Panel Three

MR. GIFFORD: My name is Ray Gifford. I'm the Chairman of the Colorado Public Utilities Commission, and it's nice to be out here from the provinces and hearing from smart people about telecommunications issues and the FCC.

This panel here today, this afternoon, is going to hopefully make prognostications and tell us where the '96 Telecom Act is leading us and, perhaps, where it hasn't led us so far.

As we all know, since the '96 Telecom Act, maybe at first glance we expected immediate and ubiquitous competition to evolve in the various telecommunications markets.

That hope, I think, has been dashed somewhat, and now I think we're in the era of more sober and painstaking reflection about how and where competition can be made to work, but we're starting to see some things slowly gel.

We do now see some cable entry into the local telephone markets; section 271 processes have come to fruition in New York and Texas and are ongoing in many, if not most of the states now, and that, I think, promises to vastly transform the telecommunications market; and we have the perennial issues of pricing and so forth that will no doubt be with us for some time and give us things to fight about for some time.

Our panel here today to tell us about the next four years and beyond is distinguished, and I will give brief introductions of them all.

Our first speaker is going to be Michael Kellogg, who is a founding partner of an appropriately enough named law firm, Kellogg, Huber, Hansen, Todd & Evans.

He has degrees so impressive that I don't feel like I belong on the same panel with him -- Stanford, Oxford, and Harvard Law School.

He clerked for Judge Wilkey and Chief Justice Rehnquist.

Following Mr. Kellogg, we'll have Don Verrilli, who is a partner at Jenner & Block. He has his education from Yale and Columbia and was a law clerk to Justice Brennan and J. Skelly Wright.

Next, we have my colleague from the west and the President of the National Association of Regulatory Utilities Commissioners, Bob Rowe, who truly -- and this isn't just effusive sucking up to the president of my national association -- but who truly is a national leader in the regulatory community on telecommunications issues.

He has his J.D. degree from Lewis & Clark College, and he also has the distinction of being one of the tallest commissioners from any state.

And finally, breaking our lawyer monopoly up here, we have Robert Pepper, who is the Chief of the Office of Plans and Policy at the FCC, which I think means that he is in charge of big-think at the FCC.

So, I think he will conclude this panel with the big thoughts that are being thought there at the FCC. He is a graduate of University of Wisconsin, Madison, where he also received his Ph.D.

We'll begin with Michael Kellogg.

MR. KELLOGG: Thank you, Ray.

I wanted to talk about three areas today that have been at the center of regulatory action for the past two years and are likely to continue so for the next several years, and I want to talk, with respect to each of these areas, about what our experience has been under the 1996 Telecom Act and where I see the end game for regulation going over the next few years.

The three areas I want to talk about are unbundling of local telephone networks, the long-distance industry, and the internet.

With respect to unbundling, the FCC has developed elaborate rules for when local telephone companies have to make piece parts of their networks available to competitors, and they have made unbundling a top priority.

They have pushed, in all instances, for more elements, more UNEs, as they're called, rather than fewer, and for lower UNE prices rather than higher.

Now, they've suffered two significant setbacks in the courts on each of these points.

The Eighth Circuit Court of Appeals has thrown out their pricing rules for UNEs, and even more significantly, in my view, over the long term, the Supreme Court has remanded their determination of how to decide how many UNEs there should be.

Now, the FCC, on remand, held firm to its views and did not engage in any contraction of the number of network elements.

They concluded that any such contraction would impair new entry by competitors, and they even expanded their list a bit in the face of the Supreme Court's resolve, and to supplement that, they've also insisted upon similar commitments from people proposing mergers and seeking long-distance relief.

But despite that, despite the short-term trend there towards more unbundled elements, I think that most even-handed observers would agree that, if not now, then certainly very soon, unbundled loops alone are going to be a sufficient basis for ensuring competition in all available markets and may even be more than sufficient in the context of broadband services.

In other words, the sort of trunks and switches, directory services, DSLAMs, et cetera, that the Commission now is putting on their list or considering putting on their list are going to be provided competitively, they're going to be added competitively, and that excessive unbundling of those items, especially at below-market rates, is going to suppress competition rather than promote it, and indeed, even many of the new entrants themselves are starting to recognize that and are participating in appeals trying to cut down the networks elements listed by the FCC.

So, at some point, the tide is going to shift and the expansion of network elements is going to cease and we're going to see its contraction, what I think will be actually a fair steady and rapid contraction under the necessary and impaired test.

And as market conditions and technology evolves, sooner or later the list of UNEs is going to be reduced only to the loop and even then, perhaps, only to residential and rural loops, and with that change will come a huge decrease in the amount of regulation governing local telephony.

And it's also going to have implications on pricing, because if you are controlling the wholesale prices that competitors have to pay and if you really have a competitive market, then there's no need to have retail pricing regulation, and that can drift away, as well.

The second area that I wanted to talk about was the end of the long-distance market.

One of the consequences of sort of the mushrooming list of UNEs has been an adverse impact on one of the second priorities that Congress established in the '96 Act, which is to provide an orderly and measured transition of developed companies into long-distance markets when they can compete with the incumbent carriers.

The FCC has made a pre-condition of that entry the development of elaborate software interfaces to permit new carriers to order unbundled elements, and overlaying on their own operational support systems all these new interfaces would be a challenge in any event, but when you multiply the number of UNEs, the complexity has been enormous, and the consequence has been that long-distance entry has been significantly delayed, delayed for at least four years now.

But Texas and New York -- long-distance relief has been received. I expect there will be another half-dozen states before the end of 2001, and I would expect that, by early 2003, probably half of the Bell Company states and more than two-thirds of their operations will be in the long-distance market.

A deeper question and the more interesting is, is there a long-distance market still, or will there be in that time, that will be worth entering?

When Worldcom and Sprint proposed to merge, they made an argument to regulators that, despite their high market shares and the concentrated nature of the market, there was no long-distance market anymore, it was an all-distance market in which distance-insensitive service bundles were going to be offered to consumers and the traditional division between local and long-distance service was simply going to disappear.

Now, as we all know, the regulators didn't believe that, but it has already happened in wireless, with national one-rate plans which are both distance-insensitive, meaning you can call anywhere for the same price, and also location-insensitive, which means, whether I'm here in Washington or in California, I'm still paying the same price and the same rates.

Now, as I say, the antitrust authorities didn't buy that vision when it was peddled by Worldcom and Sprint, and as a consequence, that merger went down, but they may well have been right, in fact, and there's serious talk, certainly among Worldcom and even by AT&T, of getting out of the residential long-distance business altogether.

And there's sort of a lovely irony in this, since, really, Worldcom got into the long-distance business by acquiring MCI, and MCI is the one that really effectively created the long-distance business by convincing the Department of Justice back in 1984 to split apart the local and long-distance aspects of AT&T, and then, under the protective umbrella of the FCC, on the one hand, with various tariff restrictions on AT&T, and the Department of Justice, on the other hand, which prevented the Bell companies from coming into long-distance, MCI and Sprint flourished for a number of years.

Following the '96 Act, when it was clear that the Bell companies would get into long-distance, and when AT&T was finally deregulated, this market that MCI had created was being driven to cost and is very likely to, in fact, simply disappear, which means that every carrier is going to be offering bundled packages of services in which long-distance is just a component.There will be distance-insensitive pricing.

So, really, the whole distinction between local and long-distance service, which has bedeviled regulators and kept them busy for the last 20 years, is simply going to go away as an area of concern.

The final area I want to talk about is data networks, in which I think everything is going to go away, and Bob Pepper and his friends are going to be out of a job within the next five to 10 years, pretty much.

And I'm focusing particularly on IP telephony, telephone service over the Internet, which is going to be profoundly destabilizing for all aspects of the industry, certainly for local carriers, with a rapid erosion of access charges and an increase in local competition, certainly for long-distance companies, which are going to see the end of 10 cents a minute domestic long-distance and 50 cents or higher international long-distance, and even for the cable industry players, which, with a massive expansion of streaming video content on the web, are going to see a reduction in the basic and prime and pay-per-view revenues that they receive.

Long-distance carriers, particularly for business customers, are already migrating as rapidly as they can to IP telephony and will continue to do over the next few years.

For now, the quality is not very good, but it is going to improve as high-speed connections proliferate and as the quality of service packet prioritization increases.

Eventually, IP telephony is going to be every bit as good as circuit switch telephony, and that really will spell the end of regulatory restraints.

It will also be a potential disaster, as I said, for the local telephone companies, who will see their access charge revenues disappear, which is a huge part of their business, and also may get a double whammy if they're required to pay reciprocal compensation on calls that are handed off to Internet service providers.

So, I think the biggest regulatory challenge in the next few years is going to be to determine the rules that are going to govern broadband Internet access services and how to harmonize the rules for high-speed telephone services with those for high-speed cable modem services and high-speed wireless access.

They all do the same thing, and the question for the Commission really is going to be, are we going to extend equal access requirements developed in the telephone context to cable modems, to wireless, or are we going to, in effect, deregulate all three, and I think what we're going to see over the next few years is some mixture of the two, that the regulators will be unable to give up altogether, but on the other hand, as the case for parity becomes stronger, there will be reduced regulation on telephone access.

Now, we've seen in the AOL/Time-Warner context there are rumors of a proposed consent decree that is going to require open access and, perhaps even more important, require an absence of limitations on streaming video.

If that happens, I think we can expect to see that extended to the rest of the cable industry, because there's really no intellectual case for saying that AT&T/Media One should not be subject to such restrictions, and when that happens, then you'll have much more regulatory parity between the various media, and at that point, if the FCC simply gets out of the way, I think we're going to see a flourishing of competition and, really, the end of telecomm regulation as we know it.

MR. VERILLI: I count it as one of the great pleasures of my life that my occupation is to take issue with Mike Kellogg and Ed Whelan and many others of you in the room, and I mean that very genuinely.

I tell people that, for me, this is like the opportunity to play basketball in the NBA, because you have the very best minds in the country and the very best lawyers in the country as your opponents, and I always find that a daunting task in court and I find it a daunting task this afternoon, as well.

I am, of course, compelled to take issue with some of what Michael has said -- not all, but some.

I think much of what Michael said is really a more long-term horizon than I think his remarks suggested, and to me, that's been the problem of the last four years under the Telecom Act and promises to be the problem of the next four years under the Telecom Act, which is how fast are technological changes going to occur such that regulatory oversight becomes less necessary, and how fast is the process of competition going to take root, again making regulatory oversight less necessary.

My view about that, based on the last four years, representing MCI and then MCI Worldcom and now Worldcom, is that the prospects for it happening very fast, with one caveat, Michael's last point, are not good and that, you know, essentially, the past four years under the Telecommunications Act have been from the perspective of companies trying to get into the local telephone business, four years of trench warfare, and I think that's not surprising. It's the product of human nature.

The owners of the networks do not see it in their interest, because it is not in their interest, to share access to the networks, and so, unless technology progresses fast enough that access to the networks is unimportant to real meaningful competition, there is going to be conflict, and because there's going to be conflict, if we want to pursue a policy of open local networks and competition in local networks, there needs to be regulatory oversight.

With respect to Michael's point about unbundling, you know, it may be true that someday we get to a situation where only loops are unbundled, but that seems to me more like 10 years than two or three, and with respect to the development of facilities-based competition, yes, it's developing.

There are enormous incentives, which -- although Michael didn't talk about this, it's the general refrain of the incumbent companies that there are incentives against facilities-based competition.

As someone who works day to day with a new entrant, I can assure you that, whatever it looks like in a graduate school economics seminar, on the ground it looks very different, because they are as tenacious in the back rooms and in programming their computers as Michael is in his advocacy, and no one would construct a business plan that depended on use of a competitor's facilities over the long term, because there are too many opportunities for it to go wrong, for you to get screwed, for you to incur costs that are enormous, to make it sensible, and so, new entrants don't want that.

They want to get in and they want to get in fast, but they want their own network.

So, at some point, I think Michael's right it will come down to unbundled loops, but not in the next couple of years, I don't think.

With respect to the long-distance market, you know, the point is similar, it seems to me.

We have some measure of competition in New York, some measure of competition in Texas, no accident.

It's because there was a positive incentive for the incumbents there, in particular, to get the authority to get into the long-distance market, and while we can talk about the nature of the requirements that the FCC and the states have imposed on the incumbents in those states, it doesn't seem to me to be any accident that the incumbents' performance in cooperating with the new entrants in opening networks ramped up dramatically once the incumbents became convinced that state and Federal regulators both were going to hold their feet to the fire on that cooperation, on making the systems mesh.

The dramatic improvement -- once there was close scrutiny, there was dramatic improvement, and that, to me, suggests that there is going to be a continuing powerful need for regulatory oversight, because once that incentive has been removed and the companies are in the long-distance market, something other than the desire to get into the long-distance market has got to sustain that cooperation, and it's not clear to me that there is anything to sustain it, other than vigorous regulatory oversight.

The point that Michael made about the disappearance of the long-distance market is a real one and a strong one, and it seems to me that what that suggests is that, the more rapidly that occurs as a result of the kind of pressures he talked about, the more regulatory pressure there is on opening the local markets, because if that's not going to be the case, then it seems to me what you can do is abandon the prospect of meaningful competition with broad geographic regions controlled by the incumbents unless there is really a technological breakthrough.

Absent that, it seems to me that, to the extent that long-distance becomes a disappearing market and what it is is one market, which, as Michael says, Worldcom thinks that's where we're headed, but more slowly, I guess, and the Justice Department, unfortunately for our merger, agreed with that, more slowly than I think Michael suggests, and the pressure there is, I think, on regulation of the local market is going to increase.

It seems to me that the critical thing that the state commissions are going to become over the next four, five, 10 years, even more than they have been, is enforcers of the rules, an enormously important role in setting rules, but now they're going to be enforcers of the rules, because that enforcement really can't occur meaningfully at the FCC without shutting down the agency, overburdening it too much.

So, you know, I do think we're still in this debate about open networks versus closed networks, and technology hasn't got us to the point where that debate is irrelevant, and won't for a good long time, and so, the fight's going to be, in respect to the telephone networks, about open versus closed, and in order for them to be open, the regulators are going to have to be aggressive.

MR. GIFFORD: We have some time for questions, and I'm going to assert my prerogative as moderator to ask the first question.

As state regulators -- I think Bob will confirm this -- I think we see as colossal issues in the next four years just one of the things that Robert just mentioned, which is intercarrier compensation schemes, and inherent at the state and the Federal level, some legal categories that are, needless to say, outdated, recip comp and access.

First, how, as regulators, should we deal with the inter-carrier compensation issues we see on the horizon?

Second, do we need to be that involved in these inter-carrier compensation issues?

And three -- and this, I think, may be unique from a state regulator's perspective, but if I'm going from a regulated monopoly, with all the cross-subsidies that were inherent in that and had traditionally very low residential rates and, through various inter-carrier compensation issues, and maybe business-residential tariffing practices, I created historical cross-subsidies to residential rates, when I do reform inter-carrier compensation, that means that my price point for basic local residential is going up, and how do I sell that to the citizens of my state and to the citizens of this Nation, that competition has brought you great fruits, namely that your phone bill is going up?

MR. PEPPER: We talked about this at lunch, and I think that you're right, that's the conventional wisdom that I think was correct for a long time, that local phone rates were kind of a third-rail telecom policy, we're not allowed to talk about residential rates.

I think something's happened over the last decade, easily over the last five years, that completely changes the dynamic, and here, we're not talking about low-income families that cannot otherwise afford service. We're talking about middle-class families.

When you were talking about, 10 years ago, your phone bill is going to go from $14 to $18, people got upset, or at least the perception was that people were going to get upset.

Today, half the households are paying 15 to 20 bucks a month for their internet connection.

Ninety million people have cell phones. The average residential cell phone user is probably 30 bucks a month.

People have long-distance bills on average of 15 to 20 dollars a month, and they're getting as much long-distance calling as a bill that would have cost them $60 a month seven, eight years ago.

You have your cable bill, which is $35 a month.

You have your local phone bill, which may still be $18 a month.

And I think if you look at it as a totality of what people are buying as part of their communications package -- yes, if it is broken out as your bill is going to go from 18 to 21, right, that's one story -- but if, in fact, people begin to think about this as your monthly bill actually, on some things, has gone down, but you're using more -- you know, the elasticity actually is quite high, which we've seen, and you're looking at a total communications package of 100 to 110 dollars a month in the average middle-class household, I think it's a different debate.

I'm not saying that the issue goes away, but I think it's a very, very different way to think about it, and what we are going to see, by the way, is when companies begin to bundle and package big buckets of services, as they're already beginning to do, you're not even going to have a local phone bill, and I think this is one of the points that previous panels made in terms of this -- you know, how the technology markets have changed, whether we even think about things as a separate long-distance bill.

A company which used to be called Nextlink until this week -- it's called XO, I think -- is now offering a new service for small business. It's the small business service, and depending upon how many employees you have, they have a package where, for each employee, every what they call seat, it's 140 bucks a month.

For the $140 a month, it's local, it's DSL, and it's long-distance, and it's all you can eat. There are no per-minute charges for anything, and it's just a big bucket, and I think that we're going to see that happening in the residential market, as well.

So, I think that, actually, it becomes a completely different question.

MR. GIFFORD: I think you're right, and I hope you're right, but if you see in the next year in the trade press that I've been impeached by the Colorado Senate, you will know whether a case study of that theory wasn't true.

How about on the intercarrier compensation issues in the short-term horizon? How should we be sorting those out?

Michael, do you want to take a crack?

MR. KELLOGG: Sure, I'm happy to take a shot. If it's true that long-distance is going to disappear as a separate market, the issue of access charges simplifies itself significantly.

As far as the rest, it seems to me we have to move towards ability to keep a system in which carriers capture customers, they charge them what they can, but they don't look to other carriers who they're required to interconnect with for money.

MR. VERILLI: The theory requires some assumptions about balance, and when we get there, it will be great, but it seems to me it's another transitional issue, like all the rest of them.

AUDIENCE: Bob, you state that the Chairman does not want to regulate Internet telephony, and you said that in a competitive environment, you would want to be regulating things equally -- the so-called level playing field and regulatory parity. I think the Commission earlier has said that, under the '96 Act, its forbearance authority doesn't allow you to forebear from section 251 and section 271. Isn't that really going to be an impediment to getting to this place that you seem to see three or four years out?

AUDIENCE: Accepting the silo analogy as being part of the problem, now that we're treating different industries differently, when you look at what the '96 Act did with respect to how the new world of competition ought to be dealt with, is that the right model that should be applied across the industry, or are there specific things to do, looking forward?

MR. GIFFORD: I'd follow up that I think that, since this is the Federalist Society, this would be an appropriate remark.

I think some of the errors that have been made and some of the blind alleys that we've gone up nationally could have been avoided had not the states been so thoroughly routed in the Iowa Board of Utilities case, which is not to say that state commissions always do a good job, a competent job, or an awful job, but I think on some of the pricing issues and the UNE issues, we would have probably, in retrospect, been better off to let different states try different pricing methodologies, to try different unbundling mandates, to see, really, what is the right mix to get -- to both induce quick entry but also to induce facilities-based entry.

When you read the Eighth Circuit's remand decision on TELRIC, it seems pretty obvious to me that the Eighth Circuit doesn't understand what TELRIC pricing is.

I'm pretty sure I don't know what TELRIC pricing is -- well, I guess I can understand it intellectually. I'm not sure how to do it, and I think different states probably did differing qualities of jobs.

And so, in retrospect, and again, since this is the Federalist Society, I think we may have been able to see more quickly what works and what doesn't work had the FCC not imposed, particularly on the interconnection side, such thoroughgoing, prescriptive rules on how to go about it.

AUDIENCE: I'm not an economist or even a business person, but I mean those are pretty small, and that doesn't really tell you what it would have been otherwise.

AUDIENCE: If you change the economics up front about how that happens, I would say you could see some fairly dramatic, over a year-or-two period, results for the amount that's spent.

AUDIENCE: So, if we do, you will?

AUDIENCE:You're putting the whole argument in the context of DSL deployment, which is one part of it, but I thought there would also be a concern about the competitiveness of some of the interLATA broadband facilities.

AUDIENCE: It's really broader than that. It's not only DSL, but it's the competitiveness of facilities with broadband that are across LATA boundaries.

Panel Four: Broadcasting and Cable: What's the Big Picture?

MR. SECREST: My name is Larry Secrest. I'm a partner at the law firm of Wiley, Rein & Fielding. It's my pleasure this afternoon to moderate a very distinguished panel. Our panelists today are going to address the daunting question of how a Bush FCC might vary from a Gore FCC in the mass media and cable areas.

Our first speaker today is my friend, partner, mentor, for many years, Dick Wiley. Dick, as probably everyone in this room knows, is a Senior Partner at Wiley, Rein & Fielding, which we're happy to say is the largest communications law practice in the country. I don't know whether that's true or not, but we say it often enough.

Dick, as you know, also is former Chairman of the FCC, more recently served as Chairman of the Advisory Committee on DTV. He's always on the list of most influential lawyers in Washington. He's a graduate of Northwestern and Northwestern Law and has an L.L.M. from Georgetown University Law School.

So, with that as a brief introduction, let's turn the table over Dick Wiley.

MR. WILEY: It's always nice to have a friendly moderator.

It's good to be here with all of you and with this distinguished panel.

Before looking at a possible future Bush or Gore FCC, let's take just a brief glance backward and at the current Commission.

I think it's fair to say that, for the last several decades, there's been a consensus among both Republican and Democratic administrations on the general direction of communications policy -- that is, more competition and less regulation, all of this being aided, of course, by burgeoning technological advances. But I think there's several major exceptions that we can see to this in the current FCC.

First of all, relative to mergers, I think it's fair to say that the current Commission has a concern about increasing industry consolidation, and thus, it's developed a complex merger standard and a rather prolonged review process in the area of telecommunications, and recently, word has it that it's considering extending all of this to the mass media area.

Secondly, and ironically, the current Commission is considering, I think, a reversal of the trend toward deregulation with regard to the broadcast industry, which arguably is the industry that is most challenged by advancing competition.

Broadcasting, after all, is principally a one-channel free service in a increasingly multi-channel paid universe, and I'm not even including the Internet in this regard.

Let me put forth some specifics on this latter point.

Ownership: Though mandated by Congress to review its regulations to determine if they are still in the public interest, the Commission, in its biennial review process, which took four years the first time around, has retained rules that seem to me to be outdated and unnecessary -- principally, newspaper-broadcasting cross-ownership, broadcasting-cable cross-ownership,and television-radio cross-ownership.

Second,in the programming content area, the Democratic platform calls for the re-imposition of the old fairness doctrine, which was eliminated in 1987 in the Reagan years, and guess what? Word now is that the FCC is considering that re-imposition, even though that policy didn't work, I would argue, when it was around, and operated, I think, counterproductively to actually stifle the discussion of controversial issues of public importance.

Meanwhile the Commission is stubbornly clinging, to two fairness doctrine spin-off rules, political editorializing and personal attack.

Additionally, the Commission has tried to regulate religious programming, suggesting that it might not be educational or cultural, before it backed off on this dubious notion under congressional pressure.

And very recently, the Commission has announced that it's going to examine aspects of so-called sexually explicit and violent programming on broadcasting and cable.

Most notably, however, is that, as broadcasting is entering the new digital era under what I would say is a costly and demanding FCC implementation schedule, the Commission now is following through on the so-called Gore Commission recommendations and considering the imposition of new public interest obligations on broadcasting, ones that would not be imposed on its multi-channel competitors.

Now let me turn to our assignment to look at a future Bush or Gore administration.

It seems to me that a Gore FCC, which would probably include a number of the current FCC commissioners, would follow through and maybe even enhance and accelerate, many of the new regulatory initiatives that I have recounted.

As for a President Bush FCC, I think it's really hard to know, because the candidate has said very little concerning his views in the communications field. Moreover, we don't know who his new chaiman is going to be. But should it be current Commissioner Michael Powell, as has been rumored, I think it's fair to say that he would turn a skeptical eye to any and all of these regulations,and if it's Commissioner Furchtgott-Roth, well, you can forget it, baby.

I'll turn it over now to the next speaker.

MR. SECREST: Our next speaker is another very experienced and knowledgeable observer of the Washington communication scene.

Shaun has been with the Tribune Company since '92 and Vice President of Washington Operations since '86. He previously served as a Senior Vice President at the NAB. He has a degree in journalism from Saint Bonaventure, and he has something in common with me that I didn't really know about -- we both served as Marine Corps captains in Vietnam.

So, he's very much in tune with anachronistic organizations.

MR. SHEEHAN: We're the last panel of the day, so let me just try to throw out a couple of topic areas, and then I guess, as the lobbyist type on the panel, perhaps I can respond to some of the political questions you may have afterwards.

No sense repeating what Dick just went through. Clearly, looking forward, however, ownership, we still have schism within the broadcast business. As to national reach, that's something that the new Commission will have to grapple with, irrespective of whether Republican or Democratic.

I'd like to throw out the notion of Internet privacy. I think that touches on mass media, as well. That's a major issue that we're all going to be delving into, not only in the new Congress but I think for several congresses going forward.

The phenomena of social issues is clearly before us, this being an election year, and I think you have to look at campaign finance reform, and under that, free air time, is that appropriate or not, the whole specter of children and television, violence and television, how it affects children, the educational aspects, the opportunity that television has to educate children.

Clearly, I think that falls under the larger issue of social issues and television.

One final area that I think we always have to consider -- and this is something my company has been involved with going back to the very beginning of this, when Al Sykes assembled folks over at NTIA, Department of Commerce, some 15 years ago -- was the specter of high-definition television and digital television, and I have the father of the effort right here in Dick Wiley and I have the good shepherd of the effort right here in John Blake, able counsel for MSTV, and we're in the midst of all that now. My company, as you may not know, has 23 television stations, and I think we have several up DTV right now.

Now, to try to draw where the elections all fall down, the ball's in the air in all three areas -- in the executive and clearly, House and Senate.

If you're handicapping things right now, I think the Democrats are a squeeze to take the House, but I think you have to favor them, and conversely, I think you have to favor the Republicans to hold onto the Senate.

What I like to do in these types of gatherings is I'm going to quote from Chairman Mao -- excuse me -- Chairman Hundt, and as you may recall, brilliant as he is, wrote his own personal memoirs as to what it was like to run the FCC.

Now, I did not buy a copy, I want everybody to know that, but my good friend, Andy Barrett, sent me over one of the draft copies, and if you don't think Tribune Broadcasting, working with Dick Wiley in a grand alliance, now working with John Blake and others, if you don't think the deck was stacked against us, let me just give you two direct quotes from former Chairman Hundt, and I quote:

"We wanted to eliminate the Commission's commitment to ordering high-definition television. We believe that the best use in the marketplace for this spectrum was not, in any event, video broadcast. Instead, it was for high-speed access to the internet, also generally called wireless data. This particular swatch of spectrum was ideal for penetrating buildings. Consequently, it would be desirable to use this spectrum for wireless connections from lap-top computers."

I think that kind of tips the hand of where city hall has been, not only when Hundt was there, and I think the same general philosophy pervades now.

Let me close with one more quote from the very same work.

"We also insisted on getting back from broadcasters twice the amount of unused spectrum the previous Commission had sought, speeding up the build-out and in all other respects eliminating the Government mandate planning for what broadcasters would do with the licenses. Although we have not been able to prevent the entire give-away of spectrum to broadcasters, we have achieved most of our objectives."

We're looking at a train wreck in the areas of 60 to 69, what's the appropriate give-back dates, when should this occur?

That's a very provocative subset of DTV, and subsumed under that is, once again, the questions of what do you do with channels 51 to 59.

I might add, my company, at competitive bidding, bought a television station in San Diego, California, about six years ago that was bankrupt. We outbid Chris Craft at the time. It probably was one of the little pieces in the equation of why they decided to exit the broadcast business.

We paid $70.5 million for a station with absolutely no cashflow. Within five years, we put that station in the black. We're achieving ratings that are higher than the Fox station in the market, and we've put news on that station.

In other words, we like to think it's a community asset.

Ordering us off of channel 69 precipitously we don't think makes very good public policy, and we're willing to go to the grassroots, if necessary, to hold onto the asset we have there.

We think that broadcast television remains a very viable public asset, and we'll do everything in our power to keep it that way.

With that, I'll turn it over to Jon Blake.

MR. SECREST: Okay. Jon is a Senior Partner at Covington & Burling. He's, along with Dick Wiley, one of the very most respected members of our Bar. He's been practicing in communications law for 35 years and, like Dick, is on almost all the most influential lists of Washington lawyers, former president of the Federal Communications Bar Association, a graduate of Yale and Yale Law School, and a Rhodes Scholar. So, we'll turn the table over now to Jonathan.

MR. BLAKE: The way Shaun did that, we have an added panelist, former Chairman Hundt.

I think, with respect to the topic of the impact of a Gore or Bush election, it's awfully hard to say how that comes out without knowing who their appointees would be to the FCC.

So, I've sort of done it in terms of Republican versus Democrat, and those are pretty gross generalizations, and some of these issues, I think, are not just FCC issues but involve Congress, legislators, and some of them are even global.

I'd try to do this in terms of comparing the match-up between Tampa Bay and the Redskins this Sunday, the receivers versus the defensive backfield and that kind of thing, and so, I'll give you a very kind of gross set of observations.

I just jotted down five issues. There are undoubtedly more than that.

One set of issues are the normative issues that both Dick and Shaun have spoken about -- violence, sex, children, et cetera -- and the first question is whether the Government has any role in those issues at all, but it's a little more complicated than that, because you have the V-chip, which isn't intended necessarily to say you can't broadcast certain kind of programming but that consumers ought to be given a technique that allows them to choose or choose what their children would watch.

And then there's another question that I don't know how I feel about, and that is whether it's appropriate for a Government official that has the right to grant or not grant licenses using its position as a bully pulpit for what it thinks, as a matter of sort of social obligation, broadcasters ought to do, as opposed to what they ought to do because they're required to do it.

So, that's one.

The second is ownership, which is a more structural issue.

I would say, on the normative, I think the Democrats tend to be more interested in regulation. They recognize they have to be careful about censorship, so often it slips into a V-chip solution which goes to a technique rather than to direct control of what is said or the bully pulpit role.

When you turn to ownership, Shaun went through the sub-issues that are involved there. I think Republicans tend to want to get rid of those restrictions or relax them a great deal. Democrats tend to want to hold onto them longer.

It's pretty hard to look at the ownership issues in broadcasting without looking at what else is going on in the media world and in the communications world, where clearly choice and competition is just growing like topsy.

A third area is -- maybe it's competition versus regulation, but I think maybe it's really bottleneck versus competition, and the question is whether there's regulation that's needed to address bottleneck issues in order to enhance competition, and I think it gets pretty complicated to discern where the political parties come out.

Guessing, I would say maybe Democrats are more concerned about bottlenecks and Republicans want to play it straight in terms of not trying to decide where there is a flaw but letting the market try to work out what that flaw is.

Another area which, in the media world, has not been debated a whole lot, although there are a couple of issues that have been debated considerably recently, is intellectual property versus competition.

There is the notion that cable systems will enter exclusivity contracts with programmers, and should their competitors have access to programs?

Well, this is another thing where it's not too clear how you split that out as between regulation, protection of intellectual property, and promoting competition through regulation.

And a fifth area which Shaun alluded to is spectrum management, and I just don't know how that splits out as between the two parties.

Clearly, it's extremely important. Congress passed the auction authority for the FCC and was very clear that that should determine who gets licenses but the FCC should continue to determine what the spectrum is used for, and then that got eroded when the notion of allocating spectrum for flexible use took hold three or four years ago, and I think that, in a sense, that battle is over; the idea of, within boundaries, flexible spectrum allocations has taken hold.

And Shaun's got the absolute perfect example of where spectrum management issues are extremely important to broadcasters, in talking about channel 60 to 69 and 51 to 59, because Chairman Hundt's threat of trying to use this spectrum for an entirely different service is being played out in that battle.

It's also interesting, I think, that in other countries, they are tending to move back away from auctions as an ineffective tool to manage spectrum. Clearly, spectrum is a magnificent resource that needs to be managed in the public good. The question is how, and as to that, as I say, I can't really discern a Republican versus a Democratic, let alone a Gore versus Bush trend.

So, those are the five issues that occurred to me.

MR. SECREST: Our final speaker is Patrick Maines, and as, again, most of you know, Patrick has long been a very sage advisor on the Washington communications scene. From his perch as President of the Media Institute, he's been one of the country's leading advocates for First Amendment rights for the media and also deregulation. He had prior careers in New York City in public affairs and magazine publishing.

So, at this point, we'll turn the microphone over to Patrick Maines.

MR. MAINES: Thank you very much. Nice to be here today, nice to see all of you.

I think I should note that this is a pretty comfy group up here. Shaun Sheehan is a member of the Board of the Media Institute.Dick Wiley is the Chairman of the Board of the Media Institute. Jonathan Blake's firm is represented on the First Amendment Advisory Council to the Media Institute. Larry works for Dick. So, I feel completely free to say whatever I really think.

MR. MAINES: I would agree with Jonathan Blake's analysis, but I would maybe use it as a jumping-off point to make a slightly different observation.

It's true that the Media Institute's primary concern in recent years has been with the First Amendment and in promotion of a strong First Amendment as it applies particularly to media speakers.

In 1993, I went out to Los Angeles to attend the so-called Hollywood violence summit.And some of you may remember that it was a summit held at a time when there was lots of concern about the subject, and Congressman Markey and others were promoting the idea of a thing called a V-chip, and Hollywood producers and broadcasters and network programmers were under a lot of pressure at that time to deal with that issue.

And so, it was agreed in '93 that they would come up with what were then called parental advisories, and the ink wasn't dry on the parental advisories before there came again the notion of the V-chip, and of course, with the Telecommunications Act of '96, the V-chip became law, and with it, ratings for television programming.

Today, Senator McCain is holding hearings that I wish I could have attended. I read something online to the general effect that he said that, in regard to the testimony of the studio programmers who were going to be there today, that he thought that they'd come up with a complex solution to a simple problem.

I don't know for sure what that meant, but I'm going to guess I know what it meant.

We went through 12 years of a Reagan-Bush administration. The Reagan administration was one of the most conservative, if not the most conservative administrations in American history, and the First Amendment went through it all unscathed, and media companies prospered.

And my take on that is that that happened because, while I am sure that lots of conservatives, like lots of liberals, aren't happy with the content of television programming, Republicans are sort of incapable of doing real damage to the First Amendment, in the end they believe in deregulation and in keeping government out of the business side of these companies.

Liberals and Democrats, on the other hand, have been notably more tolerant of speech, but of course have the reputation of So, comes the current campaign, and though I really wanted to say something even-handed about project of a Gore White House, it gets hard to do on this subject, because when you look at the fact that we now have, for the first time in my memory, really, a ticket comprised of people who are very comfortable with the idea of content controls and with government regulation of the structural side of these companies, it seems to me that you align precisely the elements that you need in order to effectively censor speech in this country.

So, I worry about that a great deal.

None of this, of course, is to deny the importance of the subjects or of the concerns that advocates for better children's programming.

The point that I want to make here, in closing, is that, back in '93, when some of us started warning about the long-term effects of the kind of "voluntarism" that we saw Hollywood and others doing, we called it a slippery slope, and we were criticized in some quarters for that, but I think the critics were right, it wasn't a slippery slope. It was a cliff.

And we're now at the edge of the cliff, and I think this country is very, very close -- really just one adverse Supreme Court decision away -- from a time when the First Amendment as we have known it, at least as it applies to media companies, won't be quite the same.

So, it seems to me that major media companies that have been importuned to go along with these concessions over the years may have miscalculated in their notion that this is the best way to preserve their independence as businesses and as speakers.

I don't see any sign that the thirst of the regulators is being slaked by such things, and I don't think it's going to be.

It puts me in mind of the whole tobacco debate, and in fact, I think that's a very instructive debate, looking at the lay of the land right now, in that my guess is that the people that are unhappy with violence in programming aren't really that concerned with the way that it's marketed.

I mean I'm sure they're unhappy with that, but I would guess that, at the end of the day, they really want that kind of programming eliminated all together, and I think that's what they're really about, and so, with that in mind, it seems to me that the day may be approaching when these companies are going to have to run the risk of just saying no.

The Media Institute defends a lot of things and tries to keep government out of a lot of kinds of speech that I abhor.

I'm often glad that I no longer have daughters of a tender age, that I would have to keep away from our TV set, and it seems to me that there's a kind of coarseness about popular culture today that the media are in many ways responsible for.

Nevertheless, I would think that the better way for companies to handle these kinds of problems in the future would simply be to practice a sort of "voluntarism without the nudge", because as they acquiesce in these demands of government, thereby affecting a kind of regulation without footprints, they're helping lay down precedents that I see being applied every day in venue after venue and that is something that I think is a real serious problem and something that I regret to say I think might become worse under a Gore administration than under a Bush administration.

Thank you very much.

MR. SECREST: We now have some time for questions to our panelists, and I had a couple of my own before I open the floor for your questions.

My first one is for our two lawyers on the panel, Jonathan and Dick, and that is, to what extent do you regard the performance of the Kennard administration of the FCC as having been constrained by the courts, and I'm thinking, in particular, of the Lutheran Missouri Senate case that set aside the entire EEO package and sent them back to retooling the whole issue, and if they have been constrained, how might a Gore FCC going forward look different if they were less constrained?

Most of the courts of appeals are within one vote, as Mr. Troy tells me, of changing their political composition; that is, who's appointed them. The Supreme Court's in a close balance, as well, but let's assume that the courts become more receptive and more protective of the agency and less likely to set aside its edicts.

Jonathan, would you take a shot at that for us?

MR. BLAKE: Well, I think, clearly, in the EEO area, that may be the clearest in which less constraints by the court would translate into more regulation by the FCC, and it goes back more than just the last four years.

I think the EEO policy at the FCC, for a number of years, has been they can't get out what they'd really like to get out, which is probably quotas, and so, there's been all of this other stuff that's been harassing and you have the wrong recordkeeping or you put it in the wrong file, so you get fined, and you may have a perfect profile in terms of employing folks, and I think, if the constraint came off in that area, a Democratic Commission would go very quickly to something not quite quotas but something along the lines we used to have 20 years ago where, if you hired a certain percentage of minorities and women in certain classifications, it was a safe harbor and you were okay.

I am not sure, in other areas, that the courts have exercised so much constraint on what the FCC has done.

I suppose the fairness doctrine getting held to be unconstitutional has dampened what the FCC would do in terms of content regulation, and it is true that the editorial rules are stuck in a two-to-two impasse, which Chairman Kennard has said that he will now break by unrecusing himself.

There might be more content control. Patrick would say that might shove us over the cliff, but my own guess is it would be fairly modest.

MR. WILEY: I agree with everything that Jonathan said.

Relative to newspaper-broadcast cross-ownership, I think if it had not been for the courts, Shaun's company would not have gotten a waiver to own a television and newspaper combination. And I'm not sure the Commission would be starting or allegedly starting a rulemaking in this area, which they said they were going to do, generally, if it were not for its concern about what the courts might do.

As to violence in programming, I have a hard time understanding how the Commission constitutionally is going to come up with a safe harbor rule as it has in the indecency area where we've got some recognized court definitions of the genre.

I don't see that in violence. I think it's too subjective.

So, I think the courts do exercise a restraint or perhaps an inhibition toward too much Commission activity.

MR. SECREST: I have a similar question for our other two panelists, Shaun and Patrick, and this is more in the political realm but also a question of external constraint on the agency, and that is that the Kennard administration has been operating in an environment where there is Republican control of both houses of Congress, and at least we know that congressmen attempt to influence FCC policy, with varying levels of success.

What do we see as the level of that constraint today, and how do you think that might change if one or both houses switch to the Democratic column, along with a Gore victory?

MR. SHEEHAN: Well, let me take first crack at that.

There's extreme frustration in the Congress right now that they view the FCC as a creature of the Congress and not of the executive, and they feel they've been ignored.

Chairman Tauzin has said repeatedly, given the opportunity to stay in the majority the next Congress, the very first thing he would do is FCC reform.

To this point in time, it's pretty much been saber rattling.

I think it's rather clear that, if Gore wins, and control of one or the other bodies goes over to the Democrats, that the Hill will continue to pretty much be ignored by the FCC, and the stuff I read to you out of Hundt's memoirs, I think, corroborates everything I just said, because the '96 Act was pretty clear about the implementation of DTV, and he took it upon himself to say no, that isn't the direction I want to go. So, I think the proof's in the pudding.

MR. MAINES: Yeah, I agree with that.

It's actually kind of remarkable that the FCC has exercised the sort of independence of the Hill that it has. They get dragged up there all the time, but they're really not giving in to that, and the key question, of course, is the control of the White House.

This notwithstanding, I'm sort of impressed, now and then, with the fact that the Democratic appointees among the commissioners actually care about what they say. I mean I don't know that Gloria Tristani, just to name a name, would change her views no matter what was happening on the Hill.

MR. WILEY: Don't you think one of the reasons why they appear to be ignoring Congress is they get mixed signals from Congress, even within the parties? I mean McCain might say something quite different than Tauzin might say.

One of the commissioners told me that they can find support or opposition for any position they take from the Hill.

MR. SHEEHAN: Well, the other piece of that is that the Hill will set broad parameters and it goes down to the agency to flesh out. The '96 Act would be classic in that regard.

You know, here's, in general, what we want to see done, here's the skeleton, you put the flesh on the bones. That entails all kinds of rulemakings and actions on the part of the agency.

On the other hand, however, the Hill doesn't feel that -- for instance, we did this big acquisition of the Times-Mirror recently -- and as a courtesy, although it doesn't require any FCC approval, I brought my executives to the Commission, and we called on everyone, and we like to think that the '96 Act put the onus on the agency to justify regulation and not on the private parties, and you certainly wouldn't have gotten that sense as we went from office to office just on an informational basis.

I mean we got into how many angels can you put on the head of a pin time and again, and it's quite an eye-opener for folks that haven't worked the FCC regulatory process ever.

MR. BLAKE: I think, as a matter of administrative law, the relations between Congress, the agency, and -- it was worse five years ago -- and the courts -- it's broken. Something's really, really wrong, and I don't think it's a matter of just rewriting the Act or restructuring the FCC.

MR. SECREST: Explain what you mean by saying that relations with the courts is broken.

MR. BLAKE: Well, I had the sense that there was a period of time -- I think it's less true now -- where the courts were not giving deference to the expertise of the FCC, and the FCC, I think, has tended to base a lot of its decisions on expertise in fields where it didn't have expertise rather than on engineering or the sort of ground root [???] for where the expertise lies.

Similarly, I don't think Congress has been respectful --

MR. SECREST: So, you're saying the courts were afraid in the areas where the Commission --

MR. BLAKE: Well, I thought the courts would come in and say this is de novo, we'll just go ahead. There was a time when the FCC record on appeals was something like -- it was less than the flip of a coin.

Hundt's book said he was so proud about what his record was, and he did do better, but I also think that there are areas in which Congress is not respecting the FCC's expertise with respect to technical matters, and I think it's because the FCC has acted in other areas where it doesn't particularly have any expertise, and Congress said this doesn't make any sense to us, if you're not making sense to us in the areas we know something about, we're kind of distrustful about you in areas where you are the experts, like interference or spectrum management.

MR. SECREST: We've gotten some reaction that this agency, at least in the political environment, is somewhat impervious to political influence, but there was one rather extraordinary little case that Dick worked on for religious broadcasters where there was a remarkable change of direction.

The Commission announced a decision, and then, within 60 days, on their own motion, vacated their order, and I'm wondering if you saw that as being political pressure, public pressure.

What was different about that case, where the agency really did fold up its tent completely in a very short period of time?

MR. WILEY: There was political pressure. There was a lot of concern on the part of Congress. There was tremendous outpouring from the grass roots.

When you step on religious principles and precepts, you do get feedback, as Madeline Murray O'Hare could attest, if that ever actually happened. I think the Commission actually recognized itself that it may have overstepped in this area and wanted to walk the cat back.

So, I think the pressure certainly helped, from Congress and from the grassroots, but I think once it was pointed out to the Commission -- and you certainly did an effective job in that regard -- I think they recognized that they had gone too far.

AUDIENCE: I had a follow-up on Patrick's analogy to tobacco.

Under this scenario -- tell me if you think it's plausible -- the combination of Columbine and the FTC report has really led to a sea-change in attitudes about the media and violence akin to the Surgeon General's report in 1964, and under this scenario, the FTC does, in fact, go after Hollywood, and plaintiffs' lawyers use the FTC report as a link between media and violence, to essentially do a end-run around the First Amendment and start imposing liabilities on companies through the tort system.

The Supreme Court has already, for the first time, refused to stop a case that's been going forward on this sort of copycat theory that's being tried right now in Louisiana or Texas, and one thing that suggests that the scenario is not implausible is that the attorney generals have filed suit, the plaintiffs' lawyers are broadening these actions into class-action suits, and so, my question is how can the mass media, under these circumstances, vote for a Democrat?

AUDIENCE: Why aren't mass media companies trying to do all they can to fight against this scenario? I mean they seem to have largely ceded the field, and it seems to me that the tobacco paradigm is out there. You don't have to be, you know, brilliant to figure out that the plaintiffs' lawyers have figured out that this is a way of getting a lot of money fast.

MR. BLAKE: Boy, I'd like to duck that question.

I think the analogy is very striking. I think a lot of terrible law and a lot of terrible precedent was set in the case of tobacco.

We represented the tobacco industry. We have a lot of wonderful young lawyers who come in. They would do it at the start, because they were told to do it, but they found that the issues that you're talking about were so intriguing that, notwithstanding that their grandmothers didn't like the fact that they were working for the tobacco companies, they thought they were doing the right thing, and I think they were.

I guess, to answer your first specific question, I guess there are other issues out there that are more important.

MR. MAINES: My take on that is that these companies have lots of interests, and governmental bodies, particularly the FCC, in the case of the media companies, have sway over their affairs in many areas, not just content, and so, as these companies find their interests commingling with those of government or governmental agencies or legislatures, where you have the precedent that you can sort of coerce conduct without, by the way, making a record and without creating a law that can be appealed, then it's a pretty nifty way of doing it.

That's what I meant by, you know, censorship without footprints.

So, I'll give you a point that I would be a little bit concerned about. I knew I could find something to say that would favor Gore.

There is, I think, a perverse relationship now going on in terms of this concentration issue. Where we, as an institute, have taken policy positions, it's always been to expand ownership, to liberalize ownership. Let me just say that right away. And we've done that, because that makes sense in terms of the finances and the economics of it.

Having said that, I would guess that, under a Bush administration, you would see more concentration than you would under a Gore administration, and I will tell you that I think you'll see a concomitant erosion of the standard that I'm defining in the First Amendment, and that will happen, I think, because concentration will yield two things.

It yields media companies and whole industries that are political weaker, not stronger, while diminishing the number of targets, so to speak, for critics and activists.

So, my guess would be that as this concentration goes forward, you're going to see more, rather than less, accommodation on the part of these media companies in the way that you rue.

MR. SECREST: You said that larger companies are going to be less vigorous in asserting their rights than smaller companies.

MR. MAINES: I think they will.

MR. SECREST: Some exceptions come to my thoughts, for example.

There seems to me to be a large company that's pretty darn aggressive and pretty successful in asserting its rights.

MR. MAINES: I'm very fond of Fox and all the networks, and so I don't want to talk about Fox exactly, but let's talk about industries.

Do you believe that the NCTA, just to take an example, will be stronger as a lobby five years from now than they were, say, five years ago?

MR. SECREST: As a moderator, I don't have to have an opinion on that.

I would return with a question. I see a lot of First Amendment heros among the smaller companies.

MR. MAINES: Yeah. Well, I guess my point would be that it's just easier -- you know, political power and strength derives, ultimately in this country, from local power, and so the more owners, the more power, and the fewer owners, the less power.

MR. WILEY: Of course, when you mention NCTA and NAB, you're talking about trade associations.

MR. MAINES: Yeah, I am.

MR. WILEY: And historically, they do have to be affected by the interests of a diverse membership, and therefore, sometimes they don't take the strongest position that you'd like to see. I'm not sure that necessarily follows when we're talking about an individual corporate enterprise.

MR. BLAKE: Kennedy would subscribe to what you said. He would say, whenever you want to take a regulatory initiative, you can always get U.S. Steel to go along. It was the smaller companies that couldn't necessarily do it.

When Pacifica had the seven-dirty-words case, I don't believe any commercial broadcaster intervened on behalf of them.

MR. SECREST: To make Patrick's point, a pretty small operation brought down the whole EEO policy. No major broadcast company took on that challenge.

AUDIENCE: Red Lion Broadcasting was a very small company. Depending upon how you look at it, they were very heroic in what they did, even though they were unsuccessful, which brings me to my question, which is going back to the fairness doctrine.

The only way the Supreme Court could shore up its decision to okay the fairness doctrine, in light of the First Amendment problems that it has, was by using the scarcity argument, and today, with the media-rich environment we have, the scarcity argument doesn't even pass the straight-face test.

Now, assuming that Bush would win and assuming that he would appoint some conservative justices, would it then perhaps be a good strategy for the FCC to go ahead and start enforcing the fairness doctrine so that some of the forces for righteousness could take them to the Supreme Court and drive a stake through the heart of the fairness doctrine permanently?

MR. SECREST: Do our lawyers want to take a crack at that?

MR. WILEY: Well, the hope is we're not going to see the fairness doctrine rise up from the grave, and so, I hope it won't be enforced, because there won't be a fairness doctrine.

MR. SHEEHAN: I happen to like the politics of this position.

Also, Red Lion, I believe, was Dr. Carl MacIntyre, wasn't it?

Well, now, you've got Rush and Liddy and you've got this cadre of talk-show guys that, if the FCC politically is dumb enough to raise the issue right now, they'll go ballistic, and you go back to small radio owners, they turn around, say I can't afford the lawyers, I'm taking Rush off, and there goes your robust marketplace of ideas.

I'm stuck with the newspaper cross thing. I'd love to see anything that embraces scarcity. I'd like to see them feed it up, because that gives me an opportunity to come in the back door with my favorite issue.

MR. SECREST: There's a question back here.

AUDIENCE: Staying with the fairness doctrine and with Red Lion and the combination of the two, one place it did not regulate was in children's TV, and yet, that case hasn't been litigated.

I go back to 1979 with Michael Pertschuk, and what did Michael Pertschuk want to do with the Federal Trade Commission?He wanted to impose some relatively innocuous regulations on what advertisers could put on Saturday morning.

I say relative to these FCC rules that tell us what, when, and where broadcasters must carry in content, not the advertising.

If a political stink -- and arguably, it could have been a legal stink -- was raised in 1979 with that sort of case, why have we not seen litigation on the children's TV, a serious challenge to the children's TV rule, number one, and number two, looking at the Gore Commission report, all of these various creative ideas people have for green space on the internet and obligations for digital television broadcasters, that may be the place where we will, in fact, end up litigating Red Lion and will do so successfully.

MR. WILEY: Patrick, I think this is probably your point, right?

MR. MAINES: I think these things will come up perhaps in the context of the public interest obligations of digital broadcasters, and it's kind of hard to see how that doctrine holds water at a time when you have the kinds of diversities that you have in digital.

So, I would expect to see Red Lion fail. I think Red Lion will lose authority.

It seems to me that the great rallying cry now for regulation is really children. Edward Markey spoke at a Media Institute lunch last week, and I was interested in the way he presented his argument. The thrust of it was that courts had pretty much made it possible to do whatever that you want to do if the object was to protect children.

I would look to that standard as the new standard, because there's almost nothing you can't do if that's the test.

MR. SHEEHAN: You were talking about a product category. We as an industry have been singed, no pun intended. We have lost tobacco completely, which was 10 percent of our revenue at that point in time. We are staring down the loss of a product category.

It's one thing to say I want to defend my industry or my company in this amorphous thing of children in television, another thing to say I want to keep my advertising, which I believe is safe and wholesome, and I want to protect the opportunity to put it on, and I think that's what that fight was really all about.

Mike Pertschuk, back when he was working the Senate, of course, really took great pride in authorship of getting rid of tobacco advertising, and he thought he was going to gin up a brand new attack, and he just didn't have support.

It came out of an editorial in the Washington Post. It was at that point in time he knew he had lost.

AUDIENCE: Dick, you mentioned the Kennard Commission had been more aggressive in terms of merger policy, and as you know, the way they've done it, they haven't typically just stopped mergers.

I mean there will be license transactions, and they review it under the public interest standard to decide whether the licenses can be transferred, and they haven't typically blocked the merger, but they have ended up, through this process of reviewing the transaction with the companies coming forward to volunteer.

This happens in the mass media area, too, of course.

So, you end up with one of these mergers where you have 50 voluntary conditions, some of which don't relate very closely to the actual antitrust types of theories or competitiveness theories that you might think the FCC would be looking at.

When a new chairman takes place, assuming it's a Bush chairman that has a different philosophy about the extent to which it wants to regulate by condition, would one way to achieve a measure of deregulation by the Bush Commission be to come in and say, I'm just getting rid of a lot of those voluntary conditions that were approved and, by the way, were never appealed and never reviewed by a court, because no one ever seeks to review one of these voluntary deals?

Would you do that if you were chairman?

MR. WILEY: Well, I've had that question put to me before.

I tend to doubt that if there's a Bush chairman, he's going to look backward and try to undo certain things that the parties have already put together, but I think that we're not likely to see more of this in the future in the Bush administration, and in particular, I question whether the telecommunications standard of finding that the benefits have to outweigh the harms the rather elaborate Bell Atlantic/Nynex standard will be extended to the mass media area. But I think in the Gore administration, it probably will be. I think the current commission was planning to do it in the last big merger and it didn't quite get there. If you read the dissenting statements, you kind of get the feeling that this is what held up the decision for a while.

So, I think, going forward, we'll see differences. It's an intriguing suggestion you make, but I doubt that we'd see somebody coming in and taking office and then saying we're going to try to remake deals that were already made.

That would be my guess.

Jonathan, how do you see it?

MR. BLAKE: I do think it's intriguing, too, and I think if somebody wanted to make a political statement, it would be a heck of a way to get some attention, to say we're going to undo the conditions that have been imposed over the last four years. I think election results would have to be quite a bit different than the sort of split scenario we've got now.

MR. WILEY: And the Hill might be involved, too.

MR. BLAKE: Oh, yeah. It would be really something to do that, but I can see Mark Fowler saying the hell with it, I'll say it anyway.

I may differ a little bit from Dick on this.

I think that the business about conditions -- it is the high water mark now, regardless of who wins, because I think it's just been a mess.

I think the FCC has lost so much credibility with Congress, and if Congress changed, I don't think a new Congress would embrace the conditions.

I don't think the FCC is equipped, really, has the expertise to craft some of these conditions.

So, I don't think it would go away, and I'm not sure it would recede under a Gore administration, but I find it hard to believe that it would actually get worse.

MR. WILEY: Well, my sympathies are with you.

AUDIENCE: I would first say don't knock scarcity if you like must-carry, because the case that's currently pending in the Eastern District of Virginia in which the Satellite Television Association has challenged the constitutionality of the must-carry rules, certainly one of the arguments that I would expect to be raised is that the satellite licenses, as a matter of scarcity, are required to have must-carry, which brings me to the question.

It's been mentioned a couple of times by other panels -- and Dave Farber, I think, put it best this morning when he said don't regulate me, regulate the other guy, and many of these regulations, including cross-ownership provisions, are things that are part of a broader statutory or regulatory scheme that all rest on a common fundamental nature, diversity of voices in the marketplace of ideas, the importance of communications.

If you're going to start pecking away at these things, eliminating cross-ownership rules, what stops the cable side, for example, or the satellite side from coming in to say, okay, then how can you say must carry over here if there is no ownership cap over there?

How do you say, you know, channel occupancy rules over here if the internet is such a broad distributor of speech that we no longer have to worry about whether we have cross-ownership rules or public interest requirements?

MR. SHEEHAN: The cable industry, in great part, was built on the back of the broadcasters. You may not want to believe that.

I like to think of broadcasting in scenarios like the faithful wife who put junior through medical school and now he's got the degree and runs off and marries the nurse.

There's a linkage in my mind's eye between compulsory carriage and must-carry, and in the present environment, where the Congress is telling us now get the stations up, get them operating, it strikes me that, with all the costs that we're encumbering, it's very simple.

If there is the compression of technology, we think it's out there in the capacity that's coming on-stream.

A very logical piece of the equation is there should be carriage if somebody has gone out and put out all this money to buy a TV set, and it strikes me that there's just a common fairness argument in that.

MR. BLAKE: In the case of satellite must-carry and the compulsory license, it's in the same piece of legislation.

The link is just very clear.

The other thing I think sometimes gets lost track of with respect to must-carry is that the original principle was tied principally to a compulsory license, but it also had to do with 307(b) of the Act, which said we've gone around, we've distributed frequencies to local communities, because we believe in local broadcasting.

Using our engineering tools, this is how we think the spectrum ought to be used, and cable came in and moved signals around and threatened to destroy that localism that was built on the basis of 307(b), and satellites can do the same thing.

So, there's a link there to the core spectrum management function that the FCC discharges.

MR. SECREST: "RATS", the allegedly subliminal advertising that an RNC ad had the word "bureaucrats" flashing around, ultimately compressed down to just the letters R-A-T-S that appeared on the screen for about a 30th of a second.

Anyone want to take a crack at the substance of a policy in that area, and whether something funny is going on with the Commission acting with as much dispatch as it did in the way that it did.

MR. WILEY: I was on the Commission when we voted against subliminal advertising in 1974, and we said it was inappropriate, and I think that's probably true today. If that ad did have "RATS" in there, it seems to me awfully stupid, in the first place, and probably inappropriate. But Brit Hume said, it was the most ridiculously overplayed story, and I think it's also the most regulatory overplayed -- to write 200 stations immediately and ask them, did you run that ad, when did you run it and what did you know when you ran it and all the rest. It almost assumes that there was a violation of some rule, which there wasn't. There was no rule, it's just a policy. I have never seen the Commission act with such alacrity, and it disappointed me, frankly, to see that, because I think that was not an appropriate step by the Commission.

MR. BLAKE: I thought there was a little bit of unintended humor involved, because the question was it's only a concern under that policy if you can't see it. So, the Commission's letter says did you see it?

If you saw it, then presumably, it wasn't a violation, because it wasn't subliminal. I think it was a joke.

MR. WILEY: Have you ever seen them act that rapidly on something?

MR. BLAKE: I can't understand why they did. The bats had gone to the belfry.

MR. SECREST: Let's give a round to the panel.