A PROPOSAL FOR PUBLIC INTEREST OBLIGATIONS OF DIGITAL TV BROADCASTERS

EXECUTIVE SUMMARY

The attached proposal includes recommendations to the FCC for specific, enforceable and flexible public interest obligations for digital television broadcasters. They accomp- lish the twin goals of 1) compensating the public with new service in exchange for the grant of free extra spectrum to broadcasters and 2) providing broadcasters latitude in fulfilling these obligations. The proposal also takes into account the dynamic nature of digital technology by suggesting different obligations for broadcasters depending on the type of services they provide.

The proposal recommends that the FCC:

The proposal also recommends the following voluntary actions by the broadcast indus- try:

Finally, the proposal makes additional recommendations for Congressional action. Be- cause enactment of legislation in this area is highly unlikely, they are intended only to augment those recommendations made to the FCC. The proposal asks Congress to:

A PROPOSAL FOR PUBLIC INTEREST OBLIGATIONS OF DIGITAL TV BROADCASTERS

Congress has expressly delegated to the FCC the power to "prescribe such other [digital TV] regulations as may be necessary for the protection of the public interest convenience and necessity." 1996 Telecommunications Act §201(b)(5). It did so in recognition of the fact the Commission, as the expert agency, is far better equipped than Congress to determine those obligations.

Therefore, the recommendations to the FCC made in Section I are intended to stand alone as a proposal.

Sections III and IV of this document do suggest some additional recommendations for Congressional action. Any recommendations to Congress that the Advisory Committee might make would be helpful, but are not essential to achieving the goal of ensuring that democracy and civic dis- course are promoted as Americans enter the age of digital television. However, should the Advisory Committee choose to do nothing but recommend Congressional action, it unlikely that these goals will be realized. This is because the probability that Congress will enact legislation in this area is very low.

The recommendations to the FCC are for specific, enforceable and flexible public interest obligations for digital television broadcasters. They accomplish the goals of 1) compensating the public with new service in exchange for the grant of free extra spectrum to broadcasters and 2) providing broadcasters latitude in fulfilling these obligations. he proposal also takes into account the dynamic nature of digital technology by suggesting different obligations for broadcasters depending on the type of services they provide.

I. RECOMMENDATIONS TO THE FEDERAL COMMUNICATIONS COMMISSION

A.For commercial stations broadcasting 0-12 hours per day of programming in a single digital TV format using more than 80% of the digital TV capacity: Adopt a processing guideline for automatic license renewal under which 1) 20% of its DTV capacity is dedicated to noncommercial programming of an educational, informational, civic, cultural, local governmental or local public affairs nature during those periods when a single digital TV format is not in use, and 2) one fifth of this "public interest" programming includes that which addresses issues of local importance and/or is specifically tailored to meet a community need that is otherwise underserved.

Rationale:

The conversion to digital transmission technology currently permits broadcasters to provide 5-6 video programming streams of quality equal to today's television picture, as well as other non-programming services such as data, paging, internet and telephone services. Rapid advances in digital compression technology are expected to expand that capacity greatly. Because of the costs of providing full resolution High Definition Television (which uses up most of the DTV capacity), and because a broadcaster can obtain extra revenues from using parts of its capacity for multiple program and non-program services, it is unlikely that most broadcasters will provide such programming more than a few hours each day. Thus, it is expected that many broadcasters will have extra bit stream capacity for a substantial number of hours during the day.

The public is entitled to a benefit in return for permitting broadcasters to use extra public airwaves to convert to digital TV. Market deficiencies interfere with the creation of adequate amounts of educational, informational, civic, cultural and public affairs programming, especially at the local level. The Commission should therefore adopt a processing guideline that allows virtually automatic renewal for broadcasters who do not use virtually all of their DTV capacity for a just one video channel for the majority of the day. Such broadcasters will be expected to 1) set aside 20% of their capacity (approximately 4 Megabits per second - enough for a picture which approximates the quality of today's television picture) for local noncommercial programming in any of the above numerated categories; and 2) reserve a portion (approximately 1/5) of this programming for covering issues of local importance and/or meeting an otherwise underserved need in the community. As with the Children's Television Act, a broadcaster not meeting the processing guideline can demonstrate to the Commission service in the public interest on an ad hoc basis. As digital compression technology improves, the capacity dedicated to this programming will also increase.

The three hours per week of children's educational and informational programming cur- rently required by 47 USC §303a could be satisfied under this standard - however, the broadcaster must provide three hours of children's programming for each commercial video program stream it provides. For example, if a broadcaster provides 3 full time commercial video program channels in addition to the one noncommercial stream, it must provide 9 hours per week of children's educational programming. This programming may be placed on the noncommercial channel.

B. For commercial stations broadcasting 12+ hours per day in a single digital TV format using more than 80% of the digital TV capacity:

Adopt a processing guideline for automatic license renewal if: 1) 20% of all program time is dedicated to "public interest" programming, including children's educational, informa- tional, civic, cultural, local governmental or local public affairs programming; 2) One fifth of the public interest program time is dedicated to programming that addresses issues of local importance and/or is specifically tailored to meet a need in the community that is otherwise underserved; 3) Three quarters of the public interest programming is broad- cast during the hours of 7 A.M. and 10 P.M.; and 4) the public interest programming is no less than 15 minutes in length. This requirement should be adjusted to match the requirement set out in Section A as compression technology permits the provision of full HDTV on less than the entire digital TV capacity.

Rationale:

Some, but not many, broadcasters will probably choose to provide most or all of their programming in a digital TV format that uses most, or all, of the DTV capacity. For example, 1080 interlaced format HDTV uses approximately 18 of the 19.4 megabit capacity. Such stations would not, at this time, be able to provide adequate capacity for the non- commercial program channel described in Section A.

That these broadcasters will not "multiplex" should not relieve them of the obligation to ensure that the public is provided with a benefit in return for permitting broadcasters to use extra public airwaves to convert to digital TV, and also to correct market deficiencies in the provision of local educational, informational, civic, cultural and public affairs programming. For these broadcasters, the Commission should adopt a processing guideline that ensures license renewal if they: 1) dedicate 20% of their program time to "public interest" programming, including children's educational, civic, cultural, local govern- mental or public affairs programming; 2) dedicate one fifth of this public interest program time to programming that discusses local issues and/or meets the needs of an underserved segment of the community of license; 3) broadcast three-quarters of all of the public interest programming between the hours of 7 A.M. and 10 P.M. and 4) broadcast public interest programs of no less than 15 minutes in length. If the processing guidelines are not met, the broadcaster may still demonstrate how it has otherwise provided programming that addresses local issues. The three hours per week of children's educational and informational programming currently required by 47 USC §303a could be satisfied under this standard. To the extent that the broadcaster does provide multiple video channels during some parts of the day, it must also provide a prorated amount of children's educational programming.

C. For noncommercial television stations:

Permit noncommercial stations to retain and digitize both their old and new channels. Require that no less than one third of the capacity which would otherwise be returned to the government be dedicated to locally originated noncommercial programming of an educational, informational, civic, cultural or public affairs nature. Public broadcasters should be encouraged to form partnerships with local educational, civic, cultural, and governmental groups for the purpose of increasing those organizations' access to the airwaves.

Rationale:

Permitting public broadcasters to keep both channels will not only provide for greater delivery of noncommercial programming, including educational, civic, governmental, children's and other programming, but could also provide revenue sources that will ensure the continued viability of public broadcasting. For example, under Section 336(e) of the 1996 Telecommunications Act, public TV stations could derive revenues from services provided over the extra digital capacity. They could also greatly increase their presence and visibility in their communities, resulting in higher donations from individuals, local and national corporations.

But the public should likewise benefit from this permanent grant of extra airwaves The Advisory Committee has heard testimony that local nonprofit, civic, cultural, educational and governmental organizations have less access to present their viewpoints on public broadcast stations than ever before. Thus, the Commission should require that no less than one third of this new capacity (approx. 6.5 megabits per second) be dedicated either to the provision of locally originated programming of an educational, civic, cultural or public affairs nature, and/or other digital services that benefit local nonprofit organiza- tions (e.g., Internet access, data and video streaming to the desktop). Public broadcasters should be encouraged to form alliances with these groups for the purpose of increasing their access to digital services. See Richard Somerset-Ward, "American Public Television Programs - Now and In the Future."

D. For all television stations:

1. With or without Congressional action, require broadcasters to provide free time to national and local political candidates or parties using models such as those presented by the Alliance for Better Campaigns and the Center for Governmental Studies. This requirement should condition free time on 1) the message being no less than 1 minute in duration, and 2) the candidate appearing in no less than 50% of the message. If a broadcaster engages in "multiplexing" it may not segregate all of its free time programming onto one channel. To the extent that Congress does not repeal the lowest unit rate provision of Section 315, discussed below, reaffirm the Commission's prior interpretation that any provision of "free" time to political candidates does not reduce broadcasters' lowest unit rate to zero.

Rationale:

To ensure that citizens have broad access to candidate speech that results in informed decisions at the ballot box, the FCC should require broadcasters to provide free time to federal, local and state candidates for public office. The right to free time should not be unlimited, of course. The Advisory Committee has been presented with "time bank" and "voucher" models that would result in broadcasters providing very modest amounts of free time for political candidates 60 days before a general election. In light of the expanded capacity and increased opportunities that digital transmission will provide for broadcast- ers, the burden upon broadcasters would be minimal. Any perceived burdens arising from such a requirement can be alleviated if the Commission reaffirms that any provision of free time does not reduce a broadcaster's lowest unit rate under 47 USC §315 to zero. But the Commission's goal of ensuring an informed electorate will not be achieved if the benefits of free time are used only for 30 second attack ads and 7 second sound bites which are segregated onto one of multiple channels. If the FCC provides a benefit of free time, it may, and should, also require that those ads be a certain length and that candi- dates actually appear in their ads for a specified amount of time. It should also prohibit broadcasters from segregating the free time programming onto one of multiple program channels.

2. Ensure that the disability community has appropriate access to digital TV program- ming. Proposal and rationale to be provided by Karen Peltz Strauss.

3. Ensure balanced coverage of ballot initiatives and referenda.

Rationale:

In 1991, the FCC repealed its requirement that broadcasters provide balanced coverage of ballot initiatives and referenda. As a result, tobacco companies, the nuclear industry and other large corporate interests have spent multiple millions of dollars on advertise- ments intended to support or defeat such referenda, while their much poorer opponents are denied similar access to the airwaves. For example, in 1996, the Tobacco Institute spent approximately 2.6 million dollars on an advertising campaign to defeat a tobacco tax initiative in Oregon. Their opponents, a coalition of antismoking and health care groups could only afford to spend approximately $100,000 on advertising, and were re- peatedly denied requests for greater balance in coverage. It is hard to imagine another instance where balanced coverage of an issue is so essential to self-governance. To the extent that controversial ballot initiatives rarely arise more than once every few years and only in certain states, such a requirement would not be burdensome.

4. Augment the current requirement that broadcasters maintain a quarterly "is- sues/programs list" in their public files to require broadcasters to keep a more detailed record of the programming they have provided to meet the requirements of Sections A, B & C. These records must describe the programming in detail similar to that required by the Commission's regulations promulgated under the Children's Television Act of 1990, e.g., identify and describe the programming, when it was aired, and how it meets the Commission's requirements for providing such programming. A broadcaster may choose to keep these records electronically - either as part of a computer database or on a World Wide Web site.

Rationale:

When it eliminated the requirement that broadcasters demonstrate at renewal time that it has provided programming that meets community needs, the Commission stated that "we have found that the best vehicle for bringing violations to our attention has been public participation in our processes through petitions to deny, informal objections, and com- plaints." Revision of Applications for Renewal of License, FCC No. 80-327 (1980). But the Commission's subsequent elimination of the requirement that descriptions of such programming be made available in broadcasters' public files, Report and Order, 98 FCC 2d 1076 (1984), has made meaningful public participation in license renewal proceedings all but impossible. With broadcast licenses up for renewal only every eight years, there is almost no way for a community to hold broadcasters accountable for the local issues programming that is the raison d'etre for receiving a broadcast license. To ensure broadcaster accountability, and to ensure that the public has the information it needs to ensure that broadcasters are indeed serving their communities of license, the FCC should augment its current requirement that broadcasters keep a quarterly "is- sues/programs list" in their public files. This issues/programs list are merely listings of certain programming, and do not describe the programming or how it meets community needs. This new list would be a more usefully descriptive narrative record of the programming they have provided to meet the requirements set out in Section 1,2 & 3 above, but would in no way resemble "program logs" of the kind formerly required of all broadcast licensees. The program descriptions should be as detailed as that required by the Commission's regulations promulgated under the Children's Television Act of 1990, 47 CFR 73.3526(8)(iii), including identifying and describing the programming, when it was aired, and how the programming meets the Commission's requirements. Where ap- plicable, the report should specifically indicate how the programming address local issues and/or meets the needs of underserved segments of the community of license. To ease any perceived burden, broadcasters may choose to keep an electronic list on their computers and/or on their World Wide Web sites.

E. For commercial television licensees wishing to "pay or play":

Permit a commercial broadcaster to choose to "pay" its way out of its additional new public interest obligations. This would not relieve it of the obligation to provide free airtime for political candidates or programming under the Children's Television Act. It may pay its way out of the other new requirements set out in A & B above. To "pay" out of one's new obligations, the broadcaster must provide 3% of its gross year- ly revenues either to a local nonprofit organization created by local broadcasters or anoth- er bona fide non-partisan nonprofit organization to fund and produce local noncommercial programming that will appear on public broadcasters' excess capacity described in Section

C. If no such nonprofit exists, then broadcasters shall divide those proceeds among the local noncommercial stations in its community for the production of local noncommercial programming of an educational, informational, civic, cultural or public affairs nature.

Rationale:

The Advisory Committee recognizes that there are some broadcasters which, faced with an obligation to provide certain "public interest" programming, will provide little but the bare minimum, in terms of quantity and quality, to retain their licenses. Rather than impel these broadcasters to provide this programming, which does little to serve the public, the FCC should give them the option of giving the money they would have otherwise spent on such programming to others who take such obligations seriously. The 3% gross re- ceipts fee would not be a "tax" because payment would be optional. As has been noted above, the marketplace has not provided for significant amounts of lo- cally originated programming of an educational, civic, cultural or public affairs nature. Thus, the money broadcasters pay to relieve themselves of their new obligations should go to entities that would provide that programming. The money could be paid to several entities that would use it for the express purpose of funding for noncommercial locally originated programming for broadcast over the local public broadcasters' extra capacity that must be dedicated to such programming under Section C. Local commercial broad- casters wishing to collaborate could create a local nonprofit organization that would provide such funding, or they could give the money to another bona fide non-partisan non- profit to do so. If no such nonprofit entity exists, broadcasters must then divide the proceeds among the local noncommercial stations in its community. These funds must be used for the express purpose of producing local noncommercial programming of an educational, informational, civic, cultural or public affairs nature.

F. Review, and modify if necessary, the public interest obligations it adopts every 3 years in light of changes in digital technology.

Rationale:

A common complaint heard by the Advisory Committee is how hard it will be to recom- mend public interest obligations in light of the fact that digital technology can change very quickly. The recommendations made here are based on what is known about digital televi- sion transmission technology in 1998. But the Advisory Committee recognizes that tech- nology can, and will change, and will likely permit even more information and access than can be achieved even today. Therefore, these recommendations should be viewed only as a baseline for what can be achieved via digital TV.

For example, as discussed in Section B above, those broadcasters engaging in 1080 interlaced HDTV for most or all of the broadcast day today, will not have the capacity for a separate channel dedicated to noncommercial "public interest" programming. With advances in compression technology, it may soon be possible to do 1080i HDTV using far less capacity that it takes today, thereby permitting creation of another, or several new channels. Thus, the FCC must review its public interest obligations every 3 years to ensure that the public's needs are being met by changes in digital technology.

G. Condition "must carry" and "channel positioning" benefits on broadcasters' provision of additional public interest obligations such as those set forth above.

Rationale:

Under the 1992 Cable Act, broadcasters may compel local cable operators to carry broadcast signals for free ("must carry") and to place them in preferred channel positions. Congress gave broadcasters preferred status vis-a-vis cable because it found that broad- casting served an important role in providing "local origination of programming" and also served as "an important source of local news, public affairs programming and other local broadcast services critical to an informed electorate." 1992 Cable Act §2(a)(10) & (11). In converting to a digital transmission format, broadcasters will ask the FCC for retransmission consent and must carry benefits for all the free digital services carried on their capacity (ancillary and supplementary services are denied must carry under Section 336(e) of the 1996 Act). They will also ask the FCC to compel cable operators to carry both their analog and their digital transmissions throughout the transition period. But there is no legal or policy justification for increased must carry and retransmission consent privileges in the absence of increased public service. This is especially true in light of the evidence presented before the Advisory Committee that local public affairs programming has become increasingly rare. Therefore, the FCC should grant broadcast- ers those privileges only upon the condition that they provide extra public service of the kind set out in this section.

II. PROPOSAL FOR VOLUNTARY ACTION BY THE BROADCAST INDUSTRY

A. Broadcasters should affirmatively meet with community leaders to ascertain the needs of various segments of their communities. Where possible, broadcasters should work in coalition with these community leaders and local non-profit groups to develop programming that meets community needs. Quarterly reports of such efforts should be placed in the licensee's public files, on a computer in its main studio, or on its World Wide Web site.

Rationale:

In 1984, the FCC repealed the requirement that commercial TV stations "ensur[e] that licensees actively discover[] the problems, needs and issues facing their communities, thereby positively influencing the programming performance of stations...." Revision of Programming and Commercialization Policies, et al., 98 FCC2d 1076 (1984). This, and other Commission decisions to deregulate in the program area were premised on the idea that "market incentives will ensure the presentation of programming that responds to community needs and provide sufficient incentives for licensees to become and remain aware of the needs and problems of their communities." Id. at 1077. The Advisory Com- mittee has been presented with ample evidence that the marketplace is not providing ade- quately for programming that meets community needs. Part of the reason for this is that broadcasters no longer have an obligation to determine what those needs consist of. There is little disagreement that the now-repealed paperwork requirements for ascertain- ment were over-regulatory and burdensome. But a general duty to ascertain community needs remains important to ensure that broadcasters provide programming responsive to their communities. To the extent possible, broadcasters should work in coalition with community leaders and local non-profit organizations to develop this programming. The Advisory Committee believes that the best way to achieve this goal is not through FCC mandate, but by voluntary adoption of the duty by broadcasters. Consistent with the obligation to provide increased community programming discussed above, those broadcast- ers who do not already engage in ascertainment will likely find it necessary.

III. ADDITIONAL RECOMMENDATIONS TO CONGRESS

A. Enact legislation to expand citizens' access to candidates' viewpoints and reduce the in- fluence of money on the political process by 1) directing the FCC to initiate a rulemaking proceeding to require broadcasters, at minimum, to provide free time to local and national candidates and parties 60 days before a primary and general election if such candidate agrees to appear in an message that is no shorter than 1 minute; 2) repealing 47 USC §315(b), the "lowest unit rate" provisions of the Communications Act, so long as a broadcaster provides for minimum amount of free time for candidates (as determined by Congress or the FCC); and 3) providing income tax credits or other incentives which reward broadcasters for providing a minimum amount of free time for candidates for political office.

Rationale:

The pervasive influence of money in political campaigns has become a threat to democra- cy. Potential candidates for public office are declining to run because they must raise thousands of dollars every day from the day they declare their candidacies until the day they leave office. The result is that only the richest Americans even dare to seek to unseat incumbent politicians.

The cost of political advertisements is the largest single expense in electoral politics. Making some free broadcast time available to federal, state and local candidates for politi- cal office results in several public benefits. First, it would reduce the influence of money in politics by relieving some of the demand for it. Second, it would make political campaigns more competitive by helping underfunded challengers make their views known to the public. Third, it would ensure that candidates, and not unauthorized independent parties, remain the most robust communicators in political campaigns. Fourth, it will improve self governance by increasing and improving the information the public has in an electoral context.

The last goal will not be achieved if the benefits of free time are used only for 30 second attack ads and 7 second sound bites. If Congress provides a benefit of free time, it may, and should, also require that those ads are of a certain length and that candidates actually appear in those ads for a minimum amount of time.

The burdens upon the broadcast industry are not great - particularly in the digital era, where broadcasters can today multiply their programming capacity by a factor of five or six. With rapid changes in digital compression technology, that capacity is expected to expand greatly. However, to offset revenues that may be lost by the provision of free time, Congress should repeal 47 USC §315(b), which requires broadcasters to sell time to candidates at the lowest rate that they charge to other advertisers. This benefit should be contingent upon broadcasters providing a minimum amount of free time to candidates for political office. Congress should also permit some tax relief for broadcasters who provide a minimum amount of free time to candidates.

B. Amend the Communications Act to provide that 1) fees for broadcasters' "ancillary and supplementary" services and 2) proceeds from the of old "analog" spectrum be placed in an endowment for noncommercial broadcasters, other "noncommercial telecommunica- tions entities," and producers of noncommercial educational, informational, children's, cultural and civic and public affairs programming.

Rationale:

Congress has directed the FCC to impose fees when broadcasters engage in "ancillary and supplementary" services (services for which a fee is charged) over their new digital capacity. Under Section 336(e)(3) of the Telecommunications Act of 1996, these fees are now to be placed in the United States Treasury. In the 1997 Budget Bill, Congress also directed the FCC to auction the spectrum that broadcasters will return after they have completed the transition to digital TV. Under 47 USC §309(j)(8), these revenues must also be placed in the Treasury.

Public broadcasting, noncommercial programming and other noncommercial telecommunications services are, and will continue to be, seriously underfunded. Indeed, CPB funding for 1998 is actually 12% less than it was in 1995 (285 versus 250 million). The fees and revenues discussed above result from America's communications infrastructure. Therefore, there is good reason to put all or some significant portion of these revenues back into that part of the infrastructure that most needs them. To do so, Congress should amend both Section 336(e)(3) of the 1996 Act and Section 309(j)(8) to direct the FCC to place these proceeds in a special endowment that will fund noncommercial telecommunications entities, as defined in 47 USC §397(7), noncommercial producers and public broadcasters. The Advisory Committee recognizes, however, that these revenues, alone, are unlikely to resolve the funding problems of noncommercial telecommunications entities. Given that it is uncertain 1) how many broadcasters will actually engage in ancillary and supplementary services, as opposed to free services; 2) at what rate the FCC will set those fees; and 3) exactly when the old analog spectrum will actually be returned, there is a good possibility that this fund may not generate much income.

IV. ALTERNATIVE RECOMMENDATION TO CONGRESS IN LIEU OF PUBLIC INTEREST REGULATION

A. Enact legislation relieving broadcasters of all public interest obligations (except for their political broadcasting responsibilities), on the condition that they pay 1% of their gross yearly revenues to an endowment that will fund broadcast time for political candidates and 1% of their gross yearly revenues to an endowment for noncommercial broadcasters, other "noncommercial telecommunications entities," and producers of noncommercial edu- cational, informational, children's, cultural and civic and public affairs programming. The legislation should also specify that 1% of the sales price of all broadcast stations should also be placed in the endowment.

Rationale:

As discussed above, the Advisory Committee recognizes that there are broadcasters which, faced with an obligation to provide certain "public interest" programming, will provide little but the bare minimum, in terms of quantity and quality, to retain their licenses. Rather than impel broadcasters to provide this programming, which does little to serve the public, Congress could relieve broadcasters of all their public interest obligations (except that which requires them to give "reasonable access" and equal time to candidates) by taking 2% of their gross revenues, plus 1% of the selling price of all broadcast stations, and give the money to entities that are willing to provide noncommercial public interest programming and services. Under this proposal (commonly known as the "Geller Proposal"), 1% of broadcasters' gross yearly revenues would go to fund broadcast time for local and national political candidates and the other 1% of the gross yearly revenues, plus 1% of the selling price of all broadcast station transfers would go to an endowment to fund public broadcasters, other noncommercial telecommunications entities and pro- ducers of noncommercial educational, informational, children's cultural and civic and public affairs programming.

This small fee could have an enormous impact on provision of noncommercial telecommunications services. In 1995-1996, TV stations produced gross revenues of nearly $61 billion. Broadcasting & Cable, April 6, 1998. A two per cent fee would provide nearly $1.2 billion for free time and noncommercial telecommunications services. Broadcast station sales also approached the $27 billion mark in 1996 - which would provide another $270 million dollars to noncommercial telecommunications services. Broadcasting & Cable, December 22, 1997.