TRANSCRIPT OF PROCEEDINGS
TAKEN ON JUNE 8, 1998
AT 9:38 A.M.
[Click to view the morning session]
BARBARA J. STROIA, RPR
CHAIRMAN ORNSTEIN: Why don't we get started? We still have a lot that I hope we can move through. When we ended, we had not quite completed our discussion of this set of issues on education, and I think we will focus, in 182 particular, on the recommendations that deal very directly and explicitly with this area rather than some of the others, which we will get to that in another context. But it seems to me we need to do two things before we're done with this area. We need to reach a consensus, if we can, on how we define educational programming. And really, there are some differences here. I think what Gigi has suggested, which was in that description in the public broadcasting proposal is, in fact, a broader definition of educational programming than what some others have suggested. So we need to nail that down. MS. CHARREN: I think in that Gigi's definition, we should consider a broader definition of public interest programming, and that Robert's definition is really educational programming, which Charles enlarged on today, that that's educational and the other is public interest. So we're not using the word education in terms of programming. CHAIRMAN ORNSTEIN: Absolutely. The question remains, though, whether -- I think what Gigi was suggesting is that she 183 prefer to keep a broader definition for what would be the responsibilities for this dedicated channel. We at least need to settle among ourselves whether we want to make that focus. The continuum is one that is specifically instructional programming all the way over to what would be in the public interest. We have been talking about something in-between, and probably we could take that definition and excise a couple of elements of it, or we could use it, develop a new definition or use the one that Charles is suggesting which is on learning, including lifelong learning. MS. CHARREN: That whole thing, all those things that were included from Robert's channel, which it's almost a way of talking about the delivery systems for the education instead of what the definition of the education is, and I think that's better, because I mean it's -- a particular school can't get itself together on what education means in that set of classrooms. CHAIRMAN ORNSTEIN: That certainly makes sense. I agree with that, and 184 then we really do need to have some brief discussions of which we may need to delegate further in terms of conclusion. There is a mechanical problem here. I don't think we want to recommend that there be a separate dedicated channel for every public television station in an area where there are two, three or four or more and there's overlap, and we do need to have at least some consideration of what we would recommend in terms of how you pick one. I don't have any answers to that. Maybe people have some suggestions. If not, we may need to designate a couple of people and simply take that responsibility and think it through to make it work accurately. But clearly, I mean just to pick one example, if we have a -- in the Washington metropolitan area, there are actually three now which are widely accessible. There's one set in Annapolis, which is Channel 22 in the cable universe, and then there's a Channel 26, which is the greater Washington area public television, and there's the Howard University Public Channel, which is 32. So we need to 185 find some mechanism to choose, probably one from among the three, that would bear that responsibility. I don't know quite how to do that, but if anybody has any ideas. MS. SOHN: I guess why do you have to pick one? Why couldn't there be possibly opportunity for a sharing arrangement? CHAIRMAN ORNSTEIN: Certainly a sharing arrangement. I don't think you necessarily have to pick one station, but there's going to be -- I think what we want is, in each area, one dedicated channel, and the question is, what mechanism do you devise or can you device a mechanism to decide who will operate it. Of course, it doesn't have to be done -- you don't have to have an all or nothing or a zero-sum game here. MR. BENTON: Just a thought. If you went along with this FCC notion, which I think is an interesting idea, you could not only write guidelines for the stations in, say the New York area cooperative, which New York maybe more complicated, but beginning or ending, but also including other major public 186 institutions like libraries and schools as a part of the consortium. The suggestion I made earlier this morning about the various acts, I gave you a paper on this. The Library of Services and Technology Act, one could think down the road is another funding possibility of a local broadcasting services, which the criteria would be exactly what was done when the Library Services Technology Act. Money was only awarded to multi-institutional proposals. So you have to come in with a multi-institutional proposal, was the basic idea that was the use of networking in computer technology for sharing resources and libraries. That was the fundamental idea of the act. And one can look upon this in an analogous way at the community level, is getting the nonprofit organizations that logically would ban together to define need and then work through the programming expression of that need through noncommercial television. So this is very complicated, and maybe this could be put back to the subcommittee. CHAIRMAN ORNSTEIN: I suppose 187 the easiest way to deal with this is if we all agree that this mechanism, that the public television stations would submit a plan showing what they would do with this channel, which includes, you know, sensitivity to local needs, working with local entities and the right to the FCC. MR. DUHAMEL: All the local entities. CHAIRMAN ORNSTEIN: It might be that any of the stations in an area could either submit separate plans or they could work together and submit and then the FCC can choose from among rival plans or reject them all and arrive at a wider range. MR. CRUZ: Norm, on the issue of the overlap situation, there is a lot of research going on now internally within public broadcasting; PBS, CPB and acts and so forth in reference to that particular issue for other kinds of things, but I think there may be wording in some of the solutions that they're working on for their own problems that might have applicability to a second channel recommendation in an overlap market. 188 CHAIRMAN ORNSTEIN: Maybe there's something out there you can get back to us and we can work with it. MR. DECHERD: Pardon me, we're talking about a licensing process. There's currently a licensing process. It seems to me we can, in effect, hand this off to the FCC to devise the rule that you just described. It's not as if this is a permanent allocation which is never going to be reviewed again and the winner takes all, if you will. I think it's the same licensing process for the spectrum. MS. SOHN: Robert, let me ask you, now that the comparative hearings are basically dead in the water, how -- let's say WHUR, all the three stations, MPT and that big one, WETA, all apply for the same extra spectrum. How would you propose the FCC choose among them given that the comparative hearings are no longer viable. MR. DECHERD: Well, they have a process, I believe, still in place for competing applications for newly-allocated channels, yes? It doesn't happen very often, but basically, you're recreating some sort of 189 internal review mechanism, and all we're saying is there's only one per geographic area so the outcome is the country has one large system with no duplication of licensees within any part of it, and it's up to them to determine how to do it. MR. CRUZ: That's why I indicated that there is a lot of work already being done in terms of research regarding that particular concept. MS. SOHN: That's an important point. MR. CRUZ: They haven't been researching it for this particular issue, but they certainly have a lot of background information on determinations of -- CHAIRMAN ORNSTEIN: We can leave an awful lot up to the FCC. MS. CHARREN: They still have their stations. We're not going to get rid of three stations. CHAIRMAN ORNSTEIN: They're going to keep their stations. MS. CHARREN: Right. CHAIRMAN ORNSTEIN: Let me just 190 sum up here in terms of where -- MS. WHITE: I think James has a concern for one of the recommendations. MR. BENTON: Norm, there is a DS-2 proposal that's going to be at the PBS annual meeting next week. The 27 second-market stations all together. MR. YEE: In the third point about the trust fund. MS. CHARREN: Would you read it because I can't find it. MR. YEE: Thank you. The recommendations by this committee, the third point, the trust fund be invested by public broadcasting, which I assume to be CPB for clarity, a percentage go to an alternative system of independent producers and programmers. When we talk about percentages, it gets a little shaky here. I just feel like I was recommended for a discussion or further research, a baseline number to work from rather than just a flat percentage. My history with public broadcasting has proven to be they put you in a niche, that 191 niche doesn't get any bigger. CHAIRMAN ORNSTEIN: If I'm not mistaken, that relates to our discussion about how we were going to set aside a share for bidding by other entities. MS. CHARREN: That's a better phrase. MR. YEE: Yeah, just for clarity. CHAIRMAN ORNSTEIN: We were talking in the range of 15 or 20 percent. MS. CHARREN: I think other entities is better than programmers. CHAIRMAN ORNSTEIN: Yeah, we'll work out appropriate language. But in any event, we're basically -- we are in agreement about the set-aside of one layer of spectrum, 6 megahertz that would be the equivalent of what is now one analog channel dedicated to educational programming, which will define appropriately funded in our recommendation by dedicated revenues from any other auction of the analog spectrum, a mechanism set up through the FCC, both to handle overlapping stations and to create a 192 mechanism where, in effect, public broadcasting stations have the first bids to go forward to present a plan to make this work appropriately to show -- MR. BENTON: Working in conjunction with community groups. CHAIRMAN ORNSTEIN: Working in conjunction with community groups and to show how it would be distinct from their existing public broadcasting station and focused on education, and the plans would either be accepted or rejected, and if they're rejected, then it would be open for bidding by other entities in the local community. That pretty much covers the larger range of things. MR. CRUZ: All that's separate from the trust fund. CHAIRMAN ORNSTEIN: Separate from any recommendation for a trust fund for existing public broadcasting entities. MR. BENTON: Do you want a motion on that? CHAIRMAN ORNSTEIN: I don't think we need to vote on anything at this 193 point. CHAIRMAN MOONVES: Just writing them up. CHAIRMAN ORNSTEIN: Writing them up. Eventually we will either, you know, presumably have to make a formal ratification of specifics. It makes sense not to move to votes on it at this point. I would suggest the following plan for the rest of the afternoon. If you look at the recommendation, the outline that I pulled together, there are -- we discussed the first two areas. MR. RUIZ: Are we done with this? CHAIRMAN ORNSTEIN: The education one? I think so. MR. RUIZ: Do you accept written comments. CHAIRMAN ORNSTEIN: Oh, absolutely. We haven't finalized anything other than we have an understanding about the thrust of what we're going to do, and clearly, these other areas and it includes the sensitivity to those left out in the process. 194 We'll try to incorporate language, and we are, of course, open to -- in the next few weeks, we're presuming to have a lot of give and take in these and other areas. MS. SOHN: Norm, could I just bring attention to this memo that I had originally sent to Frank in regard to our subcommittee deliberations? I'm not advocating anything here, but just when we do get more towards what educational program, to define it, I thought these would be instructive. I just want to make sure people saw it, May 28th. MR. BENTON: The ironic twist here is that in the education world, what is defined as an education program is really an instructional programming, and what is defined as instructional programming is really educational programming. CHAIRMAN ORNSTEIN: We will try and work on appropriate definitions, not required to use their definition of instructional or educational. MR. RUIZ: I wanted to go back to what Jim was saying, and I will write you 195 about that in the history. If amounts or percentages are not written in, history says nothing will happen. It's only happened when Congress mandated by a figure. When Congress has just suggested it and left it up to CPB, it has not happened. CHAIRMAN ORNSTEIN: I think the reality is that, in some areas, we will have an easy time coming to a consensus on numbers. I think we can come to a consensus on the one James was talking about. In other areas, it may be more difficult, but we'll do what we can. I would suggest the following. I, basically, put out five areas that I thought core of what we need. We have a sixth area that we really need to discuss, and that is the question of the minimum standards that James has brought up, and Gigi has also addressed this issue. I'd like to leave that one to the end because it's very important. We clearly will have some differences of opinion on that, as we will some of the others. But I'd like to clear out as much as the underbrush as we can in these other areas first 196 and see how far we can get, and we'll be sure to reserve some time for that before we're done. The third area is one that we have raised a couple of times in the public, and it's been raised otherwise in some of the communications from people, and it really is based on the following. We've had, of course, a lot of discussion, and there has been far more discussion in the public arena about the way in which the digital spectrum was transferred to broadcasters. The law itself leaves a lot of leeway for broadcasters to use digital as they sit fit. But clearly, within the rhetoric, there was some distinction made between the possibility of a one-for-one exchange where, in effect, what would happen is that broadcasters would have digital spectrum lent to them for a period of time while they made a transition to the digital age, and then, as we have been discussing with regard to public television, give back the analog spectrum and use the digital to send out one comparable signal, except it would be a much higher quality high 197 definition program, and that is distinct from two other possibilities here, none of which are mutually exclusive. One is that a good portion of this digital space would end up being used for ancillary and supplementary services. That means things that have explicit separate payments attached to them. That might be pay per view or paging services or the like. In the Act, Congress, as we know, explicitly set up a funding mechanism fees to be attached. The FCC is supposed to attach fees, and frankly, none of us have any idea what those fees will amount to. If there's a consensus, it is that they're not going to be some huge sum of money. The third possibility is that broadcasters will use all or some of the time that they have on the digital age to transmit more than one signal, which might be free over-the-air programming but still commercially derived, and that might mean two, three, four, five or more, and I don't think any of us knows what the state of compression technology will be several years down the road. It could be a much larger 198 number. It is very reasonable, it seems to me, to say that if, in the end, we have a one-for-one exchange, given that broadcasters are going to be paying a very sizable sum of money to make this transition for equipment, towers and the like, and what consumers end up with after this transition is a channel that involves a much higher-quality picture, that that's going to be a good deal for the public. But that if, indeed, what we see for a number of hours a day or generally is a lot of separate channels, each with its extreme of revenues, that then it's worthwhile revisiting. Whether that which may turn out to be a substantial revenue windfall for broadcasters compared to what exists now will require something else in terms of the public interest. If we make that distinction, then we have at least one proposal that was put on the table, and that is that if broadcasters, say, go beyond two channels, that the fourth channel be reserved for the public interest. MS. CHARREN: Where's the third? The fourth? 199 CHAIRMAN ORNSTEIN: If they go beyond two. If they go to three, then the fourth one is the tollgate, in effect. So if they want to go to three, then they're going to have to turn the fourth one over. They can't do three exclusively. There would have to be a fourth one. We can certainly have some debate over where the trigger mechanism comes, but we need first to determine whether we have a consensus that having some kind of a trigger where you'd have channel space reserved for the public interest and, presumably, some commitment to program it and not just to leave it as we have with cable with putting empty space. Or in this case you could have an option if a broadcaster wanted to pay somebody else to carry that particular channel forward in the public interest. MS. CHARREN: When you say pay somebody else, do you mean pay that money into a trust fund or to pay somebody else. CHAIRMAN ORNSTEIN: Pay somebody else. MS. CHARREN: Like who? 200 CHAIRMAN ORNSTEIN: What I would suggest here, and this is simply me, would be that if you -- you may very well have a situation where a broadcaster wants to go to five or six channels but doesn't want to use the person power at the station or the resources of the station to program an extra channel, would prefer to take what might be some share of the revenues from the additional channels -- this is all presuming a new revenue stream coming in -- to either have a public broadcaster or some other entity program it to serve the public interest. In this case, that means all of the things that we're talking about in terms of the public interest. And you know, here it seems to me we have a way of making a distinction that I would hope could satisfy a number of different interests. It's really suggesting that if, indeed, in an era we can't foresee it does turn out to be one where there can be a very substantial windfall here using a large number of channels, there's an easy way to try and make sure that you can strike a balance, and if it doesn't, then it doesn't. 201 MS. CHARREN: I'm still not sure I understand the choice of the alternate, you know, who's going to do the programming if you give it away. If you decide you're not going to play, you're going to pay somebody else to do it. CHAIRMAN ORNSTEIN: Then you contract with somebody else, whether it's the local public television station, local university. MS. CHARREN: And you, the broadcaster, can decide who you're going to contract with? CHAIRMAN ORNSTEIN: We need to discuss that. I don't have a problem with it. MS. CHARREN: I think I do. I think I do. At least the broadcaster is working under a set of something established by the FCC. It's an entity that is part of a structure. If that broadcaster can just pick who is going to do, in effect, his or her public interest broadcasting, that separates that out from under a kind of mechanism. CHAIRMAN MOONVES: But it would be another broadcaster. 202 MS. SOHN: That's an important distinction. MS. CHARREN: That doesn't say that. CHAIRMAN MOONVES: As opposed to what. MS. CHARREN: I have visions of it being an American Enterprise Institute. I'm kidding. CHAIRMAN ORNSTEIN: Let Robert speak. MR. DECHERD: I believe it is correct to say that there is nothing in the Telecommunications Act and nothing contemplated which will obviate broadcaster responsibility. We are going to be licensed to 6 megahertz. Today we have all sorts of people doing programming for us. We're making those very choices today, but we are the licensees. We are held accountable for the spectrum allocated to us. This isn't a discussion that's out of this committee's hands. MS. SOHN: Well, I have to respectfully disagree because, Robert, because -- and this is a problem that comes up 203 with local marketing agreements where you have licensees that lease out -- well, it's radio and television -- lease out 24 hours a day, sometimes to another local broadcaster, but sometimes to somebody who is not licensed by the government, and my concern is, for instance, we've had somebody who had to have their license revoked for doing phony contests or phony programs or not doing enough political broadcasting and being able to lease out that station or lease out that channel and do that program. So I would be more comfortable with a recommendation that makes clear that only other licensees would be permitted to do that, and I really think -- I mean, this is -- Robert, you disagree with me -- I think the notion that the licensee is leased out 24 hours a day to another licensee, the program still has editorial control, I think that's just a fiction, and you and I can disagree on that, but -- CHAIRMAN ORNSTEIN: Let me raise just a question about that, and that is especially if you want to meet your concerns 204 about a local orientation, if you can only lease out to another licensee, which means another broadcaster in your market or in your area and the other licensees don't want to do it, then what are you going to do? I mean, I'd much rather leave some flexibility here for somebody else, which might be a university or another entity, always assuming that the responsibilities included in the subcontract, as they do to the broadcaster, or you're going to find an easy way to get out of all this by saying, I'm not going to do it, they're not going to do it, nobody will do it. MS. SOHN: They need to make crystal clear that the licensee has -- you know, must have, at all times, have editorial control over what's on that channel. MS. CHARREN: Why couldn't that be money? Pay or play. Pay. CHAIRMAN ORNSTEIN: Let's come back to that. MR. GOODMON: My suggestion about this is that we have minimum public interest requirements for a station. We're going to have one 24-hour station. One of our 205 stations is going to run 24 hours, that channel, and that's going to be high definition part of the time and standard definition. There's going to be all sort of a mixture there of how we do it. And my suggestion is we have minimum public interest requirements for the station, and if we run two channels 12 hours a day, then we have the same public interest requirements scale. I mean, this is just another station. It's on the air for a shorter period of time, but I haven't -- There are two notions. One is that we have a channel that we want public interest programming on and everybody going to watch it. I think our public interest programming ought to be as part of our total programming effort on all of our channels. And two, the notion that we can somehow pay somebody else or pay money to somebody instead of fulfilling our public service obligations, or this is not -- CHAIRMAN ORNSTEIN: That's a separate discussion. MR. GOODMON: I know but -- 206 CHAIRMAN ORNSTEIN: This is not in lieu of your public interest obligations. This is an additional set-aside if you multiplex. MR. GOODMON: You still have the public interest obligations that you have, and we have to have set aside another channel? CHAIRMAN ORNSTEIN: If you move to three or more. MR. DUHAMEL: Why does it have to be done commercial? I don't understand, because we already have a noncommercial system. I mean, if you could sell public service time, what's against selling it? You got to pay the bill to somebody. Why would you want -- it's onerous. Now, there isn't -- public affairs is not a big revenue maker, but why, if we can sell it, what's the problem? MR. CRUMP: Well, let's remember here that with the public service -- excuse me, PBS stations we have today, there's this sponsorship that we have where we suddenly see the advertiser's name, they put money in. I mean, in actuality, it's already taking place. 207 It's being sold, and some of the best public service programs that I have ever seen have been those which have been sponsored commercially because they provided the wherewithal where you could go in and really do a first-class job. Is there a hang-up? I know some people have it. Is there a hang-up here between public service that is coming to you as a nonsponsored entity as opposed to a commercial entity? I would think that quality would be the main decision making portion of this. MR. RUIZ: I'm somewhat confused because we're leaving an analog station for the public broadcaster. The public broadcaster is currently financially strapped to fill what they have, and now we're creating another entity that's an access point. Where is the programming going to come from? And then again, if you're going to limit, if you're going to take the entrepreneurial spirit to be able to put on or sell or raise the money for their piece so that you lift the quality in homes of getting viewership, what are we creating? To me, it sounds like a 208 ghetto. A bunch of stuff is going to get dumped into, and no one is going to care about it, and if we want to stay away from the state that cable did in the access channels, it doesn't seem that we're approaching this in the right way. CHAIRMAN ORNSTEIN: Well, I would hope that it would not be the same as cable where it's just space set aside. What we're suggesting here is this has to be robust programming. It is, in effect, a payment for moving to a stream of channels, each of which would have a separate commercial revenue. The idea here is that if, indeed, the digital age is going to represent some terrific new broadening money- making opportunities for broadcasters beyond the same kind of revenue stream that would come in if you move from one-to-one, that we devise a mechanism for providing more in the public interest. That's the goal here. CHAIRMAN MOONVES: Norm, does anybody care whether anybody watches these shows? If you have, in a market, six stations, let's say each station multiplexes and you get 209 four channels and one of -- this is our public interest station, nobody is going to watch that station. Nobody is going to watch it. MS. CHARREN: Nobody is not the right word. Somebody is going to watch it. The question is -- CHAIRMAN MOONVES: No, no, no. Peggy, what I'm saying is if our goal is really to get -- to help the local marketplace and really do programming that really helps your community, if you designate a channel, this is the channel for the people who want to see things that do good for their community. MS. CHARREN: No, this is a channel that wants to see things that the other channels don't make possible for you to look at. Think of it that way. MR. RUIZ: It may not be, though. The other broadcaster, it may be PBS repeating "Sesame Street" in the afternoon. Who knows? MR. SUNSTEIN: How much of a disincentive do we create with this to go beyond two channels? MR. LA CAMERA: Tremendous. 210 MR. SUNSTEIN: That's important factual -- MS. CHARREN: I agree with that. MR. LA CAMERA: If you take what could be a likely scenario, and that is you have your principal 24-hour channel, as Jim suggested. It would enhance obligations. Your second channel may very well be a regional news service, 24-hour news service, as currently populates cable, transferring that activity over onto one of these different channels. The third channel maybe give back to your network, maybe have a 24-hour or 12-hour or 6-hour soap channel, one of the things ABC is speculating on. And now you got to come out and program a noncommercial public interest channel? It's impossible. There's no fodder for it. There's no programming for it. You talk about robust. I can't imagine where it's going to come from when your second and third channels already are marginal, at best, and are commercial initiatives, but there's no guarantee that they're going to work. CHAIRMAN ORNSTEIN: Well, but if 211 there's a disincentive, obviously, that disincentive is going to be based on weighing the commercial viability if moving to three or more channels. If there is not great commercial viability to doing so, and if you're doing it just to do it, I don't see any reason to encourage it, frankly. Maybe not any reason to discourage it. If, on the other hand, there is substantial revenue to be made by moving beyond three channels, there is every rationale in this case for requiring something back in the public interest. That is a shakier rationale if you're talking about a one-for-one exchange. Now, if you don't want to do it by setting up a channel and programming it, I'm more than happy to consider just paying money and make it a fee for moving beyond those areas. I thought it would be far more acceptable to actually, not only set aside the channel space, since there will be sufficient channel space, but to try and build an incentive to do something more here, but the other way to go but it is -- MR. LA CAMERA: What possibly is 212 the mechanism to produce noncommercial public service programming in that quantity? There's no model for it. Public broadcasting, which is a multi-, multi-multi-million dollar -- CHAIRMAN ORNSTEIN: The alternative here is, rather than simply try and use it directly to produce that kind of programming, and if you have some money, you can take even things like what are now being done on cable for nothing, basically, just sticking a camera in the room where the city council is and making it work a little bit better, or to do some of the things that Jose Ruiz was talking about in terms of reaching out into these other communities. But if you don't want to do that, then you can take some share of the revenues coming beyond the two channels once -- since you're going -- presumably we're going to be talking about a situation in which there is a very substantial new revenue base and simply putting that into the pot to pay for the public interest. MS. CHARREN: I second that. MR. RUIZ: The goal is to better 213 serve the communities through this multichannel market. Why can't we change our thinking for a moment here and say, if the station goes two channels, an additional hour of public affairs programming be included; if it goes three, another hour; if it goes four, additional hours, so that we're not ghettoizing it, but we're actually putting it into the mainframe of the system. And these programs are to serve that local community. MR. CRUMP: As is Norm with me, I'm confused. I thought -- I thought that we had said previously that the situation already exists where if a broadcaster was taking additional channels and there was going to be a revenue stream from it, they were going to have to pay a fee to the government. MR. LA CAMERA: Fees, not advertising. Now I'm confused again for a while. MR. RUIZ: Does that accomplish it? MS. SOHN: I just want to address a couple of things. First of all, on the ghettoization, I guess I don't think it's 214 that bad of an idea for people to know where they can get the kind of programming that serves their communities. I'm not really wedded to the notion that, you know, every -- this is where I disagree with Jim -- that every multi-cash stream has to have its public interest program. I think there's actually some benefit to knowing where it is and when you can get it, number one. Number two, on who watches, I really think that can't be the measure because the demographics you look at are certainly not the demographics that public broadcast stations get or that, you know, you want to throw in local access. MR. DUHAMEL: The public broadcasting is subsidized. The commercial -- CHAIRMAN MOONVES: We're talking about people with money. MS. SOHN: You're not going to get the same demographics, but people watch C-Span and they watch it like crazy. It wouldn't make you happy, but it's certainly enough to make an impact. It makes an impact on people, and I think this channel can make an 215 impact on communities. So that's who watches. As far as the viability of noncommercial programs, I think I'd like to hear from Jim about how much noncommercial programming is out there that nobody ever sees because there's no place for it, and whether -- and whether your producers would just love to give Paul La Camera hours and hours worth of programming, good programming, to put on his channel. CHAIRMAN MOONVES: Didn't we do this panel a couple months ago? MS. SOHN: I wanted give you ample opportunity to be jealous. I just want to finish my thoughts. Also on the problem of noncommercial, I think my notion of noncommercial certainly would not exclude sponsorship like multicorporate sponsorship, so there could be some right to be made that way. The other point is that one of the reasons that I changed the notion of the trust fund funding, some could go to commercial broadcasters and some could go to noncommercial is to address this very thing. So I think there are ways that you can 216 economically fund the public interest, and I don't think -- I wonder if you can maybe talk to that, Jim. MR. YEE: Well, it's not astrophysics either. I think you can. My concern is about can we capitalize in terms of actually money for production because independent producers, commercial and noncommercial people are -- they have the incentive, a place to have their programs seen, vis-a-vis, public interest or community programs, they'll do it. I think the problem I have is the funding and then creating a whole different niche of thinking and of packaging. People come to it. They may traverse across it, but they maybe come back to it, and like I said in my earlier remarks, regarding a period where they can experiment and play around with this and not just have it locked out or locked in. That's my concern. I think from the producing side, whether your network or working in public television, producers are the most adaptive creatures on earth. If they smell money and opportunity, 217 they'll go for it, and I think there's a lot of people who like -- (inaudible) -- in a way in an informed community. The question is cash and where. CHAIRMAN ORNSTEIN: Let me suggest the following. It seems to me that we have a number of alternatives here in terms of dealing with multiplexing, and assume that what we're talking about is the kind of world that Paul was suggesting, which is, in a lot of cases, it's going to be somebody running their normal channel, and then a second channel might be an all sports channel, and a third one might be an all news channel and a fourth one might be an all soaps channel. One alternative for us is to require the same public interest obligations for all channels when they're on, and as Jim has suggested, you know, you amortize, depending on how many hours they're on the air. We have to ask ourselves the question of whether, if you're running an all sports channel, requiring the same obligations in terms of hours of children's programming or public affairs programming, is going to be a 218 good way to go here. Now, a second alternative is to basically try and come up with a quantified, completely different set of obligations which gets us into a moras that I think we could not get out of. A third is to try to provide some flexibility here and obviously do it in a way which least discourages experimentation. Now, there are two ways to go then. One way is to have a dedicated channel and either have it run by the broadcaster or have him pay somebody else. A second way might be to offer the following options to broadcasters if they want to move to multiple channels; either pay some fee to enable you to do this, and then you'll just have the one channel which has the public interest obligations and all others you can do with as you wish and make that fee some share of the revenues of the third channels and beyond so that if you're not going to make any money, or if you're going to make only small sums of money, you're not going to have to pay very much, some percentage, and if you make a lot of money, then you'll pay more. Or, you can run a public interest channel with a 219 commitment to programming it in a robust way. Now, maybe that's the way to best ensure flexibility and also make sure that you capture what you want to capture here. MR. CRUMP: Let's go back to your thought of taking various channels that would be programmed in different ways and requiring that we have public interest programming put on them. I am somewhat intrigued by that because what we always worry about is getting an audience, and the next thing we worry about is having a different audience. And what you have here if, indeed, you have taken what I would term niche programming channels and you have an opportunity suddenly to put some type of appropriate educational public service, whatever it is, programming in with that, you have the ability, if it's done right, using what Jim is talking about, which is the creative ability of other producers, perhaps what we got here, to try to grab an audience that you've never had before. As another specific example, suppose we take something as bad as sports, it's going to 220 be sports all the time, so who would do it? Who watches a lot of sports? Children do. Kids, teenagers we're talking about. Suddenly we have an opportunity, perhaps, here to capture them if you do an innovative educational program or an innovative educational program from the standpoint of politics, getting the vote, this sort of thing. So to me, that's an interesting possibility. MS. CHARREN: That's one of the options. MR. SUNSTEIN: Can I say something? Which is that I think a general concern is that if broadcasters are moving to multiplex, it's because there's a market demand for that, and that is, you know, a potentially fantastic thing for consumers, they get all these options, and what we want to do is make sure we don't have any regulatory burdens which would discourage that, you know, very good use of the new technology. So the trick is to build in sufficient flexibility that it doesn't discourage the use 221 of the multiplex technology, while at the same time, doing some good, and the two horns of the dilemma are doing no good and creating a disincentive. I think a way to do that would be to have, Norm, what you're saying, which is flexibility, but maybe even a little more flexibility; money or niche or maybe something like code plus, where a third way of meeting it would be to go beyond what's in the code or what's in any minimum standards. CHAIRMAN ORNSTEIN: And certainly, another alternative would be to have some kind of progressive rate structure so that if the revenues are not very substantial, you pay a smaller percentage than if you're doing very, very well. Maybe what we ought to do is consider building in a menu here of things. We have a choice for broadcasters. MR. LA CAMERA: It's important to remember here, again, as you think of these accelerator additional channels as -- (inaudible) -- programming as some form in the future, that's our emerging cable channel 222 today. There are single-revenue stream channels. The revenue comes from advertising. We don't enjoy the advantage of subscription fees as cable does as well. So as you're looking at your third channel and developing a third channel, it better be a surefire idea because not only are you absorbing the development cost of that third channel, now with that you're absorbing the development and start-up cost of the fourth public interest channel as well. That is going to significantly discourage any form of experimentation and use of that third channel within the industry. It has to. MS. SOHN: But Paul, my concern is what happens when we start getting like 20 to 1 compression where you can have 10, 15, 20 different video and other streams? I mean, should you think at that point even there shouldn't be a public interest channel? I can understand the nearer term, and part of our recommendations could include a phase-in, and I definitely think should include a phase-in to permit experimentation, but how about when the digital compression technology 223 gets to such an extent that you can have 10 and 15 different services? Doesn't the public deserve something back at that point? MR. LA CAMERA: No, I don't disagree. On the other hand, it's going to contribute to the fragmentation and erosion of the digital television that we deal with today. And secondly, again, unless you change the model, we're looking at a single revenue stream to support that growth for the other technologies. CHAIRMAN MOONVES: Let me jump in on what Paul said. And you're absolutely right. I mean, when you're talking about multiplexing, there should be a give-back of some point. But for a panel, for a commission that's looking ahead, the single-revenue stream broadcaster is becoming less and less a force in the marketplace where the only people that are starting to make money are the cable channels and the networks who own their own stations. In other words, it's a dual revenue source, right? 224 This year we're looking at a universe where, believe it or not, three of the four networks probably will lose money. MS. SOHN: Really? CHAIRMAN MOONVES: Now, as a network. As a network. Can I finish, please? It is necessary for us to use, basically, the network as the assist man for our stations. It's the second revenue stream that is making us the money, which is why, once again, we're getting into more content, more ownership on the part of that because we're looking for an additional revenue stream. While CBS is going to lose money this year, USA network -- Barry Diller, are you listening -- supposedly is going to make $250 million dollars because they have a dual-revenue source. So Paul's point, which is well-taken, as we look towards adding a third, a fourth, a fifth channel that only has one revenue stream, it's not a very good business. So that has to be, as we look ahead, figure it into the equation of what is the payback? What is the payback on the menu that you're talking about, Norm, which is not a bad 225 idea, but we're heading away from the single- revenue stream. MR. RUIZ: In respects to Gigi's question about independent producing, it's a tremendous empowerment if you were to come to me, and I'm the independent producer, and say, look, I want to do something on Sunday night from 7:00 to 8:00. I want it to be local, I want it to be well-produced. I can access you that time if you can come to me with a really good idea and a way to finance it. That's empowerment and incentive for me, and I would rather be on a mainland channel that I'm going to get a good lead-in and I'm going to get promotion, and we're working together to bring that rating, because you don't want to lose that hour and not have anybody watch it and to be cast off somewhere that I have no way of promoting it, I have to raise my own financing, I have no way of telling the people who do fund it if anybody is going to watch it. That's a real tough gig. CHAIRMAN ORNSTEIN: Let me go back to one of the things that Cass said. We want to do what serves the public. I think 226 Congress doesn't believe that if what we end up moving towards is all broadcasters multiplexing most of the time, or even all the time, would serve the public, and there's a reason, and a good reason for that. One good reason for that is that what broadcasters have represented is not the same thing as cable except done in a different way. They are the public square. Now, that audience is eroding, to some degree, although one hopes it has stabilized, but to provide an encouragement to further divide that audience up in terms of the public interest, if it's divided up by a bunch of broadcaster channels or joining a bunch of cable channels, joining a bunch of satellite channels, it's still going to create less and less of a public square. Now, Congress did not, when it passed the Telecommunications Act, affirmatively and explicitly discourage this kind of multiplexing, but those who crafted the act had made it abundantly clear, starting with Billy Tozan and moving on, as soon as some people in the industry suggested that what they probably 227 do is multiplex all the time, that that was simply not acceptable to them, and that the expectation was that this would be largely, if not exclusively, one signal. There is -- I believe, basically, if we don't come up with some kind of formula to create a public interest payback for multiple channels, that the alternative is likely to be a whole lot worse down the road. It would be a more onerous burden, and the trick here is to do it in a way that preserves that public square and public interest without discouraging experimentation. Now surely, we ought to be able to find a mechanism to be able to do that, and surely, we ought to be able to do that in a way that doesn't create an enormous penalty if you're putting out a bunch of channels that don't make any money. But I have a hard time believing that broadcasters are going to put out a bunch of channels that don't make a lot of money for a great length of time. Maybe there is a phase-in mechanism or there's a trigger mechanism that requires a certain amount of revenue coming in, and it is 228 one revenue steam, and in this case what we're talking about is a separate commercial driven revenue stream for each of these channels. Now, maybe that won't add up to more than what you would get from one channel. Maybe you're going to divide it up in that fashion. I doubt that's going to happen, and we don't want to penalize, in that case, but we ought to be able to come up with a formula that meets what seems to be a common goal here; that if, indeed, as Les suggested, we end up with a very large number of channels, that there should be some payback, and it's a different formula than if it's a one-for-one exchange. And throughout the discussion of the Telecommunications Act, by almost every actor involved here, the rationale for not auctioning off this spectrum was, basically, this is a loan in return for a one-for-one exchange. So it is clearly within our purview to try and consider what we do otherwise. If you want to come up with a better formula for doing this, fine, but I think if we resist doing anything here, were are not fulfilling our responsibilities. 229 MR. CRUZ: Norm, it's been about six months since we last heard from someone who -- I forget who the panelist was -- who indicated that they had some trends already indicated as to what possibly the broadcast community of America would be doing with multiplexing. Has that gotten any better in terms of refinement? Do we know the programming possibilities? CHAIRMAN ORNSTEIN: I don't think, Frank, that we are going to know until we actually get out there and people test it in the marketplace. MR. CRUZ: Well, let me ask is it possible that CBS or ABC could do what MSNBC is doing, only instead of doing via cable, do it with one of their other channels -- editorial comments aside? But I mean, is it possible? CHAIRMAN MOONVES: When you talk about multiplexing, you're talking about it on the local levels. CBS is not going to have six stations, you know. Paul will have six stations, he hopes. 230 MR. CRUZ: But there could be commonality with a lot of -- MR. LA CAMERA: What Norm said was right, and there's a school, and hopefully the majority of broadcasters are in this school, that high definition television is the most exciting option for us, is going to help reenergize our business, reengage the viewer, and that will not be multiplexing. There will be other day parts outside of prime and weekend sports that maybe there will be some multiplexing, but in what numbers, no one knows. CHAIRMAN MOONVES: The only thing I have trouble with, Norm -- not the only thing -- but when we're doing this menu, there are so many question marks about, you know, to use words like share of revenue and I don't -- you know, I don't know how we figure out an appropriate menu with pricing, with hours, with -- when there are so many question marks still to be answered; whether, you know, we're going to be an hour a night starting in November. Five years from now, we very well could be multiplexing all our stations. I 231 don't know. I don't think anybody does. MS. CHARREN: We could write something that deals with that. That's what business plans do all the time. Nobody really knows anything about the future. CHAIRMAN ORNSTEIN: And we don't have to get specific in a lot of these in terms of a percentage, and clearly, I think it's absolutely appropriate to have some significant phase-in period, both to allow for experimentation and to be fair. MR. CRUZ: In a simplistic way, we're writing a road map how to get to New York from Los Angeles and basically saying, look, you can fly, you can walk, you can drive, you can take a bike, you can go around the Panama Canal or whatever have you, but you're given a myriad of options. CHAIRMAN MOONVES: Yes, but you know where those two cities are located. MR. CRUZ: That's true, and I know a direct line gets you there. CHAIRMAN ORNSTEIN: Well, given the earthquakes -- CHAIRMAN MOONVES: I don't think 232 we do know where these stations are located. CHAIRMAN ORNSTEIN: Given natural disasters in California, that's not a certainty either. But you know, when I talked about a share of revenues, I think the idea here is that what I would suggest is revenues for the third, fourth and subsequent channels so that we're not talking about cutting into that single stream of revenue if there's a high definition channel, but you're talking about what larger sums might come in down the road. And again, you can have a lot of flexibility there to make sure it doesn't kick in until you're getting substantial revenues. MR. GOODMON: On our list, on our shopping list, I would like to suggest that there be a minimum requirement for HDT. We could not have adopted a more confusing system. We got 18 formats. We can broadcast in those. Cable is going to change it to something else, and then all the TV sets change it to something else. Is it unreasonable to suggest that every station should do a small percentage -- some 233 percentage of its programming in high definition? CHAIRMAN MOONVES: That's a whole separate subject. MS. SOHN: Don't go there. CHAIRMAN MOONVES: We could have a whole other commission on that one. MR. LA CAMERA: Now you're dictating to the networks. CHAIRMAN MOONVES: Exactly, and all the networks right now are in the middle of fighting amongst themselves about what to do, as well you know. MR. SUNSTEIN: I think the committee has delegated to Norm the responsibility to cross out 3-B, his good first effort, and to come up with some version acceptable to the various concern -- that addresses our various concerns on the model of the menu idea, and then we can look at it and see what we think. MS. SOHN: I just want to say that, Luis, I was very intrigued by your notion of if you multiplex and you're looking at these other areas, if you could develop that somehow 234 as part of the menu, I think it's an interesting -- MR. RUIZ: Any suggestions I would be -- MR. MINOW: One historic thing. FM was a nothing until the '60s. In the '60s the FCC said you can no longer duplicate on FM exactly what you're doing on AM. You have to have half the programs stricken. FM today is the dominant oral media. AM stations are not. You don't know, is what I'm saying. These things develop, and that's why the broadest flexibility, Norm, is what's sure. CHAIRMAN MOONVES: Absolutely, Newt. We don't know. MS. CHARREN: Can we sort of suggest -- we have ideas for possibilities of what can make them work better. When we said that a TV set has to have a click for UHF stations, we weren't sure the effect that would have on UHF, but the fact that nobody knows where their bloody signals are coming from. MR. MINOW: When the UHF started -- when cable started, UHF people fought it every inch of the way. I used to say 235 it's the best thing that's going to save your life. So nobody knows is what I'm saying. CHAIRMAN ORNSTEIN: The most significant thing we can do to start with is, first of all, agree on the principle that if there is multiplexing beyond two or three, that it is a very different take in terms of what gets given back to the public than if that does not occur. And if we can all accept that principle, then I am confident that we can come up with a menu that is sufficiently flexible, that since it's only a recommendation that goes out to entities that would have to implement it anyhow, that we can live with it. What's most important is we accept that basic principle. MR. DUHAMEL: Norm, I don't think I accept the principle because, basically, we're talking about an exchange for 6 megahertz for 6 megahertz. We're spending billions of dollars to go into it, and there's no -- there's no new audience out there. We're taking our existing audience and fractionalizing it. So to say that there's something else out there, I can't agree with that. 236 CHAIRMAN ORNSTEIN: We thank you for a dissenting voice. MR. CRUZ: Norm, our subcommittee, Lois Jean White's, came up with the recommendations that also appears that Barry Diller's recommendations, and that is creating financial incentive for commercial broadcasters to do additional educational programming in a multiplex channeled era. Incentives, it could be any tax credits or tax breaks or whatever encourage you to do it. Give them a break in that sense. So that might be part of your menu is what I'm saying. MS. SOHN: Could I just amend Cass's -- Karen wants to cross out the VB. I would put VB as one of the menu items. Is that okay? MR. SUNSTEIN: Why not? MR. BENTON: Absolutely. I think -- MR. SUNSTEIN: Especially your insight on Congress, history of the act here, means we really need to do this, but it's very complicated, and I think you're taking the lead -- because we got another whack at this -- 237 you're taking the lead on articulating what this menu is. I would have complete confidence, once the principle has been accepted, which I think virtually all of us, with maybe one dissenting voice do accept. CHAIRMAN ORNSTEIN: I will certainly work closely with our co-chair. CHAIRMAN MOONVES: We're not accepting anything until we see it written down. We'll make that statement right now. MS. SOHN: You're sounding like a lawyer. CHAIRMAN MOONVES: I've been deposed enough times. We'll see how much low fat is on the menu. CHAIRMAN ORNSTEIN: All right. Let's turn to the easy one, which is political discourse. We'll probably have no more than five minutes on this, and then we can move along. It is -- just so we can make this work, it's 3 o'clock. I think -- well, we'll see how we get here, but we may have to put an arbitrary stop to our discussion so we can cover the other areas. I don't think we can do 238 everything as fully as we would like. We need to get a general sense of things. CHAIRMAN MOONVES: What time is the public -- CHAIRMAN ORNSTEIN: I think we can probably safely go until 5:00, maybe 5:15 is what we're suggesting. We have until 5:30 altogether, so we'll try and divide up the time appropriately so we can at least have some robust discussion of all the areas that we need to consider. There are -- I put three things down here, and these are my basic ideas to try and do what we can to reach a broader consensus here. That broader consensus, it seems to me, is basically going to have to stay away from the notion of explicitly mandating a carving out time from broadcasters out of their hides for the purpose of political discourse, and we have to look for other mechanisms. I do think -- I at least would endorse, and I think we've see in some of the comments that others have made as a goal so that we can do this in the spirit of cooperation with the industry, the flat statement that the president 239 of the NAB made, Andy Fritz, just a few weeks ago, that he would support broadcasters providing two hours of free time for federal candidates, if they would agree not to purchase any additional time. MR. GOODMON: That's not what he meant. MR. LA CAMERA: It was an off-the-cuff remark which he immediately repudiated. It was a bad joke. CHAIRMAN ORNSTEIN: Well, the reporters who did the interview said there was nothing joking about it, and he was very explicit. MR. MINOW: It was in a transcript. He said it in so many words. I would take him up on it. MR. GOODMON: But his point -- MR. LA CAMERA: He subsequently, immediately, he refuted it. CHAIRMAN ORNSTEIN: So he doesn't mean what he says? MR. LA CAMERA: He didn't mean that. MR. GOODMON: No, I think he 240 meant that if candidates are given free programming time, it will not affect their spot time. They want to buy spots, and they're going to buy them, and that's what he was saying. Just because they get free program time, they still want to make their spot buys. I think that's what he was saying. CHAIRMAN ORNSTEIN: And we can get out the transcripts and read it. MR. MINOW: He's right about that. I agree with him about that. That's why I think there should be no buying or selling time, and there should be a certain amount of time, public service time, and no buying or selling time. He's right about that. CHAIRMAN ORNSTEIN: Maybe we can get a -- MR. MINOW: He's quoting it to Congress. CHAIRMAN ORNSTEIN: I think, under the circumstances, given what Paul has said, maybe what we should do here, at least to start with, is to get a communication from Mr. Fritz indicating whether he stands by what he said or whether he has, in fact, repudiated 241 it. MR. BENTON: Norm, just in broadcast -- CHAIRMAN MOONVES: If you are attempting to get a consensus here, I don't think the way you phrased that is an appropriate way to get the broadcasters together with you on this issue. MR. LA CAMERA: If you want to discuss this, that's fine. I don't think it's an official NAB position. MR. BENTON: Anyway, in this article that was passed out at the last meeting, April 6th broadcasting cable, it says, "Fritz insisted any free time mandate would merely provide more time for negative attack ads." Quotes. "I will make a deal tomorrow with the Congress of the United States." Quotes. "That says the following: We will give you two hours of broadcast time to run your campaign, federal candidates only. However, you will not be able to buy any additional time." Unquote. It's right there, black and white. There it is. MR. LA CAMERA: From my 242 understanding -- CHAIRMAN ORNSTEIN: Did he, in fact, as Paul said, repudiate this? Is this an NAB position? MR. JACK GOODMAN: It is not an official NAB position. I think you have to look at it as a package, and I think, as you will note from the letter I sent you, the restriction on the ability to buy time is clearly unconstitutional. So I think you should view it as a rhetorical rather than a serious proposal. MR. LA CAMERA: If you want to discuss -- MR. MINOW: Well, wait a minute. For the record, I disagree totally with that view on constitutionality, totally. MR. JACK GOODMAN: The Sixth Circuit said exactly the opposite. MR. MINOW: That's because of the way the law is phrased now. If Congress changed the law to say you couldn't buy time, that would be constitutional. MS. SOHN: If they could get a compelling government interest? 243 MR. MINOW: Yes. MS. SOHN: What would that interest be? MR. MINOW: That the cost of campaigning today is destroying the democratic process. MR. JACK GOODMAN: Well, it was rejected in Crews and rejected in Buckley, that very argument. MR. MINOW: You know, that's a difference of opinion. That's all that is. Everybody is entitled to his own opinions, but not to his own facts. CHAIRMAN ORNSTEIN: Well, I was just trying to take what the president of NAB had explicitly said. I guess it's not an official position and he's repudiated it, so we can move beyond that. I do think as a goal, it would be a reasonable one. But beyond that, I'd suggest two very simple things; one which Cass had written into the code is an attempt to try and bring some candidates into discourse while providing a tremendous amount of freedom for broadcasters, and that is, basically, that in the 30 days 244 before an election, every broadcaster would commit to providing five minutes a night of candidate-centered discourse. Broadcasters would choose the races and the candidates which deserve interest and would be encouraged to experiment with formats. It needn't be a five-minute block of time. It should meet the commercial needs of broadcasters. It should be at least a three-minute block. It might come in the news, it might come at other times. We've extended the definition of the evening hours back to 5 o'clock to 11:35. I believe, basically, that this could probably be done for those who wanted to without loss of a second commercial time, if you wanted to do it that way, that it would be a fairly modest commitment, but done in this fashion, it would send a powerful signal to the public, and it would provide a tremendous opportunity for some candidates who get no time to have an opportunity to get messages across. And what we've also suggested is that to prevent a situation where you offer time to candidates and the powerful one says, I don't 245 want it, to prevent his opponent from getting any message across, that any equal time provisions be waived here, that there be a commitment to fairness, obviously. So it's not used by a broadcaster to simply promote one particular point of view. MR. GOODMON: Is this federal candidates? CHAIRMAN ORNSTEIN: I'd leave it up to broadcasters to determine, during that 30-day period, which candidates they felt deserved attention, and that doesn't have to be federal. MS. STRAUSS: Would the broadcasters be allowed to accumulate minutes; for example, 50 minutes on one night and that would take up -- CHAIRMAN ORNSTEIN: No, I think what you want to do here is to try to move into a pattern here where every night you get some time devoted to candidate-centered discourse. MR. YEE: Five minutes? CHAIRMAN ORNSTEIN: At all times. This is not instead of the kinds of activities that stations normally engage in in 246 covering elections. It's not in lieu of debates. It's not in lieu of news coverage. This is a distinct commitment, but it's one that I think you could make into a win-win situation, and you'd get a lot of creativity using this process. MR. LA CAMERA: I think that's part of the biggest way to attract flexibility and creativity. MS. SOHN: Norm, I'm concerned when you say equal time and rules waived in return for fairness. Now, only Congress can waive the equal time law. So that's sort of an important thing to understand. And there are -- on the other hand, there are ways of doing this that don't -- that would fall within the exemptions to the equal time. CHAIRMAN ORNSTEIN: Yes, and along the way, until Congress made an exception, there are lots of ways in which you can handle this, but it seems to me the best way to handle it, ultimately, is if broadcasters are given the kind of flexibility. You know, one of the problems with 247 debates, as we have learned, is that you will find many candidates, particularly incumbents, who don't want a debate, and if they don't want to debate, then you can't give that time to the opposing candidates. So the idea here is to try and provide opportunities for broader discourse, but also for candidates who, otherwise, in important races, wouldn't have an opportunity to get a message across. MS. SOHN: I just wanted to make the point that this may be a hybrid recommendation-- (inaudible). CHAIRMAN MOONVES: Are you willing to tie this to your first sentence in C? MR. CRUZ: I would recommend that. CHAIRMAN ORNSTEIN: Sure, but it also seems to me that the best way for something like this to happen is for broadcasters to do it on their own initiative. I would prefer not to mandate anything. I'd prefer not to force things on broadcasters. It seems to me that this is the 248 sort of thing -- CHAIRMAN MOONVES: What did you say? CHAIRMAN ORNSTEIN: I would prefer -- CHAIRMAN MOONVES: I just wanted to make sure I heard you correctly. CHAIRMAN ORNSTEIN: I think, for most of us, the preference is always to have it occur in a fashion that works through the industry rather than mandated by a government, so that's not a first resort, and there are ways of doing it here, either by action -- as we're seeing now, with things like the Minnesota Compact, there are lots of places where broadcasters, themselves, are stepping forward and looking for these kinds of creative ways to improve political discourse. Another way is to build it explicitly into a code and hope that it gets carried out voluntarily in the Code of Conduct. The last resort would be to make it a mandate as a part of a congressional action. The only part of a congressional action that I would suggest here would be a way to facilitate 249 broadcasters moving to this kind of action as Gigi suggested by -- for this purpose waiving equal time provisions. CHAIRMAN MOONVES: I'm not trying to act dumb, but you say a commitment by broadcasters. Now, you're saying that is now a voluntarily commitment? CHAIRMAN ORNSTEIN: Yes. CHAIRMAN MOONVES: A voluntarily commitment on the part of broadcasters. I was saying that if you wanted to be stronger on broadcasters, you know, once again, we had brought up the idea that broadcasters should be part of the solution, but part of a larger solution, which is why I was trying to combine C with, you know -- CHAIRMAN ORNSTEIN: If your judgment would be that the best way to do this is to incorporate this into a comprehensive congressional campaign reform that would include a congressional mandate -- CHAIRMAN MOONVES: I think it should certainly be discussed anyway. CHAIRMAN ORNSTEIN: I don't have a problem with calling on broadcasters to do 250 what they want to do now with this as a model and then incorporate it into that recommendation. MR. DUHAMEL: Would you be willing to exchange the most unit rate for five minutes a night. CHAIRMAN ORNSTEIN: As you'll see, the third suggestion is something much broader than that, which is, basically, the following; that this committee believes that there ought to be a comprehensive campaign reform and that campaign reform should not simply be on the shoulder of broadcasters. But in the context of campaign reform, it would be appropriate to move to an exchange of lowest unit rate in return for some formula of free time. To suggest that we repeal lowest unit rate and move to a market rate system and, in return, what you get is five minutes a night for 30 nights, I don't think would be widely acceptable, Bill. But given that, the NAB has said, I think most recently just a few weeks ago, that the lowest unit rate costs about 30 percent of the 251 revenues that would otherwise come in, that we know that it presents a bureaucratic and legal burden often, that some formula that would replace it that moves more to a market system. Removing those reporting requirements, the headaches of trying to figure out what the lowest unit rate is at every different point in time and, you know, the easiest formula, it seems to me, which is one that has been suggested some years ago by the industry is, in return for repeal of lowest unit rate. Only those broadcasters who are selling time at market rates would provide, for every two minutes of pay time, one minute of free time that gets divided, presumably, among the parties, the same kind of formula we now use for presidential campaigns. And then you're going to have -- you're not going to solve the problem of campaign costs here. One hopes that Congress would do that in other ways, but you are going to open up opportunities for candidates who otherwise wouldn't have a voice in this process of providing more flexibility. So it's a small piece. 252 MS. CHARREN: Does that take into account what a gift the repeal of that rate is? Does the public get enough back with that -- I mean, I think that's a tremendous carrot in terms of political discourse. CHAIRMAN MOONVES: What was? MS. CHARREN: The repeal of the lowest unit. CHAIRMAN MOONVES: The lowest unit rate is not the great windfall that people believe it is since it is not used really as much as people think it is. It's only applied in certain situations, and I know that may not have been the intent of the rule way back when but, in fact, it is not. It's not -- MS. CHARREN: Who just said that it's not? CHAIRMAN MOONVES: Norm did. The two-for-one does not come out equal at the end of the day. CHAIRMAN ORNSTEIN: If you go back to that same interview on broadcast cable, which is just a few weeks ago, Fritz said it costs 30 percent of revenue. Does this guy say anything that isn't going to be repudiated 253 here? CHAIRMAN MOONVES: Norm, that's my name. MS. CHARREN: I just think it sounds to me like if I were a broadcaster, that's a very good thing, and if I'm going to get away with not doing that, I want to be required to give something big back to the political -- MR. DUHAMEL: I thought five minutes a night is pretty much. MS. CHARREN: That's separate. MR. DUHAMEL: It doesn't have to be separate. MR. CRUMP: I'm not sure I'm understanding what you're saying. MS. CHARREN: I just want to make sure that here we talk about to repeal the lowest unit rate, and I want to make sure that what we get for that is worth it. MR. CRUMP: Well, then I'll make a proposition back to you then. Let's keep the lowest unit rate just as it is now and do away with this free programming. Do away with the free programming. We'll keep the lowest unit 254 rate that we got right now. Are you against that, Bill? MR. CRUZ: Somebody's got to pay it. MR. DUHAMEL: I'd be agreeable to that. I'd keep the lowest unit rate. MR. LA CAMERA: I'd like to see us make some steps forward here. MR. CRUMP: My point is we're talking about what we're going to get back. See, we're in a situation that's not the best. We don't like it, but it's not so bad that it's the end of the world, so we're not going to want to give a tremendous amount of something else in order to get that back. That's my whole point of this. CHAIRMAN ORNSTEIN: Let me be very frank here. I'm trying to come up with a recommendation that is not one that just says we ought to take a whole lot more out of the hide of broadcasters because we're moving to the digital age, that it will be more widely acceptable. That suggests a move to some kind of an exchange. When we started this process, we heard an 255 awful lot individually from some of you, from many other broadcasters, publicly in our first few meetings, about what a pain the lowest unit rate was. As soon as we talk about an exchange, we get some saying, oh, it's not that bad. It's really not that much at all. Well, I'm going to take the industry at its word here that it is an administrative burden and that it costs significant sums of revenue and suggest that rather than try and reach dissensus by saying, all right, we just recommend we take more out of your hide, we suggest a trade-off here. It is not a perfect trade-off. It is not a trade-off that solves the problems of spending in campaigns. It's an attempt to get at some other problems in the system and to move us past an impasse. MR. SUNSTEIN: Can I suggest that whether it's a good deal depends on how much free time, and if it's two seconds of free time in return for repeal, that may be a pretty good deal. If it's five hours, then it would be a bad deal. So it's hard to know whether this is a good deal or bad deal without knowing. I mean, 256 if we wrote in -- one way to do it would be to say to a mutually agreeable exchange, something like that. CHAIRMAN ORNSTEIN: Well, again, let me get back. CHAIRMAN MOONVES: Norman, I have to take exception to what you said. The person that's used lowest unit rate more than anybody at the table is you. I haven't heard the broadcasters around here saying what a bad deal it and how horrible it has been to live with that, and I've been at every meeting, to the best of my knowledge, and I don't recall more than one time hearing about how bad lowest unit rate. We have said from day one, lowest unit rate isn't all that it's cracked up to be. And please don't quote Eddie Fritz to me again. This is what the fact is, that lowest unit rate is not all that it's cracked up to be. So we're not talking out of both sides of our mouth, and it's unfair to characterize it that way. MR. DUHAMEL: The other thing is, 30 days times five minutes a day, doesn't 257 that come out to 150 minutes, which is two and a half hours. One of your proposals is two hours. Here we're talking about two and a half hours. MR. GOODMON: Yeah, I think the question is, do we believe that qualified candidates should have some sort of advantaged right as a generic issue. I think what we've been saying is that the lowest unit rate, the way it is now done and the way the rule is written, doesn't work. It works different ways and different stations, let me put it that way. And so I think the first question is do we believe that candidates should have an advantaged right, and if we do, let's figure out one we can all understand and make sense. If we don't, we don't. I mean, just saying lowest unit rate doesn't get us to the crux of the matter, which is do -- lowest unit rate is just federal candidates? MS. SOHN: Everybody. MR. GOODMON: Every qualified? MS. SOHN: Yes. 258 MR. GOODMON: I went back to look at that. Is it every -- MS. SOHN: Yes, it's everybody. I'll get it for you in my handy, dandy book here. MR. GOODMON: But it seems to me that's a vested issue that candidates have an advantaged right, and if they should, okay, how should we figure it. What I've been saying is we can't figure out how to apply it. MR. MINOW: Well, let's address that issue. I, for one, do not think there should be an advantaged right. I think it was a lot of hutzpah for Congress to pass a law saying that they should buy time cheaper than anybody else. Why should we go along with that? What's fair about that, that Congress could write a law doing a favor for itself and other politicians and not for other people? MR. LA CAMERA: You want to pass a law now that they can have free time. MR. MINOW: The people who have free time. MR. LA CAMERA: Hutzpah. MR. MINOW: The people who have 259 free time in this country are broadcasters. They're the ones who have free time. They get a free license for eight years to use the time as they wish. They're the ones that get free time, not anybody else. The free time belongs to the broadcasters, not to anyone else. CHAIRMAN ORNSTEIN: A large number of candidates would prefer this system as we have it now. Most of the incumbents prefer the status quo to any kind of a change, as we know. The fact is, if we repeal the lowest unit rate and move a market rate system, some candidates are going to end up paying more. An advantaged rate isn't necessarily going to solve -- however we work it out, even if it's on a better formula. What this proposal suggests is not an advantaged rate for an individual candidate. It's not exchange of repealable lowest unit rate so a candidate gets a bonus. That's the last thing you want to do directly because then it means the rich get richer and the poor get nothing; in fact, they get a worse situation. The idea here is not that you can move 260 back to a market system, which is what is fair, I think, under these circumstances, but then you have an exchange in return for what I hope would be a formula that would be comparable. And as I say, the NAB, which see seem not to accept what they've said before very directly, had suggested a two-for-one exchange. One minute of free time for two minutes of paid time, not to go to the candidate, but to be split among the parties to distribute to others. MR. GOODMON: I misunderstood it was going to the parties. CHAIRMAN ORNSTEIN: So this is a simple suggestion, and it basically would be if Leslie Moonves were running for the senate in North Carolina. MS. CHARREN: Oh, my God. CHAIRMAN ORNSTEIN: And bought a vacation home there and changed his accent -- got to change the accent. CHAIRMAN MOONVES: And the religion. CHAIRMAN ORNSTEIN: If Leslie Moonves were running against Jessie Helms for 261 the senate and went to Jim Goodmon's station and purchased 10 minutes of time, at market rates, then Jim Goodmon's station would agree to provide five comparable minutes during the campaign to be split -- forgetting third parties for the moment -- two and a half minutes each to the North Carolina Democratic Republican Party, which could use it for whatever candidates it wished, including challengers who otherwise would have no access. MR. GOODMON: He doesn't get an advantaged rate? CHAIRMAN ORNSTEIN: He does not get an advantaged rate. He pays market rates, in fact. You don't have to go through the headache of figuring out what the lowest unit rate is or dealing with the lawsuits or reporting requirements. You just have to provide additional time. Now, it seems to me that maybe the two-for-one is not the appropriate number, but there ought to be a way of making that a win-win where even if it's not as onerous as some has said it is, you remove that burden. You move, which we ought to be doing in a 262 digital age, to a market system even more than we have now. And in return, but as part of the package of comprehensive reform. Let's face it, ladies and gentlemen, Congress, if we make this work effectively, isn't going to want to do it. So this is not going to happen overnight, but what I've been searching for is a formula that can unite all of us and make broadcasters look like they're looking for a formula to improve this system and not look like they're against every change, and any time something is brought up, there's another excuse for not doing it. That's the goal here. Now, if this is not the best way to go, come up with something better. MR. RUIZ: This is a proposal that would be acceptable to Les but probably not to Jessie who's in power. CHAIRMAN ORNSTEIN: Well, we'll see if it's acceptable to Les. CHAIRMAN MOONVES: Not me, as the candidate. MR. RUIZ: As the candidate. CHAIRMAN ORNSTEIN: But this much I will tell you, Jose Luis, that if we 263 came up with a proposal of this sort and made the recommendation with the backing of broadcasters, it would be a very significant additional impetus on Congress, whether they liked it or not, to move towards some kind of comprehensive reform that included a broadcast component and probably making it one that wouldn't be so terribly onerous. MR. RUIZ: Sure make a powerful state -- (inaudible). CHAIRMAN ORNSTEIN: It would be a very powerful incentive, in fact, to reform state parties, which is not a bad way to go either. MR. BENTON: Norman, Paul Tare is sitting back over here, and I'd sure like to get his quick reactions to the discussions so far. CHAIRMAN ORNSTEIN: Charles, I would rather -- I don't want to set the precedent when we're talking among ourselves of opening up any proposals. We already opened up a Pandora's Box. MR. BENTON: I hear you. Thank you. 264 MR. LA CAMERA: Norm, let me ask you about a couple of things, one is item B. Do you have a comfort level that is -- a certain agreement on that item. CHAIRMAN ORNSTEIN: Yeah, I think we need to talk a little bit more about how we would implement it, but yes, and I assume there's no great disagreement other than from Bill. MR. DUHAMEL: The thing that bothers me, though, is we talk about free time in B, and then, all of the sudden, Bingo, we're talking about free time in C again. How many times are we doing free time? MR. SUNSTEIN: B was not, at least in its code version, this was not free air time. The station could give free time, could have a mini debate, could have candidate interviews. It needn't be a revenue loss in the sense of free air time. MR. DUHAMEL: Well, it's provide five minutes a night. MR. SUNSTEIN: Not for free. It's program. . CHAIRMAN ORNSTEIN: You can take 265 five minutes out of your newscast and devote it to this 30-day period. MR. DUHAMEL: Who's going to pay for it, the furniture stores? MS. CHARREN: The same way the news is paid for. CHAIRMAN ORNSTEIN: Who pays for your broadcasts that says there's a hurricane? Do you require that every element of your newscast that isn't a commercial be paid for? MR. DUHAMEL: Yeah, but we're talking about we're giving five minutes of free political time. MR. BENTON: Wait, remember the little fracas we got into this morning? I said 39 percent is on crime, violent crime. MR. DUHAMEL: I disagree with the numbers. CHAIRMAN ORNSTEIN: Let's leave this for awhile, for later on. MR. DUHAMEL: Aren't we doing twice on political free time? MR. LA CAMERA: The strength of item B is the flexibility and creativity that you cited before. The station could take that 266 five minutes, and it could be a three-minute component of the few minutes of free political time. CHAIRMAN ORNSTEIN: Sure, but you don't have to. You can do whatever you want. MR. LA CAMERA: You want to mandate it in addition to this? CHAIRMAN MOONVES: This is purely voluntary, this five minutes, but recommended. MR. LA CAMERA: But the key word here is flexibility. That's what makes it so attractive. It could be free political time, it could be mini debates, it could be candidate profiles over and above your normal -- CHAIRMAN ORNSTEIN: You might very well have a station that decided that what it would do each night is offer a minute to each of five candidates to get a message across. Another station might decide not to do that at all. MR. LA CAMERA: That's what I'm saying, and that's what makes it attractive to broadcasters. There's as a flexibility 267 component. MS. CHARREN: And it's what makes it interesting to the public. MR. LA CAMERA: I love it. I love it. I'm supporting this. Please. MS. CHARREN: I know you are. MR. LA CAMERA: Where I'm having problems is why this doesn't cover, as Bill's suggesting, item C as well. We're moving from here, the flexibility, the creativity, now into a mandatory. CHAIRMAN ORNSTEIN: I basically believe, Paul, that this is a significant step, but it's not a sufficient step. MR. CRUMP: I just want to make certain that I am understanding this correctly. In other words, what you're saying here is when we talk about candidate-centered discourse, you're saying in no way is the broadcaster committing himself to give free political time to specific candidates. MR. SUNSTEIN: Correct. MR. CRUMP: Because to me, what makes it so important is, as a broadcaster, 268 what I think we should be doing is trying to increase the public knowledge of what the issues are and try to drive them into the voting poll on voting day. That what's more important than putting a candidate or any series of candidates on free, but I want to make certain that I'm -- MR. SUNSTEIN: That's right. That's very important. MR. CRUMP: This, to me, is not free political time. It could be, but that's if you choose it. CHAIRMAN MOONVES: If you ain't got a minute, does that count on your local news. CHAIRMAN ORNSTEIN: Yes. CHAIRMAN MOONVES: Even covered as a news event, so and so appeared today at the PAL and made the following speech. CHAIRMAN ORNSTEIN: If it's a broadcast report that says here's what happened with a couple of five-second sound bytes, no, but if it is taking an excerpt of a minute or two from the speech in the same way that the news hour with Jim Lehr, for example, takes 269 longer excerpts from some speeches, yes, that's candidate-centered discourse. Absolutely. MS. SOHN: And Norm, except for the fact that the broadcaster gets to choose what races they would cover, they would have no editorial control over what the candidate says. CHAIRMAN ORNSTEIN: Well, it's up to the broadcaster. If the broadcaster wants to do, say interviews, that its news people would do with the candidates, you bring in Senatorial Candidate Umvez and your anchor interviews him for a minute or for two and a half minutes, say, and then does another interview with his opponent. MS. CHARREN: Or doesn't. CHAIRMAN ORNSTEIN: That's perfectly fine. Or if you want to find some other format, or if you believe that a race is significantly important that, throughout the course of that 30 days you want to cover it several times, including interviews, mini debate and minutes of time for the candidates to get their own messages across, fine. The idea here is you provide almost a limitless flexibility in terms of what the 270 broadcaster itself does with that time, except that it is a commitment of five minutes a night for 30 nights and it is candidate-centered. It's not the same kind of coverage of newscasting. MR. BENTON: And in fairness, nonpartisan. CHAIRMAN ORNSTEIN: There's an attempt to make it fair, but you also want to provide flexibility so that you can't have -- one candidate held hostage to another that doesn't want to get across at all. MS. STRAUSS: Is there a requirement for balanced viewpoints? Is that how you're defining fairness, the equal time requirements. CHAIRMAN ORNSTEIN: What I want to do here, Karen, is to, as much as we can, provide flexibility but avoid, as much as we can, a situation which could happen where a broadcaster basically decides that it is going to devote all five minutes for all 30 nights to promoting one candidate and saying I'm not going to let people -- MS. STRAUSS: How do you avoid 271 that? What kind of language do you use to avoid that? CHAIRMAN ORNSTEIN: I think, frankly, that what's going to happen in the marketplace is that anybody who tried to do that would be brought short and other stations would likely make it up. MR. SUNSTEIN: If this is a code revision, the code already has an independent requirement of balance. So if this is a code provision -- when we discuss a code provision, by the way, it seems agreeable and understandable. I think what's balling us up is that B and C look like they're doing the same thing, and they look overlapping, but now I think we're clarifying that B is what people seem pretty clearly to like, and C seems the controversial one. MS. CHARREN: B is like people saying nice things about children's television in the code. It could be mishandled. That's why we're going to do something else too. CHAIRMAN ORNSTEIN: The larger balance -- and let's face it, five minutes a night, what we're trying to do here is to 272 strike a balance where it's not a tremendously onerous burden, and the flexibility helps to provide that, and it can satisfy larger goals of discourse. I think if we are aiming, as clearly our mandate is, to deal with the broader issues, we can't deal with the question effectively and practically of cutting the cost of campaigns. That has to be done as a part of a comprehensive package if it's done at all. There are other goals in campaign reform which broadcasting can play a part; broadening the discourse to a wider range of candidates, improving the roll of parties and so on, creating more opportunities for challengers. That's what C, as well, tries to get at. And again, let me reiterate that I think B would be a tremendous step forward that ought to be agreeable to virtually everybody. And yeah, but it is not sufficient, given the larger universe in which we reside. We need some other creative way of trying to avoid a mandate while also creating a unity. And it just strikes me that an exchange of lowest unit rate in return for some two-to-one or another 273 kind of formula ought to be, ultimately, acceptable, especially since it can only be done in the context of an overall reform and done by Congress. And if that's not acceptable, then we're going to have a problem, obviously, coming to an agreement, and we'll have to find some other formula. MS. CHARREN: Is there anything we can do that doesn't have to go through Congress. CHAIRMAN ORNSTEIN: The practical reality is -- is there anything we can do that doesn't have to go through Congress. If we decide, which is also an attempt, by the way, to reach a consensus here that goes for many of our earlier discussions, that we should not be making a lot of recommendations that are narrowly targeted at broadcasters, but rather, try and put this into the context of an overall reform, which is something that received a lot of very positive response from many, including both of us, early on. Then we're talking about congressional action. 274 Of course, in theory, there could be unilateral action by others, and that's, I think, outside of our purview. But the practical reality is if we're going to reach a consensus here -- and our power as a committee will come from cutting across all of our lines for, if not all, at least overwhelming majority of us, that it's going to be have to be done in that context. MR. BENTON: Talk a little more about the two-for-one. It seems to me to make a lot of sense. Can you give us the history of this and why we should support that as a part of this? CHAIRMAN ORNSTEIN: Let me say this, first of all. I agree with Newt. Congress is trying to find a way to cut costs, and that's where the legislative requirement for lowest unit rate came in, and the idea, of course, in part was it wasn't just cutting costs. Let's face it. In the history of this process, candidates often have struggled to get time, and when you come in as a candidate, you have to compete with other entities which buy 275 time year round and are -- and for whom broadcasters naturally, as business people, develop strong relationships. And the idea that you're going to take a valued, permanent, enduring customer and say, sorry, you get bumped for this person who may or may not win and who, in any event, will be there for a few months and then is gone for years, is never going to be an attractive proposition. And, of course, when candidates come in, they can't say, as other entities can, well, I want time here, but if you can't give it to me until next month in that spot, fine, because they need it now and in a particular place. So the notion that they be given at least the same rate, the favored rate that was given to other entities and they be given some guarantee of being able to get time when they needed it made some sense. The practical reality is that it is not working very well, and it is not working for anybody very well. The nature of time buying is such that candidates don't get what they want, everybody is confused, there's constant disgruntlement, there are lawsuits filed all 276 the time saying you're not really giving me lowest unit rate. You have to report that you're providing the rate, and the rate is not one number. It's a different number for every different spot that you're buying. When you buy time on block across a range of times, then it's different as well. It's foolish, as we move to a digital age, not to try to move towards a market system here, but then there has to be, in a practical reality, some kind of a exchange. What's the best kind of exchange? The best kind of exchange, especially if we think of this as involving, you know, whatever it is; 25, 30 percent cost, even adding in -- or then adding in the headings involved is an exchange of time. And the best way to make this work, let's face it, free time provisions that require every station to provide a lot of time, including stations that now don't have a lot of political candidates because their markets just don't make it feasible is a foolish thing to do. Requiring stations that are not very rich 277 and aren't getting a lot of revenue to come in to pay the same revenue out or the same costs as stations that are getting a large amount doesn't make any sense. What you can do in a very easy fashion is basically to say for those stations that reap the benefits of being able to charge market rates because they're getting a significant amount of time being purchased, they're the ones who will then give back in a fairly simple way with an exchange of some time only if you're -- if you're not getting a lot of time bought, you don't have to give anything back. So it seems to me it's a very fairly simple way to try and defray the headaches of the costs while also providing some great opportunities here to create a more level playing field and strengthen entities that we want strengthened, recognizing this has to be done by Congress, and it is an uphill battle. A part of what we can do here, I think, is to create a set of forces who are not often on the same side and where it's easy to demonize one group as being villains here, greedy, they just want to keep making large sums of money 278 and put them on the side of the angels without having to pay an awful lot in the process. So that's the goal here, and frankly, I'm a little baffled at the kind of visceral negative reaction. MR. CRUMP: I always thought we were the angels. CHAIRMAN ORNSTEIN: I didn't characterize you as angels. MR. LA CAMERA: Norm, let me ask you a little bit about the logic of the two-for-one model, and I think this is the first time you referred to the two-for-one model. If we accept the lowest unit rate that the station now is selling those political spots at two-thirds their value, a candidate comes in and buys three spots but pays for two at two-thirds. The two-for-one rate, now we go to 100 percent market rate. The candidate comes in and want three spots, pays for two again and gets the third one free. CHAIRMAN ORNSTEIN: No. You're not giving the time to the candidate, Paul. Let me go back to the analogy that I used. 279 MR. LA CAMERA: You're giving it to the party. CHAIRMAN ORNSTEIN: And you're not giving it to just one party. Paul La Camera buys 10 minutes of time, okay. The station in which he has purchased that 10 minutes of time now provides five minutes of additional time, but it doesn't go to Candidate La Camera, and it don't go to Candidate La Camera's party in toto. Half of it, if there's no third party involved, goes to La Camera's party, and the other half goes to the other party. MR. LA CAMERA: But if I'm a challenger and not the choice party, I have now paid a market rate. I got 10 minutes of time, and previously, I would have got 15 minutes of time for that figure. CHAIRMAN ORNSTEIN: Yes. MR. LA CAMERA: And now it goes to the party, which could rechannel that money to the incumbent. And this is going to further the interests of channels? MS. CHARREN: Yes, because it's going to keep you from advertising. 280 CHAIRMAN ORNSTEIN: What's going to happen is -- MR. LA CAMERA: The idealism of all this escapes me. CHAIRMAN ORNSTEIN: What's going to happen in many cases is the incumbent will buy 10 minutes of time, and then the challenger, if this is a viable race, will be able to have his party provide two and a half minutes of time so that he can at least get on the air to offer a response, and indeed, if that party decides that this is the race that really matters, then there will be additional time accruing to the party from other candidates and channel it in that fashion. MR. GOODMON: This is supposed to be a general election. This won't work in the primary. CHAIRMAN ORNSTEIN: Yes. MR. LA CAMERA: It has to be general election. MR. GOODMON: It couldn't work in the primary. MR. LA CAMERA: Because it would always favor the incumbent. 281 MR. GOODMON: What do you do if you got three republicans? Who is the party going to spend the money on? CHAIRMAN ORNSTEIN: Well, at least one could argue one way in which you could deal with a primary where an individual is coming in and trying to buy the nomination by basically spending a huge amount on advertising, is now that candidate will have to pay retail. And if the party, as an entity, doesn't want that particular candidate, you got an opportunity to give the party a little more clout. But I'm perfectly happy to make the recommendation for general elections and not for primaries, which I think is an easier sell anyhow. MS. STRAUSS: Norm, are you assuming a two-party system? CHAIRMAN ORNSTEIN: No, the formula that makes the most sense here is the same formula that's used for public funds for presidential campaigns. It's been accepted by the Supreme Court. That's part of the Buckley decision as constitutional, and basically, 282 there's -- we work with an estate. There's a formula which provides a proportion of funds to a third party that qualifies by getting over a threshold. That's the easy way to do it. MR. CRUZ: Norm, the five-minute one with the revision of the code there, the one that Cass proposed I think is most appealing to me if it is really tied to, I would think, some kind of true campaign reform from Congress, or that they make sure that there's something there in that context. I mean, that would be my perspective on it. CHAIRMAN ORNSTEIN: Well, I think what we should probably leave this issue now given our time frame, and what I would ask is that we have at least close to a consensus on one part of this. MR. DUHAMEL: I don't think we do. We don't -- what do the broadcasters get here other than we're giving two and a half hours in free political time 30 days before the election? I don't understand the give-back. There is none, is there? MS. STRAUSS: We're supposed -- that's the whole idea. 283 MR. DUHAMEL: That's why I didn't agree to that either. MS. STRAUSS: It doesn't sound like you're losing very much. MR. DUHAMEL: Close to two and a half hours that we can't sell. CHAIRMAN ORNSTEIN: We may just have to agree to disagree with you on this, Bill. Let's move beyond that. I would just ask you all to consider either some variation of that third area or some new proposal so that we can keep our broader goal of reaching a consensus in this contentious area. MR. LA CAMERA: That's the two-for-one within general election? CHAIRMAN ORNSTEIN: Yeah. We'll interact on this in the next few weeks and see if we can come to an agreement and we're -- we have a broad range of support for something there, or close to it. Let's turn to -- we have two other areas to discuss here. One is one in which we've certainly had some disagreements before, but that is the larger question of whether we want to get into, even in terms of recommending just 284 a simple consideration by these entities down the road, that in the digital age where the watch word is flexibility, a whole new model of public interest obligations. Now, that's beyond the question of multiplexing, but really, the issue of whether, in an age where we're going to have proliferation of different kinds of broadcasters, we'll probably have an expansion of some religious channels and shopping channels, where some stations are going to be much less interested in and probably much less appropriate in terms of some of these core public interest obligations. Whether we ought to consider, or at least ask these other entities to consider some of the various models that we had presented to us by that Aspen Group, including, most obviously, a pay or play model. That's one which provides a choice for broadcasters, basically, and that choice is you go along with an existing framework, or you can pay, and in exchange, possibly get a more expedited license renewal because you wouldn't have these obligations with the money dedicated to the public 285 interest. Now, I know that we have some who disagree with that notion, but we ought to at least put it out on the table and have a further discussion of if. MS. SOHN: Well, Norm, are we not even going to consider making that -- recommending that the FCC do that at all, or are we just -- what you're considering here is just sort of a broad request that the relevant, you know, regulatory political agencies, you know, will look at a new public interest model, and one of those things should be a pay or play option, or is it not at all? CHAIRMAN ORNSTEIN: Well, what I wanted to do here, to start with, was to put out on the table where we might be able to, once again, to achieve a larger consensus. It might be a consensus that involves one or two who strongly disagree but everybody else goes along, or maybe all of us agree, and I just want to explore where that is and if that is, in terms of very explicit recommendation for the FCC to act in this fashion, fine, but if it isn't, whether we could do nothing or whether 286 we can fall somewhere in between. MR. MINOW: Has everyone had a chance to read Jim Goodmon's paper? MR. GOODMON: That's coming next. CHAIRMAN ORNSTEIN: I thought we would go through these and then talk about the minimum standard, which itself is even more controversial in some ways. MS. CHARREN: I'd like to say that I like this, and I like this as a recommendation. MR. BENTON: Norm, I do too. The one thing that could be added to this 5 A to B is the notion of some ongoing independent mechanism. I mean, in Europe 30 years ago, there was the Hutchins Freedom of the Press thing which was more narrowly focused, but this group is a good, you know, mix of -- a complicated mix of interests and experience, and to have some -- we have the public interest and obligations of broadcasters, but there needs to be a look at the performance versus the standards and the obligations. There needs to be an ongoing 287 review of this. We don't have a lot of the answers about multiplexing and digital television. You were asking about theoretical questions about we don't have the programming and we don't see the revenue streams, and that experience is all ahead of us. So there needs to be -- apart from the FCC, there needs to be kind of an independent citizen broadcaster public interest mechanism to continue to look at this issue, because this is a very important issue. We all know how important broadcasting is in our society, and there needs to be an ongoing mechanism to keep looking and making reports, maybe an annual or biannual report to Congress and the President, some -- it could be part of a public interest -- CHAIRMAN ORNSTEIN: I think we need to consider the recommendation that we're not the last word here, and obviously, a few years down the road when the world of telecommunications has changed in ways none of us can predict, that somebody else come back and revisit these issues. 288 But we face a great difficulty here, obviously, trying to take the existing world of public interest obligations and move them to a digital age itself is a difficult intellectual challenge, given that we're going to have, potentially, every broadcaster doing something differently than what he or she is doing now and each doing it differently from the other. Where I came down on this one is, basically, I looked at and thought about whether or not it makes sense to take a religious programmer, a broadcaster who is running religious programming all the time, and say you will have the same obligations in children's television, in public affairs programming as other broadcasters, and whether that will serve the public interest very well when you have an entity that doesn't have much of an interest in doing it and probably isn't going to do it very well. MR. GOODMON: I just don't -- why? I mean the religious broadcaster can do public service announcements, they can do public affairs programming. I don't know why you think they can't do that. There are people 289 that watch those stations all the time and should be served by that station. I don't -- I don't know why you think they're different. CHAIRMAN ORNSTEIN: I think that there are some entities that are better suited, given their audiences, to some areas and not to others, and if I can find a way to better serve the public more broadly, rather than expect from both the 400 nonmembers of the NAB and others that have a different focus, that they will be creative and do these kinds of things. If there's a way of getting, instead, a payment in return and then be dedicated to creating better programming or improving the mix in an area, it strikes me as, if you're going to leave that option open -- and it's just an option -- that I would prefer it. Now, obviously, this is related to your suggestion for minimum standards, and we will segue into that, but -- MS. CHARREN: When you say trade obligations with other broadcasters, C, I understand C very well, and I love D. What is trade obligations with other broadcasters? CHAIRMAN MOONVES: The problem 290 is we don't know what we're paying for yet. You know, we don't know what the obligations are that are going to be set forth. So we're talking about, in principle, can you buy your way out of whatever obligations there are. MS. CHARREN: Yes, and I understand that trades, in terms of, for example, that trust fund for educational television. CHAIRMAN MOONVES: Peggy, if the FCC hasn't done the three-hour rule, let's say this commission set the three-hour rule and I wanted to get out of it, I could go pay Norm's station to put the three-hour kids programming on so I wouldn't have to do it. That's what the question is. MS. CHARREN: Yeah, but could you is the question? CHAIRMAN MOONVES: That's what we're asking. Should you be allowed to? MS. CHARREN: Right, that one aspect of the public interest in this area is choices. You know, we don't want -- say this was now instead of in the digital age. We don't want necessarily -- or do we -- just one 291 station doing public interest and everybody else is saying, the hell with this, we'll figure out how much it costs to get out from under it. CHAIRMAN ORNSTEIN: But what you might be able to do here -- and the model in terms of trade would be much more the kind of model that's now being used frequently in environmental matters, pollution-wise, and here the idea is it might not necessarily involve a payment. You might very well have a situation where you have a station that is really strong on public affairs and doesn't have much of an interest in doing children's programming or an audience for it, and another station that has the opposite, and if you can, certainly consistent with maintaining the balance in a local market, have at least some ability to create a mix of public interest programming for each station that fits its own needs and that would cover the bases that you wanted to, it would be preferable. Now, we can't devise a model that would explicitly do that. MS. CHARREN: I have only a 292 content-sensitive kind of concern about that, in that since we can't define easily what public service is in terms of content, we can do it in terms of structure; news, documentaries, that it can mean one public -- just like you would want one publisher in publishing, that the more you get away from the diversity of sources -- this is just a caveat -- you get to -- one publisher of the public interest in the commercial world, say, and I don't know why, but I feel a little differently about this trust fund for education. I guess it's because I'm so worried that there isn't going to be any money for programming for the software in this digital world, that I love D, any fees collected. I can see that going to that first -- that trust fund, that first trust fund, and then I have confidence in the structure for how that trust fund is going to work. And I guess I don't have confidence, at the minute, in how the other station is going to handle all this in the same way that I wouldn't want one publisher to do all the children's books. It's a bit of a caveat is 293 all. CHAIRMAN ORNSTEIN: What we have, in effect, to bring Jim's model in here as well, is really, it seems to me, three options to consider here, to enhance the public interest appropriately, more so in some cases for some of us, perhaps more than others. One is to set fairly robust minimum requirements and make them explicit as Jim has done, and then you hold each broadcaster to those requirements, and we will have some discussion, and some would think that that's an anthema because it's a requirement, and others who think that it's not so good because you're going to have one size fits all in some ways for everybody, and others who believe that that's -- you're going to then have everybody involved and they'll find ways to make it work. A second is to have some kind of, in effect, market-oriented model, which is what pay or play or pollution rights trading is, which is to let the stations both trade among themselves for payout of obligations and then smooth out the process appropriately by making 294 it apply. And the third is basically neither of the above, and to let an entirely voluntary process, along with a couple of explicit quantitative recommendations or mandates, whether it be closed captioning or reasonable access or three hours of children's programming suffice. We have to, I think in our recommendations, go in one of those three directions, and we've at least got the market model on the table. Maybe it's inappropriate. Yes, Rob? MR. GLASER: Just one thing I was going to say about the market model, and normally, I'm a bid fan of flexibility. I think that the environmental metaphor has a little bit of a flaw here in that for environmental externalities, it's easier to understand what the costs are, let's say, of cleanup or the pollution or toxin than some of these things where I think it could be immensely difficult to come up with economic equivalence on all the issues. Is the economic equivalence the cost of 295 providing the service, say captioning for the sake of argument, or is the economic equivalence the perceived loss to that community as having captioning available by measuring -- just to extend that metaphor -- to a number of hard of hearing people in that community, and I think it's immensely difficult. So the challenge I would see with that is just is a pragmatic one, is that if you do it for very many things, you'd have an incredibly hard job of pricing fairly. So I would say that that needs to be against pay or play for very many things. There may be a few things where it's easily quantifiable in a trade-off kind of way. MR. MINOW: Norm, I think Rob is right. I think the analogy to the pollution and environment may appeal to the economists, but that's about it. You're dealing here with a social force of broadcasting which is a very different phenomenon. Because I have to go soon, I just want to say I read Jim's paper with great admiration because I think the only justification for 296 giving free broadcast licenses is public service. Otherwise, why do you have must carry? Why do you have three licenses? Why not treat them just like you auction off everything else. It's only public service, and unless we have some minimum standard of public service, we've got a charade here about the whole concept of serving the public interest. CHAIRMAN ORNSTEIN: Why don't we turn to Jim's proposal in that case? We have three alternatives on the table now. We've put one out there. We haven't had a lot of discussion, we've had a little, but I think it may be wise -- it's 4 o'clock. I'll tell you what, why don't we at least raise this now for 10 minutes, and then we'll take our public comments, and then we'll have a more robust discussion of it and any other areas that the group thinks ought to be raised in terms of what do we put into our four recommendations. MR. GOODMON: Here's the idea. The goal for this is no make the free market people really upset with me and to make Gigi really upset with me. 297 What is some reasonable middle ground here in terms of saying broadcasters do have public responsibilities, and what is a reasonable minimum level? And I tried to do it -- A, B, C and E are really the important things in here. The other items we can -- CHAIRMAN MOONVES: A, B, C and E? MR. GOODMON: A, B, C ad E, is that we got to figure out what the problems are in our community. I sued the word ascertain, and a lot of people don't like that, and you can think of some other name for it if you want to, and I have suggested that it be a formal process. But I've suggested that we've got to ascertain the problems, and as a result of that ascertainment, we do a minimum number of public service announcements and a minimum amount of public affairs programming. And then E, we report on that in the public file and on the air, and we're off. This is localism. CHAIRMAN MOONVES: Can we cross out B and F? MR. GOODMON: That's part of 298 what we're doing, but it's not -- you know, there are lots of different ways to do it, but I just added those others things, like must carry, but the key notion here is we do have minimal obligations, and it's to figure out what's going on in our communities and do public service spots and public affairs programming, and there's no news requirement, there's no -- all of the stuff, this is a very minimal and straightforward acknowledgment that, in return for our license, we have an obligation to serve the public. And now, for those that want to do more than this, we have a voluntary code. The extra stuff is in the code, but everybody that has a license does this, whether they are a home shopping station or the big CBS affiliate. The concept is still to have an obligation to the local community, and they do it through public affair spots and public affairs programming, and that -- my logic, I'm amazed at my own logic, and I'm kidding. I do not consider this a radical notion. I'm not going to let my friends on either side of the aisle say this is -- you have betrayed 299 broadcasters or you haven't done enough. I mean, we need to talk about this. We have public service obligations, public interest obligations, and what are they? And I've just suggested what they should be, and I think we need to talk about that, PSAs and public affairs programming. And I suggested, to get around the points that were made -- by the way, I think that NAB report was terrific, and it showed that broadcasters do a lot, and I think we do do a lot and are doing a good job. I put in here because of the -- what was said about that NAB report, some sort of notion about the day parts, broad sort of day parts, some of the public affairs spots in prime, some of the programming in prime. But more importantly, there is the obligation that we report this quarterly so that the NAB or anybody else can put all the stations in the country together under a definition that we all understand, and we got almost an instant report in terms of how we're doing. I mean, I'm very supportive of the NAB doing that annual report, and I think this is a good way to do it. 300 Now, there's some -- into how we can do a better job with political time, I got two or three ideas about that, and that's another issue. What I just mentioned is sort of the key here in terms of we should have obligations, and that's what I think they are, and everybody has got them, and let's roll. CHAIRMAN ORNSTEIN: These are statutories? MR. GOODMON: These would be -- I don't know. FCC is what I'm suggesting. MS. CHARREN: I notice you say that news programs -- (inaudible). Do you mean the children's television for three hours because that's also -- MR. GOODMON: Right. I didn't say anything about children's. MS. CHARREN: Just three hours that's already mandated by law. MR. GOODMON: Yes. What I meant was that this is a public affairs programming effort, not news segments, and -- MS. CHARREN: Not the already mandated by law segment? MR. GOODMON: Yes, it had 301 nothing to do with that. MS. CHARREN: Okay. MS. SOHN: Norm, if you think it's appropriate, I would actually -- I'm not upset with Jim, but of course, I don't really think Jim's proposal goes far enough, and I wanted to people to take out -- I'm not upset. I could never be upset with you. I never get upset. The certification form that I put together laboriously, I might add, which sort of lists the areas where I'd like to see us set minimums basically based on what the good broadcasters around this table do. My goal is not to make good broadcasters do more, but it's to raise the bar so those broadcasters that don't do anything or close to nothing do something. So what I would like to do, at some point when you think it's appropriate, Norm and Les, is to maybe ask the broadcasters how much each week of this kind of programming you provide, and let's fill in the blank and let's make that -- MR. DUHAMEL: Do you know how 302 long it would take to fill this thing out every week? MS. SOHN: I'm not asking you to fill it our every week. It's a quarterly report. MR. DUHAMEL: This is more onerous than anything we ever had in 50 years. MS. SOHN: It's a certification. Do you do it, yes or no? MR. DUHAMEL: I'm telling you, this is more onerous than anything we've ever had. MS. SOHN: All right. Then you can work with me, Bill, and we can make it less onerous. CHAIRMAN MOONVES: Gigi's form? MR. DUHAMEL: Gigi's form with all this stuff. MS. SOHN: Well, it's 35 questions. I respectfully disagree, but that's really not -- the form is not the point right now, okay, and I'm glad to make the form less onerous, and you can give me suggestions on how to do that. What I'd like to do, at some point, is 303 fill in the blanks. MR. DUHAMEL: I don't think the form is needed. Nobody has demonstrated this. MS. SOHN: Concentrate on -- I'm talking about mandatory minimums. Let's get away from the form. MR. DUHAMEL: The mandatory minimums are not necessary. They have not been demonstrated. I don't recall anything in all the months we've been meeting that it's been demonstrated. MS. SOHN: You disagree with Jim and me is what you're saying? MR. DUHAMEL: I disagree with you. MS. SOHN: But you also disagree with Jim because he thinks there should be some mandatory minimums, right? MR. GOODMON: I'm not in this discussion. MS. SOHN: Okay. I'm just suggesting a different way to look at the discussion of minimum obligations. MR. DUHAMEL: I don't think your certification is necessary. 304 MS. SOHN: Okay. But that's a different issue. Public disclosure, we talked about that, okay. I've been working on this with Barry Diller's people to try to come up with an adequate way to make it simple for the public to know. Remember, this is not just about what you give back to broadcasters, okay. This is more about what we're supposed to be doing for the public, and I've sat here for eight hours today listening to what we have to give back to broadcasters. Let's talk about what we're giving to the public, and this is about disclosure, but I don't want to talk about disclosure now. I want to talk about the minimums because that's what we're talking about. That's what I would like to do. I'll leave it up to Norm and Les to decide how they want to proceed. MR. GOODMON: There are a couple of things here. One is one is a real concern that if we quantify minimums, that's just the beginning; it's two hours now, and then it's four, and then it's six, and then it's eight. Were you asking me about whether the FCC 305 or Congress should do this and that, that if Congress does it, it won't be changed. CHAIRMAN ORNSTEIN: No, it was simply an informational question. MR. GOODMON: Well, it's been suggested that if Congress does this, we're not subject to the change anytime there's a new commission. That's all I wanted. CHAIRMAN ORNSTEIN: No, I think the first question we have to deal with, and obviously we want to hear from broadcasters, the other broadcasters here, is what kind of receptivity there is to the concept of a required set of minimum standards, and if there is receptivity to it, then we move to two questions; which elements, how quantified, and who does it? But I think we ought to start with that first question, and of course, in some ways it is -- Jim has made it a complement to a code. One option is to include it in a code and make it, in some ways, voluntary, but basically saying, if you want to be given a seal of approval, then you have to meet minimum standards. We could make it more explicit in 306 the code itself. A second option is to do it through the FCC, and a third would be to make it statutory. But I think there is a fundamental question here, and my guess is that you find an awful lot of people generally in the nonbroadcast community who would be perfectly happy with a set of minimum standards, although there might be some questions about what would be included, but there was a conspicuous silence from other broadcasters other than Bill who has indicated a vociferous disapproval. So Harold, Paul, Robert, what's your reaction to this? MR. LA CAMERA: To Jim's proposal? CHAIRMAN ORNSTEIN: Yes. MS. CHARREN: To Jim's proposal? CHAIRMAN ORNSTEIN: To Jim's proposal. MR. LA CAMERA: Robert, you haven't said anything in a while. MR. DECHERD: Is it the hand- off? 307 MR. LA CAMERA: Well, I thought exhausted myself in my welcome. MR. DECHERD: Norm, I'm in the same place I think I've been consistently, and see, as a consistent theme in Cass' analysis of all this, in that we don't need more regulations. We don't need mandates. It will be fiercely resisted, and therefore, make our recommendations less meaningful. So why go off? I'm not for this. MR. LA CAMERA: If you leap ahead to the end product -- and that's maybe where this is all gone awry -- and that's in the relicensing process. And perhaps some formality needs to be brought back to that process through that era, Bush deregulation or whatever. It's come now with a postcard in eight years, and unfortunately, a lot has been left by the wayside as we made the transition to that. So I mean, I'm not opposed at all to reengage in the broadcasters as to what their responsibilities are, they're reporting that. I would be much more conscientious about it to realize again that that precious license is 308 dependent upon that. It's a great gift that we're given. I don't know -- I mean, I would have difficulty returning to the era going as far as what Jim is suggesting. On the other hand, as I said in the brief memo that I sent where you were trying to get some consensus thought from the various members, quarterly reports which I think do tend to be a ready document of what stations do, all the public service announcements, are all in the political process, and other aspects, I don't have problems with, provided eventually they lead up to a licensing process. But Robert said something very key, and this is, with all respect to what Jim has suggested, would be fiercely opposed within the industry by broadcasters. I don't know what would be served by that. I think it goes so far as being challenged very significantly in court. MR. GLASER: Just for somebody who doesn't have the large respects on broadcasting, back when the renewal process had more teeth, did the renewal considerations go 309 beyond the scope of what Jim was talking about? In other words, is what Jim is talking about beyond what renewal used to be like or less than what renewal used to be like? MR. DUHAMEL: Jim is beyond it. MS. SOHN: Do you have the memo you gave? MR. GOODMON: We used to have programmed time requirements, we used to have zillions of requirements. MR. DUHAMEL: But the FCC never required a specific number of PSAs, they didn't require an amount of public affairs programming, but they talked in general about guidelines, but they never required any specific amount. In fact, if you go back, that was that NAB. MR. GOODMON: For a certain amounts of nonentertainment. MR. GLASER: To understand, Jim's proposal was more specific than the old methodology? MR. DUHAMEL: Yes. MR. GLASER: But it was sort of consistent. 310 MR. DUHAMEL: The political time was never a requirement. MR. GLASER: Sure. I'm just trying to make sure the historical comparisons, for those who are broadcasting, where it appeared there was more commercial -- CHAIRMAN MOONVES: The broadcasting industry was very different then as well. MR. GLASER: Of course. CHAIRMAN MOONVES: The programming is very different today than it was 20 years ago. MR. GLASER: But I was just trying to ascertain whether the concept in the previous era of accountability is subject to -- tied to license renewal, what the scope of it was, and it sounds like it was more case-by-case in the sense there wasn't more mathematical requirements in these areas, but these were the kinds of issues that were under consideration. CHAIRMAN ORNSTEIN: So it's clear, at least, that we could not get a consensus here around the mandates. 311 MR. CRUMP: As I have sat here today listening to all of this, thinking about it before we got here -- and I confess I'm possibly on a totally different level from all we've heard -- and that is that I have no quarrel with setting realistic minimums to a degree with public service programming, to do PSAs, et cetera, but the reason I do not have a problem with that is because I would like to see them set voluntarily in something like the code itself again where it would be administered by the broadcasters themselves. I personally would like to see a code that has some teeth in it where the broadcasters, the NAB, has the ability to speak sharply to the people who do not live up to the expectation for what they have promised to do, and I think when we get a license, we are assuming, certainly, the obligation to operate in the public interest, and therefore, public interest is public service. But I think it should be on a voluntary basis, and it should be minimums there, and then what you're trying to do is establish a plateau and give people a target to shoot at and get them to go beyond 312 that. We do have a lot more stations today than we had in the old days, we've got a lot more broadcasters than we had in the old days, and some of them are fairly new into the business, and for that reason, I think it's good to remind those who have been here a long time, like myself, and to tell those who are newcomers what should be expected of them, what we, as professional broadcasters who have been in it a long time who are proud of what we do, who are proud of what we have accomplished, that we want to continue this, we want to strive to do better at all times, and give them goals to shoot at that we expect of ourselves. MS. CHARREN: Can I bring up the idea that in the old days, if we're comparing old and new days, it was a license renewal process that happened -- was it once every five years -- three years. MS. SOHN: Three years, then five. MS. CHARREN: Three years, then five years. And now it's an extraordinarily long time for the FCC to look at, you know, in 313 this new era. MR. GOODMON: It's mailing a postcard every eight years. MR. DECHERD: I'm sorry, it is not a postcard every eight years. A tremendous amount of works goes into that. MS. CHARREN: Regardless of what it is -- MR. DUHAMEL: The children's deal -- MS. CHARREN: Children is separate. MR. DUHAMEL: Well, that's in the license renewal. MS. CHARREN: Yeah, but that's what's in the license renewal. That only took 30 years, and we don't have that much time. MR. LA CAMERA: We don't submit -- and again, it was hardly romantic, what we were doing, but we don't submit, in terms of program performance, what we need in those days. CHAIRMAN ORNSTEIN: Assuming that we're not going to get a broad agreement on recommending that the FCC or Congress set 314 the minimum standard, what do you -- MR. GOODMON: From who? CHAIRMAN ORNSTEIN: A broad agreement. MR. GOODMON: From the whole committee? CHAIRMAN ORNSTEIN: We clearly have some significant dissent. MR. GLASER: This is sort of my kind of a thing I always come back to, is in a digital area, in a cable satellite infratructured world, to address these questions where we say simply because broadcasters have licensed spectrum, they have these set of obligations, and to not look at the delivery experience from the consumer standpoint is myopic, and it seems to me, particularly if we end up moving in Harold's direction and having whatever we do be a voluntary code, there's no reason why that code shouldn't span anybody delivering audio -- digital-audio visual stimulus to consumers. CHAIRMAN ORNSTEIN: We did, in fact, come to that agreement. MR. GLASER: But it seems to me 315 that, in that context, that the broadcasters here would stack up in the general case -- and there are cable exceptions to this and there are satellite exceptions to this and there are internet broadcaster exceptions to this -- but the broadcasters are far better at interrogating public interest obligations into their programming than any of these other pathways. So it would seem to me if there were a Code of Conduct, maybe voluntary, if it has to be self-approval, if there were some teeth that applied in a universal way, that you all ought to be in favor of that insofar as it reinforces the direct focus that you provide to serving your consumers, and it highlights that, vis-a-vis, what these other methods of broadcasting don't do or don't yet do. CHAIRMAN ORNSTEIN: I agree with that, but before we turn to our period of public comment -- and then we'll come back for a larger discussion -- let's, just to see where everybody is, if Robert and Paul could respond, and Les maybe as well, as to what Harold suggested. 316 What would your reaction be, or what do you think others' reaction would be to taking our code, which we had general statements in these areas, and building in some explicit minimum standards but make the recommendation be a part of the code rather than mandated by the government? Is that still -- MR. DECHERD: Norm, honestly, I'd have to go look at the numbers. I've never seen these numbers before this morning, and it would be way out of sensibilities on me to sign up for anything. We may do quadruple this number on any one of our television stations, but when you get into time periods -- and these are valuable assets -- and to me, the challenge with the discussion today and in our recent committee meeting is we're going back in the direction of where we started out last fall, which is this notion of extracting concessions and economic commitments in the broadcasting industry at a time when the broadcasting industry is in the most competitive environment in the history of communications, increasingly so every day. It is not a world where there are three 317 networks who divine how the future is going to unfold, and as Harold just mentioned a minute ago, every day there are new players in our business who have virtually no experience with any of the matters we're talking about. I cannot imagine Tom Hicks having this discussion and making any sense of it whatsoever except to go back to his place and say, hey guys, we're against all this stuff. So I mean, we've got to find a way to take what exists, which are good, important public interest concepts and use the code as a vehicle, use voluntarily compliance, use initiative in public and political time and all of these arenas and try to take the best broadcast, the best models, put them to work, try to rally support among all the people who are ultimately going to decide this, which we all have said today is not this commission, but it's the President, it's the Congress, it's the FCC, it's a lot of people who have very strong feelings about all these matters. And I'd just urge us to try to focus on something that is truly meaningful in that discussion for a long time, not six months or 318 nine months, and there are many very good ideas in this. So within the code, could we address Jim's points? Yes. Should we do it by describing the number of PSAs during the day parts? I'd have to know a lot more, and I'm not sure what the value added is, if you will, of going through that process within this group as opposed to focusing on what I've tried to advocate, which is let's have something of such clarity and persuasiveness that, no matter where you stand on these issues, say, you know, this matters. And that's what you put in the hands of John McKane and Tom Hicks and the most radical public interest advocates. None of them are at this table. These are very reasonable colleagues of ours, been in this arena for a long. So I know it sounds like the generalist Poly Anna bit, but I think that's what's going to work personally. MR. BENTON: I'd like to ask Rob a question because you have been very consistent in your minimum standards and certainly governmental rules many times. 319 Again, very, very consistent about that. Why hasn't the NAB been more of a leader on this? Let me just finish. Why have they had a code with language (inaudible) NTIA at the last meeting in the middle of April which Cass talks about very generally this morning. It's very frustrating because without articulating some goals and how broadcasters measure up to those goals, it's all talk. I mean, it's all just good will. It's trust us, we'll do the right thing. And that, as Peggy, in her -- very articulately -- in her comments this morning said about children's television, until there were some teeth put into it, nothing happened. Nothing continued to happen. So there is a deep sense of cynicism in the public and rest of the community, which I've been involved in for a long time, about broadcasters taking these public service obligations seriously, and especially through the NAB and its general positions and statements on this. I mean, it is very distressing and very disturbing and a lot of -- I mean, look, we are of good will in this 320 group, and we have had some wonderful conversations, but at the end of the day, I'm really disturbed by the status of the code and its relevance to today compared to what I heard last night talking about some broadcasters about how meaningful the code used to be. The code was a very meaningful instrument 20 years ago, but it's not now. It's a sham. MR. CRUMP: It was taken away from us. MR. BENTON: Wait, wait. But the courts took away the advertising part of it, not the program. MR. CRUMP: They took the whole code away. CHAIRMAN ORNSTEIN: For a variety of reasons, including some other litigation that, in effect, through consent decrees and other ways, there is no code at the moment. There is a statement of principles out of it. So for whatever set of reasons, which we needn't get into now, we clearly have a consensus to move towards a code. What I've been trying to determine in the last few 321 minutes is can we bridge the gap between what Jim has proposed and what clearly the opposition is, making it a government mandate, see if we can find some formula in the code. Clearly, the numbers you can't accept without -- but the larger question is whether we can -- whether we build in a minimum standard into a code or not. MR. BENTON: Can the code be meaningful? That's the central question. MR. CRUMP: I'd like to answer Robert. The proposal I put forth, because I've just read yours for the first time, so when it comes to numbers, I'm not tying myself to the numbers that Jim put in, but I don't disagree with them either. I'm like you. I don't know. I got to go back and look at this thing. I'm just telling you -- CHAIRMAN ORNSTEIN: I meant in a general question, not on specifics, but maybe that's not workable either. MR. DECHERD: I think what -- my opinion is what's workable is it's a very strong code, a number of statements in the code that tie all of the very constructive things 322 we've discussed together, and if that includes some reference to minimum standards, even if they're nonquantitative, that may well be fine, but we need to work our way through that. I think other things that have been said are amenable to everybody here and to broadcasters. The quarterly report is one thing, but as, obviously, we saw Bill's and Gigi's suggestion how to go another step, every step we go in matters like that, or when we get to political time, is going to raise the fear on the side of broadcasters. And I'd like to come back to your question, Charles, but that this is just incrementalism, that no different than we had a ratings agreement with the White House, and then we're going to get into phase two within six months. That is part -- I mean, there's sort of a mutual cynicism about all this, and I think it is not within our ability, as a commission, to either overcome that or eliminate it. We need to recognize that's part of this process. And while I am not the person qualified to speak to imply the antipathy towards the NAB 323 exists, I would say -- I mean amongst the public interest community -- and it's been very evident in all of our meetings, it's very evident now. Today I must have heard that five, six, seven times at least. They are pulled, at least, six to ten different directions by their own internal constituencies, and those are not the same constituencies. The networks and independents and so forth are all pushing on them, and they have a reasonably difficult time, in my estimation, finding equilibrium between them, and it results in a very tough public stance. But I think we're better off, in this report, trying to anticipate how decisions are going to be made in the future rather than vilifying the NAB or whatever has preceded this. The decisions about all these matters, I believe, are going to be made by different groups in the broadcast industry than has been traditionally the case. We're seeing it right now in the discussions between the networks and the affiliates. It's not the elected affiliate groups who are making the deals, if you will; 324 it's through broadcasters who didn't exist until the Telecommunications Act deregulated the industry. And the new players, the new networks, I mean, here we are kind of focused on Leslie who is the only pure broadcaster among networks. Imagine the responses from the Dizzy, it's in a dozen different businesses, or a Fox or UPN. These are the people that are going to be players, and we've got to create expectations for all of those people, not try to go defeat the NAB in some pre1998 wrestling match. I mean, it's passed. This is a different set of issues largely created because there is going to be this digital capacity, and as we said how many dozen times, nobody knows where this comes out. So for my part, I'd just as soon say we appreciate the work the NAB has done. Let's judge them on how they perform in this new environment rather than, again, try to change the relationship. MS. SOHN: I've got one point, and I want to pick up on what Paul was talking about, license renewal, because that's really 325 important and we're just sort of skipping over it. I'm still not satisfied -- and this is the second meeting in a row I've asked this question -- about how do we ensure that those broadcasters that do nothing do something? And the code just ain't going to cut it. We heard this morning how you cannot tie -- if you starts to tie enforcement to a code, then you run into antitrust problems. So that question still has not been answered, and if people have a creative way of answering that question, I really want to hear it. The second thing is Paul talked about license renewal, and that folds into my notion of accountability, and I wanted to sort of propose a possible alternative to the idea of mandated minimums, and that is similar to what's been done in the past. That is guidelines, programming guidelines, and if you meet -- and if you meet those guidelines, the FCC automatically renews your license. If you don't, they look at it. They have to look at it and give it a harder look and then decide whether or not you meet those guidelines. It's 326 similar to the Children's Television Act. So why not do something like that with public interest programming? So it's not a mandatory minimum, you don't have to do it, but if you don't do it, the FCC will look harder at your renewal application. They may grant it, they may decide to open it up for comparative applications, something like that, sort of a more middle ground. CHAIRMAN ORNSTEIN: Any reaction to that? And then we'll break. MR. DECHERD: This will stir the pot, but I'm going to go back to the first meeting we had. If I broadcast in HDTV, the day the loan ceases, nothing is different about the amount of spectrum I'm using or the kind of programming I'm putting on the air. So why should I be subject to additional public interest requirements or regulations simply because there's this digital thing out there and we all met? Now, if we go beyond that, there are important questions here about what happens if we multiplex, how do public interest obligations apply in that context. I think 327 we're headed in the direction of addressing those things, but you know, to say, as a proposition, that we need to go step up all of these oversight functions is -- that's not what we're here to do. MR. GLASER: I'd be willing to tie any new things we did into multiplexing, in part because of -- (inaudible) -- in part, because it's incredibly likely that most broadcasters will multiplex substantial periods of the time. And therefore, this is tied to a new broadening of access. And then there's a third point, which is I think we have an opportunity, because commissions like this don't come along that often, to broaden what we're doing -- repeating my oft-repeated point -- so what we're talking about is a regime that's digitally appropriate across digital broadcasters, whether they use spectrum or other networks. And it's that third point that I think is reinforcement here. The more we do that's broad in nature, codes -- not just to NAB, but codes to NTBA, codes that span the set of organizational response of broadcasters, I think the more we'll be serving the intended 328 purpose of this commission for the opportunity this commission provides us. MS. SOHN: And Robert, I don't think -- I think you're using the wrong terminology, from my perspective, when you say additional public interest obligations because my guess is that any processing guidelines that we might come up with, you're already doing, okay. Again, I'm trying to -- I'm trying to raise the bar for those that do nothing. So I think to characterize it as additional -- for some broadcasters, yeah, it would be additional because they're not doing anything. But for folks like you and Harold and Jim and Paul and Bill, it wouldn't be additional. CHAIRMAN ORNSTEIN: I want to move, as we have to, to our another period of public comment, and then we will come back and try and wrap up, will include the following. I think we need an extension of this discussion, a little bit more of play it out and see if -- where we have areas where we're just not going to come to an agreement, see where we can move beyond that, and also, begin to talk a little 329 bit about our logistics. So let's take public comments now, and as we did this morning, please come to the microphone if you have anything to say and identify yourselves. MS. WILKEN: I'm Debra Wilken on behalf of the Salvation Army, and on behalf of our supporters and volunteer people we serve, we really do appreciate your efforts. It was October of 1987, and all the planning in the world wouldn't have prepared us for the absolutely unexpected. Our Minnesota Twins were in the World Series. All the television and public service stations previously secured for our Coats for Kids Drive was eagerly eaten up by advertisers. With two days left for the outerwear collection, 19,000 children still waited for coats for winter. The additional press releases weren't working. We stapled baggies onto press release papers and typed the lines that said, these children will be wearing this for winter. A second release was issued with all of the facts. The lead stating, Twins hot, but Minnesota children are still cold. Within 36 hours, 27,000 coats 330 were collected because of CCO sponsorship of our drive. This response was one of the countless examples of the Salvation Army's experience as a result of a significant impact our broadcast media has made in this area. I received a phone call, can you send that magic bus down to help me, said the voice on the other end. My children's baby books are floating around seven feet of sludge in the basement, and I can't get out of my wheelchair to find them. The caller was a victim of the catastrophic flooding in Montevideo, Minnesota last year. The magic bus that she referred to was a coach bus filled with cleanup teams sent by Care 11 Television to assist the Salvation Army. The unprecedented critical relief operation became so important that the mayor declared that residents would not be allowed back into their homes until the Salvation Army teams cleaned and inspected the homes. Twin Cities media and surrounding areas felt and quickened the pulse of the communities through their coverage of the devastation, but 331 went further and gave viewers the opportunity to work on the front lines of flood-sieged areas. Phone banks were set up at stations, and calls came in from all areas of the country to volunteer. A marine from Hawaii took leave and jumped four military planes to participate. A woman in Phoenix took three weeks' vacation and drove a Greyhound Bus for 46 hours to meet the Operation We Care Bus at the studio. The Salvation Army set up 40 additional phones line in the warehouse to handle all the calls. Phone lines jammed. An additional 75 phones were added. We finally had a total of 170 phones in our warehouse after the studio lines were full, and the ringing remained constant, almost 24 hours a day for five days. Three bus loads of students from Robbinsdale, Minnesota followed the Operation We Care Bus to Granite Falls. One of the teachers reported that the activity was the finest learning experience that her children will ever have. So successful was the partnership with the media and the relief operation that it was replicated in other 332 disaster-affected areas throughout Minnesota and North Dakota communities, as intensive recovery activities were needed. It's now being used as a national model for the Salvation Army Emergency Disaster Services. Indicative of the commitment by the television broadcast community, a plan was implemented as a first-ever simulcast telethon to raise disaster relief funds. For this collaborative effort, communities -- commitments were secured from the usually competitive counterparts to broadcast to all metro areas by television stations on May 17th. So staggering were the results that a special -- not-for-profit disaster relief agencies were established to distribute more than one million raised. As a result of the support given by the local broadcast media to the Salvation Army flooded out communities, the Salvation Army volunteer base increased from 3,766 volunteers to more than 26,014. National and local corporations stepped up to the plate to be involved in replicating 333 efforts that they saw in media partnerships, including 3M, Northwest Airlines, Sun Country Airlines, Norwest Bank, St. Paul Companies and Cargill. Local restaurants and supermarkets again provided hundreds, and eventually thousands, of meals for volunteers and victims at Salvation Army relief centers for several months. This happened, too, with the partnership we had for Hurricane Andrew. Just in this area alone, more than $1.8 million dollars went to the television station at WCCO from viewers when they joined a partnership with Pillsbury and Salvation Army for relief funds. Thousands of people have been impacted as a result of our media collaboration. Awareness of the work and scope of the Salvation Army has never been stronger. The partnership with the Twin Cities media is one of the most significant milestones the Salvation Army has had in this area since the general service given by the donut girls in World War I. Last spring's pledge is just one example of extraordinary action from communities 334 throughout the nation prompted by the media. The importance of the role played by our media partners cannot be measured, and I know there are thousands of people who are endlessly grateful for all that they were offered. Thank you for your help. CHAIRMAN ORNSTEIN: Thank you very much. I had a question. Les, that first station, WCCO, what affiliate is that, CBS? CHAIRMAN MOONVES: Owned and operated. MS. CHARREN: They are one of the very special stations in the country. They once aired a public broadcasting program on children's television hosted by Bill Moyers without commercials. They did an introduction to it and aired it from beginning to end for one hour. CHAIRMAN MOONVES: And they did it voluntary. MS. CHARREN: Yes, they did, because they thought it was so important. There are a lot of people like that in the broadcast industry. I think it was Jim Rupp. I can't believe I remembered that?. 335 CHAIRMAN ORNSTEIN: Not to mention Dave Moore, best local anchor ever. Enough of that. Yes? MS. MACK: Hi, I'm Dian Mack, executive director of Minnesota Food Bank Network, and I'd like to thank you for the opportunity to provide a few brief comments on the public service activities of broadcasters in the State of Minnesota, and specifically, here in the Twin Cities. I've been the executive director of the Minnesota Food Bank Network for nearly 12 years, and the Minnesota Food Bank Network is a nonprofit organization whose members distribute food to individuals and families in need throughout Minnesota and North Dakota and Western Wisconsin. During this past 12 years, television and radio stations have always been responsive to requests by charities for public service announcements, but I've noticed that, in recent years, there's been increasing efforts on the part of broadcasters to integrate charities on a more purposeful and regular basis. Charities are seen as an important part of 336 the health of Minnesota communities, and broadcasters are continually looking for ways, not only to report on, but to support the communities they serve and the charities that serve them as well. During the previously-mentioned floods of 1997, I also had the dubious distinction of being president of Minnesota -- (inaudible) -- Informations Act of the disaster. It was the first time in the organization's history that we had to respond to a level 5 disaster and that's on a level 1 being the least, 5 being the worst disaster. Television broadcasters called together all the local charities with which they already had relationship to a meeting to discuss how they might utilize their collective reach to help us help all the individuals in the communities affected by the disaster. But beyond the flood telethon that was previously mentioned was born out of that meeting. I'd say fierce competitors in the field of broadcasting and in the arena of nonprofitable charitable fund-raising came together to tell a simple, but important, story during the 337 telethon, and in doing so, we were not only able to educate the public about how and when to help during times of disasters, but we also raised nearly a million dollars which was distributed to flood survivors through nonprofit charitable agencies working in the flood-affected areas. The bad news is that Minnesota has already seen far too many weather-related disasters this year, but the good news is the information dispensed by the media last year about the disaster survivors has generated even more appropriate responses by the general public during these recent disasters. We're truly thankful for the caring and thoughtful broadcasters in the Twin Cities. They not only take the time to learn about the nonprofit community, but help us to better understand how we can use broadcasting to get our messages out to the communities we all serve. Working together has made us all more informed and more effective. Thanks for being here today. CHAIRMAN ORNSTEIN: Thank you. Models for the rest of the country, Harold 338 leading the way. MR. CRUMP: Harold doesn't know any of these people. CHAIRMAN ORNSTEIN: Let's return. We have some scheduling and other things we needs to get to, but I think we ought to go as far as we can to continue this discussion to see at least where we are in terms of the meeting of the minds, and we're not going to come to a meeting of the minds obviously in this area. We may have to try to work it out in another fashion or come back to it again. I have to say, Jim, that it strikes me, at least, that -- fairly clearly that we will not have a consensus in the group as a whole, certainly not among the broadcast representatives, to recommend a set of minimum standards as a mandatory requirement. That seems crystal clear to me. What is not clear is whether we should move towards building in or how, the building in a set of minimum standards into a code, and one that doesn't -- that may or may not include some specific quantitative requirements, or it 339 might not. But that strikes me as where we are on that issue, at least. MS. SOHN: What are the guidelines? We only heard from Robert on the processing guidelines. CHAIRMAN ORNSTEIN: We'll come to that. Do you disagree with that, Jim, or do you want to come back to it? MR. GOODMON: I handed this to everybody today. I think we're together on increased reporting requirements. I think there are whole lots of things we're together on here. I'm not giving up. I want to keep talking about it. CHAIRMAN ORNSTEIN: One thing I would like Gigi to do is, with regard to the reporting requirements, and I haven't seen -- I know you were working with Barry Diller's people to try to come up with a broader recommendation. I would ask you to consult with our broadcasters and representatives so we can come up with a set of requirements for reporting public interest activities that is reasonable and feasible, not terribly onerous for the larger group because it seems to me 340 that getting on the public record what people are doing is a very important part of this process, the voluntary process of moving forward. MS. SOHN: Basically, my certification is, really, is quite simple. You just say how many hours a week or whatever amount of week of something you do, you know, of a particular kind of programming, say that you've, yes or no, you've complied with your policy of doing that, and just list a half dozen -- or it doesn't have to be each program -- you could change that -- aired that addresses, you know, this particular issue and how it doesn't. It's nowhere near as onerous as the program logs, which were extremely detailed. MS. CHARREN: May I suggest that what might help that kind of a document is some idea of the production that this doesn't imply that everybody is obligated to do all of this. When I saw the requirement for religious programming, I got a little nervous, she says gently. MS. SOHN: Well, these 341 categories track the 1960 scheme. MS. CHARREN: I know they do, but there's an implication when you see it in hard copy like that, that if you don't do it, you're going to get hung up. CHAIRMAN ORNSTEIN: I think we agree that there should be a reporting requirement of public interest activities. I want to be sure that, if we don't have unanimity, we at least have a reasonable consensus that's done in a way that's acceptable. MR. CRUMP: Norm, if I might make an observation. As I sit here and think about it and listen to what's been said, you know, I believe what's happening is, to some degree, the broadcasters sitting around this table thinking back to the old days, and we're remembering the good things that we did. We're remembering the outstanding things that some stations did in public service, just almost beyond belief. And others who are not broadcasters are remembering some of those, but you're remembering the bad things. We're remembering the good; you're remembering the 342 bad. The observation that Robert made about the fact that perhaps what we should do is put the past behind us and go on from there, obviously, the opinions that we have are all based upon personal experience. And sometimes the most difficult decisions we have to make are those where we say, gee, okay, I'm going to put this past behind me, I'm going to change my ways, or I'm going to change the way I feel about this person and then go forward. But it seems to me that if we're going to try to reach a consensus, listening to this over and over for months now, that's really what each one of us, as an individual, I believe, has got to try to do, that we're working in a new ball game. Now, the one thing I would say to all of you who are not broadcasters to please remember, keep it in your mind, in the back of your mind, anyway, at all times, and that is that, as we have discussed what has occurred in the way of less regulation that has occurred for the broadcaster over the years, that we are very proud of this, and we all feel that the 343 reason we got the less regulation was because we had done a pretty damn good job all the way through. And put yourselves in our shoes. If, indeed, this is the case, which we believe it is, surely they wouldn't have rewarded us if we had done badly. Then you can understand why we feel as strongly as we do about trying to add reregulation back onto us just because we're taking 6 megahertz and exchanging it for 6 more megahertz and having to put millions of dollars into this new system that we hope is going to work, do well, be good for the American public. But it's still a gamble, and we're happy to do so, we want to do so, but none of this stuff is a lay-down hand as to how good the business is going to be. MS. SOHN: Were you responding to the idea that the public should have more information? MR. CRUMP: I'm responding to everything that's gone around and around, and we're having a lot of varying views, and I think based upon our own past experiences, and I'm just saying, as I think about this 344 suddenly, we've got two sets of experiences; those of us that remember the good, and those of us that remember the bad, and we've got to put that behind us, both of us, to come to an agreement here and go forward. MS. CHARREN: I don't want what I said to be perceived as having related to, for instance, Robert's proposal on how I feel about what we've talked about all day, but I think it's important to keep in mind -- the spirit of what you said I agreed with. We're all sitting here because we think we can do something that's going to make a difference. That's why we all said yes to something that was using up a lot of time, and at least in my case, a lot of money, and because we think that we're going to make something happen that's going to help the public interest, help the democratic community and something we could be proud of or we wouldn't have committed to do this. On the other hand, it's important for -- just to personalize it, I am not a broadcaster. The only reason I'm sitting here is because of an experience with 30 years of 345 dealing with some broadcasters who really understood the public interest obligation that came with the license and some that didn't, and we all agree that some don't, and that there are various ways to deal with that, and all of them don't involve legislation, for example. I didn't think mine did, my issue. I thought the FCC could deal with that. In fact, I thought the broadcasters could. When I started out, Harold, I said I going to take two years to make this happen. I was just going to tell all the broadcasters how important it was to provide choices and diversity for children, and I thought all these good people would then say, gee, there's a market out there for that, and they'd go do it. A little naive. And I learned over time, what required action and what didn't. I don't think everything we're talking about requires legislation, but I think that I learned that some things do require more than just an exhortation that the good guy's going to pay attention to, that I am still operating on the idea that some stuff has to get back to the public. With my early efforts, it was in 346 the law. In return for a license, you got to serve the public. It's a broader set of issues now, but I think that we have to be careful that we don't just come up with sort of soft proposals that cross our fingers that things are going to happen. I'm not saying that the things we've been discussing are that, but I think we have to be careful not to be so sensitive to the fact that these are all people, after all, and ultimately, they will do the right thing. My experience is that a lot of them don't do the right thing for the public, present company very much excepted. CHAIRMAN ORNSTEIN: I think we have to consider several larger issues here that we bandied about for several months. We're moving into a very difficult and uncertain world, and I think Robert is absolutely right; we have to look ahead, but we have to consider several things as we look ahead. This is going to be a world where we don't know what's going to happen in terms of revenue, where broadcasters will be relative to others, none of us do, and we do face very 347 substantial costs as you move ahead, and I think you have to be very sensitive to that. There will be some blurring of the lines between broadcasters and other entities, and we have to be sensitive to the notion that broadcasters are special. They're special because they provide the public square that others don't, and we want to find ways to enhance and preserve that. At the same time, as we talk about where the power lies looking into the future, the power is not going to lie as much with broadcasters who started as people and communities who began operations within those communities who were rooted in those communities, who started as pioneers believing that what they were doing is not just entering a business which is -- could have been the same as a widget business, but one that had a very special character. But it is the nature of the marketplace now that we are moving to include an awful lot of entities where this is a decision of how you set your capital out there, and if it turns out you can get a better return on your capital by 348 investing in widgets or investing in semiconductors as opposed to investing in broadcast stations, then you may just go ahead and do that, including a lot of entities that have no local anchor and no intrinsic belief that this is a special business that requires a public interest obligation. Now, I don't know how we come down striking the balance here. Clearly, what you're hearing from some of the others here is a fear that, in part, because we already have a lot of entities that don't do very much, and we know that within the industry there is disdain for many of them that haven't done what they should be doing, but clearly, that disdain has not translated into a kind of peer pressure that's changed that process. And I think what broadcasters will hear from some of the others around the table is a kind of frustration that, in part, because there has been this great division of a reaction to protect those among you who don't do what you do, which creates a sense of bafflement among many, and I don't know how we bridge that, except, clearly, the best way to do this is by having the industry 349 itself do it, if we can manage to make that happen. At the same time, I want to try and make sure that we don't do anything that creates an even less level playing field, that means that burdens are placed on broadcasters that aren't placed on others that will make it much more difficult to achieve what we all ought to be achieving, and that's, obviously, part of what we're trying to do here, is try to figure out how we can make those things happen consistent with a process that is not going to happen at this point, which is a lot more regulation and that we, I think, generally agree would be the least best way in which to go. Now, as we turn to this discussion, clearly, we have to work through whether we believe that basically -- we all agree that code, in creating that sense within the industry of a set of standards is a good step to take. Obviously, if it's just a bunch of words that everybody ignores, that's not going to achieve the purpose that any of us want. And obviously, we don't want -- we want to make 350 this a voluntary effort. That's why I think we need to have at least some discussion -- more discussion of how we do that and whether building in some kind of minimum standards. And probably, I think, quantification is not going to be a very good approach to take, simply because of the uncertainties of the digital age, that we may want to find another way to go about doing that. MS. CHARREN: When you do that, can you also focus so that somebody gives me a list of the enforcement mechanisms and the pros and cons. CHAIRMAN ORNSTEIN: Yes, and of course, we had some discussion earlier of what enforcement, consistent with the law and otherwise, we can have. And my own judgment would be if the industry moves towards, not only creating a minimum, but basically saying that you have to achieve that minimum to get a seal of approval, and that we will point to those who go beyond that and say, boy, you're good guys and, you know, make it very clear that for those who don't, that there will be an awful lot of 351 criticism leveled at them, and indeed, it may hurt them in the bottom line down the road, that's a preferable way to go, and it may, in fact, be a workable way to go, and certainly better than any kind of direct federal burden. Now, I think we're very close to coming to an agreement on how we do that. The question now is, basically, whether that is a good route to go in which to add a minimum standard and whether that's going to be acceptable more broadly. And on that, I, frankly, believe we need to rely on our members who are broadcasters to try and come up with something that, obviously, we're all going to have to look at to judge. But if it isn't going to work with you, then it probably isn't going to work with the rest of us. So I would urge you to try and do that. We do need to discuss whether, in fact, we need a sharper stick or a weapon to move forward, which is, in a way, what Gigi is suggesting, and we need to go further on that in terms of discussion. I don't know if we can reach an agreement on that tonight. We, obviously, don't have an agreement at this 352 point on whether the minimum standard is going to be acceptable, and I leave it to Jim to try to persuade his colleagues as to how far to go on this as well, but it will be my judgment that -- MR. GOODMON: Are we really on this everybody has got to agree with everything before it's in the report. CHAIRMAN ORNSTEIN: No. And certainly, we clearly already have areas where we know there will be at least one member who takes sharp disagreement. I think having one or two members or three or four members who don't agree with a particular provision is perfectly all right. What I believe we do not want to get into, if we can avoid it, is a situation where a more substantial block of people, and in particular, a group of people who represent either the broadcasting side of the spectrum or a very substantial block on the other side basically say, no, this doesn't work. If we can get an agreement that cuts across those lines but has one or two or three people who just don't agree, you're never going 353 to find a group of 22 people who will agree on every job. That's fine. But it seems to me our goal here is if we can manage to avoid having a sharp line drawn in the dust where this is basically a majority report and a minority report. That may be something that we end up with. I think, and hope, we demonstrated today with a lot of strong viewpoints represented, and maybe, as Robert said, it's a little Poly Anna-ish, but I think it's there, there is a real opportunity to come to a broad agreement that may not include everybody on everything but it will include a broad agreement. If we do that, I believe we will have very substantial residents out there and a whole hosts of communities because the fact is there are questions here that nobody has answered, and there is a driving need to have them answered and responded to. And if somebody comes forward representing the broad interests that is basically not driven by a partisan motive or any other kind of ideological motive with some reasonable suggestions that can move the ball forward, there will be people in 354 Congress and people in the White House and people in the industry who will literally jump on board. So we have a great opportunity to do that, and it is going to require, obviously, from all of us, some more considerable flexibility, which most of us, I think, have shown up to this point. But now we're getting close to the point in time where we are all going to have to demonstrate a little bit more. MS. STRAUSS: Norm, I just want to follow up on that and just say that if we look at our mandate again -- and I talked about this in California -- we were asked to determine obligations. We were not asked to determine voluntary measures, and if we don't do it, somebody else is going to do it. If it's not going to be us, it's either going to be Congress or it's going to be the FCC, and I think we passed up a golden opportunity to not set forth a set of recommendations, whether they're minimum standards or minimum obligations, or whatever you want to call them, at this time. And I think we would have failed if we just put forth soft, voluntary measures that 355 may or may not be followed by members or nonmembers of the NAB. I don't think that we will have fulfilled our mandate. And it seemed like we were getting someplace today, so I was sorely disappointed when, towards the end of the day, some of the broadcasters suggested that, in fact, there was no interest in having some submit to minimum standards. CHAIRMAN ORNSTEIN: Karen, let's be clear here. What we're talking about now is, more than anything else, it's a code, and that's one component of what we're doing. MS. STRAUSS: If it's only one component, that's fine, but it's not clear to me whether the statements made are limited. CHAIRMAN ORNSTEIN: I believe we have very close to a consensus on a pretty far-reaching and very significant educational proposal. There is clearly a consensus in terms of many of the issues involving closed captioning and many of those other issues that we discussed, and I think we haven't had any dissent in terms of moving that particular ball forward. We have an agreement that there ought to 356 be some way of recapturing for the public something in return if there is substantial multiplexing that involves a lot of revenue streams. We are moving towards what I hope will be a set of recommendations on the political discourse area that I hope we'll move that ball forward. MS. STRAUSS: Are you saying these are voluntary or mandatory? CHAIRMAN ORNSTEIN: Well it's a mixture of things, but you know, obligations can be internally derived, as well as externally forced, and if we can come up with a set of obligations that are generally internally derived but work, that's fine as far as I'm concerned. It, obviously, isn't fine if you come up with a lot of language and it doesn't mean anything, but when we have our mandate for obligations, that does not mean that our mandate is either limited to or necessarily has to focus on government-imposed obligations. We need to find a best way to get to it. MR. BENTON: Norm, in this sense 357 it would help me enormously, and Robert, before Robert leaves here. MR. DECHERD: Airplane. I'm not mad at anybody. MR. BENTON: No, no. But it would help me enormously, in line with what Norman just said, Robert, and others as well -- don't mean to be sending you off -- but you're the guy who made the proposal on which we've largely based our discussion today. If we can have some formal written indication from the NAB about its attitude towards this code, not committing to any specifics at this point, but committing to a serious reexamination of the code and its application to its members, this would help. This would move me along the trail of getting off the regulation number because there is a big gap here on the part of a lot of us. And I need some documentation from the NAB saying, look, on this code business, with digital, we are serious about having a serious look at this, and we're serious about the application to our members, and we are interested in minimum standards which we would then 358 promulgate, not force upon our membership, but say these are the minimum standards we expect you NAB members to live up to. I think that's the least of it. I think we ought to get something like that in writing. If we can something like that in writing, then I'm going to feel a lot better. CHAIRMAN ORNSTEIN: Let me interrupt you. One thing before you all leave, we don't know exactly whether this will work, but we are supposed to come up for a report on October 1. If we can all reserve, as best you can, October 1 on your calendars and not make any ironclad commitments, it's quite possible we'll have some kind of presentation to the Vice President, just to keep that in mind. It may not happen that day. MR. CRUMP: What are we going to do with the subcommittees that are supposed to meet. What are we going to get set up. MS. CHARREN: What subcommittees? MR. CRUMP: How about the subcommittee on the NAB code or the new code. 359 CHAIRMAN ORNSTEIN: Well, we had this working group that Cass is chair, ask him to find time. He's going to do some drafting. And I would hope you would conclude this discussion, maybe even broaden it to include some of your members who are not in the subgroup, of the minimum standard. (Inaudible). My guess is that there's probably not going to be a great willingness to commit to anything at this point. MR. BENTON: Is there even a code committee? Is there a structure? Who do we talk to. CHAIRMAN ORNSTEIN: We will have, I think, some expression of that. And otherwise, what we are going to do here is we've got a couple of subgroups who are going to move forward to try to fit language in, individuals who will do so. We will see, as we canvass members and talk among ourselves over the next three weeks or so whether we can move this forward without another meeting, and in about three weeks or so, we'll let you know that we are, indeed, meeting on August 10th. I'll let you know in 360 about three weeks. Thank you all very much. (Whereupon, the meeting concluded at approximately 5:20 p.m.) * * * 361 STATE OF MINNESOTA ) ) ss COUNTY OF ANOKA ) Be it known that I took the foregoing meeting; That I was then and there a notary public in and for the County of Anoka, State of Minnesota; That the foregoing transcript is a true and correct transcript of my original stenographic notes in said matter; That I am not related to nor an employee of any of the parties hereto, nor a relative nor employee of any attorney or counsel employed by the parties hereto, nor interested in the outcome of the action; WITNESS MY HAND AND SEAL THIS 10TH OF JUNE, 1998. _________________________ BARBARA J. STROIA, RPR Notary Public