CO-CHAIRMEN'S FRAMEWORK FOR RECOMMENDATIONS OF THE ADVISORY COMMITTEE

INTRODUCTION

The Advisory Committee's responsibility is to make recommendations in a variety of areas. One such area relates to how the public interest obligations analog broadcasters currently have are applied in the digital era. That is not as straightforward as it sounds. Analog broadcasters send one signal, usually 24 hours a day. Digital broadcasters may send one or multiple signals, at different hours; some of those signals might be programs, others, data transmission. So making a one-to-one transfer is not simple.

A second mandate for the Advisory Committee is to examine additional public interest obligations which might accrue to digital broadcasters, given enhanced opportunities and advantages that may come with digital broadcasting. The grant by Congress of the use of digital spectrum to broadcasters is valuable. We are not in a position to assess that value in monetary terms; no one knows whether it will provide a huge windfall to broadcasters, or even enable them to maintain their existing revenue streams. But if the digital portion of the public airwaves does ultimately provide a windfall, it is reasonable to recommend ways for the public to receive some benefit in return.

Windfall or no, digital broadcasting opens up unlimited opportunities to achieve a variety of important goals for our society. The vastly increased number of channels of communication, the sharpened clarity of images and the varied kinds of signals that can be transmitted digitally create multiple avenues for diverse groups in each community and in the society as a whole to have their voices heard. They create an opening to explore ways to improve political discourse, which is at the heart of deliberation in a democracy. At the same time, digital avenues can be applied in creative and constructive ways to improve early warning of impending natural disasters, enhance the opportunities for the visually and hearing-impaired to receive programming and communications, and improve the range, quality and delivery of educational programming to schools, libraries and communities at large. Some of these goals, like notification of disasters or expanded closed captioning, can be done at little or moderate additional cost. Others, like enhancing education, will cost more. In our recommendations, we explore ways of achieving these goals without putting undue or unreasonable burdens on broadcasters.

Making any recommendations in these areas is a difficult task, not only because the Advisory Committee has a diverse range of members, each with his or her own interests and perspectives. The greater challenge is that no one knows how digital broadcasting will develop--- when receiver costs will come down to appeal to the larger public marketplace; when digital will supplant analog broadcasting; how much digital will rely on single-signal high definition broadcasting or multiple channel multiplexing. The answers to some of these questions may differ for different areas of the country, or for major metropolitan communities and rural ones. Huge technical questions linger---what formats will dominate, how much screen and compression technology will advance to enhance viewing and expand channel capacity.

As a consequence, the Advisory Committee has operated under several basic principles. We have tried wherever possible to build flexibility into our recommendations to accommodate the economic and technological uncertainties of the future. We also believe that information, voluntary self-regulation and economic incentives are much preferable, in principle, to command-and-control regulation, which should be a last, rather than first, resort in a context of rapid change.

If our distinct preference is for little command-and-control regulation, we are not proposing total deregulation or the erasure of broadcasters' public interest obligations. Broadcasters have a long tradition of commitment to the public interest and have formally expressed their role as guardians of the public trust via the public airwaves. Congress, the Executive Branch, and the courts have consistently insisted that public interest obligations by broadcasters are appropriate and required in return for the loan of valuable portions of the public air waves. Those obligations do not disappear in a digital era. With our recommendations, we hope that they can be continued and enhanced, in ways to serve the public and broadcasters alike.

CORE RECOMMENDATIONS OF THE ADVISORY COMMITTEE

Multiplexing. Nobody knows what the digital future holds for broadcasters, their viewers, their advertisers, or their competitors. It is true that broadcasters were granted use of an extremely valuable piece of the electromagnetic spectrum to transition to the digital age. It is also true that to do so, broadcasters will have to make large capital outlays to purchase equipment, erect towers, and convert programming to digital formats-with no clear picture of what will happen to their revenue. As the congressional debate leading up to the 1996 Telecommunications Act makes clear, should broadcasters decide to use their digital space to broadcast one high-definition digital signal--meaning a swap of one lower-quality analog signal for the new high-definition digital one--there would be scant rationale for some large new payment or massive new public interest obligations on the part of broadcasters.

But that debate also underscored that if broadcasters decide to use their digital real estate to run multiple commercial channels at less than high-definition, each generating its own revenue stream, then it is appropriate to consider whether the public interest requires a different formula--especially since, as compression technology evolves, the number of channels possible may increase substantially, to six, eight or more.

The Telecommunications Act provided for the Federal Communications Commission to assess fees to digital broadcasters who get paid for ancillary or supplementary services--subscription channels, paging services, pay-per-view and the like. It does not prohibit broadcasters from using multiple signals--multicasting several free over-the-air channels that get revenue from commercials. There is good reason to let the marketplace settle whether a single high-definition broadcast signal, multiple standard definition channels, or various combinations of them, will work best. Innovation in and testing of the markets in this area should not be unreasonably stifled, particularly since multichannel broadcasting could provide long sought new competition to cable and other multichannel program distributors.

Additionally, it is conceivable that broadcasters who apply multiplexing will simply cannibalize their single signal, achieving no additional revenues or perhaps merely stabilizing current market share. We recognize these facts. We also accept the principle that there should be some benefit to the public if its grant to broadcasters of the valuable digital television spectrum results in a substantial financial windfall for broadcasters.

We recommend the following: Once digital television becomes a reality, apply a two-year moratorium to provide ample opportunity for broadcasters to explore options in the marketplace. Thereafter, if broadcasters elect to multicast and in so doing realize a substantial increase in revenue, Congress or the FCC should apply a menu of options to multicasting broadcasters. The menu would start with a fee payment, triggered when revenues from the second and subsequent channels incrementally exceed those of the primary channel. In lieu of the fee, broadcasters could turn to alternatives. They could dedicate one of their multicasted channels to public interest purposes, which would have to include a commitment to provide robust programming and access for local voices. They could provide in-kind contributions, such as free commercial time to the political parties or studio time and technical assistance to community groups producing PSAs or public interest programming, equal in market value to the assessed fee.

With this fee or in-kind arrangement in place, other statutory or regulated public interest obligations in areas like children's television would only apply to the primary channel, and not in equal amounts to all the other multiplexed signals (unless the broadcaster could demonstrate the public interest benefit to the FCC of proportionally spreading specific obligations around the multicast channels. For example, it may prove advantageous to give a broadcaster flexibility to place political messages on whatever channels attract the right demographic audience to achieve maximum benefit.) We further recommend that, like the fees to be collected for ancillary and supplemental services, the fees collected for multiplexing be used to enhance the public interest in broadcasting, by applying them to educational or children's programming, using them as part of campaign finance reform for political airtime, or in some other fashion agreed to by Congress, the President and the FCC.

Education. The digital age will open up major new avenues for broadcasting information and entertainment to Americans, creating many new lanes on the information superhighway. In theory, the expansion in information resources and avenues should result in the marketplace driving a vast augmentation of programming in all areas, including those that serve the public interest. For the most part, it works well, as witnessed by the substantial amount of quality programming aired by commercial broadcasters. But we also know that the market alone does not provide programming that can adequately serve children, the governing process, special community needs, and the diverse voices in the country. To be sure, cable television's multiple channels have served commendably some of these needs, such as through Nickelodeon for children or C-SPAN for government and politics. But they are not available to large segments of the population, either because they are not carried on many cable systems or because cable itself is not available to a large share of the populace.

Free, over-the-air broadcasting has the virtue of being readily available to virtually all the people in America, but the marketplace dictates of commercial broadcasters do not automatically accommodate the public interest programming needs of our diverse population. That is why public broadcasting was created and why it has served the country so well. The role that public broadcasting has played in the analog era does not disappear in a digital age; to the contrary. We believe that public broadcasting will continue to be a vital link for many Americans who want access to high quality cultural, public affairs, children's and educational programs-indeed, that the exciting capabilities of the digital spectrum in terms of high definition pictures, multiple signals and data transmission should serve to enhance dramatically the value of public broadcasting to the country.

But there is a major challenge ahead for public broadcasting to fulfill its potential in the digital age. The startup costs of converting to digital signals are high, and just as significantly, the costs of producing digital programming are ten to twenty percent higher than those of comparable analog programming. We believe that public broadcasting will need the funding necessary to produce quality digital programming and to promote it so that viewers know what is available to them. Thus, we urge Congress to consider ways to provide enhanced funding for public broadcasting in the digital era, and to create a trust fund to make such funding assured and permanent.

Even if those steps are taken, we believe that there is more that can be done to exploit the move on the spectrum from analog to digital broadcasting to meet public interest needs. In particular, we recommend carving out space on the spectrum for channels devoted specifically to education, and funding them in ways that will vastly expand the educational opportunities for all Americans, and particularly for those now underserved by information resources.

Under current law, when digital channels are up and running and reaching substantial numbers of people, the existing analog channels are to be turned back to the government, repacked and auctioned off. We recommend that when this process occurs, the equivalent of one such channel in each viewing area be reserved instead for educational purposes-defined as elementary, secondary and post-secondary education, along with lifelong learning.

The local public television station or stations would be given the first opportunity to take hold of and run each educational channel. However, the license to operate the channels would not be automatic. The public television stations would first have to draft and submit a plan to the FCC indicating how they would involve the local community, including schools, universities, libraries and diverse groups, what kinds of noncommercial educational programming they might produce and air, and how the new channel devoted to education would be different from their existing public television stations. The FCC should pay particular attention to how the stations would propose to serve underprivileged and minority communities that have typically less access to the educational opportunities present in the information age.

The FCC would either accept or reject the plans; if rejected, the educational channel space would be open for bidding by others, including universities, libraries, other broadcasters or other groups.

We make this recommendation with one important condition. We believe that spectrum space alone, despite its enormous intrinsic value, will not be very meaningful if there are not adequate resources to provide appropriate and engaging programming. A new channel devoted to education can be of enormous benefit to the country if it has adequate financial backing. We recommend that Congress provide such funding, using as sources the revenues from the auction of other spectrum, including the remainder of the analog spectrum; some of the fees from ancillary and supplementary services by digital broadcasters required by current law; and a portion of the fees we recommend implementing for the use of multiple commercial-driven broadcast channels by digital broadcasters.

We have one other recommendation in this area. Some portion of the fees collected for these educational purposes should be set aside for bids by all broadcasters, including commercial ones, to produce and air educational programming that would otherwise not be commercially feasible.

Voluntary Standards of Conduct. The Advisory Committee accepts the premise that voluntary self-regulation, fuller information and incentives should be the first resort, over government mandates and rigid regulations, when it comes to broadcasting in a digital age. We also believe that most broadcasters feel a strong commitment to the public interest and the public trust, and behave accordingly. To reinforce public service interests and standards, beginning in 1952, the National Association of Broadcasters (NAB) used a "Code of Conduct" to set out appropriate principles and standards, and to acknowledge those stations that adhered to the code. The code was abandoned in 1982 after the Department of Justice objected to certain aspects of the code's advertising provisions.

A new industry statement of principles updating the 1952 Code has many virtues. The most significant one is that it enables the broadcasting industry to identify the high standards of public service that most stations follow and that represent the ideals and historic traditions of the industry. A new set of standards can help counteract short-term pressures that have been exacerbated by the incredibly competitive landscape broadcasters now face, particularly when compared to the first thirty-some years of the television era. Those competitive pressures can lead to less attention to public issues and community concerns. A renewed statement of principles can make salient and keep fresh general aspirations that can easily be lost in the hectic atmosphere and pressures of day-to-day operations.

It is desirable to have industry representatives and the viewing audience, rather than government officials, make decisions about television content. It is also clearly in the public interest to provide the public with enough information about the content of broadcasting to allow a healthy interaction about content and public interest issues.

To ensure that broadcasters fulfill their obligations as public trustees, we endorse self-regulation by knowledgeable people actually in the industry as an effective tool to avoid yet more reliance on government regulators. To that end, we recommend that the National Association of Broadcasters, acting as the representative of the broadcasting industry, draft a new set of statement of principles or standards. Our committee lacks any coercive powers; we only make recommendations. We do not believe it advisable for any governmental body with coercive powers to intervene in this area. The Advisory Committee hopes that the NAB will develop and recommend self-regulatory standards to and for the industry. The standards should be drafted and implemented by the NAB and the industry, without pressure, interference, or direct or indirect enforcement by the government. The public, the marketplace, and the court of public opinion can then judge their efficacy.

What might a set of Standards of Conduct in the digital age look like? We include in our Appendix a model draft, done by an Advisory Committee working group under the leadership of Professor Cass Sunstein of the University of Chicago Law School. Another model we have included is the Statement of Principles adopted by the Board of Directors of the NAB to replace the old Code.

Disclosure of Public Interest Activities by Broadcasters. Effective self-regulation by the broadcast industry in the public interest requires the availability to the public of adequate information about what a local broadcaster is doing. Some valuable information is currently made available. For example, all television broadcasters must prepare and place in their public file separate quarterly reports on their non-entertainment programming responsive to ascertained community needs and on their children's programming. We recommend that these reports be augmented by the addition of more information on stations' public interest programs and activities. That information should include but not be limited to contributions to political discourse, public service announcements, children's and educational programming and community-specific activities. We do not intend that such efforts should be onerous to broadcasters, but they should make readily available the most important information for community groups and other members of the public to assess. One possible form using a check-off approach is included in the appendix.

At the same time, digital television broadcasters should take steps to distribute such public interest information more widely, perhaps through cooperation with local newspapers and/or local program guides so that viewers can more readily identify and evaluate the efforts local broadcasters are making to address their interests. Similarly, many local television stations now maintain Internet websites where they could post on a regular basis this kind of information.

Enhanced disclosure of broadcasters' public interest activities would be a useful adjunct to a new statement of principles, but its implementation should not be contingent on creation or implementation of such public reports. The information is critical for citizens to evaluate their broadcasters. And since several hundred broadcast stations are not members of the National Association of Broadcasters, even the most expansive new statement of principles would not encompass the entire universe of broadcasters. For these stations, this information would be the only way for citizens to understand what public interest categories were being served or ignored.

Greater availability of relevant information will increase awareness and promote continuing dialogue between digital television broadcasters and their communities.

Political Discourse. That there are serious problems with American political campaigns and the system of campaign finance is indisputable. The "barriers to entry" for candidates to run, especially to challenge incumbents, are high and growing. A major reason is the burgeoning costs of getting messages across in a cacophonous society that consists of large and diverse districts and states. The quality of political discourse is declining. The problems in the campaign finance system are rooted in existing laws, the changing nature of communications in our society, and many other complicated factors. One of them is the growing role of television in campaigns, and its emergence as the single largest category of spending in elections. Television advertising expenditures increased eight hundred percent between 1970 and 1996, more than any other category in campaign finance.

Candidates have turned to television advertising, especially on broadcast television, because in many areas, it is the best medium to reach voters. They will continue to do so. At the same time, broadcast television remains the medium of choice for voters to learn about the campaigns and the candidates. Thus, any significant change in the campaign finance system will have to address the issue of the role of television. But no reasonable campaign finance reform can focus on television alone, or put the central burden for improving our political system on the backs of broadcasters. Reform must look at all the elements of the campaign system, recognizing broadcasting as one of them, albeit a vital one.

With some exceptions, broadcasters have played a major role in providing coverage, airtime and resources to enhance campaigns and provide voters with information about candidates and campaigns. The public interest is clearly served by a substantial role for broadcasters in this area. The digital age provides an opportunity to find enhanced ways for broadcasters to serve this interest, without necessarily imposing heavy-handed government mandates to do so. We believe that a better balance can be struck which can serve broadcasters, the political system and the public interest as well.

Broadcasters have frequently shown a commitment to providing a voice for candidates so that voters can evaluate their alternatives and so that campaigns can have an appropriate level of real debate and give-and-take to enhance the electoral and governing processes. Innovations by the major networks and station groups like Belo, Hubbard and Post-Newsweek have been models for other broadcasters. These efforts should be replicated and expanded upon. The industry should redouble its efforts voluntarily to enhance campaign discourse. To that end, we recommend two steps in this area:

First, that a critical mass of the television broadcasting industry enlist in an effort to provide five minutes each night for candidate-centered discourse in the thirty days before an election. There are creative ways to improve political discourse, provide opportunities for candidates to get messages across to voters, and enhance voter understanding, without heavy monetary costs to broadcasters or regulation of the content of programming and without it being a kind of programming that will cause viewers to turn away. A broadcaster would make a voluntary commitment of five minutes for the thirty nights before an election (between 5p.m. and 11:35p.m., or the appropriate equivalents in Central and Mountain time zones). This idea need not be mandated by the federal government; it can and should be a voluntary standard agreed to and promoted by the industry and its leading members. We recommend a process with maximum flexibility for broadcasters in this area. Stations would choose the candidates and races, federal, state and local, in the election that deserved more attention.

Equal time provisions would be waived, allowing the broadcaster, while preserving the value of fundamental fairness, to give time to one candidate in a race if his or her opponent declined, or to pick only major candidates in a race. Stations would choose the format(s), with experimentation encouraged. Formats might include giving candidates one minute of airtime to get a message across; conducting "mini-debates;" or doing brief interviews with the candidates. The five minutes need not be in a contiguous block, but we hope the five minutes will not be subdivided into such short segments that serious discourse is precluded. This candidate-centered discourse could occur within station newscasts, but would not have to do so. If broadcasters chose to make the time available within newscasts, they could provide the five minutes each night without giving up a single minute of commercial time.

We do not intend for this recommendation to supersede the fine efforts of many broadcasters to improve political discourse in their own communities; we hope the proverbial thousand flowers bloom. But we see many advantages in the widespread adoption of this plan. For a modest commitment of time during a brief period every two years, broadcasters could provide an immense contribution to the political process and campaign discourse. If every station made this commitment during the period when voters pay the most attention to elections, it would send a powerful signal that elections matter. Not all stations would choose the same races and candidates to cover, but no doubt there would be considerable overlap. In this way, many candidates who otherwise would have no opportunity at all to address a larger audience would be given that chance, probably on several occasions at different times, and via different formats; likewise, many important races that are ignored in campaign season would have a chance to be covered.

We further urge that this commitment, of five minutes a night for thirty nights, be adopted by cable, satellite and other users of the spectrum. And we recommend that this effort not be delayed until the full implementation of digital broadcasting; efforts in this regard could begin in 1998, allowing experimentation with formats and lengths to go on before the digital era.

Second, should Congress pass comprehensive campaign finance reform, broadcasters should commit to doing their part to reform the role of television in campaigns. As we note above, television is only one part of a campaign system filled with serious problems. It is not reasonable to expect broadcasters alone to provide all the answers, or to make as the central component of reform federal mandates upon broadcasters. But it is equally unreasonable to expect any comprehensive approach to campaign finance reform to ignore television and the role of broadcasters. If Congress tackles comprehensive reform, which means including areas like the role of soft money, the role of parties, contribution limits, the costs, length and tone of campaigns, broadcasters should make clear that they will support reforms that encompass the broadcast role.

What might those reforms be?

One could be an exchange: the repeal of lowest unit rate in return for a commitment by broadcasters to provide some free time in return for paid time at market rates.

The so-called lowest unit rate, the mandated discount advertising rate for candidates, is a complex and cumbersome system that clearly does not work very well. It does not work for candidates, who are confused by the system, and whose time-buying practices often make the lowest unit rate meaningless or superfluous. It can be a bureaucratic nightmare for broadcasters, with extensive reporting requirements and frequent lawsuits from candidates convinced they are being cheated. In the digital age, lowest unit rate becomes even more cumbersome and costly.

With the uncertainty and fluidity that will characterize commercial time and time-buying in the digital era, it makes sense to let the market dictate the costs of campaign commercial time. But a simple repeal of lowest unit rate would exacerbate the costs of campaigns, not make it easier to create more opportunities for discourse. The best approach would be to exchange the repeal of lowest unit rate for a simple and better approach on political time--one in which those broadcasters who would be able to air political advertisements at market rates would provide some free time for the paid political time they sell at market rates. Congress, of course, will have to specify the details of this system in the context of overall reform.

To be sure, this simple exchange would not solve the money chase or reduce overall the costs of campaigns. In the context of an overall campaign finance reform that addressed such issues as soft money and overall contribution limits, this change could be a significant component to making the system work better.

A second option would be the creation of a broadcast bank, money or vouchers that could be distributed to parties and candidates to use to purchase radio and television time. The broadcast bank could be funded in many ways. Some resources could come from the fees paid by broadcasters for multiplexing or for ancillary and supplementary services. One component could be from a provision of time by broadcasters as their contribution to overall campaign reform.

How would the time be distributed? One model would have half the time going to the political parties to distribute to candidates as they see fit, and half the time going to candidates who raise sums from small individual donors, as matching grants. Those details, of course, would have to be legislated by Congress.

There are other options involving broadcasting that could improve the campaign process, perhaps in conjunction with the ones above. One would be for Congress to shorten the period of time during which broadcasters must sell time to candidates.

Another is to require that candidates appear in the commercials they air. Many feel that a candidate stating his or her own case, rather than through the kinds of slickly produced, almost anonymous ads that so predominate today, would greatly reduce the negative tone of current campaigns.

A new approach to public interest obligations. The broadcast world will soon change from one with some stability and certainty--one analog signal for each broadcast station, operating usually 24 hours a day--to one with unpredictability, uncertainty and fluidity. Some broadcasters will operate one signal, as before, only in digital instead of analog. Some may operate multiple signals, perhaps two, perhaps many more, throughout the day and night. Others will shift between one high-definition channel and multiple channels. Applying existing public interest obligations to this variegated universe will not be easy, and will certainly not entail a simple one-for-one exchange. We believe that the White House, the Congress and the FCC should consider a whole new model of public interest obligations with the flexibility to fit the different patterns that will develop, and that will change over time, in the digital era.

There are many models to consider. Several are outlined in the appendix. One very promising approach, in our judgment, would be to move to a kind of "pay or play" model. Broadcasters would be given the choice of maintaining the existing regime of public interest obligations, or of paying a share of revenues to bypass those obligations, while receiving in return an expedited license renewal process. The revenues received could then be used to enhance the public interest, by purchasing educational or public affairs programming, providing more local access, or in other ways. All broadcasters, of course, would still have to provide closed captioning, emergency reports and reasonable access to political candidates. But allowing some stations, including religious and shopping channels, to pay in lieu of other public interest obligations would not only be less cumbersome, it would free up resources that could be used to enhance the public interest.