Communications and Society Program

Broadcasting Policy in the Digital Age

Andrew Graham
Acting Master and Fellow in Economics
Balliol College, Oxford University

Introduction

Broadcasting is currently undergoing its biggest period of change since the arrival of television. At the start of the 1990s, broadcasting in most countries was available on fewer than a handful of channels, satellite broadcasting hardly existed, and no one beyond a handful of research workers had even heard of the Internet, let alone thought that it had anything to do with television. Today cable and satellite channels are booming, digital television is beginning, and we stand on the verge of an Information Society with broadcasting, computing, publishing, and telecommunications technologies converging into a single media market. Indeed it has been argued that this change, which is occurring on a global scale, is the most significant development in communications since the introduction of the printing press by Gutenberg more than half a millennium ago.

The result of this change is that broadcasting is moving-and moving rapidly-into an apparently far more competitive and market-driven environment. A central question for broadcasting policy in all countries is therefore how well this burgeoning market will serve the public interest. Undoubtedly the extension of the market will expand choice and the increase in competition will put downward pressure on costs-both welcome developments. But will the market also foster a democratic environment, provide the information to which all citizens are entitled, and extend rather than diminish the tastes, experiences, and capacities of individuals? If not, how are these public interest goals to be achieved, especially in the more deregulated, open environment that the global revolution in communications is producing? In short, what should broadcasting policy try to accomplish and how is this goal to be achieved?

The Fundamental Arguments

The best way to begin to think about desirable policy goals for broadcasting is to address the fundamental arguments about the role of the market. The central claim made for the new technology is that television and radio programs can be made and sold just like any other commodity and that this is desirable. Note that this argument contains two separate propositions: (a) that programs can be sold commercially, and (b) that it is desirable that this should occur. Note also that the second does not automatically follow from the first. For example, it is perfectly possible to buy and sell babies, but most of us find this action morally repugnant and most countries have laws to prohibit it. This example may seem an extreme case, but it should not be assumed that this makes it an isolated one. In reality a multiplicity of situations exist in which society aims to influence the market so that people buy less or more of something than would otherwise be the case. Thus society tries to ban some products all together (e.g., unsanctioned drugs or child pornography). It tries to limit consumption of other products via regulation (e.g., the distribution of alcohol) and taxation (e.g., on tobacco). Society also encourages consumption by promoting the use of some goods through laws (e.g., the requirement to wear seat belts), subsidies (e.g., grants to promote energy conservation) and by direct public provision (e.g., health care).

The point about all these examples is that they remind us that while the market functions extremely well for allocating some goods, it does not do so for all goods. The essential public policy question is therefore "Does new technology make broadcasting just like many other goods that are sold successfully via the market, or does it have any special characteristics that make this either impossible or undesirable?"

The case in favor of thinking that broadcasting is just like other goods is almost commonplace. Peter Jay, in evidence to the United Kingdom's Peacock Committee more than a decade ago, said that he regarded broadcasting in the age of new technology as simply "electronic publishing." He therefore argued that broadcasting, once it came fully of age, would require neither any public service presence nor any regulation save that of maintaining standards of taste and decency.¹ The Peacock Committee was much taken with the analogy and in particular with the much more competitive environment that this suggested. Its report added historical comparisons with publishing, arguing that printing and publishing had been similarly fettered with unnecessary constraints when first invented, but had eventually been emancipated.

Such views have considerable appeal. However, this paper shows that, when the position is analyzed carefully, the goals that most people want from broadcasting will not be achieved by the market on its own. In particular this paper argues that the way in which both the issue of choice and the analogies with publishing have been formulated by the Peacock Committee, and by almost everyone else who has followed these lines of argument, are mistaken. As section three of this paper, "The Effects of the New Technologies on Broadcasting," shows, a degree of regulation continues to be needed, and this regulation can be-and needs to be-complemented by an important component of public service broadcasting.

A broadcasting market run on purely commercial terms would be undesirable for three reasons, discussed at length in section four, "Other Market Failures in Broadcasting"; section five, "Citizenship, Culture, and Community"; and section six, "Democracy and the Mass Media."

• Market Failure and Quality. Economic analysis suggests strong grounds for thinking that private markets in broadcasting, good as they will be in some areas, will fail on their own to produce the overall quality of broadcasting that consumers either individually or collectively desire. The two most important reasons why this happens are, first, that broadcasting can have adverse "external effects" (e.g., amplifying violence in society), and second, that good broadcasting is a "merit" good-just as with education or training or checking on their health, consumers, if left to themselves, tend to buy less than is in their own long-term interests.

• Citizenship and Community. The market, being by definition the mere aggregation of individual decisions, takes no account of community and of the complex relations between citizenship, culture, and community. In particular, the fragmentation of audiences that pure market-driven broadcasting may produce could undermine both communities and cultures by limiting our shared experiences.

• Democracy and "Common Knowledge." In a democratic society it is undesirable that the mass media should be entirely in private control (especially if such control is concentrated in few hands). Moreover, the creation and sustenance of "common knowledge" (what everyone knows that everyone knows) is a vital element in the functioning of democracy and that this "common knowledge" is not well guarded by commercial markets.²

A demonstration that purely commercial broadcasting would fail in a variety of ways does not thereby establish the need for public service broadcasting. It would still be possible, at least in principle, to regulate the market through a variety of rules. Section seven, "Rules-based Interventions versus Public Service Broadcasting," therefore, compares "rules-based" interventions with various forms of public service broadcasting, showing that some "rules-based" intervention would be necessary but not sufficient to achieve democratic goals.

Most important of all, section seven shows that in each of the three areas of concern (market failure and quality, citizenship and fragmentation, and democracy and common knowledge), public service broadcasting is a highly effective form of intervention. Moreover, it is a form of intervention that achieves what regulation cannot. In particular, the direct provision of public service broadcasting creates the possibility for a positive influence on the system (filling gaps, setting standards, and generating pressures towards high quality). As a result public service broadcasting can achieve ends that rules, by nature negative, never can. Finally, section seven also shows that rules-based intervention in the future would be less effective than in the past. The new technology thus increases, not decreases, the importance of public service broadcasting. Having set out the case for public service broadcasting, the paper turns in section eight to "Policy Suggestions" for the particular context of broadcasting in the United States.

The Effects of the New Technologies
on Broadcasting

The impact of the new technologies in terms of the massive expansion of broadcasting channels is dramatic. All over the world countries which once had two, three, or four channels now find themselves having (or about to have) two or three hundred channels. Meanwhile, springing up alongside all this is the totally new world of the Internet, which brings with it the scope for interactive television and the capacity to order whatever program one wants, whenever one wants, wherever one wants.

Thus, so the argument goes, intense competition will arise between delivery systems, between channels, and between broadcasters. However, while it is correct that the number of channels will change in this way, it does not follow that the number of broadcasters will change correspondingly. When the situation is examined more carefully in terms of (a) production, (b) delivery, and (c) consumption, it is far more likely both that broadcasting will remain highly concentrated in the hands of few large owners and that particular consumers will become reliant on a single supplier. If so, for these consumers, it will be as if they were able to shop at K-Mart, but only at K-Mart.

Economies of Scale

Take production. Here two factors will generate highly concentrated broadcasting. First, both the making and broadcasting of radio and more especially television programs have exceptionally high fixed costs. At the same time they both have very low, in many cases zero, marginal costs. Almost by definition, to "broadcast" is to say that it costs no more to reach extra people. Economists describe this phenomenon as "economies of scale" and as the gap between "first copy" and "second copy." When economies of scale are significant (i.e., when this gap is large), entry to the market is difficult and firms tend to be concentrated.

Against this position, some argue that the new technology is lowering entry costs and that the market will therefore become more competitive. With one exception (the Internet, which is considered below), this is true much less so than it first seems. It is true that the digital revolution is making cameras and recording equipment much smaller and in some cases cheaper (or more sophisticated for the same price). New technology has also allowed much simpler, and hence faster, processing and editing. It can even save on sets (for example by using computer-generated "virtual" backcloths). Nevertheless, the fundamental point is that most costs are not equipment but people-and not just individual people, but teams of people (writers, designers, performers, etc.) all working together. In aggregate these costs are considerable-especially for programs of any quality. For example, in the United Kingdom the average cost per hour of a BBC production is more than $150,000; a current-affairs program more than $200,000, and drama programs are about $750,000. Typical ITV costs are some 25 percent higher. Similarly, the fixed costs of transmission, whether in renting space on satellites, establishing digital terrestrial broadcasting facilities, or installing fiber-optic cables to the home, rule out all players except the very large. Indeed, when Rupert Murdoch entered satellite broadcasting, he told Andrew Neill that he was "betting the company on it."³

Most important is that for high-quality programs the real cost of content is rising not falling. All the discussion of technical change in the delivery of programs ignores the fact that talent and desirable content is scarce. Moreover, it is the technical change in delivery that is bringing this scarcity to the fore. The combination of more channels with multimedia companies that are increasingly operating on a global basis is generating far greater competition for services that are in short supply. In effect an economic rent (a payment for scarcity), which in the past was suppressed by the bargaining power of the small number of broadcasters, is now being revealed. For example, in the United Kingdom over the period 1990 to 1995 the average cost of the top one hundred contributors to U.K. television rose in real terms by nearly 7 percent per annum (or by more than 50 percent in total) and, on average, total talent costs for sitcoms, dramas, features, and documentaries rose by approximately 5 percent per annum in real terms.⁴

Sports rights illustrate the problem even more dramatically. In the United States, the National Football League has doubled the money it earns from television rights in recent years and is expected to double them again within a year or so from now.⁵ The same phenomenon is taking place world wide. Formula 1 Grand Prix, which cost the BBC £2 million per annum during the years 1993-96, was sold to ITV in 1997 for £12 million per annum and in the same year the television rights to the Summer Olympics increased from £59 million to £165 million. In the face of such figures it is hard to take seriously the idea that broadcasting can be a world of small competitors.

Economies of Scope

The second factor generating concentration is that new technology creates not only economies of scale but what economists call "economies of scope." Such economies occur when activities in one area either decrease costs or increase revenues in a second area. New technology (in particular the digitization of all information and the convergence that this is making possible) is greatly increasing these activities. For example, newspapers and television stations have heretofore been separate activities. Today, information gathered for a newspaper can be repackaged as a radio or television program. Indeed, because digital information can be endlessly edited, copied, stored, retrieved, redesigned, and merged with other information, it can reappear in a multiplicity of formats. In short, the very same technology that removes spectrum scarcity creates concentration.

Strong evidence that economies of scope along with scarcity of good content will produce concentration of ownership can already be seen. In particular, the digital revolution and the convergence it is creating is a major cause of the extraordinary global rush to multimedia mergers observed in recent years. Every one of the top seven multimedia firms in the world has in the last few years been buying, merging, or being bought. In 1994, Viacom acquired Paramount and Blockbuster, creating a company with a turnover well over $10 billion. In 1995 Disney took over Capital Cities/ABC in a deal worth $19 billion. Time Warner responded in 1996 by bidding for Turner Broadcasting (owner of the world's largest film and animation library), generating a company with total revenues of $20 billion.

Nor has the action all been American. Bertelsmann, the largest European audiovisual company, with revenues of some $15 billion coming mostly from publishing, announced in April 1996 a merger of the TV subsidiary Ufa with CLT (Compagnie Luxembourgeoise de Telediffision), which will make the new company Europe's largest broadcaster; and both BSkyB and Kirch (one of the largest owners of copyright in Germany) have taken shares in DF1 (the first digital television service to be launched in Germany).

So powerful are the pressures towards convergence that even companies quite outside the multimedia world have been buying in. Seagram (the world's second-largest distiller) bought MCA from Matsushita in 1995 for just under $6 billion. In the same year, Westinghouse, primarily an electrical goods company, bought CBS for $5.4 billion and in 1996 bid $3.7 billion for Infinity Broadcasting. Similarly Phillips, the world's third-largest electronics company, owns 75 percent of Polygram, the world's number one music company (and maker amongst other things of Four Weddings and a Funeral, Trainspotting, and Dead Man Walking); Procter and Gamble (best known as makers of detergents) formed a strategic alliance with Paramount Television (owned by Viacom).⁶ Concentration of ownership is therefore already a fact, not a speculation.

Delivery Systems and Gateways

Now consider delivery. It is clear here that the new technology is increasing the number of ways by which broadcasting can be delivered (by satellite, by cable, and by telephone lines). In addition, digital technology means that the number of channels that can be carried by each of these vehicles is also rising. Indeed, in the digital world, the concept of the channel might seem to be redundant-there is just a stream of bits which are first one program and then another. At first glance competition in delivery therefore appears to be a real possibility.

In practice, however, the very technology that makes competition look likely also creates the conditions for proprietary control. The two areas of greatest concern are the set-top box (or converter) and the browser. Both represent potentially extremely powerful "gateways." In the case of the converter (already used for analog TV by cable and satellite), in the future all digital signals will have to go through this. If programs remained free at the point of use (or "free-to-air" as it is called) the converter box would merely transfer digital signals to analog. However, for "pay-per-view" the converter will also control access (as it does now for satellite and cable) and make sure that payment occurs. These Conditional Access Systems and Subscriber Management Systems (as they are known) thus represent a new "gateway."

Moreover, digital technology will allow these gateways to be quite sophisticated. Once "channels," in the old sense, disappear, the gateway will be the means by which consumers select programs, using what are called Electronic Program Guides (EPGs). But these EPGs will do far more than select. They will soon allow access to a variety of "smart" features, such as automatically recording particular programs, or finding programs of a particular type and alerting the viewer. They may also become the means by which consumers "filter" programs, for example, by choosing only to receive programs that are below a certain rating for violence or sex or whatever.⁷ All of this technology will sit in a single box (a box that will soon be incorporated directly into the TV) and, via an "applications program interface" (or API), this box will control the television.

The importance of these gateways is seen most clearly when we consider the consumer. The idea that customers will buy two or three aerials and/or two or three converters is totally unrealistic. What consumers want is a single system offering the widest possible choice. Despite the increase in the number of delivery systems, then, there will be one single point through which every digital channel from every broadcaster has to pass. Moreover, any incumbent firm has large advantages (because consumers will not want to lay out twice for a converter). On top of this, there is a further advantage from having an established Subscriber Management System. There is nothing technologically complicated here, just (yet again) high fixed costs and low marginal costs providing natural barriers to entry. Finally, anyone who controls the gateway also controls the agenda-what you see when you first switch on, where it is easiest to go next, what is drawn to your attention (and what is not), and what your TV goes to as its "default" setting.

Although so far little discussed, this power over the agenda may ultimately be the most important. As already noted, once digital television arrives, "channels" will no longer exist. This is because many programs may share the same spectrum. As a result viewers will need to select what they watch by using their hand sets and picking programs from the display on the television (the EPGs). In the age of the Information Superhighway, when activities as diverse as shopping, banking, visiting an estate agent, consulting your doctor, or taking your degree may all start (and in some cases end) with the TV, will consumers think it wise that the initial menus of choice should all be under the control of a single commercial firm? Of course, and especially with careful packaging, some consumers might not realize that this was the case, but the policy issue facing society would still be present.

This control over the gateway is, of course, precisely the problem with Microsoft's Internet browser. As this case is now before the courts little further will be said here. Nevertheless, the nature of the policy dilemma is perfectly clear. On the one hand, Microsoft has been extraordinarily commercially successful. In addition, as part and parcel of this success, it has produced substantial innovation and, by virtue of its size, it has been able to promulgate standards that have allowed consumers to move from application to application and from computer to computer with ease. On the other hand, Microsoft is now clearly the incumbent and it is arguable that it has enormous potential power both to influence the consumer and to resist the entry of other products.

Indeed, so all pervasive is the Microsoft software that it can be argued that Microsoft has the capacity not only to influence what the consumer most easily finds, but even how the consumer "sees" the world. Microsoft's Word 98 software, for example, accepts without question the names "Gates" but not "Murdoch," and "Microsoft" but not "Netscape"! Of course, these types of preferential treatment are so obvious that they will be overridden by almost everyone (or the spell-checker turned off), but many other less obvious examples could be given that most people will not bother to add to their dictionaries (and most people will not want to forego the other benefits of the spell-checker). As a result, words not "approved" by Microsoft will just be avoided and ultimately dropped from the language. In a similar vein, if a search is done on Microsoft's Encarta 95 for "civil war," the uninformed could easily form the impression that the only civil war that ever occurred was in the United States. Moreover, even more striking is the result of searching for "Christian Democrats"-the largest single political party in Europe. The term does not exist! Again, there is nothing to stop anyone from consulting other sources, but the reality is that many will not do so. The point of these examples is not that Microsoft is intentionally trying to mislead, but that in the fields of information, knowledge, and culture, dominance must be rejected on much deeper grounds than those of industrial economics.

The Internet

So far it has been argued that the characteristics of production, content, and delivery all suggest strong underlying pressures towards concentration and monopolization. However, today's Information Superhighway (in the shape of the Internet) appears to offer a counter-example. Millions of people are placing information on it every day and even greater millions are using it to retrieve information. It is therefore not at all monopolized. However, far from this being counter-evidence, this is-at least so far-the exception that proves the rule. The Internet is not currently monopolized (with the possible exception of the browser, as discussed above) for three key reasons. First, the system was developed primarily by university research workers totally committed to creating an open system-the whole philosophy of the Internet is that it should be capable of connecting to all systems anywhere.⁸ Second, until 1994 academics users predominated, and entry for them was particularly easy as most of them have their fixed costs supported by public funding. Third, and most important, the great majority of the content on the Internet is extremely cheap to produce. This is because the cost of collecting some kinds of information (most obviously personal information or personally created information) is very low, and because, psychologically, people appear to value self-promotion and/or participation (so labor costs are zero). But-and this is also central-being cheap, much of the content available on the Internet is of abysmal quality.

Of course, there is some good material on the Internet, but the majority of the material that is of better quality is there either because it has been well-organized to attract advertising or because it has been produced by public or quasi-public bodies (universities, libraries, museums, etc.). Most of the rest is poor precisely because it is cheap and because most of the new sources are not embedded within any stable institutional framework and/or are without the implicit codes of professionalism that characterize existing reputable sources of information. Indeed even governments frequently fail to specify when the information was first posted or when it was last revised. Much of the information on today's Information Highway is therefore misleading or hard to understand. There are, for example, hundreds of "home pages" that have been left abandoned and many others where anyone with specialist knowledge can easily see that lists of information are incorrect, incomplete, or out of date. As David Clarke of MIT (one of the architects of the Internet) has remarked, what is needed now is a layer of "editorship"" to help users make sense of the "information soup."

In short, the great majority of the Internet's content is at the opposite end of the spectrum from mass-market, high-quality multimedia broadcasting. In the digital age, both the Internet and traditional broadcasting can, just, be described as "electronic publishing." However, this catch-all phrase fails to draw the important distinctions between the two: The Internet is personally addressable, usually received in private, and is low cost and frequently low quality; television is broadcast to a mass market, often received in public, and if it is to be of high quality, will have high fixed costs. Of course, there are already intermediate cases (such as CD-ROMs), and the new technology will spawn more, many more, but to say that we cannot therefore distinguish one from the other is as unhelpful as saying that because night shades imperceptibly into day we do not know the difference.

It should also be noted that we do not know how the Internet will develop. At the moment the multiplicity of sources predominates. However, already the organization of the Internet Service Providers has changed dramatically with the emergence of a small number of large players (such as America Online). Moreover, the growth of Intranets and the continuing pressure from economies of scale and scope in the collection, organization, and dissemination of high-quality information may apply to the Internet almost as much as to traditional broadcasting. It is, for example, clear that some sites on the World Wide Web are already beginning to become better known than others. In this case the Internet itself might need to be thought of as two separate parts, one being somewhat like conversations on the telephone and one being somewhat like broadcasting, but with a reply channel thrown in. What is more, this development looks more likely as the Internet develops different levels of service; low bandwidth (plus heavy congestion) is fine for e-mail, but, even with compression, high bandwidth is essential for multimedia.

Dilemmas for Public Policy: Concentration and Fragmentation

Whatever the outcome for the Internet, the central point, true both of today's broadcasting and tomorrow's Information Superhighway, is that high-quality multimedia content is expensive to produce in the first place and yet, once commissioned and created, is relatively cheap to edit or to change and trivially cheap to reproduce. In other words, as already stated, it has high fixed costs and low marginal costs-and these are the natural creators of monopolies.

Here we have a critical dilemma for public policy. High-quality material can still be produced and yet cost very little per unit provided that it reaches a large number of people (exploiting economies of scale) and/or provided that it is used in a wide variety of different formats (exploiting economies of scope), but the exploitation of these economies of scale and scope imply concentration of ownership. Thus, even though the new technology has removed one source of monopoly, spectrum scarcity, it has replaced it with another, the natural monopoly of economies of scale.

Another dilemma follows logically from the combination of economies of scale and scope on the one hand and a constrained audience on the other. The provision of more channels has not meant that more time is being spent watching television. Both in the United States and elsewhere, the number of hours watched has remained remarkably stable (if anything falling slightly). In the United Kingdom, for example, the number of hours watched per person per week in 1995 was twenty-five. This is identical to what it was in 1980, before the arrival of Channel 4 or cable or satellite. Thus more channels fragment audiences. The inevitable consequence is that the audience per channel or program falls and, given economies of scale, the average cost rises.

This relationship between choice and cost is not true for most goods and services that are allocated via the marketplace. A larger choice of restaurants or shoe shops or hotels does not lead to higher costs; in fact, frequently the opposite occurs as competition pushes costs down. The difference between these goods and services and broadcasting is that the former has much smaller fixed costs and variable costs are also significant. Thus minimum cost production is quite small, whereas minimum cost production in broadcasting is large. The result is that choice has a cost in broadcasting-a cost, moreover, that is not normally faced elsewhere. Under "free market" conditions consumers will face a choice between a narrower range of cheaper (and yet still high-quality) broadcasting and a broader range of more expensive and yet lower-quality programs.

The obvious response from those who advocate the expansion of commercial TV is that this is a choice that should be left to consumers. Why do otherwise? If some consumers want lots of choice and the consequence is that they pay more and yet, on average, receive lower quality, is that not up to them, and does the market not correctly reflect their wishes? Surprising as it may seem, analysis suggests the opposite.

The reason that individuals' choices via the market do not capture individuals' wishes accurately is because of "externalities," the effects of one person's purchase on someone else, the existence of which the market ignores. The effects may be either harmful, as in the case of traffic congestion arising from private car use, or beneficial, as in the case of vaccinations-everyone benefits from the fact that other people are vaccinated. The existence of externalities means that left to itself the market produces too many car journeys and too few vaccinations (which is one reason why petrol is taxed particularly heavily and why there are public health programs for vaccinations).

In the case being examined here, externalities arise because the person who migrates away from existing channels in favor of others imposes a cost on all those who do not move, a cost that the mover does not have to pay, and so does not take into account. The situation is analogous to that of membership in a club. Clubs have common facilities, the costs of which have to be shared. As a result, if someone leaves, all the remaining members face either higher charges or worse facilities or both, a less than optimal outcome. If the members who remain were able to organize themselves, they would all be willing to offer the potential leaver a sum just below the extra costs that they would otherwise face in order to try to persuade the potential leaver to remain. If such side payments were on offer, fewer people would decide to leave. However, in broadcasting it is impossible to organize in this way because it is too expensive to find and communicate with potential leavers (they are numerous, unknown, and uncontactable). As a result, a pure free market in broadcasting would be biased in favor of too much fragmentation of audiences (and, at the same time, too much concentration of ownership).

In the case of the United States, this particular dilemma is much less sharp than in other countries. The scale of the U.S. television market has meant that multiple channels have still been able to attract large audiences. Thus, in most cases, the effective cost per viewer has been lower than elsewhere. However, while this argument is true in general, it does not apply with the same force to public service broadcasting precisely because public service broadcasting has been such a low volume activity in the United States. Even in absolute terms, the total expenditure on public broadcasting in the United States is less than one eighth of that spent in Japan or the United Kingdom.⁹ In other words, if the United States wants high-quality public service broadcasting (as the remainder of this article argues it should), then it should not try to combine this with a proliferation of public service channels.

Other Market Failures in Broadcasting

Consumers and Market Failure

Another set of "externalities" apply to broadcasting more than to most other goods and services. These are not the direct result of fragmentation, but, like excessive fragmentation, they also threaten quality. These externalities exist once we suppose, as both common sense and research suggests, (a) that television has some influence upon the lifestyles, habits, interests, etc., of those who watch it, and (b) that these habits, tastes, interests, and sympathies have implications for those around us. Indeed, even just the belief that television affects behavior is sufficient for externalities to exist. Elderly people may become more fearful of walking down the street at night if they believe that the portrayal of large amounts of irrational violence on TV encourages such behavior, irrespective of whether in fact it does or not; the possible falseness of the belief does not alter the genuineness of the fear. In other words, the television that is broadcast ought to reflect the preferences not only of those who watch it but also those affected by it indirectly-yet the market cannot do this. It follows that, if left just to the market, more "bad" TV (bad in the sense of being judged to have harmful side effects) and less "good" TV will be purchased than consumers in aggregate would have wished could they have acted collectively.

A further reason why a broadcasting market would not work as well as one for many other goods and services is that markets do not work well where what is being sold is information or experience.¹⁰ People do not know what they are "buying" until they have experienced it, yet once they have experienced it they no longer need to buy it! Of course it can be argued that in such information-based markets, consumers are often willing to experiment by paying for the right to access a bundle of information for the chance that some of it might prove useful. But this argument does not remove the problem. If the correct long-run choices are to be made, the cost of the initial experiments should be only the marginal cost of disseminating the information, and in the case of broadcasting this is zero.¹¹

Third, and most important, the theory of choice on which the economic claim in favor of a free market in broadcasting rests relies on a fallacious assumption. This theory assumes that consumers already know their own preferences. Indeed it operates as if people arrive in the world already fully formed. Strictly speaking, such an assumption is false everywhere. Nevertheless after a period of time, it may be a reasonable assumption for some goods and services-people undoubtedly do have different tastes and they can find out by experiment what meets their tastes. However, in broadcasting such an assumption is seriously flawed. Much of broadcasting exists to inform and educate us, but the process of learning and understanding the world is part of how our preferences are formed. They cannot therefore be taken as given in advance.

Those who advocate a free market in broadcasting discount both this and the preceding argument (about the costs of information) on the grounds that television-unlike, say, a pension policy-is purchased every day, so any mistakes that a consumer may make can be quickly corrected. That much is true, but what is at issue here is both more subtle and more important. The point is that in the particular case of broadcasting, consumers may be unavoidably myopic about their own long-term interests. Consumers cannot be other than ill-informed about effects that broadcasting may have on them, including effects on their preferences about television itself. Moreover, such effects may well be spread out over a period of years after the present reception of broadcasting.

The point being made here is not that television may have great power for good or evil over society as a whole, but that television has the capacity either to cramp or to expand the knowledge, experience, and imagination of individuals. Television fictions, for example, as J. Mepham notes, "can expand the viewer's sense of what is possible and enhance his or her vocabularies and repertoires of words, gestures, and initiatives . . . only if they are of high quality."¹² In other words, if all television is elicited by the market, there is a very real danger that consumers will under-invest in the development of their own tastes, their own experiences, and their own capacities to comprehend. This is not because consumers are stupid, but because it is only in retrospect that the benefits of such investment become apparent.

In technical terms, good-quality broadcasting is what economists call a "merit" good, analogous to eating sensibly or receiving preventative health care. No matter how much someone tells us in advance that we need it, the evidence is that, in general, we under-invest in it. In a free market in broadcasting, where each item would have to be paid for at the point of use, this tendency to under-invest in watching those programs that did not attract us at that moment would be greatly (and mistakenly) increased.

Market Failures in Production

The danger that market-driven broadcasting will lead to concentration on the side of production has already been discussed, but there are two more general problems. First, it is well recognized by economists that pure market economies will under-invest in training. This is because each firm tends to "free ride," buying in talent as it needs it. Such behavior is rational for each firm, but not for the system as a whole. In countries such as the United Kingdom with large public service broadcasters (PSBs), this flaw in the market-at least in the case of broadcasting-has been solved by the presence of bodies such as BBC. The PSBs have acted as "talent conveyor belts," attracting many of the best staff early in their careers, training them well, and then allowing the benefits of this training to spread throughout the broadcasting industry. The solution in the United States has to be found elsewhere, but if the United States wants high-quality television-including high-quality public service television, where the skills and implicit values are not necessarily identical to those of the commercial sector-the solution has to be found.

Second, there is some evidence that in countries such as the United States and the United Kingdom, which have highly developed financial markets, firms take too "short" a view, have not innovated sufficiently, and have given insufficient attention to quality. The explanation of these failings is complex, but one factor suggested in research is that the structure of these financial markets places an undue premium on corporate control. The result is that U.S. and U.K. firms are forced to pay higher dividends than their competitors abroad in order to resist the threat of takeover and that these high payouts reduce investment.

For present purposes, what matters about both of these arguments is that they suggest a case for some degree of publicly funded support for investment in general and for training in particular in order to correct these market failures.

Market Failure and the Interaction of Consumption and Production

The possibility of a purely commercial broadcasting market failing to provide everything that individuals in society ultimately want is still more worrying when the interaction of production and consumption is considered. It has been suggested above that in a pure market system, consumers will fragment more than they really wish, will buy fewer good programs than is collectively desirable, and that may under-invest in their own long-term development because the beneficial effects are only recognized in retrospect. It has also been argued that private-sector broadcasters are likely to take too short a view, under-investing in training and in the production of good programs.

Given these undesirable effects, it is easy to imagine further adverse feedback effects. If consumers fragment and prove unwilling to pay the higher prices that good programs will then require, because they are unaware at the time either of the longer-term benefits to themselves or to society, then broadcasters will not have the incentive to invest in producing such programs. Conversely, if broadcasters are not providing good programs, even well-informed and far-sighted consumers cannot buy them. To this situation may be added the possible external effects from one broadcaster to another via the consumer: individual broadcasters may well consider their own (good) programs not commercially worthwhile unless other broadcasters are also transmitting good programs that are gradually extending consumers' tastes.¹³ Putting it bluntly, a danger exists that the market on its own will "dumb us down."

These theoretical concerns find support in practice from the experience of other countries. Admittedly, there is, as yet, little direct evidence about exactly how a fully commercial system based largely on pay-TV would operate, as no country has such a system. Even those with pay-TV and dominated by commercial sectors gain by far the greatest part of their revenue from advertising. Nevertheless, the inferences that can be drawn are not encouraging. Countries with a low element of public service broadcasting typically display poor quality, concentration of ownership plus frequent battles over ownership, flouting of regulators' rules, and more or less subtle forms of government interference.

In France, for example, Canal Plus was launched in November 1984 as a subscription channel, but only six months later it was in financial trouble and so was allowed to accept advertising; as J. Forbes notes, "[i]ts major shareholder is the state-owned advertising company Havas, whose chairman . . . has been a close friend and associate of François Mitterrand since 1950."¹⁴ Although Canal Plus later became profitable, La Cinq, launched in 1986, filed for bankruptcy on New Year's Eve 1992-and this in spite of offering quality news at one end and late-night soft porn at the other plus financial support from Silvio Berlusconi. Moreover, with four new channels opened since 1984, it was found, according to Forbes, that "[b]etween 1983 and 1988 the number of game shows screened jumped from four or five to fifteen or sixteen a week, . . . the amount of light entertainment doubled [and] the number of feature films quadrupled."¹⁵ The Financial Times described the effects of deregulation on French television as having heralded "an anarchic scenario of dozens of different channels pumping out soft porn and pulp programming punctuated by virtually unrestricted advertising."¹⁶

Experience in Germany and Italy offers similar warnings. German pay-TV appears to contain large amounts of pornography. In Italy, on the face of it, there is intense competition among well over thirty local channels. However, in practice, virtually all of them are controlled by Fininvest (owned by Silvio Berlusconi), and the Fininvest channels have been much criticized for their down-market programming (consisting of some 90 percent entertainment and with over 50 percent of their total programming imported from abroad).

The case of the United States itself is the most interesting, as the United States has the largest commercial broadcasting in the world-both proportionately and absolutely. However, as already noted, because of its size the United States is a special situation. As a result of its vast market it faces less of a problem from the higher unit costs that accompany a proliferation of channels. In the United States, channels can increase and yet the audience size per channel can still be high, so the tradeoff between choice and quality is less severe that it will be for countries with smaller audiences.

The result is that, in the United States, the move from a system with a small number of channels almost all financed by advertising to a multiplicity of channels and an expansion of pay-TV (both subscription and per program) has genuinely extended choice. It has increased diversity, provided more (and better) news coverage, and extended significantly the range of sports, music, language, education, weather, travel, and other special interest channels.¹⁷ This is exactly what economic analysis would predict. Advertising inevitably concentrates on the mass, middle-income, market. Audience size, not how much the audience values the program, is what matters. In addition, as channels multiply, the incentive to look at minority interests rises. When only two channels exist, they will both locate near the middle of the market and try to acquire 51 percent of it; when, say, ten channels exist, it becomes worthwhile to focus on a group that only constitutes 10 percent of the population. Television financed by pay-per-view is therefore far better than television financed by advertising at reflecting consumer wants.

Such observations, showing an improvement over time within the United States, are not, however, at odds with the argument above that a purely market-driven system will fail in important ways. While the U.S. market undoubtedly offers considerable choice, few would say that it offers television of such high quality as that of the United Kingdom, Australia, or Canada, where there has been a much stronger contribution by PSBs. "Dumbing down" is all too prevalent.

Moreover, even with its large market, the United States has only relatively recently begun to develop its own significant original productions for cable channels; its public service broadcasting (reaching only about 3 percent of the audience) has had to rely heavily in the past on importing programs made abroad (especially from the United Kingdom).

More serious is that the United States provides little good broadcasting for children, and what does exist relies on advertising, or, worse still, on insidious advertising either via "infomercials" or by producing shows based on a toy (e.g., "Care Bears," "He-Man," "Transformers," "GoBots," and "Masters of the Universe"). As E. M. Noam comments, "The most successful channel for children is Viacom's Nickelodeon, which has 30 percent of the viewing time of 6-11 year olds. . . . [I]ts programs are more entertaining than educational."¹⁸ And as B.P. Lange and R. Woldt note, the United States is also thought to have provided only a "continuing narrow scope for political information."¹⁹

U.K. experience, in contrast, with a strong public service presence and ethos, is widely acknowledged to have much good-quality broadcasting and to have raised the quality over time. In his study of broadcasting in the 1980s, Tim Madge refers to the extent to which the television program-makers have enhanced the sophistication of their audiences so that "programs are made which simply could not have been 'read' correctly a few years ago."²⁰ Of course the high quality of British television is partly the result of good ITV programs. However, the context is crucial. Madge points out that as "ITV executives admit, without the BBC as a constant reminder-and threat to their audiences-the best ITV programs would be rarely made. Producers in commercial television unashamedly use the BBC to argue their case for the equivalent of public service programming."²¹

The Company We Keep

These points about quality can be made another way. In many aspects of our lives, we readily recognize that the environment within which we live and the people with whom we work can have an enormous influence on what we do, or do not, achieve. To take just a few examples: everyone wants children to go to high-quality schools, sports teams to have the best coaches, and firms to learn from best practice world-wide. Yet is not television part of the company we all keep?

People in all countries of the world watch it for very high proportions of their weeks. In the United Kingdom, the BBC estimate that, including radio, the average household spends more than a quarter of all their leisure time watching or listening to the BBC. Moreover, children watch it more than the average. So also do households with children. It is impossible to know precisely what effects this has since it is not possible to run the experiment of what a society without television would be like. Nevertheless it seems inconceivable that broadcasting has anything other than a powerful effect.

As Robyn Williams, Australia's foremost producer of popular science programs, comments when discussing the effects of down-market broadcasting, "Of course the Popzonk/Newzak/Blisscomb culture need not go hand in hand with a world marooned somewhere in Mad Max country. But somehow I seem them together. It is likely that the broadcasting (the communication) system we choose for our future world will come wedded to certain social values, demonstrating, perhaps, what kinds of communities we want to enjoy in the next century."²²

Citizenship, Culture, and Community

The argument, so far, has been that there is a case for public service broadcasting so as to make good the deficiencies of the market in providing what well-informed consumers, acting either individually or in aggregate, would wish to buy over the longer term. A quite separate argument arises from the fact that there are parts of our lives to which the market is simply not relevant. To be more concrete, we watch television and listen to the radio, not just as consumers, but also as citizens.

Our citizenship carries with it three separate implications. First, as citizens we have rights. This includes the right to certain core information about our own society. Thus almost everyone would agree that anyone is entitled to know without having to pay for it such basic things as the key items of news, their legal rights, who their Member of Congress is, etc. It is immediately obvious that the market makes no provision for this (any more than it does for basic education or primary health care for the poor). Moreover, there is a danger that, in the absence of appropriate public policy, the new technology of the Internet and Intranets will create a world in which there is high-quality commercially provided information but only poor-quality information in the public domain. In this new context the informational role of a public service broadcaster operating universally is therefore more important than ever. As the local public library declines, so the public broadcaster must fill the gap-and for zero charge at the margin.

Second, as citizens we have views about society that cannot be captured just in our buying and selling. In particular, in a wide-ranging investigation carried out in 1994 and 1995, the Bertelsmann Foundation working with the European Institute for the Media found that in all ten countries covered by its study people expected and wanted "socially responsible television."²³ Moreover, they concluded that "responsibility in programming has a chance only if and when it has been defined and constantly pursued as a strategic aim in the management [of the broadcaster]."²⁴ It is difficult to see how both profitability and responsibility can be constant strategic aims at the same time. In the competitive marketplace profitability is bound to take priority.

Third, as citizens we are members of a community. It has been said that while we are all individual we are also all individual somebodies. In other words our sense of our own identity derives from how we see ourselves in relation to society and where we "locate" ourselves within it. Stated simply, there is intrinsic value to individuals if they have a sense of community-to be alienated is literally to lose a part of oneself.

The crucial importance of broadcasting in this context is that for the great majority of people it is today their major source of information about the world beyond that of family, friends, and acquaintances. Television provides not only the hard facts, but also the fuzzy categories-the social, ethnic, psychological, etc., concepts within which we must make sense of the world. It also supplies a set of fantasies, emotions, and fictional images with which we construct our understanding (or misunderstanding) of all those parts of society beyond our immediate surroundings. It is therefore part not just of how we see ourselves in relation to the community, or communities, within which we are embedded, but also part of how we understand the community itself-and indeed part of where the very idea of community arises and is given meaning.

The general importance of community and of a common culture to the well-being of a society and its citizens is widely recognized. Culture and community provide a common frame of reference in terms of which to comprehend the history, present, and future of one's society and of one's own place within it, and so to make sense of the decisions one has to take both as an individual and as a citizen. Moreover, the texts, practices, and traditions that make it up function as sources of aesthetic and moral understanding and empowerment, as well as providing a focus for communal identification.

There is little doubt that in today's society the viewing of television is part of what creates any sense of commonality that we may have. This is true as much of low as of high culture. The latest episode of a soap opera or a recent football match can function as a topic upon which all members of the society can form an opinion or converse with one another regardless of the differences in their life-style, social class, or status group. Given that any society must embody such sociocultural differences, the value of a community where people have things in common and can interact on that basis is or should be obvious. Indeed the winning of the World Cup by France in 1998, watched on television by almost the entire nation, is already being credited with a more tolerant and inclusive approach to the immigrant community in France. Commonality has generated the overlap from one community to another.

The value of commonality, the value of shared experience, the value of self-identity, and the value provided by non-stereotypical portrayal of other cultures are not considerations that do, or could, enter into the transactions of the marketplace-but they are values nonetheless. For all of these reasons there is a case for public service broadcasting, one of whose objectives would be the provision of those broadcasts to which we are entitled as citizens.

Fragmentation

This general point about commonality takes on added importance as well as a different form in the context of a pluralist society, such as the United States in the late 1990s. As the processes of technological, economic, and social change increase in rapidity, traditional forms of social unity can break down, and new subcultures based on partially overlapping but less widely shared and equally deep commitments to certain forms or styles of life (ones based on class, region, religion, race, sexual orientation, and so on) can proliferate. To this must be added the near certainty that a "free market" in broadcasting based on an abundance of channels would itself fragment audiences and, by so doing, increase the sense of separateness. In such a context, the risks of sociocultural fragmentation are high, and so is the value of any medium by means of which that fragmentation could be fought.

As technology fragments the market, it is therefore entirely appropriate for U.S. public service broadcasting in the 1990s to contribute towards the (re)construction and maintenance of a common national culture-not a single dominant culture, but a set of shared values that are accommodating enough to accept on equal terms as many as possible of the minority group cultures that go to make up such a pluralist society, and thereby minimize its tendency towards fragmentation. What would be shared by the members of such a culture would not be belief in a particular form of life, but rather an understanding of the lives of other citizens, together with a shared acknowledgment of their worth or validity. And it is this latter requirement that specifies the sense in which the various subcultures are accepted within (form part of) a common culture on equal terms with one another.

The importance of one or more public service broadcasters in this process would be that by broadcasting informed and accurate representations of minority cultures, they would help to maintain the culture's shared emphasis upon respect for human life-it would do so by disseminating the knowledge that forms the essential basis for acknowledging those aspects of the minority cultures that make them worthy of respect. Indeed in modern society, the key way of ensuring the legitimation of a given subculture by conferring a public profile upon it is through television.

One final area under the heading of citizenship and community where a public service broadcaster might play a special role is in the broadcasting of national events. Here, the idea would be that a public service broadcaster should be given the responsibility to broadcast events which, going beyond questions of purely subculture-specific interests, are of genuinely national interest. The events in question would include happenings anywhere in the world that are of significance to virtually anyone (e.g., the collapse of the Berlin Wall) or to the United States in particular (e.g., the U.S. athletics team in the Olympic Games), as well as events in the United States that are primarily of importance to its citizens (e.g., the inauguration of the president). The idea would not be to stop the commercial stations from covering such events, but to ensure (especially as we move into pay-per-view) that events which are constitutive of citizenship are also available free at the point of view. Such broadcasting would help to maintain a sense of national identity that transcends more local communal identifications and allows individuals to understand themselves as members of a particular nation.

Democracy and the Mass Media

It is a basic principle of democratic society that votes should not be bought and sold. This alone is sufficient justification for broadcasting not being entirely commercial. As President Clinton put it, "Candidates should be able to talk to voters based on the strength of their ideas, not the size of their pocketbooks."²⁵ By the same token, broadcasting should not be directly under the control of the state. There has to be a source of information that can be trusted to be accurate in its news, documentaries, and current affairs programs and to be impartial among differing social and political views. It is a necessary, but not sufficient condition, for this to be possible that some at least of the broadcasters be independent of any political party and of any business interest.

It is not enough, however, for truth to be upheld. It must also be available-and available to all. In other countries with strong public service broadcasting traditions, it is fundamental that they are nationally available and easily accessible. Moreover, their tradition of dedicated public service provides the basis for trust without which much information is just propaganda; and their independence from governmental and commercial or marketplace pressures has, on the whole, made it more capable of representing unpopular or otherwise unpalatable truths.

These arguments are not, however, absolute ones, but contingent upon behavior. A number of supposedly "public service" broadcasters have been little more than mouthpieces for the state. The reputation of the PSBs is not therefore automatic-they have to continue to be earned.

On the other side of the coin, it should also not be assumed (as it often is) that commercial broadcasting is necessarily freer of politics than public service broadcasting just because one is public and one is commercial. In France, the close connection between Canal Plus and Mitterrand has already been noted. In Italy, the interventions have been far more blatant. In the March 1994 elections, Berlusconi used his three TV stations reaching 40 percent of the Italian audience to give unremitting support to his own political party, Forza Italia, and the wider grouping of the Freedom Alliance. Subsequent research showed not only that there was a bigger swing to the right (3.5 percent more) among Berlusconi viewers than in the electorate in general, but also that this swing could not be explained by the fact that viewers of Berlusconi channels were already more right wing. Viewers of these channels were found to be middle of the road and only shifted their voting after watching the Berlusconi channels.²⁶ Then, of course, after the election, the government was Berlusconi and in the referendum on whether Berlusconi should be obliged to sell off two of its three TV networks, Fininvest used its networks to support the "Vote No" campaign. Fininvest carried 520 spots for the Vote No campaign as compared with only 42 for the "Vote Yes" campaign, which was effectively forced off the air because its slots were placed in such disadvantageous positions.²⁷

Common Knowledge

So far the arguments about the relationship between the mass media and democracy strongly reinforce the case for public service broadcasters existing as major sources of independent, accurate, and impartial information. However, the ideas of accurate information and of impartiality need to be seen in a wider context. Although it is not often recognized, society depends critically on the existence of "common knowledge"-what everybody knows that everybody knows. Most of the time the existence of such knowledge is taken for granted. However, it plays a role in society that is both more profound and more important than at first it seems.

The influence of common knowledge is more profound than it might seem because any debate requires some common knowledge-at a minimum, it has to be agreed upon what is being debated. Moreover, in modern societies the media is one major way in which common knowledge is created. The influence of common knowledge is also more important than it might seem because almost all solutions to problems require the extension of common knowledge. In order to be agreed upon, solutions have to be based on a common understanding of the situation. Common knowledge is therefore a precondition of many coordination problems in democratic societies.

Agreeing on solutions and agreeing on correct solutions are not, however, the same thing. Or to put the same point another way, knowledge, which implies that what is known is true, is not the same as belief, which may or may not be true. The "power of the witch doctor" may have been thought of as common knowledge, but strictly speaking it was only "common belief." Another more contemporary example that displays both the power of the media and the danger and inefficiency of inaccurate "common knowledge," if that contradiction may be used, comes from the experience reported by the British Labor Member of Parliament Dianne Abbott. When visiting a school in the United Kingdom she asked what number the pupils would dial in an emergency. The answer from many was "911"-yet the U.K. emergency number is 999!

This example also illustrates that "knowledge" and "information" need to be understood as including much more than is dealt with by news programs. It also covers the discussions of news, trends, and images that are to be found on radio phone-in shows, chat shows, and so on, as well as the scientific and cultural matters typically dealt with by programs such as those on the Discovery channel, not to mention the lifestyles presented in so many contemporary fictional creations.

Furthermore, central to the idea of the democratic society is that of the well-informed and self-determining individual; but, if individuals are to be genuinely autonomous, it is not sufficient for them merely to receive information (no matter how much and how impartially presented), they must be able to understand it. They must be able to make sense of it in ways that relate to their own lives and decisions. Neither facts on the one hand nor opinions on the other (although both are important) are sufficient; for neither are utilizable by those who absorb them unless they are made the subject of reasoned analysis-unless, in other words, they are not merely transmitted but presented (organized and submitted to informed and coherent criticism from as many perspectives as possible) in a way which allows them to be understood and thereby incorporated into the audience's own judgments. Information without "organizing insights" is just noise.

The media has therefore a double responsibility. First, programs need to handle information in such a way to increase understanding and create knowledge. Second, programs need to ensure, as far as possible, that such knowledge correctly represents the world as we know it.

It is worth noting here the sharp contrast between talk shows on commercial and on public service channels. In April 1996, the New York radio station WABC fired a talk-show host named Bob Grant, but this was only after twenty-five years of regular attacks on blacks, Hispanics, and other minorities. An ABC producer was asked whether Bob Grant's remarks were an example of free speech that should be protected under the First Amendment or whether they were verbal pollution. His reply was "If the person has good ratings a station has to overlook the garbage that he spews out." The same producer added, "[In the United States,] radio is the only serious soapbox the racists have. Our advertisers are aware that hate sells their products."²⁸

The editorial responsibility that is so obviously lacking in this case is not surprising. If the product sells and makes a profit, that is all that is required. Ethical judgments, even where the only ethical requirement is a respect for evidence, is not part of its natural domain. Its purpose is to make money, not to sustain democracy, nor to expand common knowledge nor to extend the tastes and capacities of its audience.

Purposes matter. Almost all societies allow children to attend a single school for many years. The school is therefore the monopoly provider of both information and understanding-and at a particularly formative stage in a person's life. Yet an equivalent commercial monopoly, even later in life, is strongly resisted. The reason is that schools and commerce have different objectives. The purpose of a school is not to indoctrinate, but to educate. Indeed the exception proves the rule. In the rare number of cases when people do object to the influence of schools it is usually because the school is suspected of peddling a particular point of view to the detriment of education.

Closely related to this is what can be described as the "Yes, Minister" problem (after the famous U.K. TV show of that name). Someone has a piece of information. You may know that they have it and you may know that the information would be useful to you. However, you may not know what question to ask to elucidate that information. As the "Yes, Minister" program brought out so well, some civil servants like being in that kind of position, because information is power and power is not always given up easily. Typically the way in which this problem has been handled in the past has been through education. The purpose of educators is to empower other people and they want to teach people what questions to ask and how to use information to understand the world. Such an assumption cannot be made of the commercial world. The purpose of the commercial world is to make a profit. Nothing wrong in that, but it is different.

In brief, if democracy (and the role of its citizens) is left just to the market, democracy and its citizens will be poorly served. There will be a gap in broadcasting; a fully functioning democracy requires public service broadcasting to fill that gap. Moreover, one key principle for public service broadcasters to follow on this count is that they should aim to extend the understanding and experience of those who watch or listen. It is important to emphasize that this core principle is not restricted in its application to certain types of current affairs or documentary programming (although of course it does apply to them). Drama, soap operas, chat shows, children's programs, and situation comedies could all contribute to empowering as large a body of the citizenry as possible.

Public service broadcasters performing this function would therefore provide a central forum-the public space-within which society could engage in the process of extending its common knowledge as well as in illuminating and either reaffirming, questioning, or extending its already existing values.

Rules-Based Intervention versus
Public Service Broadcasting

The arguments above provide a strong case for thinking that broadcasting should not be left just to the market. There is therefore a prima facie case for intervention, but such arguments provide no guidance on the form that intervention should take. Why, one has to ask, could market failures not be dealt with by regulation, as occurs, for example, in the case of health and safety legislation?

The answer to this question is in two parts. First, it can be agreed that in some cases regulation is appropriate. For example, if the only concern of public policy were that child pornography should not be broadcast, then rules banning this activity could make an important contribution. The same is true of concentration. If the goal is to stop a single person or organization controlling a large part of the media, then laws limiting cross-ownership of media outlets have an important role to play. In short, the Federal Communications Commission (FCC) can play an important role-if it chooses to do so.

However, the second answer is far more important. In the particular case of broadcasting, rules-based intervention is necessary but not sufficient, especially not in the new environment of the late 1990s.

The first reason why rules are insufficient is that many of the issues concerning broadcasting are qualitative rather than quantitative in nature. This is self-evidently true of quality itself, but it applies equally to the discussion above of the importance of maintaining a sense of community as well as valuing a democratic society. These broad principles, which should guide part of broadcasting, could not be incorporated in any precise set of rules-indeed it is the impossibility of doing so that differentiates qualitative from quantitative assessments.²⁹

The need to make qualitative judgments creates difficulties for all countries, but especially so in the United States where any attempt to impose such judgments on commercial companies is regarded as unconstitutional. Of course, it might, nevertheless, still be possible to design a legislative framework containing clear principles and for the judgments about the principles to be delegated to a broadcasting authority. However, once rules are discretionary, a new set of issues arises. The regulators, unable to appeal to a firm rule, may give in to pressure from those they are regulating. If so, the apparent attraction of rules-based intervention is much diminished. Similarly, if producers are required to act in necessarily loosely defined ways and in ways that are against their commercial interests, it may be more efficient to establish a public body charged with explicitly non-commercial goals than to police a complex and imprecise set of regulations. To put the same point another way, trying to achieve multiple and complex objectives via regulation is just writing a blank check for the lawyers.

The second reason why rules are insufficient is that rules are, at best, negative-especially when regulating against strong commercial forces. While regulation may, therefore, be able to protect standards, for example by preventing the display of excessive violence or sexual material considered offensive, it is much less well suited to promoting quality. This point is central. At numerous points in the earlier argument it has been shown that purposes matter. But purposes are about doing things-educating, informing, and entertaining, for example. Such purposes cannot possibly be achieved by rules because rules cannot make things happen. This is of great importance because, in the case of broadcasting it has been shown that there are gaps in the system which require positive pressure to correct them. This is why, corresponding to each area in which the market would fall down, it has been possible above to identify one or more primary objectives that a public service broadcaster should pursue. To offset market failure, it should aim to expand quality and to extend individuals' ideas of what they can achieve; to meet the requirements of citizenship it should provide for the needs of community (or communities); and to sustain democracy it should extend common knowledge and empower those that watch it or listen to it.

Moreover, none of these objectives is genre specific. Neither enrichment, nor our ideas of community, nor common knowledge are restricted to some "high-brow" ghetto. What will matter most of the time are not the kinds of programs that are made, but how they are made-hardly the task for a regulator.

Nevertheless, at the risk of repetition, it should be emphasized that the structure of broadcasting envisaged here would include some regulation. Indeed one fundamental point of this section is that, in the particular case of broadcasting, regulation and direct public provision can be and should be complementary to one another. Equally important is that the particular mix of regulation and public provision should change as the context changes.

In the late 1990s in the United States, as elsewhere, there are two reasons why this context is altering in ways that make rules-based intervention less effective. First, there is technological change. At the moment, the government (via the FCC) retains the ability to allocate frequencies and so regulation can be enforced. However, as satellite broadcasting (including from outside the borders of the United States) and Internet TV become more widespread, such regulation becomes more difficult. Second, the spread of the new media means that citizens will increasingly rely on television (or whatever the TV becomes) for their information. And, as shown above, good information cannot be produced via rules.

The answer to such problems is not to conclude that regulation is impossible, but to reconsider the objectives and to see whether there is some other way of influencing the market. One obvious possibility is to use public service broadcasting. If so, public service broadcasting will become more, rather than less, important as the technology develops.

One final point about the role of a public service broadcaster remains to be underlined. Each of the three grounds for public service broadcasting-the need to promote high-quality broadcasting, the need to generate a sense of community, and the need for citizens to have and understand the information essential for the functioning of democracy-exist independent of the particular set of choices made now.

Suppose, purely hypothetically, that everyone today had full information and full autonomy and that they chose a particular (narrow) mix of programs. This outcome would then have occurred without market failure. Nevertheless, given the potential interdependence between the broadcasting offered and the preferences of consumers, there would still remain the requirement that the next generation of consumers should be presented with a diverse, informative, and enriching range of programs so that their right to exercise their choice with full information and full autonomy would be ensured. The market, left to itself, would not guarantee this right. Consumers whose tastes were unexposed to, and underdeveloped by, a richer fare would not and could not demand programs that did not exist, and so producers, for their part, would experience no unfilled demand. There would be no driving force towards better quality.

Similarly, suppose-again hypothetically-that the interaction of today's consumers with the market produced a myriad of channels, each with its own format, each differentiated (however marginally) from the others, presenting an endless stream of diverse information and diverse lifestyles without apparent connection. Here again there would remain the case, many would say the imperative need, to present within one universally available channel the idea of a society (or societies) with which future generations of individuals could identify if they so wished. We cannot choose to belong to a society unless a society exists to which we may choose to belong. To deny future generations this would be to deny them a choice, not just between brand A and brand B, but about how they might wish to lead their lives and the kinds of people they might wish to become.

On all three grounds (quality, community, and democracy), therefore, a major argument for public service broadcasting today is that it provides an insurance policy for the desires, needs, and rights of the generations of tomorrow. Moreover, this is not an insurance policy that any form of rules-based intervention will provide. What is required, especially within the increasingly deregulated environment of the late 1990s, is one or more public service broadcasters, widening and extending choice, both by its own existence and by its influence on other broadcasters.

There is much misunderstanding on this question of choice. It is clear that the fear of censorship and, in particular, of hidden censorship, has loomed large in the minds of many of the critics of public service broadcasting. In the United States in particular such fears are written deep into the Constitution-no discussion of U.S. broadcasting is complete without reference to the First Amendment. Similarly, in the United Kingdom, such fears are a major reason for criticism of the BBC, which is seen by some as elitist and paternalistic. These fears and criticisms were understandable in the past when spectrum scarcity prevailed and when, as a result, access to televisual media was, as the critics would have said, exclusively under the control of either state-funded or state-authorized institutions. But this will not be the broadcasting world of the next century. Satellite, cable, and video mean that private televisual media will expand considerably irrespective of the role played by public broadcasters and so, in this new world, provided only that the costs are met and the general law of the land is respected, no one will be denied making or seeing anything they wish. On the contrary, in the face of the new technology which threatens excessive fragmentation, the loss of common knowledge, and low quality, it will be the existence of a public service broadcaster that widens choice and which, through its commitment to provide understanding, gives the means to make the choice for oneself. Thus a vibrant commercial system plus a context influenced by public service broadcasting would be the very opposite of elitism, paternalism, or censorship.

In other words, public production and public broadcasting is needed for the health of the whole system. Thus public service broadcasting is central, not an optional add-on. In short, such a public service broadcaster is a real public good and the true justification for public funding is not the financing of a particular corporation, but the financing of choice, quality, and public information throughout the system as whole.

Just as in the nineteenth century no one thought that regulation could provide public libraries, so in the twenty-first century regulation cannot provide public service broadcasting. Public service broadcasting exists to meet goals that are not those of the market and no amount of regulation can make the market pursue such goals. Thus while public service broadcasters have no right to exist, there are purposes for their existence.

Policy Suggestions

The arguments above have set out the case for public service broadcasting. If this is to exist, what form (or forms) should it take? No attempt will be made here to answer this question in detail. Nevertheless, the arguments above plus the particular context of the United States suggest certain key principles.

First, and most important of all, there has to be a public service broadcasting institution. Trying to impose public service obligations on the commercial channels is hopeless in the U.S. context. As noted in the Bertelsmann study mentioned above, socially responsible television occurs only when it is a constant strategic aim of the management of the broadcaster. Moreover, as Henry Geller argues, the "play or pay" option always was a non-starter-any commercial broadcaster will always spend as little as possible on the public service slots that have been imposed upon it.³⁰ Even in the U.K. context such public service obligations only worked (a) because U.K. regulators can make qualitative judgments (not possible in the United States), (b) because the BBC is very large and so able to influence the system as a whole (not applicable to the United States), and (c) because the U.K. system has in the past contained an element of monopoly profit so there was scope for the commercial broadcasters to act "non-commercially" (but even this is rapidly disappearing). In short, instead of legal regulations or obligations there must be direct public provision.

Second, as emphasized earlier, legal regulations can play a complementary role. In particular, depending on the structure chosen, regulations on both the national commercial channels and on cable TV could insist on a "must carry" clause as well as on a "must display prominently" clause so that in the world of digital television the viewer can easily find the public service broadcasts on his/her EPG. In saying this it must, of course, be noted that a "must carry" clause is fundamentally different from a system in which commercial broadcasters are required to reserve a certain number of hours for public service broadcasting, but hours which they then fill. What is implied here is that they would be required to broadcast material produced by the public service broadcaster(s), which, with adequate funding, should be of high quality.

Third, the institution must be publicly financed. The analogy with club membership was made above-and for the nation the club is everyone and with no opting out. What is more, the fixed costs must be met collectively, but with consumption of the services free at the point of use (for all the reasons given above).

Fourth, the scale of such a broadcaster must be substantial and it must not spread its investments too thinly. In particular, if such a broadcaster were to transmit its own programs nationally it should not at the same time aim at providing a proliferation of channels. Both of these points follow from the requirement that there must be sufficient funds to meet the high fixed costs that quality requires-and if it is not to be high quality, why bother?

Fifth, if one of its key roles is to provide the core public information to which all citizens are entitled, and without which there will be a nation of the information-rich and the information-poor, then it must be universal in its reach. It must therefore be nationally available (another reason why it must be substantial in scale and why "must carry" clauses could be so important).

Sixth, it must make some of its own programs (though not necessarily all). This is because so many of the public service objectives are not genre specific. Neither enrichment, nor our ideas of community, nor common knowledge are restricted to some "high-brow" ghetto. What will matter most of the time are not the kinds of programs that are made, but how they are made. There must therefore be an institution whose purpose is the making of public service programs. The argument is exactly analogous with the reasons why we have schools and universities. They have purposes quite different from those of the market and these values and purposes-just like any others-require an institutional context if they, and the individuals committed to them, are to prosper.

One final suggestion remains to be made. It has been argued above (and by many others before) that television is uniquely well placed to provide the new public space within which the issues of the day can be debated. Digital television dramatically reinforces these possibilities both by creating the potential for interactivity and by increasing the availability of the spectrum. What is more, here there is genuine scope for (a) television to be local, and (b) for low-cost entry. Web-based TV does offer wholly new possibilities for deliberative discourse. Nevertheless here also there is scope for an extremely important public service element. The evidence is overwhelming in favor of the view that constructive debate occurs best when someone acts as a moderator so that some degree of order is maintained and so that someone sometimes, gently and tactfully, summarizes and/or poses the next question. Carrying out this task of editing, facilitating, and moderating in ways intended to be democratic is self-evidently a public interest activity.

In other words, entirely complementary to the public service broadcasting institution recommended above would be the training of individuals to act as the new public interest moderators. At the risk of repetition it must be emphasized that there is no implicit censorship here-multiple commercial sites where anything that the market will support and tolerate would, and should, still exist. But alongside this, it is recommended that there should be some sites, run locally, but possibly supported centrally by funds and training from the public service broadcaster (as well as by other quasi-public or not-for-profit organizations), whose function would be the promotion of local democracy and local participation.

Summary and Conclusions

Who needs public service broadcasting in a digital era? The answer is that we all do and that the new technology increases, not decreases, this need. The reasons are, first, that there is a real danger that if broadcasting were left just to the market it would become excessively concentrated; second, that even if this were not the case, commercial broadcasting on its own would fail to produce the form of broadcasting which people individually or as citizens and voters collectively require; and, third, that there is no set of rules or regulations or laws which could entirely correct the deficiencies of a purely commercial system. This is for the simple but powerful reason that rules are necessarily negative. They have the capacity only to stop the undesirable. They cannot promote the desirable.

The only way to counteract fully the deficiencies of a purely commercial system is through the existence of a broadcaster that has as its driving force the ethos of public service broadcasting. In the context of the United States such a public service broadcaster will would fulfill four crucial and interrelated roles.

First, it would act as a counterweight to possible monopolization of ownership and yet fragmentation of audiences in the private sector. Second, because its purposes are different, it wouldill widen the choices that consumers individually and collectively wouldill face. Third, provided that, via one means or another, it wereis universal in its reach, it would beis the only sure way of protecting against the emergence of the information-rich and the information-poor. Fourth, and most important of all, it is essential that in a democratic society the issues of the day should be debated not just in terms of the values of the market, but also in terms of the public interest.

There could be more than one such public service broadcaster-since competition within the public sector is also healthy. But this would only be sensible if funding on a very large scale were available. Moreover, if it were, then it would be essential that one of them be vertically integrated. This follows from two considerations. First, there is the need for public service broadcasting to be concerned with the full range of broadcasting (training, production, scheduling, and broadcasting). Second, public services values and the commitment to quality can only be maintained, developed, and passed on within an institutional framework that persists.

Equally important is that, alongside any public service broadcaster, there should be an active commercial sector. Each improves the other. The commercial sector keeps the public sector competitive; the public sector raises quality and keeps the commercial sector honest.

In brief, such public service broadcasting is not an optional add-on. It is central to the health of all broadcasting and, beyond this, to the health of a democratic society.

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