August 2006

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For upcoming media policy events, see http://www.benton.org

TELECOM
BellSouth Drops Surcharge Plans For High-Speed Internet Offering
California Epiphany

LEGISLATION
Back to school for Congress
California Franchise Bill Close to Passage

MEDIA OWNERSHIP
MMTC Asks FCC to Start Over
What-Ifs of a Media Eclipse
Digital Impasse

ADVERTISING
As TV Campaign Spending Soars, Cable Outlets Attract More Dollars
The Show Is the Commercial
Technology Boosts Outdoor Ads As Competition Becomes Fiercer

CONTENT
Adelstein: Indecency Decisions Go 'Dangerously' Too Far
Gore wants TV to welcome more users Internet-style

QUICKLY -- Testing Technology in a Disaster=20
Response; Wireless Companies Lead Airwaves=20
Auction; CPB Awards Grants for Transition to=20
Digital Radio Service; SAG, AFTRA Boards OK=20
Contract Extension; Decision By FCC a Break for=20
XM Radio; Debate switches to Channel 4's subsidy

TELECOM

BELLSOUTH DROPS SURCHARGE PLANS FOR HIGH-SPEED INTERNET OFFERING
[SOURCE: Wall Street Journal 8/26, AUTHOR: Amy Schatz Amy.Schatz( at )wsj.com]
BellSouth Corp. reversed its decision to impose a=20
surcharge on high-speed Internet customers=20
Friday, after federal regulators turned up the=20
heat on BellSouth and Verizon Communications for=20
levying a new surcharge that essentially replaced=20
a fee the government had dropped. On Friday,=20
officials at the Federal Communications=20
Commission sent an eight-page "letter of inquiry"=20
to Verizon, asking for more information about the=20
surcharge it plans to levy. The letter is the=20
first step toward a formal investigation. Several=20
FCC commissioners, including Chairman Kevin=20
Martin, were fuming about the companies' decision=20
to essentially raise surcharges just after the=20
government scrapped a fee that would have cut=20
monthly bills by a dollar or two for about 10=20
million households. "The commission takes its=20
obligation to protect consumers very seriously,"=20
said FCC spokesman David Fiske. "Consumers must=20
be provided with clear and nonmisleading=20
information so they may accurately access the=20
services for which they are being charged and the=20
costs associated with those services." Yesterday=20
afternoon, BellSouth said it would immediately=20
stop charging its 3.2 million Internet=20
subscribers a $2.97 "regulatory cost recovery=20
fee." "It was clearly becoming subject to=20
criticism, and frankly we want to do what's in=20
the best interest of our customers," said=20
Herschel Abbott, BellSouth's vice president of governmental affairs.
http://online.wsj.com/article/SB115651642324345562.html?mod=3DdjemTECH
(requires subscription)
* BellSouth drops Internet fee after FCC threat
http://today.reuters.com/news/newsArticle.aspx?type=3DtechnologyNews&sto...
D=3D2006-08-25T224327Z_01_N25230917_RTRUKOC_0_US-TELECOMS-FCC-DSL.xml&archi=
ved=3DFalse
* Bell South Drops New DSL Fee
http://www.broadcastingcable.com/article/CA6366101.html?display=3DBreaki...
News
* FCC queries Verizon on high-speed Internet fee
http://www.usatoday.com/money/industries/telecom/2006-08-27-fcc-verizon_...
tm

CALIFORNIA EPIPHANY
[SOURCE: Wall Street Journal, AUTHOR: Editorial Staff]
[Commentary] How much competition is there in=20
U.S. telecommunications? So much that even=20
California regulators have finally noticed. Last=20
week the state's Public Utilities Commission=20
voted 5-0 to lift decades-old price controls on=20
land-line phone companies. The move was=20
instigated by Rachelle Chong, who was appointed=20
to the PUC in January by Governor Arnold=20
Schwarzenegger (R). According to a Los Angeles=20
Times report, this is the first time in 18 years=20
that California has altered its rate structure.=20
Think about all that has happened in telecom in=20
the past two decades, from the proliferation of=20
wireless devices to Internet telephony, and you=20
get some idea of how far past due these changes=20
were. The good news is that these state=20
regulators have finally acknowledged that=20
competition in telecom abounds, that free-markets=20
work, and that holding residential phone bills=20
below actual cost is silly in today's brave new=20
telecom world. The other good news is that if=20
even California regulators can come to this realization, anyone can.
http://online.wsj.com/article/SB115671978346246832.html?mod=3Dtodays_us_...
nion
(requires subscription)

LEGISLATION

BACK TO SCHOOL FOR CONGRESS
[SOURCE: eSchool News]
As House and Senate lawmakers return to=20
Washington next month to reconvene the 109th=20
Congress after their summer recess, the=20
legislative agenda features several bills likely=20
to affect how technology is used in schools.=20
Among the measures currently on Congress's to-do=20
list before year's end are the Deleting Online=20
Predators Act (DOPA) of 2006, a controversial=20
proposal intended to better protect children from=20
the potential hazards of social-networking web=20
sites such as MySpace.com; the most significant=20
overhaul of telecommunications legislation in a=20
decade, which has ramifications for the $2.25=20
billion-a-year eRate; and closure on the 2007=20
federal budget, which will decide the fate of the=20
Enhancing Education Through Technology (EETT)=20
block-grant program and other school-related=20
spending. One of the first bills likely to be=20
revisited this fall in the Senate, DOPA (H.R.=20
5319) was under review by the Senate Commerce=20
Committee when lawmakers broke in August. DOPA=20
appeared on the fast track to approval before the=20
congressional recess; the House approved it 410=20
to 15. Despite its quick and nearly unanimous=20
approval in the House, however, the legislation=20
drafted by Rep. Michael Fitzpatrick (R-PA) has=20
run into steep opposition from several ed-tech=20
proponents. Its critics say the bill--which=20
requires schools to block access to=20
social-networking web sites as a prerequisite to=20
receiving valuable eRate discounts--is overly=20
broad, redundant, and likely would prohibit=20
educators from fully embracing the Internet as a=20
tool for teaching and learning. The proposal=20
would force any school or library that receives=20
government funding to block access to any web=20
site that "allows users to create web pages or=20
profiles that provide information about=20
themselves and are available to other users, and=20
offers a mechanism for communication with other=20
users, such as a forum, chat room, eMail, or=20
instant messenger." The rules would apply to all=20
U.S. schools and libraries that receive funding=20
through the eRate, the massive federal program=20
that provides Internet and telecommunications=20
discounts to needy schools. The bill also seeks=20
to limit access to personal networking web sites to people who are 18 or ol=
der.
http://www.eschoolnews.com/news/showstoryts.cfm?Articleid=3D6523

CALIFORNIA FRANCHISE BILL CLOSE TO PASSAGE
[SOURCE: Multichannel News, AUTHOR: Linda Haugsted]
August 31 is the deadline for passing a telephone=20
company-backed bill that would ease California's=20
level-playing-field law and assign franchising=20
duties to the Public Utilities Commission. The=20
Californian Senate is expected to vote on a=20
measure on today -- if approved , the measure=20
would return to the State Assembly, which must=20
review the amendments and agree to them before final passage.
http://www.multichannel.com/article/CA6366051.html?display=3DTop+Stories

MEDIA OWNERSHIP

MMTC ASKS FCC TO START OVER
[SOURCE: Broadcasting&Cable 8/24, AUTHOR: John Eggerton]
The Minority Media & Telecommunications Council=20
has asked the FCC to withdraw its proposed review=20
of media ownership rules and start again, saying=20
it has failed to specifically address several key=20
issues. In a filing with the FCC Wednesday, the=20
Minority Media & Telecommunications Council cited=20
three chief problems with the further notice of=20
proposed rulemaking: 1) its "failure" to identify=20
specific minority ownership proposals remanded by=20
the Philadelphia Federal Appeals court; 2)=20
failure to seek comment on what constitutes a=20
socially or economically disadvantaged business;=20
and 3) not spelling out a "central legal basis=20
for minority ownership relief," which MMTC says=20
should be preventing market entry barriers. MMTC=20
said the FCC's first try was not "entirely=20
hostile" to minority ownership, giving it credit=20
for seeking comment on how various deregulatory=20
or regulatory proposals would affect minority=20
ownership, and having a public forum on minority=20
ownership. But it concluded that without MMTC's=20
suggested fixes, "It will be impossible for the=20
commission to adopt--and sustain--any meaningful=20
ownership relief." That means the rules could=20
potentially be remanded again when the wind up=20
back in court for the Third Circuit's OK. MMTC=20
was an intervenor in the successful court=20
challenge (Prometheus Radio Vs. the FCC) to the=20
FCC's deregulatory rule rewrite in 2003. Andrew=20
Schwartzman of Media Access Project, which=20
represented Prometheus, says that the court=20
specifically cited the FCC's failure to consider=20
minority ownership and directed the FCC in the=20
remand to examine the issue. "This motion is, in=20
effect, accusing the FCC of failing to comply=20
with the court's directive," he said.
http://www.broadcastingcable.com/article/CA6365498.html?title=3DArticle&...
cedesc=3Dnews

WHAT-IFS OF A MEDIA ECLIPSE
[SOURCE: New York Times 8/27, AUTHOR: Katharine Seelye]
Many people in the newspaper industry are still=20
scratching their heads over how and why Knight=20
Ridder, a company with relatively high profit=20
margins and a trophy case of 85 Pulitzer Prizes,=20
allowed itself to be wiped off the media=20
landscape. The dismantling of Knight Ridder is a=20
study of the hurdles facing publicly traded=20
newspaper companies in a time of seismic change=20
in the industry. The migration of readers and=20
advertisers to the Internet, as well as rising=20
costs and falling revenue, are threatening the=20
financial well-being -- even the very existence=20
-- of some of the industry=92s most storied brand names.
http://www.nytimes.com/2006/08/27/business/yourmoney/27knight.htm
(requires registration)

DIGITAL IMPASSE
[SOURCE: Broadcasting&Cable, AUTHOR: Anne Becker]
Nearly half the network shows on the primetime=20
grid this fall are produced by third-party=20
studios=97independents like Sony Pictures=20
Television or studios owned by the parent of a=20
rival network. But NBC=92s medical comedy Scrubs,=20
produced by ABC=92s corporate sibling Touchstone=20
Television, is one of only a handful of such=20
shows available for download on iTunes. What=20
gives? A year after ABC began offering its=20
primetime hits on iTunes, kicking off a scramble=20
to put network shows on emerging platforms,=20
networks and third-party studios are still=20
battling over digital-distribution rights,=20
revenue-sharing and branding for their shows.=20
While the studios are as eager as the networks to=20
dip a toe into digital distribution, they are=20
wary of disrupting their proven revenue streams.=20
=93We need to be careful that we don't allow the=20
growth of new business models to have a negative=20
impact on the downstream value of the content=20
without offsetting the lost revenue from those=20
downstream values,=94 says Bruce Rosenblum,=20
president of Warner Brothers Television Group
http://www.broadcastingcable.com/article/CA6366086.html?display=3DNews

ADVERTISING

AS TV CAMPAIGN SPENDING SOARS, CABLE OUTLETS ATTRACT MORE DOLLARS
[SOURCE: Wall Street Journal, AUTHOR: Amy Schatz Amy.Schatz( at )wsj.com]
As campaign season kicks into high gear,=20
television-advertising spending is on track to=20
possibly break the 2002 record. But unlike=20
previous mid-term election years, candidates are=20
devoting more money than ever to cable TV in an=20
effort to target voters more precisely. Though=20
most political ad dollars traditionally are spent=20
after Labor Day, tight primaries and early=20
spending on House, Senate and gubernatorial races=20
have pushed local TV-ad spending above $311=20
million as of mid-August, up 45% from the same=20
point in 2004 and more than three times as much=20
as in 2002. All political ad buys by mid-year,=20
including issue ads, ballot initiatives and other=20
issues, have pushed spending above $700 million=20
nationally. About 85% of that spending still is=20
expected to go to local broadcast television=20
stations, but cable operators say they're=20
tracking well ahead of expectations and look=20
forward to a particularly lucrative mid-term=20
election this time, thanks to a growing=20
acceptance of cable by political ad buyers and a=20
desire of candidates to better target their=20
messages. The heavy spending in part reflects the=20
view of both parties that the stakes are high=20
this year. Control of Congress is in play, with=20
Democrats hoping to pick up the House and at=20
least a few Senate seats. Incumbents in both=20
parties are fighting uneasiness, as reflected in=20
many polls, that the country is heading in the=20
wrong direction. There also are competitive=20
gubernatorial races in big states with expensive=20
media markets, including California, Michigan and=20
Florida. Meanwhile, candidates are unusually=20
flush with cash, thanks to aggressive=20
fund-raising efforts. By the end of July, the=20
Republican National Committee had raised a total=20
of $176 million this election cycle, compared to=20
the Democrats' $95 million. But Democrats are=20
closer than usual to matching Republican=20
fund-raising totals this year, and the Democratic=20
Senatorial Campaign Committee has even surpassed=20
its rival by $12 million, with $77 million total=20
raised. Special-interest groups are also expected=20
to spend heavily in certain races this fall. When=20
it comes to cable spending, industry executives=20
credit President Bush's embrace of national cable=20
ads in his 2004 re-election campaign for the=20
burgeoning interest of other candidates now.
http://online.wsj.com/article/SB115672043113446850.html?mod=3Dtodays_us_...
e_one
(requires subscription)

THE SHOW IS THE COMMERCIAL
[SOURCE: Multichannel News, AUTHOR: Gyula Kangiszer, Deloitte Consulting]
[Commentary] As digital video recorders advance=20
viewers=92 habit of skipping past commercials,=20
advertisers must create new ways to increase=20
product awareness and purchasing. There is one=20
easy solution: Let consumers choose the=20
commercials they want to see. Automatic skipping=20
could be reduced by including a listing of ads in=20
the beginning of the break so viewers could=20
choose which to watch. In the future.=20
advertisements on digital channels will likely be=20
automatically matched to customer profiles and/or=20
self predefined interests. Furthermore, entire=20
channels dedicated solely to commercials may even=20
emerge. In the meantime -- and possibly=20
forevermore -- the show itself will become a=20
constant commercial. To combat ad-skipping,=20
advertisers will need to work with content=20
creators to write products directly into scripts.=20
You can't skip past products placed in shows=20
without missing the program itself. So don't be=20
surprised if everything you see on screen is for=20
sale: 1) Product placement will dominate=20
programming and account for the majority of=20
props, background and style. 2) The use of props=20
will be precisely defined. For example, a round=20
table might be shown two times for 25 seconds=20
each, the first time by itself and the second=20
time with a popular actor leaning over it for=20
five seconds. 3) A few key closed electronic=20
marketplaces will emerge to facilitate product=20
placement, matching the prop need to the highest=20
bidding advertiser or manufacturer. 4) Prop=20
availabilities will be acquired via open auction.=20
Many props will have dual value: Marketing value,=20
to enable viewers to buy identical products=20
(e.g., a new line of clothes by a high-profile=20
designer); or one-time revenue opportunity, for=20
selling actual items (e.g., a specific dress worn=20
during the program). 5) DVDs may get similar=20
interactive remastering. For example, a soft=20
drink in a movie or TV series could be sponsored=20
through digital edits by different advertisers at=20
different times (depending on the initially negotiated rights).
http://www.multichannel.com/article/CA6366057.html?display=3DOpinion

TECHNOLOGY BOOSTS OUTDOOR ADS AS COMPETITION BECOMES FIERCER
[SOURCE: Wall Street Journal, AUTHOR: Aaron O. Patrick aaron.patrick( at )wsj.co=
m]
Outdoor advertising, one of the oldest forms of=20
advertising, is reinventing itself. The $23=20
billion industry is introducing digital=20
technology to change ads faster, new ways of=20
measuring viewers, and billboards that beam=20
information to cellphones. As a result, outdoor=20
advertising companies -- which provide=20
billboards, posters and video screens in public=20
places -- are now seeing bigger gains than many=20
competitors. Because outdoor advertising is much=20
less expensive than TV spots, it still accounts=20
for a smaller part of overall ad spending. But it=20
has become the second-fastest growing form of=20
advertising, behind the Internet, according to=20
market-research and media-buying firms. Around=20
the world, spending on outdoor advertising last=20
year was $23.2 billion, up 6.1% from the year=20
earlier, according to ZenithOptimedia, a media=20
buyer owned by Publicis Groupe SA.
http://online.wsj.com/article/SB115672572723646939.html?mod=3Dtodays_us_...
e_one
(requires subscription)

CONTENT

ADELSTEIN: INDECENCY DECISIONS GO 'DANGEROUSLY' TOO FAR
[SOURCE: Broadcasting&Cable 8/24, AUTHOR: John Eggerton]
In an August 20 speech at the Progress & Freedom=20
Foundation summit in Aspen, Federal=20
Communications Commission Commissioner Jonathan=20
Adelstein said he supports stepped-up enforcement=20
of indecency regulations, but he believes that=20
the Commission's majority has gone "dangerously"=20
too far. "I believe that the Commission=92s last=20
batch of decisions dangerously expands the scope=20
of indecency and profanity law," he told his=20
audience, "without first attempting to determine=20
whether we are applying the appropriate=20
contemporary community standards." He was=20
preaching to the choir. The foundation is a=20
limited-government group whose president was=20
quick to praise the commissioner for his=20
free-market take on several issues. But part of=20
the danger that Commissioner Adelstein sees is=20
that the FCC could lose its power to regulate=20
content altogether. He was the only Commissioner=20
to dissent in part from the FCC's March 15=20
release of a raft of indecency decisions.
http://www.broadcastingcable.com/article/CA6365703?display=3DBreaking+News
* See Commissioner Adelstein's remarks:
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-267047A1.doc

GORE WANTS TV TO WELCOME MORE USERS INTERNET-STYLE
[SOURCE: Reuters, AUTHOR: Jeffrey Goldfarb]
Although the Internet is a democratizing force,=20
television is still the most influential form of=20
media and citizens ought to have more control=20
over its programming, former Vice President Al=20
Gore said on Sunday. Gore, long an advocate of=20
the information superhighway and now the owner of=20
a U.S.-based current affairs TV channel that=20
shows user-generated programs, also said the=20
Internet is not yet technologically capable of=20
replicating television's power. "Most of what's=20
happening in the encounter between television and=20
the Internet has been the Internet cannibalizing=20
television," Gore told an annual gathering of=20
British TV executives in Scotland. "What is=20
needed is to reverse the flow and find ways to=20
use the Internet to give individuals access to=20
the public forum, which is television," he said.=20
Gore framed his argument around the need for=20
citizens to rejoin the democratic process and to=20
be given the ability to challenge inaccurate=20
remarks made by politicians, especially in the TV=20
ads that dominate election campaigns.
http://today.reuters.com/news/newsArticle.aspx?type=3DinternetNews&storyID=
=3D2006-08-28T062110Z_01_L27801030_RTRUKOC_0_US-MEDIA-GORE-TV.xml&archived=
=3DFalse

QUICKLY

THIS IS ONLY A DRILL: IN CALIFORNIA, TESTING TECHNOLOGY IN A DISASTER RESPO=
NSE
[SOURCE: New York Times, AUTHOR: John Markoff]
In San Diego, teams from the Pentagon,=20
nongovernmental agencies and several dozen=20
technology companies participated in a five-day=20
simulation meant to showcase and test a new set=20
of digital tools in responding to disaster. The=20
limitations of even the latest technology were in=20
evidence when an effort to restore communications=20
by setting up ad hoc wireless networks resulted=20
in a three-day data traffic jam. Yet the problems=20
encountered in the training effort, named Strong=20
Angel III, did little to dampen the enthusiasm of=20
the participants, a diverse group of more than=20
800 =93first responders,=94 military officers and=20
software and wireless network experts -- some=20
from rivals like Microsoft and Google, working=20
side by side. More than $35 million in equipment=20
was assembled as part of the event, aimed at=20
preparing for natural disasters, epidemics,=20
terrorist attacks or the aftermath of war.
http://www.nytimes.com/2006/08/28/technology/28disaster.html
(requires registration)

WIRELESS COMPANIES LEAD AIRWAVES AUCTION
[SOURCE: Associated Press 8/25]
T-Mobile remains the top bidder in the latest FCC=20
spectrum auction which has raised some $13=20
billion so far. The 48th round of bidding ended=20
Friday. T-Mobile had bid about $3.89 billion on=20
125 licenses. Verizon Wireless has bid $2.8=20
billion for four licenses. SpectrumCo, a=20
consortium of Comcast, Time Warner, Sprint=20
Nextel, Cox Communications and Bright House=20
Networks, has bid $2.22 billion on 129 licenses.
http://www.businessweek.com/ap/financialnews/D8JNMU3O2.htm
* Wireless Providers Poised to Win Spectrum Licenses
http://www.nytimes.com/2006/08/28/technology/28spectrum.html

CPB AWARDS GRANTS TO 85 PUBLIC RADIO STATIONS FOR TRANSITION TO DIGITAL SER=
VICE
[SOURCE: Corporation for Public Broadcasting press release]
The Corporation for Public Broadcasting (CPB)=20
announced $7.74 million in grant awards designed=20
to help 85 public radio stations in 28 states,=20
including 49 stations serving rural and minority=20
audiences, purchase the equipment needed to=20
transition to digital radio. The grants are the=20
latest in a series of awards designed to assist=20
public radio and television stations with their=20
transition from analog to digital broadcast=20
technology. Since 2002, CPB has distributed=20
digital transition grants to 540 public radio=20
stations and 324 public television stations.=20
These grant awards are funded through the=20
approximately $220 million Congress has provided=20
to CPB to help both public radio and public=20
television stations with their digital transition needs.
http://www.cpb.org/pressroom/release.php?prn=3D566

SAG, AFTRA BOARDS OK CONTRACT EXTENSION
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
The boards of the Screen Actors Guild and the=20
American Federation of Television & Radio Artists=20
have approved a two-year extension on the=20
contracts for actors in commercials. The=20
extension gives both advertisers and unions the=20
time to study alternative methods of compensation=20
in the digital age, where ads air on a=20
multiplying number of platforms. An outside=20
consultant is being hired to conduct the study.=20
Members of the union will vote on the contracts September 26.
http://www.broadcastingcable.com/article/CA6366173.html?display=3DBreaki...
News

DECISION BY FCC A BREAK FOR XM RADIO
[SOURCE: Washington Post, AUTHOR: Kim Hart]
A Federal Communications Commission decision last=20
week cleared XM Satellite Radio Holdings to=20
resume production of three popular handheld radio=20
devices, alleviating one of a number of problems=20
that bedeviled the company this year and dragged=20
down its stock. The decision comes two weeks=20
after XM halted production of the three=20
top-selling radio models. Since April, the FCC=20
had been scrutinizing XM radios that contain FM=20
transmitters, saying the devices did not meet=20
broadcast emission standards and could interfere=20
with other electronic devices. The transmitters=20
allow an owner to play XM programs through a car=20
or home stereo receiver. Although XM is still=20
working with the FCC to certify five other radio=20
models, the approval ensures that XM's radios=20
will be fully stocked at retail outlets before=20
the holiday shopping season, which usually=20
generates the highest satellite radio sales,=20
according to analysts and the company.
http://www.washingtonpost.com/wp-dyn/content/article/2006/08/27/AR200608...
0510.html
(requires registration)

DEBATE SWITCHES TO CHANNEL 4'S SUBSIDY
[SOURCE: Financial Times, AUTHOR: Andrew=20
Edgecliffe-Johnson and Emiko Terazono]
Ofcom, Britain's telecommunications industry=20
regulator, is about to review Channel 4's funding=20
and Charles Allen, the chief executive of rival=20
ITV, doesn't think Channel 4 deserves its public=20
status and subsidy. If the channel carried on=20
with its output of reality TV, game shows and=20
soap operas indistinguishable from that of=20
commercial channels, he argued, "the inevitable=20
next step has to be privatization." Although the=20
publicly owned broadcaster is directly funded by=20
advertising revenues, it pays nothing for access=20
to valuable broadcasting spectrum. In exchange,=20
it has to broadcast a certain amount of public=20
service programming, such as news, current affairs and educational material.
http://www.ft.com/cms/s/73086760-3631-11db-b249-0000779e2340.html
(requires subscription)
--------------------------------------------------------------
Communications-related Headlines is a free online=20
news summary service provided by the Benton=20
Foundation (www.benton.org). Posted Monday=20
through Friday, this service provides updates on=20
important industry developments, policy issues,=20
and other related news events. While the=20
summaries are factually accurate, their often=20
informal tone does not always represent the tone=20
of the original articles. Headlines are compiled=20
by Kevin Taglang headlines( at )benton.org -- we welcome your comments.
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