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Communications and Society Program
Toward a New Approach to Public Interest Regulation of Digital Broadcasting
Angela Campbell
Director, Citizens Communications Center
Georgetown University Law Center
In January, 1998, the Aspen Institute's Communications and Society Program convened the first in a series of meetings to examine the public interest in the United States' communications system. With funding provided by the John and Mary R. Markle Foundation, the Program hosted the initial session of the Aspen Institute Working Group on Digital Broadcasting and the Public Interest on January 25-27, 1998, at the Institute's Wye River Conference Center. The conference brought together twenty-three legal scholars, lawyers, economists, and policy advocates, representing a variety of experiences and perspectives, to consider two issues: (1) the theoretical and legal bases for the imposition of public interest obligations on those using the electromagnetic spectrum for broadcasting purposes, and (2) other public interest implications of the move to digital broadcasting. It is the hope of the Working Group that the ideas generated at this and subsequent meetings will add to the ongoing public dialogue on broadcasting and the public interest, and will prove useful to the ongoing debate over the public interest responsibilities that should accompany broadcasters' receipt of new digital television licenses.
This report summarizes the proceedings of the January, 1998, conference, and is divided into five sections. Section one, "The Current Status of DTV," summarizes the current status of digital television broadcasting (DTV). Section two, "Red Lion Revisited," addresses the constitutional underpinnings of the current public trustee scheme for broadcasting, focusing on whether the scarcity rationale established in the Red Lion case (Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 [1969]) remains viable today. Participants considered whether the advent of DTV provides an opportunity to develop different justifications for broadcast regulation, including what those justifications might be and whether any reason at all exists for imposing public interest requirement on DTV. Section three, "Alternative Approaches to Public Interest Regulation," describes and critiques two alternatives to the public trustee model: a spectrum fee proposal and a "pay or play" proposal. Section four, "Factors to Consider in Developing Approaches for the Public Interest Obligations of Digital Broadcasters," discusses relevant factors to be used in weighing the merits of the various approaches. The final section of this report summarizes the four main models proposed and discusses the advantages and disadvantages of each.
The Current Status of DTV
Like analog television, DTV uses 6 MHz of the electromagnetic spectrum. Unlike analog, which can send only one program at a time, DTV can offer a variety of programs and services simultaneously. For example, a digital broadcaster can broadcast a single program with a very-high-resolution picture (high-definition television [HDTV]) or multiple channels of programming at standard resolution (SDTV). (The broadcast of multiple channels is called "multiplexing.") In addition, DTV also permits the transmission of a variety of data services.
The Telecommunications Act of 1996 resolved many outstanding questions about DTV. For example, the Act requires that should the Federal Communications Commission (FCC) issues licenses (which it has done), the licenses must go to existing analog broadcasters. The Act also specifies that DTV licenses, like analog licenses, are subject to public interest obligations. Moreover, the Act specifies that while broadcasters may, for now, continue to operate on their existing portion of the spectrum, they will at some point have to give it back. (It should be noted that many Working Group participants predicted that broadcasters will never actually be required to give back their analog channels.) Finally, if broadcasters use the new spectrum for "ancillary and supplementary services" for which they receive payment, they must pay a fee equivalent to that which they would have paid had the spectrum been auctioned.
In April 1997, the FCC issued a Report and Order outlining very minimal standards for DTV.1 The FCC report declined to require broadcasters to air HDTV; nor did it require a progressive signal as proposed by the computer industry. The report did require each individual broadcaster-whatever else it decided to do with its spectrum-to provide at least one free channel with programming comparable to that offered today so that the public would be no worse off. The FCC report stated the FCC's intent to hold further proceedings on broadcasters' public interest obligations.
Questions left unresolved by the Telecommunications Act and the FCC report include: (1) whether DTV signals will be protected by "must-carry" rules, i.e., whether cable systems will be required to retransmit the DTV signals of digital television broadcasters in the manner currently required for analog channels, and (2) how fees will be assessed for ancillary and supplementary services such a subscription channels (those channels for which broadcasters charge consumers to receive programming). While the industry plans an aggressive build-out, with the top four stations in the top ten markets scheduled to begin digital broadcasts in November 1998, much uncertainty remains in the market.
Red Lion Revisited: Underlying Theories of Public Interest Regulation
The explosion of new media for communication made possible by advances in digital technology raises the question of whether the scarcity rationale, discussed below, continues to make sense as a basis for regulating broadcasting. In this environment, are there alternative legal bases for justifying government regulation of broadcasting?
There was significant, but by no means unanimous, support among the Working Group participants for using a public property/public forum rationale to justify continued governmental regulation. Under this rationale, because government owns the spectrum, it has the right to set the rules for discourse, impose obligations, and provide subsidies for speech that may be insufficiently provided for in the marketplace. Some participants argued that this rationale provides a superior basis for regulating both analog broadcasting and DTV, and justifies the continuing differential treatment of broadcasting vis-à-vis other categories of media.
The Traditional Basis for Regulating Broadcasting: Scarcity
The traditional rationale for regulating broadcasting dates back to the 1920s. To reduce the amount of interference and chaos in the use of the radio spectrum, the U.S. government began to license the spectrum. The government's role vis-à-vis the spectrum has three components: it allocates spectrum among various types of uses, it assigns height and power restrictions to broadcasting towers and equipment, and it determines who gets to broadcast by awarding licenses. The government allocated more spectrum to broadcasting than to other uses to foster the local outlets Congress wanted (§307 of the Communications Act of 1934) and to contribute to the creation of an informed electorate (§315 of the Communications Act).
Because more people wanted to broadcast than there were frequencies available, the government had to make some choices. As Justice Byron White noted in the Supreme Court's decision in Red Lion, the government could have licensed many speakers to speak at different times, but instead decided to put one speaker on and keep everybody else off. Under this approach, the licensee has no property interest in the frequency and is required to act as a fiduciary for those who are kept off. In other words, the licensee has certain obligations to serve the public interest and has to demonstrate to the FCC that it has done so. Because of the dynamic nature of broadcasting, the Communications Act generally left it to the FCC to determine the nature of those public interest obligations. The constitutionality of this scheme was upheld by the Supreme Court in the 1943 NBC case (National Broadcasting Co. v. United States, 319 U.S. 190 [1943]) as well as in Red Lion.
Although many people argue that Red Lion is no longer valid because broadcasting outlets are no longer scarce, Henry Geller, communications fellow at The Markle Foundation and former FCC general counsel, asserts that this view is incorrect. The scarcity critical to the constitutional issue is that many more people want to broadcast than there are available frequencies because of a government licensing scheme putting one person on the frequency and enjoining all others. That scarcity still exists today. When Red Lion, which involved a personal attack carried on a radio station, was decided in 1969, there were approximately seven thousand radio stations on the air. Today there are some eleven thousand radio stations on the air. To Geller, it makes no sense to say that the scheme is constitutional with seven thousand stations but not with eleven thousand stations.2
Five years after Red Lion, the Supreme Court found unconstitutional a similar personal attack regulation applied to a newspaper in Miami Herald Publishing Co. v. Tornillo (418 U.S. 241 [1974]). In its decision in Tornillo, the Supreme Court did not even mention Red Lion, much less distinguish its decision in Tornillo from its earlier Red Lion decision. The government sought to extend the Red Lion analysis to cable television, but the Supreme Court rejected this approach in the first Turner case (Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622 [1994]). Similarly, the Court rejected applying Red Lion to the Internet in Reno (Reno v. ACLU, 117 S.Ct. 2329 [1997]). Although it is hard to know what to make of these recent decisions, it is clear that some justices, including Justice Antonin Scalia, Chief Justice William Rehnquist, and Justice Clarence Thomas, do not like the broadcast regulatory scheme.
Some Working Group participants thought that the Supreme Court was unlikely to extend Red Lion to DTV. However, Andrew J. Schwartzman, president of Media Access Project, said that the 1996 Telecommunications Act, as well as the budget bill, suggested that abandonment of Red Lion would be unwise. Steve Shiffrin, professor at Cornell University Law School, added that if the Court overturned Red Lion, the government could take the frequencies and put on its own programming, just as government decides what the General Printing Office (GPO) will print or public universities will teach.
Critique of the Scarcity Rationale
Several participants took issue with the traditional understanding that government intervention was needed to prevent chaos. Robert Corn-Revere, a First Amendment attorney and partner at the Washington, D.C., law firm of Hogan & Hartson, noted that a system of private ownership had begun to develop earlier this century that could have resolved the problem of chaos. This development was cut short, however, by the passage of the Radio Act of 1927. Thus, it is not at all clear that regulation was or is required to prevent chaos. He observed that the recent use of spectrum auctions provides tacit recognition that a system of private property rights could provide an alternative to regulation.
Second, Corn-Revere asserted that even if it made sense to discuss scarcity in the past, that is no longer the case today. At the time Red Lion was decided, the only way to provide audio or video programming was to get a license from the FCC. Today, with Internet radio, digital audio, forty channels of audio on direct broadcast satellite (DBS), video cassette players, and hundreds of cable networks, there are multiple ways to provide audio and video programming.
With so many alternatives available, he argued, it no longer makes sense to justify regulation in terms of scarcity. Rather than looking for other justifications, Corn-Revere would advocate the elimination of broadcast content regulation. Because he views such regulation as an anomaly and full First Amendment rights as the norm, he is troubled by the assumption that broadcasters should continue to have "second-class" rights under the First Amendment.
Robert Crandall, senior fellow at the Brookings Institution, agreed that scarcity makes no sense as a rationale for broadcast regulation-even though spectrum may be even more "scarce" today than in the past because of the increasing number of uses. If scarcity were a basis for regulation, Crandall argued, everything could be regulated. In Crandall's view, regulation might be justified by market power over ideas. But increases in the value of spectrum do not necessarily mean that there is an increase in market power over ideas.
Crandall criticized the government for allocating the spectrum in a way that created more scarcity than necessary and gave incumbent broadcasters tremendous power to hinder competition. Nolan Bowie, fellow at Harvard Law School's Berkman Center for Internet and Society, agreed that the scarcity is government created, noting that in the 6 MHz needed for a single television station, the FCC could have instead licensed thirty FM or six hundred AM radio stations. This led to a discussion of whether DTV technology would permit sharing in a way that might avoid scarcity. In the United Kingdom, for example, a white paper has proposed that different programmers be licensed to provide program feeds on a single DTV transmission. The incumbent licensee would own the transmitter and be compensated by the other programmers. However, in the United States, under the full 6 MHz standard adopted by the FCC, it would not be possible to divide the 6 MHz into separate channels and license them separately.
Because of the questions raised, both on and off the Court, about Red Lion's continuing viability in the new digital era, it makes sense to consider whether the transition from analog to digital television presents an opportunity for reconsidering the scarcity rationale for regulating broadcasting and providing a constitutionally firm basis for public interest regulation. Two alternative theories were discussed at the first meeting of the Aspen Institute Working Group on Digital Broadcasting and the Public Interest.
An Alternative Theory: The Need for Rules for an Interference-Based Medium
Tracy Westen, president of the Center for Governmental Studies, offered an alternative rationale for regulating the spectrum. He does not believe that the constitutionality of broadcasting regulation hinges on scarcity. Rather, Westen argued, the basis for regulating broadcasting is the need for government to develop rules for using the frequencies in order to avoid interference, just as a city council makes rules for taking comments at a public hearing or the Supreme Court sets the terms for an oral argument. Whether such rules are constitutional turns on whether they are reasonable. In moving to manage and to regulate the spectrum, the government could have set up the rules so that more people could speak, but it chose not to for policy reasons, thereby creating scarcity.
For example, the government could have reserved one hour per day per broadcaster in the periods before elections for political candidates without raising constitutional problems. From here, it is a reasonable next step to ask broadcasters to share their transmitters with political candidates for a limited period of time. In exchange, the broadcasters get to use the spectrum for free and they do not have to share it with any one else.
An Alternative Theory: Public Property Rationale
John Duffy, assistant professor at the Cardozo Law School in New York, argued that it is important to have a theory of the First Amendment that applies to all speech, rather than to treat broadcasting as an "exception." He urged that the best way to do this is to rehabilitate the "public property rationale." Duffy disagreed with the claim that government is needed to create rules to make speech possible in an otherwise chaotic environment. But it would be appropriate for government to create rules for use of its property. He compared broadcast licensing to a small city contracting out control over access to a public park where the contractor would have no right to speak to the exclusion of others.
Shiffrin agreed that the public property rationale provides a superior analysis to the scarcity rationale. In his view, government can license spectrum usage because it has a property interest in the spectrum. Whether or not the common law would have worked out a way to treat spectrum as private property, the fact is that the government asserted its property interest in choosing to allocate the spectrum using a licensing scheme, and under this scheme no one has a superior right. The government could have sold off the spectrum, but it did not, and nothing in the First Amendment requires it to sell the spectrum.
Because the government decided to license broadcasters as trustees, Shiffrin does not believe that licensees have the right to keep the frequencies without meeting the conditions of the trust. But this does not mean that government can do whatever it wants with the spectrum either. He claims that broadcasters have First Amendment rights analogous to the academic freedom rights of professors in public universities who, while subject to certain limitations and conditions as employees of government-funded institutions, enjoy broad intellectual freedom and speech rights under the First Amendment. The public forum doctrine further provides a basis for the public to have some right of access. If the public has a right of access to parks, ought it have access to a far more important medium of communication? This does not mean that the First Amendment mandates access, but it can be used as a sword as well as a shield. While acknowledging that the Supreme Court has held otherwise, Shiffrin thinks the Supreme Court was wrong, and that in any case, a distinction can be drawn between what the First Amendment requires and what it permits.
Tracy Westen commented that the public property theory makes an important contribution, but fails to explain why the spectrum is government property. He asked whether the City of Los Angeles could, consistent with the First Amendment, buy the Los Angeles Times and turn it into a public forum. He thinks not.3 But he would distinguish this hypothetical case from the case of the radio spectrum. Because spectrum is interference based, the government had the option to privatize it or to make it public. While acknowledging that the government could have sold off the frequencies, the question remained as to what it was selling. Is it the right to exclusive use of the spectrum or is it a more limited right?
Should Similar Public Interest Obligations Apply to All Forms of Media?
With multiple ways of obtaining audio and video content, Andrew Shapiro, fellow at Harvard Law School's Berkman Center and director of the Aspen Institute Internet Policy Project, observed that it was becoming harder for audiences to differentiate between audio and video providers who are using the spectrum (such as traditional television and radio broadcasters) and those who are not (such as Internet broadcasters). Shapiro expects that in the next five to ten years there will be a hybrid television-computer network. Where some media are subject to public interest obligations and others are not, he voiced his concern about "regulatory arbitrage." But Julius Genachowski, general counsel of HSNi Broadcasting, pointed out that every other medium is subject to some form of public interest regulation. For example, cable systems have public access requirements and direct broadcast satellites (DBS) have a set-aside requirement for noncommercial educational programming. In his view, the relevant question is not whether to impose public interest regulation, but whether public interest obligations should be the same for competing media or be adapted to "fit" the particular medium.
Others cautioned that, with the exception of broadcasting, the constitutionality of public interest obligations had not yet been ruled upon by the Supreme Court. While the Supreme Court upheld the constitutionality of must-carry regulations for cable, it essentially viewed them as antitrust regulations. And while a panel of the D.C. Circuit Court found the DBS set-aside constitutional, members of the court were deeply divided on this issue.4 Resolution of such questions are important for the future. Although the Internet is not now subject to a public interest regulatory scheme, Corn-Revere wondered if that exception would continue if policymakers and courts agreed with the assumption that all media should be regulated. He expressed his concern that the traditional protections of the First Amendment would be lost and that we would end up with a fundamentally different understanding of the First Amendment.
Framework for Assessing the Constitutionality of DTV Public Interest Requirements
In assessing the constitutionality of regulations affecting speech, the Supreme Court uses different levels of scrutiny. A standard of strict scrutiny is employed where the government seeks to suppress or regulate speech because of its content. Strict scrutiny requires the government to show that the regulation serves a compelling governmental interest and does so using the least intrusive means. As a practical matter, application of strict scrutiny quite often results in a finding that the regulation is unconstitutional. Intermediate scrutiny is employed where government regulation, while incidentally affecting speech, is content neutral. This involves a balancing test, called the O'Brien test,5 that requires that the governmental interest be substantial and the regulation be narrowly tailored to serve that interest (though not necessarily the least restrictive means). The third level of scrutiny is called rational basis. Where there are competing speech interests, the Court determines whether the government has struck a reasonable balance, as for example, rules governing the conduct of a city hearing.
Courts have applied the least intrusive means and narrowly tailored tests quite flexibly. Three questions frequently arise in applying these tests. First, what alternative means of achieving the government objective are truly available? Second, which means are narrower than others? Third, which means actually work? These tests make sense when the government seeks to suppress speech or has some adverse impact on speech rights, but not when the government is subsidizing speech, e.g., universities, museums, the GPO, the Voice of America, and other overseas broadcasting.
Monroe Price, professor at the Cardozo Law School in New York, noted that there was a quiet debate within the Supreme Court about the value of the existing categories and approaches to First Amendment analysis of the media. Some justices, particularly Justice Stephen Breyer, have seemed open to what they call a more "contextual" analysis in which historic doctrines, like scarcity, would be less relevant to determining whether and how government can regulate. Furthermore, as the media issues become more ones of industrial competition and structure, the Court will have to decide how much to defer to Congress's factual characterizations of media effects and desirable media organization and role.
Should the Court Apply the Red Lion Standard to DTV ?
Since the effect of Tornillo was to confine the differential regulatory treatment to broadcasting, it is important to address whether DTV should be treated in the same manner as broadcasting. Andrew Schwartzman argued for treating DTV differently from the Internet. He contrasted the Internet, where there is a true public square and an abundance of speakers, with DTV, where the government has selected a limited number of speakers. No content regulation is needed for the Internet, whereas regulation is needed for DTV to create a marketplace of ideas. He sees a difference between government regulation designed to create a marketplace of ideas, which is an appropriate role for government, and government regulation designed to abridge speech, which is not. With DTV, regulation should be concerned with setting up a system to maximize discourse.
Brookings' Robert Crandall pointed out that requirements imposed on broadcasters could become irrelevant in the future, when all forms of programming are distributed by wire and over-the-air broadcasting is subsumed by the Internet. Crandall thought that regulation of DTV would be unnecessary because DTV will offer hundreds of addressable channels and serve minority interests, effectively serving the public interest without resorting to government regulation.
David Johnson, former director of the Aspen Institute Internet Policy Project, agreed that one might distinguish the Internet from broadcasting on the grounds of abundance, but observed that interference exists on the Internet as well as in broadcasting. He said that he could imagine that the arguments of the past regarding interference and government property used to justify broadcast regulation could be replayed in connection with the Internet. If broadcast regulation was not premised on history, he said, he feared it could be expanded to cover everything else.
Shiffrin suggested that the property rights theory permitted DTV to be distinguished from other media. The government does not own the Los Angeles Times, but it does own the spectrum used by broadcasters. The government has communications objectives for the use of its property and it is appropriate to license the use of this property in furtherance of those objectives.
Westen argued that any rationale that exists for regulating analog television applies equally to DTV. The key difference between analog and digital television, he said, is the ability to multiplex. While multiplexing provides the ability to treat different channels in different ways, it does not eliminate scarcity since there is still only one speaker: the broadcaster holding the license.
What Are the Rationales for Regulating DTV?
Under either strict or intermediate scrutiny, it is essential to identify the government's rationale for regulating. Thus, it is important to identify the government's rationale in regulating broadcasting.
Participants first identified a variety of public interest goals and needs. These included: (1) service directed to local communities; (2) democratic deliberation by providing electoral information as well as generally promoting a marketplace of ideas with viewpoint diversity; (3) the education and protection of children; (4) public health and safety; (5) national defense; (6) lessening First Amendment tensions; (7) continued availability of free television, including both advertiser-supported and commercial-free programming; (8) arts and culture; and (9) a shared national experience.
Mark Lloyd, executive director of the Civil Rights Telecommunications Project, argued that the goal of regulating DTV should be to promote democratic deliberation. There is some tension, he said, between what is efficient in the marketplace and what is good for a democracy. The prevailing paradigm has been that of the marketplace, but it is equally appropriate for government to act to foster community and democratic values. While agreeing that the market and the community are not necessarily opposed, he urged that the market should serve community values and be checked if it does not.
Some participants suggested that providing a shared national experience by creating a "public square" was a useful goal. There was concern that young people today had less common knowledge than in the past and that society is becoming increasingly segmented. Shapiro suggested that the problem is not too few channels but too many, and the real scarcity is one of attention, causing people to complain about "data smog" and "information overload." The large number of channels makes it difficult to engage in a common discourse. But even though technologies are converging, differentiation will continue to exist. As Zoë Baird, president and CEO of The John and Mary R. Markle Foundation, observed, "not everyone can be on AOL's top page."
Why Not Simply Rely on the Marketplace?
Some participants questioned whether the solution for these problems should come from government or the private sector. Shiffrin expressed concern that the marketplace treated citizens merely as consumers, encouraged a hedonistic society, and was hostile to anti-materialistic messages. Furthermore, advertisers prefer to avoid political advertising and controversial programming, and have failed to serve audiences such as children and the elderly that are not as attractive to advertisers. In addition, the kinds of programming that attract large audience, e.g., sensational crime, are not necessarily good for society.
Crandall responded that Shiffrin had outlined the case against the old regime, but that it was a different world today. Now there are so many channels available so cheaply that people should be able to express their desires through the marketplace. Additional channels make niche programming more economically feasible. Moreover, Crandall questioned whether people could or should be made to watch television that is "good" for them because, given the abundance of channels, people can always turn to something else.
This discussion posed an apparent dilemma: In response to scarcity, the number of voices has been expanded. Now, with so many voices and their resulting fragmentation, people are concerned that society lacks a public square or common experience. Competition actually can make matters worse by eliminating common viewing experiences and squeezing subsidies for beneficial types of programming. While bookstores have an incentive to diversify content to bring in more consumers, television is always under pressure to go for the mass audience. Should the government act to remedy this problem or should resolution of this tension be left to the market?
If it is left to the market, it is uncertain whether a public square will develop. Traditional broadcasting may no longer be economically feasible in the future. Already, the cable sports broadcaster ESPN competes with the broadcast networks for the rights to football, and HBO produces movies. It is unclear what consumers will want from DTV, e.g., whether they will want a single HDTV signal or multiple channels. It is likely that stations will broadcast some events, such as sports and dramas, in the HDTV format, while at other times provide pay channels in competition with cable as well as data transmission services. To get an idea of what the marketplace might do, Nicholas Johnson, former FCC commissioner and professor at the University of Iowa College of Law, suggested looking at the Internet and asking what is good about it and what needs improvement. Would the problems with broadcasting be solved if it became more like the Internet, or would a different set of problems arise?
Some responded that a multiplicity of channels did not ensure a diversity of voices. They thought that government should take an active role in (1) promoting democratic deliberation, (2) subsidizing the creation of a "public square," and (3) promoting the availability of educational programming for children, because of market failure in these three areas. Others preferred to rely on the market, suggesting that television should just entertain and education be left to books. They believed that whether the market leads to homogenization or to fragmentation, no regulation is needed.
Alternative Approaches to Public Interest Regulation
The discussion turned next to two basic models of regulation that might be employed. The spectrum fee proposal, advocated by Henry Geller, would relieve broadcasters of their public interest responsibilities in exchange for a spectrum fee that would be used to support public broadcasting. The other proposal, called "pay or play," would give broadcasters the choice of either meeting their public trustee responsibilities or paying to get out of them.
The Spectrum Fee Proposal
Geller argued that commercial broadcasters should be relieved of public interest programming responsibilities and instead pay public broadcasters to serve these non-market public interest goals with high-quality programming. Because they do not have to maximize audiences to sell advertising, public broadcasters can seek to provide high-quality educational programming in the public interest. However, Geller agreed that there were problems with the present system of public broadcasting that would need to be reformed.
Specifically, Geller suggested setting up a trust fund that would allow public broadcasting to become independent of Congressional funding. Funding could come from a percentage of the revenues of cable companies as well as broadcasters. For example, 3 percent of broadcasting gross revenues would yield roughly $1 billion per year. After five years, the trust would be endowed and could run on the interest. Geller thought it would be desirable to make public broadcasting independent of Congress and also get rid of "enhanced underwriting." But some questioned whether public broadcasting would achieve its intended goals if it were freed of political control.
Geller would retain the existing ownership rules as well as improve cable leased access and public access in order to promote diversity of voices. Similarly, broadcasters would still be subject to section 315's requirements to provide equal opportunities for political candidates (at least for paid appearances), closed captioning, and sponsorship identification, as well as its payola prohibitions and indecency restrictions. But he would relieve broadcasters from their obligation to provide reasonable access for federal candidates now required by section 312(a)(7) of the Communications Act and would not reinstate the Fairness Doctrine.
The "Pay or Play" Proposal
Under a "play or pay" approach, DTV licensees would be given a choice of providing certain kinds of public service or paying others, such as public broadcasters, to offer services in the public interest. The provision of public service or payment might take any number of forms, including devoting a certain number of megabits, channels, or hours to public service or contributing space for educational data transmission.
Schwartzman suggested there were virtues to a "mixed model," that is, permitting the ones that want to opt out do so but not requiring them to. Some broadcasters may believe it is good for the community or good for business to do community-oriented programming. Given flexibility, broadcasters might also be inclined to enter into local joint ventures, such as a local version of C-SPAN. But others were skeptical, fearing that the only reason broadcasters would offer children's educational programming instead of paying would be because it would be cheaper to do so.
Some objected that the mixed model would continue the problems with the existing public trustee system, require aggressive enforcement, and create incentives to buy out. Proponents of this model responded that the public trustee system could work, but generally has not been effectively implemented. They thought that effective enforcement could be based on self-reporting and complaints, and would not be unduly burdensome.
Charles Firestone, director of the Aspen Institute's Communications and Society Program, presented a variation on the "pay or play" approach called the "spectrum check-off" model. First, the spectrum is valued by auctioning the lowest valued station and allowing the incumbent to match the highest bid. That amount would be converted into a ten-year lease with annual payments. Broadcasters would have to make the annual payment, which could be offset by providing programming desired by the government, such as public service announcements or children's educational programming. This approach would reduce tensions with the First Amendment because it would be clear that it was the government speaking. While similar to the "pay or play" approach, the main difference is that as a matter of largess, the government accepts payment in programming for programming that it wants.
There was some discussion of how far the government could go in dictating the content of programming that would be counted. Some suggested that the government would in effect treat the licensee as a contractor and would not have to count programming that was not what it intended. To the extent that the government did not treat the licensee as a contractor, the same quality concerns might arise that arise under the current trustee scheme. Moreover, the programming would not be noncommercial as it would be if payments were made to support public broadcasting.
Reactions to the Proposals
Participants raised a number of different questions and concerns about these proposals to allow broadcasters to buy out of some or all of their public interest obligations. Several participants expressed their concerns about relegating public interest programming solely to noncommercial channels. Some speech, such as that concerned with the political process and public safety, is so important that all members of the public ought to hear it. For this reason, we allow people to solicit door to door even though some people would prefer not to be disturbed by solicitors. Society benefits from hearing from diverse speakers and from breaking down "ghettoization." To address these concerns, it was suggested that commercial broadcasters "ventilate" their programming with, for example, access for political candidates or leased time. Shapiro suggested requiring linkages between the commercial and public programming in an attempt to get a share of the public's most valuable commodity-its attention.
Daniel Brenner, vice president for law and regulatory policy at the National Cable Television Association, suggested examining whether other schemes involving payment have been successful. For example, local jurisdictions may assess a cable franchise fee of up to 5 percent. What has this money been used for? What have been the intended and unintended effects? Are people satisfied with how the money has been used? He noted that people seemed to like things that were not subsidized by government, such as C-SPAN.
Norman Ornstein, resident scholar at the American Enterprise Institute, suggested that one option would be to create an entity in which broadcasters could participate, similar to the Ad Council. That entity would allocate the funds in the public interest. It could decide to support access for public broadcasting, operate a time bank for political candidates, support local initiatives or run programming. However, some participants were uncomfortable with the idea of broadcasters playing a role in the decision making.
Some suggested that any funds collected from broadcasters might be better spent on things other than programming. For example, funds might be used to teach media literacy or to subsidize access to DTV for low-income people. Some participants were concerned that with the shift to DTV, large segments of the public would not be able to afford the receiving equipment; other participants suggested that this problem could be avoided by letting broadcasters keep their analog channels.
Some participants also objected to collecting the payment "in kind," that is, requiring certain types of programming in exchange for use of the spectrum. In general, the government does not collect resources in kind but in dollars through taxes. Taxes may be a superior means of addressing perceived deficiencies, since they make subsidies apparent. One of the problem with the current system is that we have no idea what we are getting and what the cost is. Duffy suggested that we should be talking about subsidy instead of regulation and be looking for new approaches to subsidies.
Factors to Consider in Developing Approaches for the Public Interest Obligations of Digital Broadcasters
Working Group participants explored the factors to be considered in developing and evaluating alternative approaches for DTV public interest requirements. These included the public interest goals to be attained, mechanisms for achieving these goals, how much it will cost and who will pay, and how public interest requirements are enforced.
Goals
Four goals were identified as primary: political broadcasting, children's educational programming, public health and safety, and localism. With respect to political broadcasting, Tracy Westen further identified three important public interest elements: First, long programs as well as free access for messages should be provided. Second, state and local candidates should have reasonable paid access just as federal candidates do. Third, ballot issues should have reasonable paid access. Participants also recognized public interest obligations to serve persons with disabilities, but did not go into detail on specific mechanisms for achieving this goal. Participants generally agreed that whatever scheme is adopted, it should strive to reduce tensions with the First Amendment.
Mechanisms
Three basic mechanisms were identified. The public trustee (broadcast) model, the entry and access (common carrier) model, and the private ownership (print) model. Several hybrids or combinations were also possible. It was noted that simple access requirements would not achieve certain goals, such as children's television, because someone needs to produce high-quality programs. In general, a problem with access schemes is the lack of resources to produce programming. It was suggested that this problem might be addressed by creating a federal council such as the Foundation for Community Service. In addition, commercial broadcasters might be required or encouraged to help with production and promotional activities.
How Much Will it Cost and Who Will Pay?
Depending on the proposal, the burden of paying may fall on the broadcaster, the speaker, or the government. The government might pay either through spectrum fees or general tax revenues. Brenner expressed concern about the cost of the obligation, comparing the discussion to discussing the "flavor of tea on the Titanic." He predicted that future debate would not be over what public interest obligations should have been imposed, but who was responsible for killing DTV-the FCC (for requiring too rapid a build-out), the cable industry (because DTV may not be viewable on cable even if carried), or the broadcasters (because they did not know what to do with it). But Schwartzman pointed out that the cost of complying with existing public interest obligations is a fraction of 1 percent of the cost of converting to digital.
Enforcement
Enforcement responsibilities could be allocated to the FCC, the courts, the market, or the public. Whoever does the enforcement, however, it is important to create incentives for compliance. Some participants stressed the importance of including citizens in the enforcement process. But it was noted that currently several factors work against effective citizen participation. For example, the lengthening of license terms to eight years and the elimination of formal "ascertainment," in which stations were required to meet with representatives of their community and ascertain their program needs, has cut the connection between broadcasters and the local community.
PROPOSED MODELS FOR PUBLIC INTEREST
OBLIGATIONS OF DIGITAL TELEVISION
The following set of options for meeting the public interest in digital broadcasting is distilled from the preceding discussion, as well as from the background readings and papers prepared for the Aspen Institute conference. The options range from simply adapting the current scheme of public trustee regulation for digital television to eliminating public interest programming obligations altogether in exchange for payments to subsidize public telecommunications. The other two models fall somewhere in between. The "Pay Plus Access" model would require broadcasters to both pay and provide certain limited forms of access to third parties. The "Pay or Play" model would give broadcasters the option of meeting public interest programming obligations or paying to support public broadcasting. The models are intended to be used to achieve a wide variety of policy goals, although some models may be more effective than others depending on the desired objectives. For example, requiring broadcasters to give access to third parties may be an effective means to ensure that political candidates can get their message out, but is not a good way to ensure that children have access to high-quality educational programming.
It should be noted that two additional schemes, voluntary self-regulation and total deregulation, offer alternatives to the mechanisms discussed below. A recent survey of broadcasters, funded by the National Association of Broadcasters (NAB),6 illustrates the extent to which broadcasters already engage in voluntary public service activity. While these alternatives were raised during the Working Group's conference sessions, they were not developed in any detail and are thus not included in the discussion which follows.
Proposal 1: Continue or Improve Upon the Current "Public Trustee" Model
This option would maintain the current public trustee obligations of broadcasters and simply apply them to digital broadcasting. In short, broadcasters would continue to identify issues of concern to their communities and provide programming responsive to those issues, serve the educational and informational needs of children, provide equal opportunities and lowest unit rates to all candidates for public office, and afford reasonable access to federal candidates.
It is not obvious how these public interest requirements will translate to the digital environment, in part because it is still unclear how broadcasters plan to utilize their new frequencies. For example, if broadcasters opt to provide a single program channel in HDTV, it would be easy to apply the same requirements, e.g., to use a three-hour-per-week guideline for children's educational programming, or to determine what "equal opportunities" means by applying existing case-law precedents. However, if a broadcaster chooses to provide multiple program streams via multiplexing for some or all of the time, applying the requirements becomes much more difficult. For example, if the broadcaster has quadrupled the total number of program hours, should the children's educational guideline also be quadrupled? Should one of the multiplexed channels be devoted to public service programming? Does the broadcaster need to offer candidates the lowest unit rate on all channels or only on one of the channels?
Some have argued that if the public trustee model is retained, at the very least certain improvements can and should be made by providing clearer direction to broadcasters and objective ways to measure compliance. For example, just as the FCC has adopted a processing guideline for children's educational programming, it could adopt a quantitative guideline for local and informational programming (e.g., x percent between 6 a.m. and midnight and in prime time). Broadcasters might also be required to devote a reasonable amount of time (e.g., twenty minutes, with three to five minutes during prime time) to political candidates in the period prior to an election.7
Participants suggested several other ways that the public trustee scheme might be improved upon. These include: (1) reinstituting some form of meaningful ascertainment of the community's problems, needs, and interests; (2) repealing "postcard renewal" and requiring licensees to file sufficient information at license renewal to permit effective FCC and public review of whether a licensee has met its public trustee responsibilities; (3) restoring the Fairness Doctrine; and (4) extending equal opportunities to ballot issues.
Arguments in favor of this approach. Generally, it is easier to maintain the status quo than to effect major change. Moreover, this option seems most consistent with Congress' intent. The Telecommunications Act specifically provides that nothing in the section concerning digital television should be construed as relieving a television broadcasting station from its obligation to serve the public interest, convenience, and necessity. In the Commission's review of any application for renewal of a television station that provides ancillary or supplementary services, the television licensee shall establish that all of its program services on the existing or advanced television spectrum are in the public interest." (47 USC § 336[d])
Improvements in how public trustee responsibilities are defined and enforced could benefit the public with respect to existing analog broadcasting as well. These benefits could be especially significant if the transition to digital television takes a long time.
Arguments against this approach. This option would preserve the public trustee model, which has been widely criticized as ineffective. Geller has argued that even though the public trustee scheme is constitutional, it necessarily involves content regulation, and thus creates First Amendment tensions. Also, the First Amendment precludes governmental focus on a most important aspect of public service-high-quality fare. Moreover, it has failed to achieve its intended goals. "Public interest" is a somewhat nebulous concept and it may be difficult to adopt effective, objective, and constitutional standards for what is required of broadcasters to serve it.8 Commercial broadcasters facing fierce and increasing competition have understandably been guided more by the "bottom line" than by serving the public interest. Consequently, retaining the public interest standard continues this state of affairs.
Proposal 2: The "Spectrum Fee" Model
Under this option, broadcasters would be relieved of their public interest programming obligations and, in exchange, would pay a fee that would be used to support public telecommunications and other sources of worthwhile speech not adequately provided by commercial broadcasters. This proposal raises three sets of questions. First, how much should broadcasters have to pay? Second, what will be done with the money collected? Third, what public interest responsibilities should broadcasters be relieved of in exchange for paying the fee?
One proposal is to require broadcasters to pay a percentage of their gross revenues for a certain number of years (perhaps 3 percent for 5 years). This money would be placed into an endowment. Another proposal would be to assess a transfer tax every time a station is sold. This might be seen as more acceptable to broadcasters because it would be considered a cost of doing business and could be allocated by the parties in the transfer negotiations.
As to how the money should be spent, several options are possible. First, it could be used to fund public broadcasting, thus relieving public broadcasting of the continuing need to seek Congressional reauthorization. (However, some participants cautioned that public broadcasting would need to be substantially reformed because it has become too commercially oriented.) Another idea was to use the part of the money to fund other public interest purposes such as a time bank for political candidates, local programming, and children's educational programming. Still others suggested that a new entity be created to make funding decisions. Models for such an entity included the National Endowment for the Arts and the Ad Council.
Under this approach broadcasters would be relieved from public trustee programming obligations such as serving the educational needs of children, addressing local community issues, and affording time to comply with the personal attack and political advertising rules. However, they would continue to be subject to the same regulations as cable television (such as ownership limits and prohibitions against payola) and to equal opportunities provisions (perhaps applied only to paid time).
Arguments in favor of this approach. This approach addresses well-known critiques of the public trustee model. It would relieve broadcasters of public trustee responsibilities, markedly reduce First Amendment tensions, and greatly enhance the resources of public broadcasters, who have strong incentives to provide high-quality public interest programming. Public broadcasters exist for the purpose of providing such programming, especially in the education field. Because they do not rely on advertiser support, they do not need to maximize audience size. However, with significantly increased funding, they would be able to better publicize their offerings. This option also makes the public interest subsidies explicit, and presumably, puts the public in a better position to judge whether the subsidies serve its needs. It ends the asymmetrical regulation of broadcasting and cable television.
Arguments against this approach. This scheme could not be implemented without Congressional approval and for this reason, even if the Advisory Committee recommended it, the FCC could not adopt it. Nonetheless, its proponents felt it was a worthwhile proposal for consideration by Congress.
Even if Congressional authorization were forthcoming, some participants expressed concern about putting certain types of programming, e.g., programming about political candidates, on channels that viewers will need to seek out ("pull"). Candidates wish to reach a broader audience than just viewers of public broadcasting. To create an informed electorate, it may be important that audiences get exposure to candidates and issues whether they want to or not ("push"). Moreover, the spectrum fee might discourage broadcasters who desire to serve the public interest from doing so, thus potentially reducing the quantity and diversity of public interest programming. Finally, there are difficult, unresolved issues regarding whether the fees would be used solely to support public broadcasting, whether public broadcasting would need to be changed, or whether a different way of distributing the funds would need to be developed.
Proposal 3: The "Pay Plus Access" Model
This option 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 discussed above. It 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 in order to see or hear. To make candidate speech widely and easily available, commercial broadcasters would be required to "ventilate" their program schedule by providing some specified amount of time to political 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.
Arguments in favor of this approach. This approach seems to have the same advantages of the spectrum fee approach, while ensuring candidates' access to broad audiences and making it easier for the public to locate information they may seek that is not available on commercial stations. It promotes the ideal of a public square, that is, to have some basic level of common knowledge in society.
Arguments against this approach. This approach has the same problems as the spectrum fee proposal. In addition, it would be more complicated to administer because the FCC would have to enforce the access and linkage requirements. Leased access requirements have not been successful in producing diverse program sources on cable systems, so it is questionable whether leased access would be effective in this context.
Proposal 4: The "Pay or Play" Model
Under this model, public interest obligations are quantified, and broadcasters are given the choice of either meeting these public interest obligations through their programming or paying. Several variations of this model are possible. Two different approaches are discussed below.
One approach is called the "spectrum check-off model." This approach provides a specific dollar value to the trade off that underlies the public trustee scheme, i.e., exclusive use of a valuable frequency protected against interference by government, in exchange for serving the needs and interest of the community. It then gives the broadcaster the choice to pay for the spectrum or to continue the public trustee bargain. Payments would be used to support public broadcasting or the direct purchase by the government of programs and services deemed to serve the public interest.9
Under the "spectrum check-off" approach, broadcasters would be charged for the use of the spectrum on an annual basis. The value of the spectrum might be determined by auctioning off the lowest-rated station in a market and then permitting the incumbent broadcaster the option to lease the frequency at a price equivalent to the highest bid. Broadcasters could pay this fee to the government or they could "check off" up to the full value by airing programs or spots from program categories that the government determines are in the public interest, such as children's educational programs, free political spots, or public service announcements. In the digital television environment, they might also check off the value of certain other nonprogram uses of the spectrum, such as providing high-speed data connections to schools and libraries. The government could use the money received from the fees to support public broadcasting or to purchase time on commercial stations for government-produced or supported public interest programming.
Another approach is based on the Clean Air Act Amendments of 1990. That Act established a scheme for reducing sulfur dioxide emissions by allocating firms a fixed number of "emission allowances" that they could use, bank for future use, buy from other companies, or sell to other companies. This scheme appears to be successful in meeting environmental goals at less cost than traditional regulatory methods. It has been suggested that if a broadcaster's public interest obligations were quantified, the broadcaster could choose to produce and air the programming required or to pay another station in the market, perhaps the public broadcasting station, to produce such programming at less cost to the station. The Children's Television Act in fact has adopted this approach in permitting broadcast licensees to meet part of their obligation to serve the educational and information needs of children by demonstrating "special efforts . . . to produce or support [children's educational] programming broadcast by another station in the licensee's marketplace" (47 USC § 303b[b][2]). However, broadcasters have not yet taken advantage of the opportunity to support children's educational programming on other stations in lieu of providing their own programming.
One distinction between the two approaches is how the public interest obligations are quantified. Under the spectrum check-off approach, the public interest obligations are conceived of as "payment" for use of the spectrum. Broadcasters could be required to pay the full fair market value or somewhat less. Under the Clean Air Act approach, the public interest obligations are set at whatever type and amount of programming is considered beneficial for society. The obligation could be valued in terms of hours of programming (as it is for children's educational television), numbers of megabits, numbers or percentages of channels, or some other measure that might take into account viewership.
Another difference between the two approaches concerns the role of the government. In the spectrum check-off approach, the government plays an active role in determining the kinds of programming that will count toward meeting a licensee's obligations and in determining how to spend the funds it receives from broadcasters opting to pay instead of play. The government's role is somewhat more limited in the Clean Air Act model. There, the government would quantify the public interest obligation, but would not itself receive any money. Rather, any payments (in cash, programming, or other forms of support) would be negotiated by the broadcasters within a market. Presumably, the government would need to conduct some sort of review to ensure the public interest obligations were in fact fulfilled.
Arguments in favor of this approach. According to its proponents, the "pay or play" option combines the best of both the public trustee and spectrum fee models. It lets broadcasters who believe it is good for business or their community to serve the public interest through programming continue to do so, thus increasing the quantity, diversity, and availability of public interest programming. Broadcasters who provide such programming only because they feel compelled to do so by the FCC would instead provide needed support to public broadcasting or other programmers who want to provide this type of programming. This option could lead to significant funding for public broadcasting and provide a useful first step for testing whether the public is better served by abandoning the public interest scheme and replacing it with a payment.
The spectrum check-off approach offers ease of administration, once valuation is achieved. It may reduce First Amendment tensions because it quantifies the public interest obligation and would make clear that when broadcasters elect to pay for the spectrum through programming, they are speaking on behalf of the government. Thus, the government could be quite specific about the type of programming it wants, so long as it does not violate the First Amendment, and more directly target programming to serve the public interest.
In addition, the Clean Air Act model is thought to be attractive because it might encourage creative joint ventures between commercial broadcasters or commercial and noncommercial broadcasters within a local market.
Arguments against this approach. To its critics, this model combines the worst of the public trustee and spectrum fee models. If it is cheaper for broadcasters to provide public interest programming than to pay, they will do so and the programming will likely be of very poor quality. But if they need not pay much to get out of their public trustee responsibilities, little funding will be achieved.
For those who believe that the current public trustee system has failed and would prefer that broadcasters pay, this plan provides only a partial solution. It continues the well-known problems with the public trustee scheme, including the fact that enforcement is difficult. But without aggressive enforcement, licensees will have little incentive to "buy out" of their obligations.
The spectrum check-off approach also presents serious obstacles to implementation. It may be difficult to determine the value of the spectrum. Determining the value by auctioning the least-viewed station in a market, as described above, could likely not be done without a change in the law. Another problem is to determine the value of time on the stations. One option is to use the lowest unit rates similar to those used for political candidates. However, lowest unit rates have been criticized for generating excessive litigation.
Another problem may arise when stations elect to pay for the spectrum through programming. It is not clear how far the government can or should go consistent with the First Amendment in determining the quality and content of such programming. To the extent that licensees are given substantial discretion in determining, for example, whether a program is educational, this model may continue some of the same problems that currently exist with the public trustee model.
Congressional authorization would likely be needed to utilize the "Clean Air Act" model outside of the children's television area. Moreover, this model was criticized by some parties in the FCC proceeding implementing the Children's Television Act for creating the wrong incentives, making children's educational programming seem like something to be avoided, and being administratively difficult to monitor and enforce.
1. Advanced Television Systems and Their Impact upon the Existing Television Broadcast Service, Fifth Report and Order, 12 FCC Rcd 12809 (1997).
2. Similarly, there were about nine hundred television stations in 1969 compared to seventeen hundred today. Geller believes that at some point in the future it may be possible for millions of people to broadcast, thus eliminating allocation/authorization scarcity. But that is not the case today. The above discussion of scarcity addresses the constitutional basis of the public trustee scheme-not the wisdom of the scheme in the face of exploding numbers of electronic media outlets.
3. Shiffrin disagreed. In his view, the government could buy the LA Times, but it could not prevent the LA Times from starting another newspaper.
4. Time Warner Entertainment Co., v. FCC, 93 F.3d 957 (D.C. Cir. 1996)(per curiam), reh'g en banc denied, 105 F.3d 723 (D.C. Cir. 1997).
5. United States v. O'Brien, 391 U.S. 37 (1968).
6. "Bringing Community Service Home: A National Report on the Broadcast Industry's Community Service," National Association of Broadcasters, April 1998.
7. The specifics of one such proposal are contained in the Common Cause Petition for Rulemaking filed with the FCC in October, 1993. The Aspen Institute's Working Group addressed specific proposals relating to free and reduced-rate access by political candidates at a second meeting in late March, 1998.
8. See Henry Geller, "Public Interest Obligations of Broadcasters in the Digital Era: Law and Policy," in this volume, and Henry Geller, "1995-2005: Regulatory Reform for Principal Electronic Media," Position Paper, The Annenberg Washington Program of Northwestern University, Nov. 1994.
9. The details of this proposal are spelled out in Charles M. Firestone, "The Spectrum Check-Off Approach," paper prepared for the Aspen Institute Working Group on Digital Broadcasting in the Public Interest, January, 1998, and in Todd Bonder, "A 'Better' Marketplace Approach to Broadcast Regulation," 36 Federal Communications Law Journal (1984).
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