Communications and Society Program

Implementation of "Pay" Models and the Existing Public Trustee Model in the Digital Broadcast Era

Implementation of "Pay" Models and the Existing Public Trustee Model in the Digital Broadcast Era

Implementation of "Pay" Models
and the Existing Public Trustee Model
in the Digital Broadcast Era

Henry Geller
Communications Fellow
The John and Mary R. Markle Foundation

Four models for digital broadcasting were discussed at the January, 1998, meeting of the Aspen Institute Working Group on Digital Broadcasting and the Public Interest.¹ This paper identifies and addresses issues of implementation for three of those models: the spectrum fee (pay/public broadcasting) model; the pay plus access model; and an improved version of the current public trustee model. The paper briefly summarizes each model, addresses its main implementation issues, and assesses the major obstacles to its implementation. In view of uncertainties about how broadcasters will operate in the digital era, the discussion necessarily cannot be definitive. Rather, my purpose is to set forth an analysis that will be helpful for pragmatic consideration of the three approaches.

The SPECTRUM FEE OR "PAY/PUBLIC
BROADCASTING" model

Description of Model

The spectrum fee model outlined in the Aspen Institute report by Angela Campbell would eliminate the public trustee content obligation, which requires broadcasters to act to foster the public interest.² In its place, the spectrum fee model, or "pay/public broadcasting" model as I will refer to it, would impose a spectrum usage fee on the gross advertising revenues of stations and station sales; the sums so obtained would go to a trust fund for public broadcasting and, in connection with campaign finance reform, a political time bank. Particulars of the fee would be set out in a long-term franchise agreement between the Federal Communications Commission (FCC) and the broadcaster.

The rationale for this approach is as follows:

1. The public trustee content scheme has been a failure (e.g., postcard renewal except for children's television, inability of regulation to consider the real goal-high-quality public service programming); with increasing fierce competition from cable, DBS (direct broadcast satellite), and other electronic media in the digital era, the situation will worsen. Market deficiencies exist (e.g., the need for a ready-to-learn channel, school-age programming, adult learning, literacy, etc.); public broadcasting can supply such high-quality educational, cultural, and in-depth informational programs in the digital milieu, but it lacks resources for sustained programming and promotional efforts. The pay/public broadcasting approach would thus establish a structure working for the achievement of high-quality public service, rather than the failed behavioral regulatory scheme now used as to commercial broadcasting.

2. The pay/public broadcasting approach would largely remove First Amendment strains. Broadcasting would join other media, which are already treated under traditional First Amendment jurisprudence.

3. The pay/public broadcasting approach would end the asymmetric regulation of the two most powerful forms of television distribution-broadcasting and cable. The viewer makes no distinction between the two.

4. The pay/public broadcasting approach would fit the trends of the next decade and century. Enormous change is coming rapidly-hundreds of channels in digital cable or DBS or telcommunications (from servers) or the Internet. It makes no policy sense to single out broadcasting for this behavioral content scheme-to continue the policy adopted over seventy years ago in a completely different environment.³

Implementation Issue #1: How Much?

The most recent figures (1997) for the gross advertising revenues of commercial TV stations show $9,999 million for spot advertising and $11,436 million for local advertising, totaling $21.4 billion.⁴ Sales figures for broadcast stations in the last two years are $23.4 and $25.36 billion.⁵ Since the latter figures will vary from year to year, I use here a figure of $20 billion for broadcast sales. The percentage figure I use is directed to these gross revenue amounts to avoid the quagmire encountered when focusing on profits, a focus that simply results in much "gaming" of the system.

The percentage is necessarily somewhat arbitrary. In the case of cable, Congress, following the lead of the FCC, decreed in the 1984 Cable Act that the franchising authority (e.g., cities) could impose a franchise fee of up to 5 percent (and cities have imposed varying fees up to that maximum) for the use of the city streets. Here the fee structure for use of the spectrum must be one that is reasonable and modest, so that it is not deemed burdensome to industry operations, including sales of broadcast properties. I therefore suggest what could be called the "2-percent solution"-namely, 2 percent of gross advertising revenues and 2 percent of sales transactions, fixed in the long-term franchise so that it does not change during the duration of the franchise contract between the FCC and the commercial broadcaster.⁶ Significantly, Senator Ernest Hollings several years ago introduced legislation that would have used a 4 percent figure in connection with station transfers.⁷

It has also been suggested (by some commercial broadcasters) that government revenues obtained from the fee imposed on ancillary ATV (advanced TV) operations should go to support public broadcasting. This would be a worthy further supplement to the above. The FCC is now in the process of determining how to calculate the ATV fee scheme; in light of that uncertainty and-much more important-the complete uncertainty as to the amount and extent of such ancillary operations, no estimate can be made of what revenues might accrue to public broadcasting from this approach.

Implementation Issue #2: How Long?

From the standpoint of communications policy, the duration of the above scheme would depend upon political considerations. Thus, if the Republican Congress continues to have as a goal the elimination of government funding of public broadcasting and its replacement with an adequate trust fund, the 2-percent solution could end in about four years, when the trust fund would have accumulated roughly $5 billion. Thereafter, whether the 2-percent approach continued (i.e., whether it wants to emulate the cities) would be a matter for Congress to decide.

If, as a part of campaign reform, a political time bank were to be established along the lines of the Taylor-Ornstein-Mann proposal,⁸ the fees would need to continue indefinitely, but at a reduced rate (after the above period to establish the public broadcasting trust fund). Since the proposal estimates a need for roughly $500 million every two years (but keeping pace with inflation), the fee would be reduced to a little more than 1 percent on revenues and sales (or alternatively, 2 percent on revenues alone, eliminating the uncertainty that comes with reliance on station sales). Depending on when campaign finance reform were to be instituted, there might be the need for an additional 1 percent for this purpose, during the four-year period to build the trust fund.

There are, of course, many variations on the above theme. Thus, there could be a 1-percent solution for public broadcasting if Congress decided against the trust fund-that is, public broadcasting would receive 1 percent of revenues and sales each year, to be used largely for educational programming (defined broadly to include cultural fare). This $400 million sum would replace the Congressional appropriation process, and would continue for the duration of the franchise contract. At that point, there would be a sunset, and reevaluation of both the continuation of the fee and its dedicated use.

Broadcaster Obligations under this Approach

As stated, there would be no public interest content regulatory scheme such as the present requirements for fairness rules, community issue-oriented programming, or children's educational/informational programming (hereafter called core children's TV programming), including programs specifically designed for this purpose. Rather, the broadcast licensee would come under the Title III regime in roughly the same way as, say, a cellular or PCS radio licensee. All radio licensees come under a public interest standard, must show that they are legally, technically, or otherwise qualified (e.g., character, citizenship), are subject to forfeiture or cease and desist orders for violations of the Communications Act or rules, and can be denied renewal or be revoked for willful and repeated violations of the Act or rules.

The broadcaster would face continued application of provisions such as sponsorship identification (Section 317 of the Communications Act), no rigged quizzes, the ban on payola, and the prohibition in 18 U.S.C. 1464 on obscene or indecent programming (see also Section 312[a][6]).⁹

Significantly, there would continue to be content regulation in the political broadcast field, because without such regulation there would be little chance of Congress moving the necessary legislation. Thus, Section 315, requiring equal opportunities for legally qualified candidates (and prohibiting censorship of the candidates' use of station facilities), would be retained.¹⁰ The equal opportunities requirement should be modified to apply only to paid time; if that approach is rejected, then the requirement should be revised to apply to significant candidates, defined very liberally (see 48 FCC 2d 46 for the 2-percent/1-percent proposal). Alternatively, there could be a broad exemption for bona fide broadcast journalistic efforts under the control of the licensee and not designed to serve the political advantage of any candidate.¹¹

There is also the issue of lowest unit rate (LUR) and its allied provision, Section 312(a)(7), requiring reasonable access for candidates for federal office.¹² If a political time bank is created as part of campaign finance reform, LUR would be eliminated; however, to ensure that those receiving the time bank funds could use them for broadcast exposure, a reasonable access requirement would be broadened to cover all such candidates (although as a practical matter, broadcasters should be eager to get back the monies [the spectrum usage fee] that went into the political time bank). If no political time bank were created, Congress might well insist on retention of LUR and 312(a)(7).

The constitutionality of the above retained provisions would now fall not under the liberal and flexible standard of Red Lion but under traditional First Amendment jurisprudence (which does take into account the characteristics of each medium). Stated differently, broadcasting would be treated under the same First Amendment jurisprudence as cable.¹³ I believe that the provisions would be found to be constitutional. Thus, the equal opportunities provision, as revised, would not interfere with broadcast journalistic efforts, and in assuring equal treatment for significant candidates, would serve in a narrowly tailored and least restrictive fashion a substantial, indeed a compelling, governmental interest in light of the overarching importance of television for so many campaigns. Similar considerations would apply to LUR or reasonable access.

Multiple ownership rules would also continue to be applied. These rules reflect the diversification principle-that the underlying assumption of the First Amendment is that the American people receive information from as diverse and antagonistic sources as possible (Associated Press v. U.S., 326 U.S. 1, 20 [1943])-and have been promoted by the Congress on several occasions. They apply also to cable (see Sec. 613, 47 U.S.C. 533), with their constitutionality still being fought out in court appeals. Such rules are content-neutral, and thus their constitutionality would come under the intermediate standard of O'Brien, a test that they would meet, in my opinion.¹⁴

Reform of Public Broadcasting.

Under the pay/public broadcasting approach, especially with the use of the trust fund, there is a need to reform the public broadcasting scheme, for example, as to its governance and heightened focus on serving local needs. These issues have been treated in a number of studies, most recently in Quality Time?, the 1993 Report of the Twentieth Century Fund Task Force on Public Television.¹⁵ Since that is not the focus of either the Advisory Committee or the Aspen group, I will not pursue such reforms here.

Key Players, Obstacles, Assessment

The key player is of course the Congress, since only it can effect the sweeping reform here urged. There would be significant opposition within Congress. Some liberal elements would oppose any elimination or diminution of the public trustee content requirement. Some conservative elements would oppose any strengthening of public broadcasting. One powerful member, Chairman Billy Tauzin, has stated that there should be a shift from focus on commercial broadcasting to public broadcasting for public service; that the latter should have increased financial support through a trust fund; and that he will introduce legislation to this effect (see H.R. 4067, 105th Congress, 2d session, Public Broadcasting Reform Act of 1998).

There might well be a majority for the pay/public radio approach in radio broadcasting; it makes little policy sense to be regulating radio broadcasting today as a public trustee, when so many of the stations are simply electronic juke boxes, with very short talk interruptions and commercials. Whether a majority might exist in the case of television is more problematic, even assuming the matter were considered on its merits. Congress might well want to try this approach first with radio, and if successful, move on to television as the number of channels available grows explosively in the digital era.

However, there is little likelihood that the matter would be decided on the merits. The commercial broadcast lobby has enormous clout, as evidenced in the 1996 Telecommunications Act, which gave broadcasters many "goodies" (ATV channels reserved for existing broadcasters and with no auction; elimination of comparative renewal hearing; lengthening of license terms for TV; and relaxation of multiple ownership limits, drastically in radio and somewhat in TV (an increase to 35 percent national audience limitation). Senator John McCain, who opposed the ATV "giveaway" (in his words), stated that the broadcast lobby was the most powerful that he had encountered, and Speaker Newt Gingrich (R-Ga.) has acknowledged its power.

This lobbying force constitutes the largest obstacle to adoption of the model under discussion. The broadcasters, represented by the NAB, like and will fight for retention of the public trustee model-the social compact, as they put it, under which they are obliged to render public service rather than put profits first.¹⁶ Indeed, in 1994 in the 103rd Congress, on this ground, the NAB successfully opposed a spectrum usage fee (1 percent of gross revenues rising to 5 percent), advanced by the administration to gain needed revenue.¹⁷

While the odds would remain quite high against gaining broadcaster support for the approach, the following "carrots" and "stick" might be helpful in that respect:

1. Lengthening the franchise term to 15 years.¹⁸ There is little downside to this. Broadcasters, like PCS or cellular licensees, really have licenses in perpetuity. If there were some egregious pattern or occurrence, revocation remains available.

2. Offering to raise the national audience limitation in TV to 45 percent. While it can be argued that this leads to greater concentration, the fact is that on the national level, the diversification principle is now well served; there are many sources of information, electronic and print, on any significant national issue. It is on the local level, with important local issues, that diversification remains so important.¹⁹

3. Imposition of new and more concrete obligations in the digital era would be avoided, with the adoption of the pay/public broadcasting approach.²⁰ This possible "stick" has already been discussed.

The odds are against implementation of the pay/public broadcasting model in the near future (during the 105th or the 106th Congress). Because, however, it so much fits the driving trends, the model should be advanced, with the idea that as the trend becomes ever more apparent in this dynamic field, the need to abandon the existing scheme, so outmoded and ill-suited to prevailing circumstance, will be heightened.

The "Pay plus Access" Model

Description of Model

As described in the Aspen Institute report by Angela Campbell, the pay plus access model would relieve broadcasters of public interest program obligations except for certain types of access programming, and in return, assess a fee as in the spectrum fee model. This approach addresses one of the criticisms of the spectrum fee model, that is, that candidates' speech ought not to be relegated to channels that people need to seek out.²¹ To make candidate speech widely and easily available, commercial broadcasters would be required to "ventilate" their program schedules by providing some specified amount of time to candidates in the period prior to elections. A certain amount of time might also be available for leasing by third parties to promote a diversity of viewpoints. In addition, commercial broadcasters could be required to promote and provide linkages to the subsidized programming on the public television stations, so that more people would be aware of these sources of information and education.

Implementation Issue #1: Requiring Free Time for Candidates

The proposed "ventilation" requirement of free time for candidates was not discussed at the first meeting of the Aspen Institute Working Group on Digital Broadcasting and the Public Interest. The second meeting focused specifically on this issue, and to that meeting, Tracy Westen, the main proponent of the "pay plus access" model, contributed an ambitious and detailed proposal.²² The proposal is tied to campaign finance reform-that is, any candidate accepting the substantial free time would have to agree not to purchase any additional time (with certain limited exceptions).²³ The proposal is thus in the same league as that of Paul Taylor, executive director of the Alliance for Better Campaigns, that was advanced at the same meeting. As already noted, it is a matter for Congress to determine how to implement campaign reform-whether along the lines of proposals by Taylor and Westen, what I have proposed for simplicity, or some other way.

There is thus full agreement between proponents of these two models (spectrum fee and pay-plus-access) that substantial free time in conjunction with campaign finance reform should be sought. There is, however, a difference as to how to effect this most desirable goal. Under the proposals of Taylor and Westen, the broadcaster remains a public trustee (or a limited trustee), having to afford free time, with the constitutionality of the free time requirement tested under Red Lion. Under my approach, in which the broadcaster is no longer a public trustee as to public service content, a spectrum use fee is employed to obtain the sums needed for substantial free time, and government regulation focuses on the broadcaster's responsibility to afford reasonable access to a candidate using the political time bank. The latter requirement would be tested under the traditional First Amendment jurisprudence (and probably never tested in court, as the broadcaster, in the digital world, would undoubtedly be glad to get the money back by selling time). It therefore would be worthwhile to consider what is the most appropriate way to implement the same goal-a political time bank in connection with campaign finance reform.

Since it is so connected, the matter is clearly dependent on the Congress. Experience shows that it would be most difficult to effect without some marked change in the political climate. The broadcasters are strongly opposed, and have demonstrated their strength in this Congress when even a very modest amount of free time was dropped from the McCain-Feingold bill because of broadcaster opposition. Campaign reform itself (without free time) remains most problematic.

Nevertheless, in my opinion, the proposal for free time should be strongly advanced, because it is right, and, in the long run, might well come to pass.

Implementation Issue #2: Requiring Leased Access

The pay plus access model is similar to the cable leased channel provision (Section 612 of the Communications Act). The latter has been so hedged with limitations that it has never been successful,²⁴ and the FCC's latest attempt to implement Section 612 appears flawed.²⁵ A much better way to proceed is to require the broadcaster to engage in last-offer arbitration if no agreement on terms is reached after a stated brief interval; the programmer would thus gain immediate access during the arbitration period after posting a bond to ensure financial performance. Since the purpose is to promote the diversification principle (Associated Press v. United States, 326 U.S.1, 20 [1943]), the broadcast would have no control of the lessee's content, other than the power to bar obscene or indecent material.²⁶

This provision would be consistent with elimination of the public trustee content scheme, and indeed would promote symmetrical regulation of broadcast and cable. In the ATV era, the broadcaster, especially outside of prime time, may well engage in multiplex operation (four to six channels), and in those circumstances, some significant amount of time on one of the channels could be reasonably set aside for third-party leasing. Such leasing has been held to be constitutional as to cable,²⁷ and indeed has been cited as helpful with respect to First Amendment considerations.²⁸

Congress would be the key player in its adoption, since the FCC has no authority to make a broadcaster operate as a common carrier, even for a relatively small amount of time. (See Sec. 3[h] of the Communications Act). Broadcasters would strongly oppose such a legislative proposal, arguing that in broadcasting, licensee control is fundamental; that even in cable, the leased commercial requirement does not "kick in" until the system has thirty-six or more channels, and broadcasters will have at most six channels; and that no one can say with any certainty whether there will be extensive multiplex operations, so that the whole notion is premature and speculative (the counter-argument to that is that once the operation becomes established, it will be most difficult to impose a leased channel modification, as the cable experience shows).

In my opinion, there is little likelihood that such a proposal would be enacted in the near future. It is thus a long-term proposal.

Requirement to Promote Subsidized Programming on Public TV

This would appear to be a public trustee content proposal-a public service announcement (PSA) whose content is dictated by government for public interest reasons. The pay/public broadcasting model is meant to abandon the public trustee regulatory scheme, and bring broadcasting under traditional First Amendment jurisprudence. Under such jurisprudence, strict scrutiny would apply, and would probably doom the proposal. For if sufficient money were obtained for public broadcasting, it could engage in its own promotional activities, and there would be no need to interfere with the editorial autonomy of the commercial broadcaster.

Under pay plus access, the commercial broadcaster may be deemed a limited public trustee, and thus it could be argued that Red Lion is applicable and the requirement can be sustained under that flexible standard. Perhaps so, but I question why the public trustee scheme should be retained for this quite narrow purpose, when monies extracted from the commercial system (the spectrum usage fee) could enable the public broadcaster to accomplish roughly the same goal.

The public Trustee Model

Description of Model

The public trustee model would apply the current public trustee obligations to ATV operations (e.g., community-issue oriented programming; children's educational and informational TV programs, including "core" programs specifically designed to educate; equal opportunities and LUR; and reasonable access for candidates for federal office). If the ATV broadcaster engaged in multiplex operations, there could be improvements to the current approach-e.g., making the three-hour guideline for core educational programming applicable to each of the multiplex channels; devoting one channel (4 Mbs) to public service. Some urge an improvement making concrete the public service requirement (i.e., a quantitative guideline for local and informational program). There is also the Common Cause petition pending before the FCC that requests a very modest amount of free time (twenty minutes, with three to five minutes in prime time) thirty days before the general election. Other suggested improvements include reinstituting ascertainment, repealing "postcard renewal," restoring the fairness doctrine, and extending equal opportunities to ballot issues.

Implementation Issues and Evaluation: Restoration Policies

Some of the above proposals (e.g., ascertainment, repeal of postcard renewal, quantitative guidelines for renewal, and restoring the fairness doctrine) do not stem at all from the move to ATV operations, but rather seek to repair the damage done to the public trustee obligation during the decade of the 1980s. Certainly there is a very strong argument that postcard renewal is simply deregulation because the public cannot be expected to, and does not, examine licensee files and then petition the FCC; the licensee should be held accountable through appropriate filings at renewal (as is the case under the Children's Television Act [CTA]). Cogent arguments also exist regarding the fairness doctrine: that the first duty (to devote a reasonable amount of time to issues of public importance) should be enforced, especially as to local issues; and that the second duty-to be fair-should apply to ballot issues, which are of great importance in states such as California and Washington.²⁹ Further, just as in the case of the CTA, there should be a processing guideline informing the licensee and the public what constitutes a "safe haven" for renewal.³⁰

The counter-arguments to this position have already been set out in the discussion on the spectrum fee model; that continuing and restoring the public trustee model would be to focus on the near term and not taking into account the trends of the next century.³¹ Stated differently, it would be a huge fight to effect this restoration-yet this approach misses the much larger and more important goal of adopting a regulatory scheme that will actually provide high-quality public service programming, especially in the crucial educational area.

As to implementation, Senator McCain and others have argued that the FCC has no authority to adopt any new content requirement-that such action is for Congress alone. But clear legislative history and judicial precedent establish the FCC's comprehensive authority to flesh out the broad public interest standard precisely because this is such a dynamic field;³² the McCain position stands on its head the very reason for the original creation of the FCC. Furthermore, each of the above proposals is a restoration of policies that the FCC adopted and adhered to for many years. The FCC does have the authority to act again as to these areas.

However, whatever the merits, broadcasters would likely seek to have Congress halt this restoration, either through direct legislation or appropriation riders. Broadcasters would certainly have considerable support as Congress is now constituted. A very important factor here would be the attitude and actions of the executive branch-whether it would threaten or exercise a veto. It is not possible to reach any conclusion as to that factor.

Finally, as the focus of the President's Advisory Committee is on public interest obligations in the digital era, it is therefore questionable whether the Committee would want to focus on the past or present (analog) situation, even acknowledging that this situation will dominate broadcasting for the next five years or so, and the counter-argument that the future (digital) scheme should be built upon the bedrock of a sound present (analog) regulatory pattern.

Implementation Issues and Evaluation: Innovative Improvements

Equal opportunities, LUR, and reasonable access for candidates for federal office would all be applicable to ATV operations. Initially candidates will have little or no interest in such operations because the audience, compared to the analog audience, will be too small. As the audience becomes significant, though, candidates will seek access/LUR, and the FCC's detailed rulings will be applicable, subject to revision as experience is gained in the digital era.

The issue as to the CTA/three-hour guideline is more difficult. First, initially it would be poor policy to require three hours of core programming on each multiplex channel. Such programming is expensive and requires considerable planning and development. To require, say, 15 or 18 hours of core programs, when the digital audience is miniscule, would be arbitrary. Second, even when there is a substantial ATV audience, requiring the commercial broadcaster to present amounts of core programming as high as 15 to 18 hours would result in spreading resources much too thin; either quality would go way down, or there would be a tendency to focus on social-purpose themes with the real emphasis on entertainment. It may be that as broadcasting progresses deeply into the ATV age, some revision of the three-hour guideline should take place, perhaps to five or six hours. But any such revision by the FCC should await future developments and be based on a solid factual ground.

The Common Cause petition is a modest but worthy improvement, both today (analog) and certainly in the digital era when there will be much greater capacity.³³ As the pleading stresses, it is not designed in any way as a part of campaign finance reform (and would obviously be wholly inadequate on that score). Rather, it would impose a duty on the broadcaster as public trustee to afford a very modest amount of free time (twenty minutes with five in prime time for the thirty-day period before the general election) in races chosen by the broadcaster. There are races that are of considerable importance locally in which candidates do not seek broadcast time, because it is too expensive for them. Broadcasters, perhaps consulting among themselves, could afford to provide a needed "electronic soapbox" for such races. However, the petition makes clear that the choice of what races to bring within this "five-minute fix" is solely within the discretion of the licensee.

I believe that the FCC has the authority to adopt the above approach under the broad public interest standard. But it must be acknowledged that the controversy over the much more ambitious proposal to afford a great deal of free time for campaign finance reform has made many in Congress very sensitive about any notion of free time at all. Strong Congressional leaders like Chairmen McCain and Tauzin would likely continue their opposition. This makes it unlikely that the Common Cause proposal will go forward. Why fight a huge battle over such a modest gain?³⁴

The most interesting innovation stems from the digital nature of ATV operation-that it really constitutes 19.4 Mbs so that when the broadcaster decides to engage in multiplex operation, 3 or 4 Mbs could be required to be used exclusively for discharge of its public service obligation. The broadcaster could be given the greatest possible flexibility as to what is presented on that public service channel. It could include children's television educational/informational programs, political broadcasts, public affairs programming, public access, local C-SPAN-type fare, etc.

Again, I believe that the FCC, acting under the broad public interest standard, which is made explicitly applicable to the ATV operations in the 1996 Act, has the authority to adopt such an approach. It would of course engender a huge controversy, with the broadcast industry enlisting Congress to stop such a sweeping innovation. It is axiomatic that the more sweeping the change, the more the agency needs strong (even if divided) support from Congress and probably strong Executive Branch support. It is not at all clear that such support would be forthcoming. If this approach is not adopted initially, its imposition many years later would be most disruptive and thus foreclosed.

The foregoing assumes that the public service programming would be supported by advertising. This in turn would lead broadcasters to try to introduce more and more elements of entertainment into such programming to gain audience and thus advertising support (the "Inside the NBA" pattern encountered in the CTA core programming area, where a sports program such as Inside the NBA counts toward the children's educational television requirement). Disputes would inevitably arise as to whether the programming is really public service in nature-a natural consequence of behavioral regulation when it encounters the difficult, marginal cases.

One way to avoid all such disputes is to require that the public service channel be sustaining-that is, the public service element is supported by the advertising on the other four or five channels (like Channel 4 in the United Kingdom, supported for years by the advertising on Channel 3). Such a requirement would have the drawback that the licensee, with no revenue coming in and therefore no reason to attract audience to the public service channel (and thus away from the revenue-producing channels), would slough its responsibility by presenting low-quality, "cheapo" programming material. To deal with that problem, the FCC could follow the approach laid out in Section 303b(b)(2) of the CTA-the licensee could "buy" its way out of the entire public service obligation by paying the revenue represented by the 4 Mbs (easily ascertained by taking the average of the revenues of the other multiplex channels) to public broadcasting (locally or the national trust fund).

I have gone through the above analysis for two reasons. First, while it could still be argued that the FCC has the authority to act along the above lines under the public interest standard and its comprehensive rule-making powers to keep pace with this dynamic industry, the fact is that as a practical matter, a change of such sweeping nature could only be effected by the Congress. Second, the analysis shows that it is very poor policy if the broadcaster decides to "play" instead of "pay"-that this "play or pay" approach is really another variation on getting the broadcasters to pay. That being so, we are back to a spectrum fee model.

In the end, no broad reform action of the FCC, an administrative agency, can rise above Congress, the real arbiter of basic policy. If Congress is a failure, it is almost guaranteed that the FCC will also be a failure. So the basic issues and approaches must be brought before the Congress, with as cogent an analysis and reasons therefor as possible.

CONCLUSION

While there are many issues and nuances involved in the question of the public interest in the digital broadcast era, I believe that two relationships are of the greatest importance by far to the nation-broadcasting and education, and broadcasting and the political arena.

As for the first, education today is at the top of the public's concern, and while broadcasting is not a panacea, this medium, with its power and reach, can obviously make a significant contribution. In the digital era, there can, for example, be substantial educational multiplex operations that will make available a pre-school (ready to learn) channel, a channel for the school-aged child, a literacy channel, an adult education channel, and a training channel especially for teachers and parents. For such an operation, it is sensible to look to public broadcasting, rather than the commercial sector. It is also sensible to go beyond the flawed CTA "play or pay" option (303b[b][2]) and directly impose a 1 percent "pay" solution (based on advertising revenues and station sales), leaving the commercial sector free to "play" as it wishes. (This is not to abandon the more optimum 2-percent solution discussed before, but rather to set out the bedrock minimum.)

In the second area, political broadcasts, broadcasting is the most powerful and sought-after medium, especially in national and state-wide races. Reform in this area involves many factors-political, pragmatic, constitutional-and, as noted, must be fashioned as part of an overall campaign-finance legislative package. But part of such a package-the political time bank, using a 1-percent solution (spectrum usage fee)-is again a bedrock measure.

Endnotes

1. See Angela Campbell's paper, "Toward a New Approach to Public Interest Regulation of Digital Broadcasting," in this volume.
2. The term "public broadcasting" includes not just over-the-air broadcasting but other telecom and related activities by public entities (e.g., satellites, cable, cassettes, the Internet).
3. I stress that this is a policy argument-not a constitutional one. The constitutional basis set out in Red Lion (Red Lion Broadcasting Corp. v. FCC, 395 U.S. 367 [1969]) is still applicable-the government licenses broadcasters; allocational scarcity exists in that more people want to broadcast than available frequencies can accommodate (which is still the case today); the government could have divided up the licensing time among many broadcasters (e.g., by week or month) but instead licenses one party who then is a fiduciary for all those kept off by the government. Significantly, Red Lion was a radio case when there were almost 7,000 radio stations; today there are over 11,000. It cannot seriously be argued that the scheme is constitutional at 7,000 but unconstitutional at 11,000. What can be cogently argued is that, as a matter of policy, a different scheme should be employed in television than in radio.
4. McCann-Erickson, 1997. The television broadcast industry overall earned about $37 billion in 1997, with $13 billion going to the four major networks. The $21 billion figure is used because the regulatory scheme is directed to licensees, not networks.
5. These figures include both "combo" sales (TV and radio) and radio only. The sums so obtained would go to the public broadcasting trust fund, and would be available generally to that fund; public radio would be funded from the 1 percent spectrum usage fee (see note 5).
6. In the case of radio, where the costs of operation are much lower than in television, the suggested percentage would be 1 percent of gross advertising revenues (roughly $12 billion in 1997; McCann-Erickson, 1997). The sums so obtained would be used for public radio and the political time bank, described in the following discussion.
7. Significantly, after examining rates negotiated in patent and copyright areas, the National Association of Broadcasters suggested that the Commission adopt a fee of 2 percent of gross revenues from ancillary advanced television (ATV) operations. Source: comments of the NAB filed 4 May 1998 in MM Docket No. 97-247, dealing with fees for ancillary use of the ATV spectrum.
8. This plan does not employ a spectrum usage fee to gain the necessary sums for the political time bank; rather, at the beginning of each election cycle, every TV and radio station would contribute two hours of prime spot time to a national time bank administered by the Federal Election Commission (FEC). The plan also places certain restrictions on use of the time (e.g., at least one minute at a time, with candidates on screen at all times). I suggested that the sums be allocated by the FEC to the national and state parties, to be used as they deem best. Clearly, these and other nuances of campaign reform are for the Congress-not the Advisory Committee-to decide, and therefore are not discussed further in this paper.
9. FCC vs. Pacifica Foundation, (438 U.S. 726 [1978]), affirming the FCC policy that indecent broadcasts can be lawfully channeled to late hours, did not rely on the public trustee/scarcity concept of Red Lion, but rather on the pervasive nature of broadcasting, with children present.
10. All subsequent references to individual sections of the law refer to the Communications Act of 1934, as amended, unless otherwise noted.
11. The rationale for the above suggested changes is make sure that the equal time regime does not interfere with broadcast journalistic efforts to inform the electorate. Long experience establishes application of the equal time standard to campaigns that include fringe party candidates (e.g., Socialist Labor; Vegetarian) simply results in no time at all; the major party or other significant candidates thus get no exposure, nor do the fringe party ones. Cf. Arkansas Educ, Tel. Comm. v. Forbes, 118 S.Ct. 1633 (1998).
12. For a more detailed discussion of the lowest unit rate provision in broadcasting, see the two papers by Anthony Corrado in this volume.
13. The Court unanimously held that cable is not subject to the provisions of Red Lion. See Turner Broadcasting Sys., Inc. v. FCC, 114 S.Ct. 2445, 2456-57 (1994). Significantly, cable does fit within the provisions of Section 315 (see 315[c][1]) (defined by FCC rules to mean "origination cablecasting").
14. United States v. O'Brien, 391 U.S. 367, 377 (1968).
15. Quality Time? The Report of the Twentieth Century Fund Task Force on Public Television, (New York: Twentieth Century Fund Press, 1993). See 35-39, on governance; 18-21, for local obligations.
16. At the same time, the NAB vigorously opposes all efforts to make the obligation effective, such as the three-hour guideline for core programming. Indeed, the NAB, in recent court filings and Hill testimony, has argued that Red Lion is no longer good law because scarcity no longer exists today. It is another indication of broadcaster "clout" that they can both argue for the social compact (the public trustee concept) and, at the same time, argue that the public trustee content scheme is unconstitutional-and yet no one in Congress calls them to account for this egregious conflict.
17. See Henry Geller, "1995-2005: Regulatory Reform for Principal Electronic Media," (Washington, D.C.: Annenberg Washington Program, 1994), 24.
18. That is often the length of the cable franchise. See, e.g., the fifteen year franchise for Media General in Fairfax, Va. (Washington Post, 12 May 1998, B1, 5). So again, symmetrical regulation of cable and TV would be promoted.
19. Prior to Congressional action in the 1996 Telecommunications Act, the FCC suggested a range that included the 50 percent figure for the TV national audience limit.
20. According to his spokesman, "Tauzin believes that once commercial broadcasters 'get a peek' at public interest obligations expected of them, 'they'll be more than happy to pay into a trust fund'" (Television Digest, 18 May 1998, 6).
21. However, as noted, the spectrum fee model also includes a political time bank in connection with campaign finance reform.
22. See Tracy Westen, "A Proposal: Media Access for All Candidates and Ballot Measures," in this volume.
23. Without such a requirement, the candidates would accept the free time but still be driven to seek large sums to purchase additional broadcast time, as Senator McCain has stressed; in Barry Diller's apt phrase, it would be "pouring gasoline on a raging fire."
24. Geller, "1995-2005: Regulatory Reform for Principal Electronic Media," 31.
25. See Second Report and Order-Leased Commercial Access, 12 FCC R. 5267 (1997), aff'd, Value Vision International, Inc. v. FCC, case no. 97-1138, D.C. Cir., issued July 24, 1998.
26. See Denver Area Educ. Consortium v. FCC, 116 S.Ct. 2374 (1996).
27. Time Warner Entertainment Co., L.P. v. FCC, 93 F.3d 957, 967-973 (D.C. Cir. 1996).
28. Turner Broadcasting Sys., Inc. v. FCC, supra, 114 S.Ct. at 2480 (O'Connor, J., dissenting); 819 F. Supp. at 61-62 (D.D.C. 1993) (Williams, J. dissenting).
29. The suggestion that equal opportunities apply to ballot issues would be beyond the FCC's authority, and in any event does not deal with the real issue-the need for free time to correct any large imbalance in the treatment of a ballot issue.
30. The FCC had such processing guidelines until the deregulation actions in the 1980s. See UCC v. FCC, 707 F.2d 1413, 1420-21 (D.C. Cir. 1983); Greater Boston Television Corp. v. FCC, 444 F.2d 641, 854-55 (D.C. Cir. 1970); but see National Black Media Coalition v. FCC, 589 F.2d 598 (D.C. Cir. 1978).
31. Indeed, as to radio broadcasting, it does not fit the situation today, with the many specialized programming formats in the major markets. See, e.g., the 1976 example of the classical music station, KIBE-AM, where the licensee, in order to meet the FCC processing guideline of 8 percent nonentertainment, dropped a 6 a.m. baroque music program for a talk show.
32. See, e.g., Red Lion, 395 U.S. at 379-80; and NBC v. U.S., 319 U.S. 190 (1943). When Congress wants to restrict the agency as to content regulation, it knows how to do so. See Sec. 624 (f)(1), restricting FCC content action in the cable field.
33. Acknowledgment: I prepared the Common Cause filing.
34. Another pending proposal in which I also participated is a rule-making request that LUR be afforded only when the candidate appears in the spot at least 30 percent of the time. This is less controversial than the above free time matter, but there has been no FCC action on it for the last two years. Standing alone, it is probably not of sufficient importance to warrant consideration by the Advisory Committee.

Return to Structure and Efficiency Approach to Reforming Access and Content Policy

Forward to Casting a Broader Net