Recommendation:
Digital television broadcasters who choose to multiplex, and in doing so reap enhanced economic benefits, should have the flexibility to choose between paying a fee, providing a multicasted channel for public interest purposes, or making an in-kind contribution. Given the uncertainties of this still-hypothetical market, broadcasters should have a 2-year moratorium on any fees or contributions to allow for experimentation and innovation. Small-market broadcasters should be given an opportunity to appeal to the FCC for additional time. The moratorium should begin after the market penetration for digital television reaches a stipulated threshold.
Nobody knows what the digital future holds for broadcasters, their viewers, their advertisers, or their competitors. It is true that broadcasters were granted use of an extremely valuable piece of the electromagnetic spectrum to transition to the digital age. It is also true that to do so, broadcasters will have to make large capital outlays to purchase equipment, erect towers or antennas and convert programming to digital formats -- with no clear picture of what will happen to their revenue. Congress and the FCC originally envisioned this grant of spectrum as a one-for-one exchange, with broadcasters using it primarily for a single high-definition television (HDTV) signal. Under this scenario, the rationale for greatly increased public interest obligations or a massive new payment would be diminished. However, if broadcasters decide to use their digital real estate for multiple commercial channels (whether or not they are high definition), each generating its own revenue stream, then it is appropriate to consider whether the public interest requires a different formula. This is especially true since, as compression technology evolves, the number of channels possible may increase substantially, to six, eight or more.
The Telecommunications Act provided for the FCC to assess fees from digital broadcasters who get paid for ancillary or supplementary services -- subscription channels, paging services, pay-per-view and the like.(8) It does not prohibit broadcasters from using multiple signals -- multicasting several over-the-air channels that get revenue from commercials. There is good reason to let the marketplace settle whether a single high-definition broadcast signal, multiple standard definition channels, datacasting, or various combinations of them, will work best. Innovation and testing the markets in this area should not be unreasonably stifled, particularly since multichannel broadcasting could provide long sought new competition to cable and other multichannel program distributors.
Additionally, it is conceivable that broadcasters who apply multiplexing will simply cannibalize their single signal, achieving no additional revenues or perhaps merely stabilizing current market share. We recognize these facts. We also accept the principle that there should be some additional benefit to the public if its grant to broadcasters of the valuable digital television spectrum results in enhanced economic benefits for broadcasters.
We recommend the following: Once digital television reaches a significant level of penetration as stipulated by the FCC, begin a 2-year moratorium during which digital broadcasters can experiment and explore multiplexing options in the marketplace without any undue hindrance. Small-market broadcasters should be given an opportunity to appeal to the FCC for additional time if they lack the resources for experimentation with multiple channels. Thereafter, if a broadcaster elects to multicast, and in doing so reaps the benefits noted above, Congress or the FCC should apply a menu of options to that multicaster. The menu would start with a fee payment, either contingent upon the extra channels reaching a particular revenue goal or on some other formula judged fair and appropriate by the FCC.
In lieu of the fee, broadcasters could turn to alternatives. They could dedicate one of their multicasted channels to noncommercial public interest purposes, which would have to include a commitment to provide robust programming and access for local voices, or lease one such channel at below market rates to an unaffiliated programmer who is local and has no financial or other interest in a broadcast station. They could provide in-kind contributions, such as free commercial time to political parties, or studio time and technical assistance to community groups producing PSAs or public interest programming, equal in market value to the assessed fee. Whatever requirements are assessed must be attentive to the risk that they might have unintended harmful consequences, such as discouraging multiplexing at all. And such requirements should be sensitive to the opportunities multiplexing can offer for underserved constituencies to speak in their own voices, and for enhanced minority participation in broadcasting, including opportunities in management and ownership. The FCC should make clear that if a broadcaster uses its extra capacity for public interest purposes like an all-news channel or children's educational channel, it would not incur extra obligations
If a multiplexing broadcaster chooses either to (1) pay a fee in lieu of its additional public interest obligations; (2) dedicate a multicast channel for noncommercial public interest purposes; or (3) lease a multicast channel to an unaffiliated local programmer who has no financial or other interest in a broadcast station, it would not have to apply other nonstatutory public interest obligations to multiplexed signals other than its "primary" channel (unless the broadcaster could demonstrate to the FCC the public interest benefit of proportionally spreading specific obligations around the multicast channels. For example, it may prove advantageous to give a broadcaster flexibility to place political messages on whatever channels attract the right demographic audience to achieve maximum benefit, in ways that will accommodate the rights of candidates under the law.) We further recommend that, like the fees to be collected for ancillary and supplemental services, the fees collected for multiplexing be used to enhance the public interest in broadcasting, by applying them to educational or children's programming, using them as part of campaign finance reform for political airtime, or in some other fashion. In any event, these fees should not simply be used for deficit reduction or placed in the Treasury's general revenue accounts.
Endnote
8) 47 U. S. C. § 336(e).
Supplemental Statements
- Statement of Charles Benton, Frank M. Blythe, Peggy Charren, Frank H. Cruz, Richard Masur, Newton N. Minow, Jose Luis Ruiz, Shelby Schuck Scott, Gigi B. Sohn, Karen Peltz Strauss, and James Yee
On to Recommendation 6