Panel Three: Telecommunications:
Four More Years
Panel Four: Broadcasting and
Cable: What's the Big Picture?
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
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
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
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
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
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,
The second area that I wanted to talk about was the end of the
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
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
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
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
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
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
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
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
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
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
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
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
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
AUDIENCE: It's really broader than that. It's not only DSL, but
it's the competitiveness of facilities with broadband that are across
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
MR. SECREST: As a moderator, I don't have to have an opinion on
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
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
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
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
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
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
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
I think the FCC has lost so much credibility with Congress, and
if Congress changed, I don't think a new Congress would embrace
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
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
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
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
MR. SECREST: Let's give a round to the panel.