Friday, December 5, 1997


Meeting Transcript -- Morning Session

[Go to the afternoon session transcript]

 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.)

[Go to the afternoon session transcript]