology constraints the station from
 9        providing them simultaneously.
10                  MR. GLASER:  That's very interesting. 
11                  CO-CHAIR ORNSTEIN:  Rob?
12                  MR. DECHERD:  Norm, I want to let the members
13        stay with the other panelists, but if I may just pick up
14        on a couple of questions that have been posed and then
15        make the comment that I was going to make earlier in
16        response to Jose and Newton's questions.
17                  First, Karen posed the question just a minute
18        ago about this being different and it's not an exchange of
19        channel for channel.  But I think it's useful to look at
20        it from our perspective in this sense.  If overnight the
21        U.S. could achieve the penetration of high definition
22        acceptable or receptive monitors, we could go with our
23        current channel.  So the question would be from a public
24        policy standpoint, is there something different tomorrow
25        from today if we're using only 6 megahertz of spectrum and

 1        probably on day one doing what Bob Wright said, and that
 2        is broadcasting in a way that uses that whole spectrum. 
 3                  So I think it's the length of this transition
 4        and it's the skepticism about our intentions that
 5        complicates this a great deal.
 6                  As Norm knows and I mentioned at our last
 7        meeting, I testified at the McCain hearing where Preston
 8        Patton and David Smith were brought to task.  And I said
 9        then, and I feel more strongly today, that the views of
10        the people at this table, including Don and Bob and Bob,
11        do represent the plans and the intentions of the vast
12        majority of broadcasters. 
13                  We got in trouble because a year ago, when the
14        FCC chose not to adopt a single high definition standard,
15        it opened up this very theoretical debate about how we
16        would use the spectrum that's being loaned and whether you
17        go 1080I or 720P.  And of course Rob's industry is very
18        much engaged in this discussion.
19                  I think that that whole distinction is about to
20        be marginalized.  I think the technology is moving so fast
21        that that's not going to be an issue and we're going to be
22        back to the basic issue of what's the content.  And the
23        content is going to be in the highest form technically
24        feasible, because that's where the competitive arena will
25        be defined.  How it evolves over time is where we're all

 1        stuck here, trying to define what will happen 3, 5, and
 2        however many years out.
 3                  So with those caveats and, Gigi, to your
 4        question:  We're going to spend, I'll guarantee you, write
 5        checks for $50 million in the next 3 years.  That's our
 6        capital budget.  We have major requirements, and this is
 7        not a charade.  We're going to do it.  Don's going to do
 8        it.  Bob Wright's going to do it.  Jim Goodmon's done most
 9        of it.
10                  And we know, because we work with our colleagues
11        all the time, that they are all now making very specific
12        plans to spend enormous amounts of money in relation to
13        their normal capital budgets.
14                  Rob said a minute ago that we're building a
15        foundation here for our deliberations, and that's to me
16        the greatest value of this panel.  What I would observe
17        is, apropos of Jose's question, which I believe, without
18        paraphrasing too much, was do you think you're doing
19        enough public service and are you doing it well enough and
20        should it be mandated?
21                  Two observations.  One is we are going to have
22        to deal as a committee with two very different
23        philosophical perspectives.  One is government playing a
24        major role in these matters and government playing a
25        lesser role.

 1                  The second point which has come up here today
 2        especially and I think we'll talk more about in future
 3        meetings is the degree to which we're going to make
 4        recommendations to address the so-called "bad
 5        broadcasters."  I would only ask that everyone be very
 6        open-minded and, if you will, make a leap of faith until
 7        evidence is presented to the contrary that we are not the
 8        exception seated at this table.
 9                  I think there's an impression that Jim Goodmon
10        and Harold Crump and Bill and I are some angelic band
11        that's been recruited to hoodwink everybody.  But we live
12        in this world and we know what the majority of
13        broadcasters think and are planning to do, and
14        unfortunately the discourse in Washington for a long time
15        has created an inherent skepticism about what we say
16        through our industry organizations.  I think it is
17        unfairly focused on the networks and we, the individual
18        station owners, need to step up and be a part of this
19        discussion to gain your trust that we do represent the
20        large majority, that we're not the exception.  And Don
21        Cornwell is a perfect example of that. 
22                  CO-CHAIR ORNSTEIN:  Yes, Frank.
23                  MR. CRUZ:  Norm, just a couple of risks here. 
24        At the risk of asking for a 30-second sound bite and at
25        the risk of asking you to speculate -- I know speculation

 1        is dangerous -- but move forward the clock to about 4 or 5
 2        years from now.  And I realize the producers, the
 3        manufacturers, aren't here.  But what will the average
 4        family be looking at at home?  High density TV's,
 5        converters, boxes, mixtures thereof, all of the above,
 6        none?
 7                  MR. CORNWELL:  Everybody's got their own. 
 8        Everyone has their own opinion on that, so you're only
 9        going to get just this person's opinion.  And if you
10        limited it to a 4 or 5-year horizon, I personally think
11        that if the question is how quickly will digital
12        television take hold, I'm not convinced that it's going to
13        take hold that fast.
14                  That's my own personal view of the world.  That
15        doesn't mean that they'll be looking at exactly the same
16        thing as they look at today, because we are obviously an
17        evolving industry and there's always changes that take
18        place over time.
19                  I think Peggy has left, but I just wanted to
20        observe that the Children's Television Act is an example
21        of a regulatory mandate that has in effect created, I
22        think, and will continue to create more change in
23        television.  So I don't know what 4 or 5 years looks like
24        from now, but I don't think that digital television sets
25        are going to be in the majority of the homes in 4 or 5

 1        years.
 2                  MR. CRUZ:  Bob?
 3                  MR. COONROD:  I think that's right, that digital
 4        television sets won't be in the majority of the homes in 4
 5        or 5 years.  But we played out a number of the scenarios
 6        and there's no one obvious scenario.  But the one that I
 7        personally think is going to evolve is that the wide
 8        screen, high definition set is going to be the heart
 9        around which the family gathers and watches television.  I
10        think that's the trend that will ultimately be the one
11        that works.  It's going to take longer than 4 or 5 years.
12                  CO-CHAIR ORNSTEIN:  We have a comment from Rob
13        Glaser and then we'll thank our panelists.  And let me
14        suggest that rather than -- we're running now about 15
15        minutes late.  If people agree, we will not take our
16        break.  We had it this morning almost before we got under
17        way.  I want to move into our public dialogue.
18                  Rob.
19                  MR. GLASER:  Yes, just a quick question and,
20        since I'm the last person this morning, I want to thank
21        you all for the incredibly thoughtful and thorough
22        analysis and candor.
23                  Just as we're trying to forecast or have a view
24        of what the first couple years will look like, one thesis,
25        coming from people associated with the Internet or the

 1        computer industry, is that in the first couple of years,
 2        when these TV's are expensive, the existing installed base
 3        of PC's could become a significant percentage, given that
 4        30-plus percent of households have PC's already, not as a
 5        long-term strategy for television, but as a transitional
 6        strategy.
 7                  What's your assessment of that, and if so what
 8        do you think the implications are in terms of ramp rate or
 9        transitional economics or programming strategies?
10                  MR. COONROD:  The thing that, particularly in
11        light of that Intel --
12                  MR. GLASER:  Intel backing off and deciding,
13        yes, it's fine.
14                  MR. COONROD:  Yes.  The thing that would concern
15        me is something that we talked about before, and that is
16        the information-rich and the information-poor.  It really
17        would widen that gap, and that's something that we would
18        want to look at ways to narrow.  That would be the
19        concern.
20                  MR. CORNWELL:  I don't have anything to add.
21                  CO-CHAIR ORNSTEIN:  Thank you both very much,
22        and we can move on.
23                  (Applause.)
24                  CO-CHAIR MOONVES:  This is now the time for
25        public comments, questions, responses.

 1                  Step up to the microphone, please.  Will you
 2        please tell us your name and if you represent an
 3        organization first.
 4                  MS. KAYSON:  Yes.  Is this working?
 5                  CO-CHAIR MOONVES:  Yes.  Bring it down a little
 6        bit.
 7                  MS. KAYSON:  Is that working?  Can you hear me?
 8                  CO-CHAIR MOONVES:  Yes.
 9                  MS. KAYSON:  I won't scream then.
10                  My name is Sarah Kayson.  I'm the Director for
11        Public Policy at the National Council on Alcoholism and
12        Drug Dependence and, having sat through a good part of the
13        day today, I realize you all don't have enough issues to
14        deal with, so I'm going to add one more, I hope.
15                  As you study the public interest obligations of
16        broadcasters who will receive digital licenses, NCADD
17        strongly urges you to recommend that they be required to
18        air a significant amount of counter-advertisements that
19        provide information and challenge the messages that young
20        people receive about alcohol on television and radio.
21                  This idea is not without precedent.  In the
22        1960's the Federal Communications Commission, concerned
23        about the public health implications of ads that promoted
24        smoking, ordered broadcasters to air cigarette counter-
25        ads.  This decision was made under the public interest

 1        standard requirements of broadcast licensees.
 2                  The health implications for young people
 3        relating to alcohol are as serious today as tobacco was 30
 4        years ago because, intentionally or not, people under the
 5        legal drinking age see and hear alcohol ads on television
 6        and radio and they absorb that information.  Broadcasters
 7        profit from these advertisements for a product that is a
 8        factor in the three leading causes of death among 15 to
 9        24-year-olds and is a leading cause of kids dropping out
10        of high school and college.
11                  The ads on television and radio portray alcohol
12        as an elixir for social success and approval.  However,
13        alcohol is a factor in numerous potentially life-altering
14        situations for young people, which include but is not
15        limited to:  unintended sexual encounters that can result
16        in sexually transmitted diseases, including AIDS;
17        unplanned pregnancies; criminal activities; family
18        disruption; alcohol poisoning that can result in death, as
19        it has at least twice so far this school year; accidental
20        falls such as those that fractured the skull of one
21        undergraduate in Wisconsin and killed a sophomore at
22        Virginia Tech just last month; and of course drunk driving
23        crashes that kill and maim thousands every year.
24                  The broadcasters' public interest obligation in
25        today's analog world as well as the future's digital age

 1        must help protect young people from messages that
 2        glamorize and normalize a product that is illegal and
 3        harmful for them to use.
 4                  Earlier this year, 22 organizations joined NCADD
 5        and the Mothers Against Drunk Driving and petitioned the
 6        FCC to require broadcasters to air counter-ads so young
 7        people will be able to challenge the myths that are sold
 8        to them over the airwaves.  Another 250 organizations
 9        petitioned the FCC to issue a notice of inquiry to examine
10        how the broadcast media are used to advertise alcohol and
11        the effects those ads have on young people.  As Chairman
12        Cunard has stated, this is about the kids.
13                  When Vice President Gore was in the Senate, he
14        recognized advertisers' responsibility to balance the
15        information provided to consumers and potential consumers
16        of alcohol.  He introduced legislation that would have
17        required rotating health and safety messages on all print
18        and broadcast alcohol advertisements.
19                  As you prepare your recommendations for him, we
20        hope you will recognize the broadcasters' responsibility
21        and public interest obligations regarding alcohol and
22        include counter-ads that will help protect the health and
23        well-being of America's youth.
24                  I'd be happy to provide more information,
25        including the counter-ad proposal if you're interested. 

 1        Actually, I'll probably do it anyway.  And I'd be happy to
 2        answer any questions that you might have.  Thank you. 
 3                  CO-CHAIR MOONVES:  Thank you.  We look forward
 4        to seeing that material.  Thank you. 
 5                  MR. DINGEMAN:  Good afternoon.  My name is Jim
 6        Dingeman.  I'm from the Coalition for Missing and Abducted
 7        Children in New York City.  I come here to speak about the
 8        issue of missing children and the public interest
 9        obligations of broadcasters, not only in the digital
10        world, but today.
11                  As many of you know, there are about 2 million
12        missing kids a year in the United States in all the
13        various categories.  About 35 to 4500 of them are stranger
14        abductions, of which about 300 result in homicides.  There
15        are about 354,000 parental kidnappings, 455,000 runaways,
16        and the list goes on.
17                  One of the problems that we as victim parents
18        have is the sensationalized response that the media tends
19        to take.  It's, in fairness, not to say that that should
20        be generalized.  We know that people here represent media
21        organizations that treat this issue seriously and
22        sensitively and try to do as much as they can to publicize
23        missing kinds.
24                  But we feel that the marketplace cannot
25        completely solve this situation.  There has to be

 1        mandatory requirements implemented that require all
 2        broadcasting institutions to show on a daily basis the
 3        faces of missing children.  I would ask any of you, if
 4        your grandchildren, nieces, nephews, or children were
 5        abducted, would you want to wait until 6 or 7 months down
 6        the road, and you may or may not get a slot on the Maury
 7        Povich Show or Sally Jesse Rafael Show, and essentially be
 8        used as a sensationalized measure to exploit the anguish
 9        that you're going through to boost Nielsen ratings of a
10        broadcasting institution?
11                  So I have left a paper here concerning this.  We
12        are taking this proposal, along with others that have to
13        do with other aspects of this issue, to Capitol Hill. 
14        We've been meeting with the Telecommunications Committee. 
15        We're going to go to the FCC.
16                  But we want you all to seriously think about
17        modifying and expanding this, because we're talking about
18        immediate situations.  If a child is abducted by a
19        stranger abductor, you're talking about the risk that a
20        child could be killed within 24 to 48 hours, let alone
21        when you're dealing with the wider issue of runaway kids
22        and parental kidnappings you're talking about
23        statistically high incidence of physical abuse, sexual
24        abuse, emotional abuse, et cetera.
25                  And nobody -- I'm sure anybody here would not

 1        want to have this kind of miserable and anguishing
 2        experience happen to any of them themselves or their loved
 3        ones.  So we're really talking about a serious public
 4        interest obligation on the media, on broadcasting
 5        institutions, so that these kids can be recovered and not
 6        exposed to these dangers.
 7                  I thank you.
 8                  CO-CHAIR MOONVES:  Yes, Jose.
 9                  MR. RUIZ:  It would be helpful for us if you
10        were to tell us how you heard about this hearing.  And
11        anybody else who comes up, too, I'd like to know how are
12        they getting the notice.
13                  MR. DINGEMAN:  How I heard about this hearing? 
14        I myself have been a member of a local board of an NPR
15        station, so I sort of follow communications issues in
16        general, and I think that more people should be aware of
17        this because you're really talking about very, very
18        important issues for the future.
19                  I think you should be having these meetings
20        around the United States in all sorts of communities.  It
21        just can't be in Washington, in a very inaccessible
22        building to get to.  This has to be open to the mass
23        public because you're talking about issues that really are
24        things that the public have really no grasp of at this
25        point and really require a true democratic airing to get a

 1        sense of the potentials and the complexities of this
 2        issue.  That I'm sure you all know and are aware of is
 3        something you should do.
 4                  CO-CHAIR MOONVES:  Jim, do you have a specific
 5        proposal for broadcasting?  You say individual
 6        broadcasting units or whatever?
 7                  MR. DINGEMAN:  Well, I know that the Home
 8        Shopping Network does it a few times a year.  But what I'm
 9        talking about specifically is that there are systems in
10        place -- the National Crime Information Center, NCIC
11        system that the FBI has, the III identification system,
12        they record the faces of children.  This is a mandatory
13        law.  When a child is missing they have to be recorded.
14                  I'm not going to bring up the issue of how local
15        law enforcement throughout the country tends to ignore
16        this.  That's a separate issue altogether.
17                  But a system that could exist is one that is
18        centralized and decentralized, working with the missing
19        children's clearinghouses throughout the states -- every
20        state in the United States has such an entity -- and the
21        National Center in Washington, the FBI.  There could be a
22        system set up where there could be a loose coordination, a
23        coordination worked out so that some sort of triage system
24        could be set up, obviously.
25                  Obviously, as I say, stranger abductions are the

 1        number one requirement, where a kid's life is in danger
 2        immediately.  But this is already being done, by the way,
 3        voluntarily by ABC local news in New York City.  They are
 4        flashing, albeit for only 2 to 3 seconds, which doesn't
 5        really help the person to see the kid -- you know, he's a
 6        boomp, boomp; so maybe they've lost a couple hundred
 7        dollars in revenue there. 
 8                  But nevertheless, we're talking about something
 9        that has to be -- we're talking about something that has
10        to be beyond the considerations of purely fiscal
11        requirements.  This is something, when you're dealing with
12        kids and the safety of kids, we have to get beyond the
13        issues of whether it is something that revenue will be
14        lost or not lost.  I realize that that perhaps is
15        unpopular to some.  But again I say to you, what would you
16        do if your kid was in that situation?  I doubt you would
17        be too -- you'd want the cavalry to come out from all
18        directions.
19                  CO-CHAIR MOONVES:  Thank you, Jim.  We'd be
20        happy to look at anything you submit to us.
21                  MR. DINGEMAN:  Thank you. 
22                  CO-CHAIR MOONVES:  Good afternoon.
23                  Yes.
24                  MS. DUVA:  Good afternoon.  My name is Maureen
25        Duva.  I am the founder of Parent, which is an

 1        international organization supporting the advocacy for
 2        parents whose children have been internationally
 3        kidnapped.  
 4                  My daughter was kidnapped 5 years ago.  I had no
 5        media attention until 3 years later.  I have made about
 6        seven trips to the Middle East and just came back from
 7        Lebanon.  
 8                  There are tens of thousands of parents like
 9        myself.  This is not an issue that has really hit the
10        mainstream of our culture yet, and yet it is a worldwide
11        problem.  We have international treaties addressing this. 
12        It is a Federal felony in the United States and it is
13        child abuse.
14                  When children are kidnapped by a parent or a
15        relative, don't think they are not in danger.  These
16        children are found dead, these children are found
17        neglected.  My daughter was abandoned 2 years ago.  We
18        still haven't found her.  We just know she was abandoned.
19                  We need media exposure.  Just like Mr. Dingeman
20        said, if the broadcasters would show the faces of these
21        children before they're ever taken out of the country, a
22        teacher, a pre-school worker, a neighbor may recognize
23        them.  In these cases, oftentimes that's the only way
24        they're found.
25                  The numbers are so high in family abduction

 1        cases, 354,000 plus a year.  There is no way law
 2        enforcement can handle it.  In fact, they don't even do
 3        anything but record it.
 4                  My message to you is please consider Mr.
 5        Dingeman's request and mine and all the other parents. 
 6        Put our kids faces on TV.
 7                  MR. RUIZ:  How did you hear about this? 
 8                  MS. DUVA:  I heard about this meeting through a
 9        mass E-mail from COMAC inviting all the organizations and
10        parents to come down.  We've been lobbying for a long time
11        quiet.  We're just parents, but we're starting to make
12        some noise.
13                  CO-CHAIR MOONVES:  Thank you for coming down.
14                  Yes.
15                  MR. KAUT:  I'm actually a reporter.  I just
16        wanted to ask a question about the issue if possible.  Is
17        that okay?  My name is Dave Kaut with the Bureau of
18        National Affairs.
19                  I was interested in what Mr. Diller had to say
20        about linking the free time proposal with campaign
21        finance.  He obviously believes there is some linkage
22        there.  Mr. Taylor thinks you should go ahead and push
23        something with free time anyway.
24                  I understand that broadcasters are skeptical and
25        maybe some even opposed to some of the free time ideas,

 1        but I would just like to hear more, if any of the
 2        broadcasters would like to say anything, about why there
 3        should be a linkage.  I'm not sure I really understand
 4        what that linkage is.  Why couldn't you move forward with
 5        a free time proposal if you can come up with a good one
 6        that you can accept?
 7                  CO-CHAIR MOONVES:  I'd rather not comment.
 8                  MR. DECHERD:  We've done that.
 9                  MR. KAUT:  I don't mean on the voluntary level. 
10        I mean on something that gets kind of a broader --
11                  CO-CHAIR MOONVES:  Once again, I think this is
12        the second meeting of the panel and we don't want to start
13        drawing conclusions.  We're throwing out a lot of ideas
14        now and I for one don't think we should comment
15        specifically on that.  It obviously will come up quite a
16        bit a little bit later.
17                  CO-CHAIR ORNSTEIN:  On March 2nd we'll have a
18        whole day devoted to this and related larger issues, at
19        which I think we'll probably get more explicit.
20                  CO-CHAIR MOONVES:  And you'll here a lot more
21        opinions then, I'm sure.
22                  Anyone else?
23                  (No response.)
24                  CO-CHAIR MOONVES:  Shall we talk about future
25        calendar, Norman?

 1                  CO-CHAIR ORNSTEIN:  Yes, we need to talk about
 2        future calendar, and then we need to have some final
 3        remarks, I think.
 4                  I think our most driving need at the moment is
 5        to talk about our meeting on January 16th.  We are going
 6        to have, of course, we'll have a morning panel that Rob
 7        Glaser will put together.  And Rob is going to, I think,
 8        frame it in a fashion similar to what we've done with
 9        these two panels.
10                  The question we have to address immediately is,
11        if we take the rest of the day and focus it around issues
12        of education and children, how do we want to frame that,
13        the rest of that session?  Peggy?
14                  MS. CHARREN:  Just a question.  If we do frame
15        it around education, is that where we're going to do
16        public broadcasting, or are we going to have a separate
17        time, a separate day or something, for how public
18        broadcasting might differ?
19                  CO-CHAIR ORNSTEIN:  Well, that's an open --
20                  MS. CHARREN:  Does it fit there?  I mean, we did
21        public broadcasting here in a panel.
22                  CO-CHAIR ORNSTEIN:  Yes.
23                  CO-CHAIR MOONVES:  Jose, do you have a comment?
24                  MR. RUIZ:  Yes.  Just speaking for myself, and I
25        know some others feel the same way -- maybe they'll speak

 1        about it as well -- I would hope that public broadcasting
 2        would be included in this whole process and not be a
 3        sidebar.  It is a network, it is a business.  The business
 4        is education, although its nonprofit.
 5                  CO-CHAIR MOONVES:  I agree with you, and I don't
 6        think there's too many people who would disagree with you
 7        on it.
 8                  MS. CHARREN:  So education is how this new
 9        structure will provide education maybe across the board?
10                  CO-CHAIR ORNSTEIN:  Across the board, yes.
11                  CO-CHAIR MOONVES:  I think we can deal with the
12        FCC, the 3-hour rule, if that is working, do we want to
13        change.
14                  MS. CHARREN:  That's what I meant.
15                  CO-CHAIR MOONVES:  And everything dealing with
16        the children and education issues.
17                  MS. CHARREN:  Okay.
18                  CO-CHAIR MOONVES:  Can I going back --
19                  MS. CHARREN:  And adults.  Not just children,
20        but education.
21                  CO-CHAIR ORNSTEIN:  No, no, education broadly.
22                  CO-CHAIR MOONVES:  I said children and
23        education.
24                  MS. CHARREN:  Sorry.
25                  CO-CHAIR MOONVES:  You dealt more with Rob about

 1        what this panel's going to be.  We had two terrific panels
 2        today and I was very pleased with them.  We had a lot of
 3        comments.  We also had over 2 hours worth of discussion
 4        among the group.
 5                  Are we going to need that same sort of
 6        discussion about technology when it doesn't, I don't
 7        think, have quite the controversy, let's say, that the two
 8        panels today did?  Are we going to need three and a half
 9        hours to deal with technology, is my question, or can we
10        get more into next month's meeting as well?
11                  CO-CHAIR ORNSTEIN:  Well, my guess is we
12        probably don't want to extend beyond those two subjects. 
13        I think we'll have lots to talk about with education and
14        children, unless you have another suggestion.  I'm not
15        sure.  Until Rob gets a little further along, I doubt that
16        we're going to need that much time, although there are a
17        lot of questions about that will take us at least a little
18        bit further down the road towards understanding what the
19        future might -- what different alternative futures might
20        be.
21                  I'm not sure what he's going to do at this
22        point, to know how much time.  What else would you want to
23        fill in there? 
24                  CO-CHAIR MOONVES:  I was just saying, the idea
25        of three and a half hours of technology scares the heck

 1        out of me.
 2                  MR. DUHAMEL:  One of the things that bothered me
 3        this morning -- and I'd asked and we ran out of time, so I
 4        didn't get a chance to respond to Andy.  But first of all,
 5        I disagree wholeheartedly that the cost of digital
 6        conversion has gone down.  I mean, the fact that you're
 7        selling millions and millions of computers and you can buy
 8        one for $1,000, when you're talking about 1500 potential
 9        buyers of digital television, we haven't talked about
10        anything close to that.  GE picked that up and said that.
11                  I heard this morning what I thought was First
12        Amendment rights and all of a sudden it became First
13        Amendment duties.  And I would like to see a panel, a
14        broad diverse covering of the First Amendment, because I
15        think the Red Lion case, which is 30 years old, based on a
16        scarcity argument, may not be the appropriate model that
17        we should be talking about.  And I think we ought to
18        examine this whole idea of the constitutional principles,
19        the court cases, the First Amendment as it relates to
20        broadcasting, and get a diverse, broad panel on this. 
21                  I just think that what we heard this morning was
22        -- really, that Red Lion kept coming back and back.  He
23        must have mentioned it 15 times.
24                  MS. SOHN:  It's the law.
25                  MR. DUHAMEL:  So I'd like at least, next time or

 1        at some point, to have it on the agenda.
 2                  CO-CHAIR MOONVES:  Well, the truth of the matter
 3        is these two panels, we kept them apart for a reason in
 4        that we wanted it to become informational because,
 5        frankly, I think Bob Wright and Andy could have gone at it
 6        all afternoon if we wanted to.  There's a lot to what
 7        you're saying.  I think we veered away from that in terms
 8        of gathering information.
 9                  Yes, Peggy.
10                  MS. CHARREN:  As someone who loves talking about
11        First Amendment issues, I feel, though, that that is the
12        same as talking about public broadcasting, that every one
13        of our panels has to deal with constitutional concerns.  I
14        mean, that's sort of what we're doing here.
15                  CO-CHAIR MOONVES:  And we're getting different
16        interpretations of that. 
17                  MS. CHARREN:  Right, and it's appropriate to get
18        different interpretations.
19                  MR. DUHAMEL:  But that's why I think we ought to
20        get some experts in to talk about this, to lay it out.
21                  MS. CHARREN:  I think that can put us -- I think
22        we have some experts.
23                  MR. DUHAMEL:  We do.
24                  MS. SOHN:  We discussed it at the first meeting
25        as well.

 1                  CO-CHAIR ORNSTEIN:  We had a fairly extensive
 2        discussion of the scarcity model and the First Amendment.
 3                  MS. SOHN:  And it's not the only model, I think
 4        we agreed on that. 
 5                  CO-CHAIR ORNSTEIN:  We clearly are going to have
 6        to address it in our report, and these are very
 7        interesting and important questions.  At this point I'd be
 8        reluctant to have another session or panel on that
 9        specifically.  Let's get further along and then see what
10        loose ends we really need to clean up.
11                  MR. DUHAMEL:  That was one side, but that Red
12        Lion case was just over and over.
13                  MS. SOHN:  It's still good law.
14                  CO-CHAIR MOONVES:  Well, once again, we could
15        discuss that for a few hours.
16                  Yes, Cass.
17                  MR. SUNSTEIN:  Let's just stipulate that the
18        first panel made some contentious claims about law that
19        ought not to be taken as necessarily true.
20                  MS. CHARREN:  So did the second.
21                  MR. SUNSTEIN:  Then let's figure out what we can
22        do on policy issues.
23                  CO-CHAIR MOONVES:  No, the second didn't quote
24        any Supreme Court cases.
25                  MR. SUNSTEIN:  Then let's figure out what we

 1        think would make best policy sense, and then maybe after
 2        we've done that, we've made some progress on what makes
 3        best sense, then we can think of what legal constraints
 4        there are on what we think makes policy sense.  And if
 5        there's something that's obviously unconstitutional, we'll
 6        have people in the room who can announce that. 
 7                  CO-CHAIR MOONVES:  Good.  I think that's a good
 8        solution.  I think we should leave it at the fact that
 9        both groups were presented today with a point of view,
10        different interpretations of things, and that was fine. 
11        They were very different, Gigi and Bob and Norman and I
12        discussed how to do it and we didn't want to make it --
13        yes, there were things that we all disagreed with with
14        what everybody said, and that wasn't what it was about as
15        much as gathering some information from different points
16        of view, and I think we achieved a lot of that. 
17                  James.
18                  MR. YEE:  It's been interesting just to kind of
19        get this data downloading from all the various points of
20        view.  My concern is this.  As a committee, I think we
21        need time among ourselves probably in terms of absorbing
22        and deliberating.  We always seem to be responding to the
23        panel and that's fine.  And I'm just wondering, is a day
24        enough?  And also, where do you see as the for us to
25        begin, not just responding, but to get into some form of

 1        deliberation, trying to find consensus and points of
 2        differences so we can find common ground?
 3                  I'm not so sure we're all on opposite sites as
 4        we're trying to apply some kind of general principle of
 5        consensus eventually.  It concerns me to rush through a
 6        day, and I understand the time constraints.  But I'm just
 7        a little concerned about that, because it's a lot to
 8        absorb, and then we are gone for a month and then things
 9        happen in between. 
10                  How are we as committee members going to be kept
11        apprised of your developments as a body?
12                  MS. CHARREN:  Apprised of what? 
13                  MR. YEE:  I mean, I guess we're looking at the
14        agenda, but it seems to me how are we going to be
15        deliberating all these issues and try and come to
16        conclusions of our own, versus just what people are
17        telling us?  That's part of my concern.
18                  CO-CHAIR ORNSTEIN:  I think what we're aiming
19        toward, James, is that we're going to have a couple of
20        additional sessions where we are mostly absorbing, we're
21        both absorbing points of view and learning something about
22        the moving targets that we've got here.  We're learning
23        something about existing obligations and other things that
24        might be out there. 
25                  One of the things I hope we will learn a little

 1        bit more about in the next panel is, we're talking about
 2        all of these new ways -- for example, one of the things
 3        Karen had mentioned, not just closed captioning but video,
 4        bringing video in.  If we can learn a little bit more
 5        about what possibilities exist in digital as opposed to
 6        analog technology, it'll give us a handle on how we can
 7        translate existing obligations into a new world.
 8                  It's going to take us a while, I think, to pull
 9        that together.  I would hope that as we go along that it
10        isn't just a static, members talking to witnesses and them
11        responding, but we'll get a little bit more give and take. 
12        But we're aiming towards, as we move towards June and we
13        start to focus on where we might go, that turning much
14        more to a dialogue among ourselves.  
15                  And we should all be thinking about -- clearly
16        we're trying to find common ground here.  We've got
17        positions staked out that are useful to us.  They are not
18        the final word on either side, I think, for the members of
19        our panel.  Whatever any of us are saying, we all
20        recognize there are positions that are going to be staked
21        out here.
22                  My hope is one of the statements that Bob Wright
23        made:  We've got to be flexible.  Flexibility in this
24        process should be our watchword in my judgment.  Our best
25        hope of achieving a consensus here is to recognize that,

 1        because we've got a technology that is changing every
 2        minute, it alters our goal.  It means that we have to look
 3        at existing obligations as we move to the next year in a
 4        very different way.  
 5                  It can't be a static process.  We can't just say
 6        X hours of this are going to be required, because we don't
 7        even know what streams of information will be going out
 8        there.  We need as we go through this process to be
 9        thinking about what models we can develop that build in
10        that flexibility, that might cut across the lines,
11        dividing lines we've had, in ways that -- view this as an
12        opportunity along with this challenge, and we will be just
13        fine.
14                  Remember, too, we have a web site and most of us
15        have E-mail.  We should be communicating through that and
16        among ourselves as we go along.  This is not a process
17        that is limited for us simply to the meetings that take
18        place every 4 to 6 weeks.
19                  CO-CHAIR MOONVES:  Also, James, don't assume
20        that we have been talking.  We probably spoke three times
21        since the last meeting, and it was more about form than
22        substance.  There's nothing going on up there. 
23                  Karen.
24                  MS. PELTZ STRAUSS:  Apropos of what you just
25        said, Norm, I just wanted to clarify one thing.  The March

 1        2nd meeting, was that supposed to be dedicated to talking
 2        about some of the issues that we talked about this
 3        morning?  Because it may make sense, it makes sense to me,
 4        to flip the April 14th and the March 2nd meeting.
 5                  We've already introduced some of these issues
 6        already.  It sounds like the March 2nd meeting was going
 7        to be one in which we engaged in a more full discussion
 8        among the committee on possibly some resolutions and some
 9        consensus on what we think on this issue.  The 14th
10        meeting it seems like was still a background meeting, more
11        along the lines of what we did today and what we're doing
12        next week.
13                  Shouldn't we get all the issues on the table
14        first and then start engaging in deeper discussion about
15        the subjects?
16                  MR. BENTON:  Just picking up on this excellent
17        point of Karen's, maybe the technology panel could go much
18        better with the emergency broadcasting and closed
19        captioning.  These are technology-related.  So I think the
20        other -- plus the technology might be the next meeting,
21        and then we could really get down to the education and
22        children, the political democracy, and hopefully community
23        as well.
24                  CO-CHAIR ORNSTEIN:  Well, the only concern I
25        have about that is that, as each week goes by, we learn

 1        about more areas or possibilities that we need to
 2        consider, but we have to think about whether we want to
 3        consider them.  So I've thought about that meeting taking
 4        place in April, believing that in fact the next couple are
 5        going to be along the same lines.  I mean, we'll have a
 6        discussion; we're not going to come to any conclusions.
 7                  MS. PELTZ STRAUSS:  But I don't think there's
 8        any question that we're going to be talking about the role
 9        of the broadcasters in terms of political access.  We've
10        established that that is going to be one of the subject
11        matters that we're going to be talking about.  So what do
12        you see as the purpose of the March 2nd meeting? 
13                  Do you know what I'm saying?
14                  CO-CHAIR ORNSTEIN:  Yes.  I saw that as having a
15        much fuller discussion about mechanics and where we might
16        go or how we might achieve a broader consensus, along
17        with, not just the specifics of free TV time, but this
18        larger issue of the public marketplace and the discourse
19        and the diversity of the discourse in the public
20        marketplace.
21                  MS. PELTZ STRAUSS:  And that's what I'm saying.
22                  CO-CHAIR ORNSTEIN:  I'm happy to move that. 
23                  MS. PELTZ STRAUSS:  You just talked about
24        reaching a consensus and I think that we definitely need a
25        meeting on that.  But shouldn't that be with the other

 1        meetings in which we're talking about a consensus?
 2                  CO-CHAIR ORNSTEIN:  It certainly would be fine,
 3        as far as I'm concerned, to flip-flop those.
 4                  MS. CHARREN:  When is the next meeting?
 5                  CO-CHAIR ORNSTEIN:  The next meeting coming up,
 6        we'll start with the discussion of technology.  And I
 7        think all of these other issues are going to take a full
 8        day as we think about all of them.  So it makes sense to
 9        discuss education, which also logically flows from that,
10        at this next meeting. 
11                  MR. CRUMP:  Would you go through the layout of
12        the meetings again?  What I wrote down is nothing that
13        you're saying.  I started out with education.
14                  CO-CHAIR ORNSTEIN:  Yes.
15                  MR. CRUMP:  And then I went to political. 
16                  CO-CHAIR ORNSTEIN:  Yes, and now we're talking
17        about --
18                  CO-CHAIR MOONVES:  Flipping number two and
19        number three.
20                  CO-CHAIR ORNSTEIN:  We're talking about the next
21        meeting starting with technology, then dealing with
22        education.  And then, instead of having the following one
23        deal with the political marketplace questions, we would
24        move to the sets of issues, including emergencies, closed
25        captioning, public service announcements, the kind of

 1        other issues, the grab bag issues.
 2                  MR. SUNSTEIN:  One thing I found very helpful
 3        actually was the thing that Norm had worked out with Paul,
 4        I guess it was, just a proposal for a flexible, low-cost
 5        way of handling free media time.  It's not clear that's a
 6        good proposal, but it's a suggestion for a proposal.  It
 7        might be good to circulate some proposals, because one
 8        thing I liked about having the free media time thing
 9        second was that it would be a particular issue to focus on
10        and then have various different approaches and maybe
11        converge on one, rather than having a bunch of issues
12        going by our heads so fast we were swimming.
13                  I'm not sure how to handle that exactly, but
14        that proposal has a possibility.  Maybe we can build other
15        possibilities off that one.
16                  CO-CHAIR MOONVES:  With all due respect, I think
17        I agree with Cass, only because I think wrestling with the
18        political free time issue is the hardest task that this
19        committee will have to deal with.  And I think the longer
20        period of time that we get these issues out on the table
21        and various suggestions, the better off we will be.
22                  MS. PELTZ STRAUSS:  It's up to you.
23                  CO-CHAIR MOONVES:  No, it isn't.  It's up to us.
24                  Yes.
25                  MS. SOHN:  I was just going to say, I think it's

 1        going to be very difficult in a one-day session to discuss
 2        the free time stuff.  We could have devoted the entire 2
 3        hours just to that, and the democracy, citizen access,
 4        community service, I really think that's a day in itself,
 5        or at least a half a day.
 6                  I just don't see how you could do both of them
 7        at once.  Clearly there was a lot of interest in the
 8        notion of how broadcasting can improve democracy and how
 9        we can theoretically give the mike back to communities
10        that are not often -- that are underserved.
11                  MS. PELTZ STRAUSS:  I don't think we're talking
12        about making it a half a day.  We were just talking about
13        whether we were going to switch it with April 14th or not.
14                  MS. SOHN:  I know that, I know that.  This is a
15        different question.
16                  CO-CHAIR ORNSTEIN:  I guess my inclination would
17        be to follow the schedule that we talked about and see
18        where we end up.
19                  Why don't we do this.  We've reached, I think, a
20        consensus on what our next meeting should be like.  We
21        still have to discuss the format for the second half of
22        that, whether we want to designate one or two of our
23        members to put a panel together, whether we want to do it
24        more among ourselves.  We need to get to that. 
25                  But what we should probably do is then assess at

 1        the end of the second meeting exactly what we'd want to do
 2        with the third meeting.  That will leave us ample time to
 3        pull it together.  We don't have to set in stone the
 4        schedule that we're going to follow.  We do know the
 5        general guidelines of what we'll do in the couple of
 6        meetings that will follow.
 7                  Then from that point forward as we go along we
 8        clearly want to, as Cass said, consider models that may
 9        even be applicable in a broader way to what we're doing as
10        we apply them to a narrower fashion.  But all of us should
11        keep in mind that we're trying to move towards some set of
12        recommendations that we're nowhere near agreeing to yet,
13        and we haven't even formulated them yet.  But we're going
14        to have to move in that direction.
15                  At some point, let me add, we are also going to
16        have to grapple with a very difficult question, which is,
17        if we are going to move to a flexible model, we have to in
18        some sense quantify or specify what obligations are worth
19        and how we're going to convert them.  That's tricky
20        business, and we can see from today that there will be
21        some real disagreements about that. 
22                  I don't know whether we do that in a separate
23        session.  I hope not, because I think it would be probably
24        Washington -- it might be counterproductive.  But we've
25        got to all keep that in mind, too.

 1                  MR. CRUZ:  Norm, from my own personal
 2        perspective -- and if I'm, Glaser, stepping into your
 3        area, please let me know.  But I think it would be very
 4        meaningful if the technology session really honed in on
 5        not a lot of the futuristic stuff, but what we can expect
 6        to see during the next 4 or 5 years, to clarify some of
 7        the concerns that people have that it's too far away, that
 8        it's not predictable.
 9                  I hope there are some manufacturers, some
10        computer firms and so forth, that can at least bring in
11        the picture, which now to some appears to be 15, 20 years
12        out there, down to the next 3 or 4 or 5 years.  That will
13        be helpful.
14                  MR. GLASER:  I haven't talked to Jim yet, but I
15        hope that what WRL has done will be a major component of
16        what we discuss in the context of taking some very
17        futuristic things and really making them work in practice,
18        which there are a few practitioners that can help us
19        understand in both the most straightforward form of the
20        technology discussion, which is literally what's going on
21        in DTV, as well as two or three other categories, which is
22        what's going on in today's shifting technologies that are
23        sort of other predecessor pathways into the same outcome.
24                  But I think that's a good point, and certainly
25        it's our intent, just from the brief conversations I've

 1        had with Les and some of the other folks here, to do
 2        something that is not just a pyrotechnics show, but that
 3        very pragmatically points out what's knowable and,
 4        frankly, what's not knowable in the relevant time frame.
 5                  CO-CHAIR ORNSTEIN:  I must say, what floated to
 6        me from today were some very concrete questions that are
 7        very directly relevant to us.  We had this discussion of
 8        Web TV.  Having some sense of what kind of convergence
 9        we're going to get in all of these different technologies,
10        if there will be a convergence, even a rough sense, will
11        be very important. 
12                  The compression technology that people have been
13        talking about, is it likely that we're not going to be
14        talking about the potential of 6 channels, but the
15        potential of 12 channels within the next few years, or
16        more?  And with that, which I don't understand, if that is
17        the case, does that mean that you could actually run two
18        HDTV channels at the same time, not just one, in that 6
19        megahertz of space, or that you could run 4 pretty high
20        quality channels, much higher than what we would otherwise
21        have, and 12 that are just like what we would get with
22        normal?
23                  We need to have some handle on that because that
24        has enormous bearing on what we will do.  That's where to
25        me the technology becomes very directly relevant.

 1                  MS. CHARREN:  I feel that the education process
 2        here is very important to us, and I think it's working
 3        very well and I'd like to suggest that, with the education
 4        part of our next meeting, that we in some way between now
 5        and then set up at least two people to come talk to us
 6        about the possibilities, because I think that just for us
 7        to chat without focus won't be as productive.  I've found
 8        this format very productive.
 9                  CO-CHAIR ORNSTEIN:  So we should discuss, should
10        we designate somebody to pull together a panel in the same
11        fashion that we had here as the kind of framework for that
12        discussion?  Does that fit, or is there a better way of
13        doing it?
14                  MR. BENTON:  Well, if Peggy will volunteer I'll
15        co-volunteer, because we can do children and education. 
16        These are different things.  Children are quite different
17        from education.
18                  CO-CHAIR ORNSTEIN:  Well, we also have a PTA
19        representative here that knows a little something about
20        education.
21                  MR. BENTON:  Maybe the three of us can work on
22        it together.
23                  MS. CHARREN:  Well, do you like that? 
24                  MR. BENTON:  Peggy can be the leader.
25                  CO-CHAIR MOONVES:  That's fine.  I think that

 1        panel fine.  I would just urge when we're dealing with
 2        educational stuff, let's deal with what's practical.  NBC
 3        and Paul are not going to go out and do two million
 4        cassettes for the school system.
 5                  MS. CHARREN:  I don't want to be on the panel.
 6                  CO-CHAIR MOONVES:  Why not?
 7                  MS. CHARREN:  I want to put it together.
 8                  CO-CHAIR MOONVES:  We want you to put it
 9        together.  You don't have to be on it.
10                  MS. CHARREN:  I was talking about educating me,
11        not about education generally.
12                  CO-CHAIR MOONVES:  I know, but who knows
13        children's television better than you?
14                  MS. CHARREN:  But that isn't what I meant the
15        education was doing.
16                  CO-CHAIR MOONVES:  Don't you think that the FCC
17        situation with children's television should be discussed?
18                  MS. CHARREN:  Oh, I certainly would be happy to
19        --
20                  CO-CHAIR MOONVES:  That should be part of that
21        panel certainly.  Is what we're doing right now good, is
22        it bad?  Is it working?  Should it be changed? 
23                  MS. CHARREN:  All right, I'll do some.
24                  MR. LA CAMERA:  Under the larger umbrella of
25        children and family, were we asked to look at the rating

 1        system also?
 2                  CO-CHAIR ORNSTEIN:  No.
 3                  CO-CHAIR MOONVES:  No.
 4                  CO-CHAIR ORNSTEIN:  That is outside our purview,
 5        and I think we will keep it outside our purview.
 6                  CO-CHAIR MOONVES:  Gladly.
 7                  MR. RUIZ:  Are we talking -- did we settle on
 8        the March 2nd meeting for education?
 9                  CO-CHAIR ORNSTEIN:  No.  The January 16th
10        meeting, the afternoon.
11                  MR. RUIZ:  You'd leave it the way it was?
12                  CO-CHAIR ORNSTEIN:  Yes.
13                  MR. RUIZ:  And then technology that afternoon?
14                  CO-CHAIR ORNSTEIN:  Technology in the morning
15        and then we will follow with education and children.
16                  MR. RUIZ:  One of the problems is that we are
17        missing, I think, wonderful opportunities.  For example,
18        in the area of education you're also talking a lot about
19        what Bob Coonrod mentioned, which is all the potential
20        distance learning and rural service and stuff like that.
21                  MR. BENTON:  The Children's Television Act, that
22        we can do in a half day, the children's television.  But
23        that's not education; that's a whole different thing.
24                  MR. RUIZ:  Excuse me, excuse me.  I think that's
25        a wonderful opportunity to go to a site that really has

 1        always sought to use the technology, so we can get the
 2        fit, and also have it open to the public there, also the
 3        workers, the people who are doing it and everything else. 
 4        So we have to get out of here, and I think there may be
 5        facilities, something like that, very close to here that
 6        wouldn't really break our backs to go to.
 7                  CO-CHAIR MOONVES:  I think we have to focus on
 8        what we are set up to do.  I'm not quite understanding
 9        what you're saying about that in regard to this committee. 
10        Now, when you say go visit a site --
11                  MR. RUIZ:  Not physically a field trip.  Have it
12        at a place, our next hearing.  What's the matter with a
13        university that is already starting to deal with this? 
14                  MS. SOHN:  In the Washington area?
15                  MR. RUIZ:  In the Washington area, Maryland,
16        Virginia.  There are other places.  It would give us an
17        opportunity to get out of here and I think maybe have the
18        people who are actually dealing with the issue there in
19        the audience.
20                  CO-CHAIR MOONVES:  What issue are we talking
21        about?  I'm still --
22                  MR. RUIZ:  I'm talking about education and
23        technology.  I'm sorry.
24                  CO-CHAIR MOONVES:  What does that mean,
25        education and technology?  I don't quite understand.  And

 1        is that under what we are supposed to be doing here?  I'm
 2        not sure.  Can we get some help?
 3                  CO-CHAIR ORNSTEIN:  Certainly the larger
 4        questions of education, which include the function that
 5        television can provide for learning in the classroom, for
 6        distance learning, telecourses and the like, those are big
 7        and important questions.  Frankly, I think I'd rather have
 8        the discussion at the next meeting flow into those than
 9        more specifically on children's television.
10                  The children's television, it seems to me we
11        have an act in place and our biggest question there is
12        going to be how we take the existing model and apply it,
13        build flexibility in for the future.  That's almost
14        something we can keep --
15                  MS. CHARREN:  I agree with that 100 percent. 
16                  MR. BENTON:  Those are two things right off.
17                  MS. CHARREN:  And I feel that what's happened
18        with the Children's Television Act has already happened. 
19        It's very easy to read about.  It's in articles in
20        newspapers.  I can give you all kinds of stuff to submit
21        on that. 
22                  That is not -- as much as that's part of my
23        growing up, that's not really what I thought this
24        education section should be dealing with, because that's
25        not the digital future of education in technology.  And

 1        that's where I'd like this to focus.  So I agree with you,
 2        Norm.
 3                  CO-CHAIR ORNSTEIN:  That I think makes sense. 
 4        Maybe what I would suggest is that if you, perhaps drawing
 5        on the resources that we have here and others, could come
 6        up with some suggestions for people who know something
 7        about these issues and can address them.
 8                  MS. CHARREN:  Why don't I get together with Bob.
 9                  CO-CHAIR ORNSTEIN:  Yes.  Is that okay with you?
10                  CO-CHAIR MOONVES:  Okay.  I'm still not quite
11        sure what it is we're looking at, but I'm fine.  I'll know
12        it when I see it.
13                  Robert?
14                  MR. DECHERD:  I'd like to make --
15                  MR. BENTON:  I was just going to say the other
16        point here in terms of the free time, I think to try to
17        lump broadcasting and localism\community with broadcasting
18        and politics, I think that's just trying to bite off more
19        than we can chew.  The community, being responsive to the
20        community, the ascertainment, all the stuff we were
21        talking about this morning, that's really different from
22        political candidates and broadcasting and politics.  I'm
23        not saying there's no connection, but those are different
24        things.
25                  We need a day to talk about localism and

 1        broadcasters, local broadcasters being responsive to
 2        community needs and all the opportunities there are for
 3        building broadcasting as a very competitive institution
 4        and meeting community needs.  That is a separate
 5        discussion, I think, from broadcasting and politics.
 6                  CO-CHAIR MOONVES:  I'm very concerned about how
 7        many different issues we are going to be able to deal with
 8        in the time we have allotted to us.  That's what I'm
 9        concerned about.  There are a lot of special interest
10        groups.  There are a lot of different issues that people
11        have, that are all very valid.
12                  I'm just wondering about being too spread out.
13                  MR. CRUMP:  Which brings us all back again to,
14        you guys need to get us an extension, which hasn't been
15        done yet.
16                  CO-CHAIR MOONVES:  Yes, that we have to do. 
17        That we know.  But it sounds like we're talking about we'd
18        need a 2-year extension.
19                  CO-CHAIR ORNSTEIN:  Yes.  It's not clear that a
20        day as opposed to a half a day on some of these subjects
21        will necessarily enlighten us more.  We will just stay
22        flexible.  If it turns out we can't, that we are so far
23        from covering the essential things that we need to
24        schedule extra meetings, we'll schedule extra meetings.
25                  MS. CHARREN:  We may want to start in the

 1        afternoon one day and continue the next day.
 2                  CO-CHAIR ORNSTEIN:  We will reserve the
 3        flexibility of extending, as we did the first time,
 4        meetings to a day and a half.
 5                  MR. BENTON:  Yes.
 6                  CO-CHAIR ORNSTEIN:  Robert, you had something?
 7                  MR. DECHERD:  Norman, I'd like to make a
 8        suggestion about the technology pattern, but really this
 9        in my mind applies to all the subjects here.  I think it
10        would be very useful if, when we select the members of the
11        technology panel, if Rob could somehow induce a
12        decisionmaker to appear as opposed to a technologist.  By
13        that I mean the difference between someone from
14        Microsoft's labs coming and talking about Web TV in
15        technical terms and Bill Gates or Steve Ballmer sitting
16        here and saying, here's what we're going to do.
17                  The reason this was compelling today, I think,
18        is the buck stops with Bob Wright on Don Cornwell and Bob
19        Coonrod when ultimately the people who control the
20        business plans are the ones who are going to have to be
21        motivated to do whatever we do, and we can only learn from
22        them where content's really heavy.
23                  MR. GLASER:  Bob, I would imagine we want both,
24        but we want to make sure we don't get just theorists.
25                  MR. DECHERD:  Right.

 1                  MR. GLASER:  That's a fine point.  And on your
 2        model, if you can get Bob Wright, I ought to be able to
 3        get -- I don't know those guys.  We'll do our best.
 4                  (Laughter.)
 5                  MR. DECHERD:  Anybody you want to.
 6                  CO-CHAIR ORNSTEIN:  We'll settle for nothing
 7        less than Bill Gates.
 8                  MR. DECHERD:  They're not shy and retiring.
 9                  MR. GLASER:  They've been trying to stay away
10        from Washington, D.C., is my understanding.
11                  CO-CHAIR ORNSTEIN:  Well, now I think they're a
12        little more sensitive to the need to spend a little time
13        in Washington.
14                  We'll schedule the Justice Department proceeding
15        around the same time.
16                  (Laughter.)
17                  CO-CHAIR MOONVES:  That was Norm Ornstein,
18        ladies and gentlemen.
19                  (Laughter.)
20                  MR. GOODMON:  Let me mention a couple of things,
21        three things.  I'm trying to get to the end, and in the
22        end we're going to have a report.  And I think all of us
23        are interested in, we have certain ideas about what ought
24        to be in this report.  How is that going to -- let's say
25        ascertainment:  I think there should be formalized

 1        ascertainment and it should be in our report.  When does
 2        that -- when do I get a chance to do that or put it in the
 3        report?  I don't know what I think about ascertainment,
 4        but I'm just trying to think of something that was brought
 5        up today.
 6                  CO-CHAIR MOONVES:  Very good point.
 7                  MR. GOODMON:  In the end we're going to have to
 8        have something.
 9                  CO-CHAIR MOONVES:  Right, that's correct.
10                  MR. GOODMON:  My experience with commissions or
11        committees of this type is they spend an awful lot of time
12        gathering information and hearing different ideas and
13        spend the last 30 minutes working on the five different
14        options that we've heard of.  I'm not suggesting you are
15        going to do that.  I'm just bringing it up and saying that
16        in a lot of these areas I think many of us are ready to
17        say what we think or what we think should happen or how it
18        should go.
19                  So I'm just interested in what that process is
20        going to be, one.
21                  Two, you know, I'm supposed to not like these
22        public interest group people and think that we're on
23        different sides of the table here or something, and the
24        truth is I see an awful lot of commonality between the
25        morning group and the afternoon group.  And I'm

 1        encouraged.  I'm a half-full, not half-empty.
 2                  MR. GLASER:  You're being brainwashed.
 3                  MR. GOODMON:  Yeah, okay.  I've heard a lot of
 4        stuff that makes a lot of sense this morning and I heard a
 5        lot of stuff that makes a lot of sense this afternoon.  So
 6        I'm not by definition here to fight.
 7                  Third -- wait a minute.  Let me do this.  Third,
 8        self-regulation is an important notion and I hope it's in
 9        here somewhere.  We gave everybody a copy of the old NAB
10        Code last time, and I just think that's an interesting
11        topic.  I think that was a very successful notion.  I
12        don't know how to get that in here.
13                  CO-CHAIR MOONVES:  Jim, regarding your first
14        point, which I think is very essential, that's what I'm
15        talking about about how long we're going to spread out or
16        how many different issues we are going to deal with and
17        discuss until we finally get into the decisionmaking
18        process.  And I would like to leave a number of meetings
19        for us to be able to discuss it and get into what this
20        thing's going to be about, so we don't have 11 meetings of
21        things and then try to throw it together in one meeting,
22        which is going to be very hard to do.
23                  I think that's something we've got to come up
24        with, is how widespread the issues can be, because there
25        are a lot of issues we have to deal with. 

 1                  MS. CHARREN:  Who's going to write the first
 2        draft?
 3                  MS. PELTZ STRAUSS:  That's my concern, too,
 4        because I've also been on these committees and it's
 5        exactly my experience that at the eleventh hour you're
 6        trying to put everything together.  I guess that was one
 7        of the reasons that I was concerned about first presenting
 8        the issues on the table as late as April, approximately 6
 9        months after we began.
10                  One thing that we may want to do is make the
11        presentations next time shorter and include more things. 
12        My presentation, I can get somebody in here to talk about
13        video description, I can talk about captioning; I can do
14        the whole thing in half an hour.  
15                  Some of these issues just have to be put on the
16        table.  Do we really need whole days for each of these
17        subject matters?  I don't think so, not to at least
18        generally educate the group about what's on the table.
19                  CO-CHAIR ORNSTEIN:  We should definitely stay
20        flexible in terms of what we do here.  I think we all need
21        to be action-oriented, and we all need to start with the
22        notion that the goal here is to come up with a set of
23        recommendations and a consensus.  
24                  I think the difficulty that we have, Jim, is
25        that we could vote now on some of these specific areas of

 1        public interest and perhaps get a consensus or at least
 2        get a very substantial vote.  That's not going to lead us
 3        to a solution in terms of the overall model that we're
 4        going to have to develop here for a different technology. 
 5        It's going to take us a while, and some of those areas
 6        where we will have an agreement, we don't need to worry
 7        about them because we'll have that agreement. 
 8                  What I'm expecting and hoping is that when we
 9        get around to, as we move from April towards June, we are
10        really going to start to focus very specifically on the
11        larger and the smaller issues that will have to go into a
12        report.
13                  How we put the report together we will have to
14        decide ourselves, how we do the drafting.  That I don't
15        think will be terribly difficult.  We'll clearly have to
16        come up with a process where we circulate the drafts among
17        ourselves as well. 
18                  But this has to be an organic process, at least
19        for a while.  That doesn't mean that we have to have every
20        subject.  That's why the notion of because it's so
21        important it's got to take a full day, I think is not the
22        way we need to go.  As we go along -- the issues today
23        were broader issues.  We did focus on some narrow ones. 
24        We're learning a lot about ourselves and where we are all
25        standing in this, as we're learning about the larger

 1        issues, and it's going to take us a while to figure out
 2        how we operationalize this into some specifics.
 3                  Again, let me emphasize that our deliberations
 4        are not just what we do here.  Each of us will be talking
 5        individually with others in our group, and I hope that we
 6        will begin to work through in our own minds, not that we
 7        will have solutions emerge outside of this public arena at
 8        all, but we find -- I think even I found our lunches,
 9        where we're just talking informally about what we heard in
10        the morning, has proven to be very, very useful at raising
11        ideas about what we can do.
12                  So we will have a better sense of where we're
13        heading as a group, I think, by the time we get to the
14        March meeting.  
15                  CO-CHAIR MOONVES:  I think I want to go back to
16        something Karen said, and I think I agree with you 10
17        percent.  I think today was a very important day in that
18        it laid out the broad general issues from the two major
19        points of view.  I think the rest of the issues can be
20        done in a shorter amount of time, without quite as much
21        discussion, and then we can get into deliberations.  So I
22        think literally to spread it out as long as we're doing is
23        probably a mistake, I really do, and we have to limit,
24        once again.
25                  May I add, we're not going to be able to deal

 1        with 20 different issues or we'll never get anywhere.
 2                  MS. PELTZ STRAUSS:  Well, maybe we can talk
 3        afterwards, but I'm ready January, March, whenever you
 4        want me.  And I would imagine that the other people also
 5        would be ready.  So, whatever you decide to do, I think
 6        that we can probably get a lot done in one meeting.
 7                  CO-CHAIR ORNSTEIN:  Okay.  Well, let's sum up. 
 8        Basically, Rob is going to put together his panel.  He has
 9        some direction from various among us about what kinds of
10        people, and we will work with him to make sure that that
11        works in a fashion that advances our cause.
12                  Then Peggy is going to consult with some of the
13        rest of our members and others about the education issues
14        from distance learning to what comes on public television
15        to reaching the classrooms to telecourses and other things
16        that are relevant for us as we look at it.
17                  MS. CHARREN:  I can introduce the panel.
18                  CO-CHAIR ORNSTEIN:  Yes, and introducing the
19        panel.  And that's what we'll do the next time.  We will
20        formalize the next time exactly how we handle the session
21        that follows and see if we want to tighten it up or
22        shorten it or throw more things in.
23                  Does that make sense?
24                  MR. DUHAMEL:  Is the March session the
25        political?

 1                  CO-CHAIR ORNSTEIN:  Well, probably, and we'll
 2        determine the venue for the future meetings in January. 
 3        January will be somewhere in the Washington area.  We'll
 4        see what works in that regard.
 5                  (Whereupon, at 4:53 p.m., the committee was
 6        adjourned.)