SPEECH BY REED HUNDT CHAIRMAN FEDERAL COMMUNICATIONS COMMISSION ARTISTS RIGHTS FOUNDATION DIGITAL TECHNOLOGY SYMPOSIUM LOS ANGELES, CALIFORNIA (AS PREPARED FOR DELIVERY) FEBRUARY 15, 1996 Thank you, Gerry. And thanks to Gene Reynolds, President of the Directors Guild, and Larry Chernikoff of the Artists Rights Foundation for all their help in arranging my visit. Well here I am straight from the entertainment capital of the world: Washington DC. That's a Jack Valenti line. He hasn't used it yet today, has he? He will. And you'll laugh again. He told me it's guaranteed. And it really is funny back in Washington. It's funny, for example, to have Congress shut down the Federal Communications Commission in order to solve the deficit problem even while we're selling spectrum licenses for billions of dollars, which goes to solve the deficit problem. I always say our auctions are not about the money. They're about fast, fair and efficient ways to allocate precious public resources and jumptstart competition. It really doesn't matter how much we raise in the auctions. What is really important is that the government doesn't pick the winners of the licenses according to who has the best lobbyists or the most congressional influence. And we don't tell the license winners what to do to make money in the marketplace. We guarantee that the markets are competitive and then we let the auction winners compete, whether its in the cellular telephone business or the direct broadcast satellite business. So that's why it wasn't really relevant that Rupert Murdoch had to give me a king's ransom, an absolute fortune, a colossal sum, $682 million in an auction for the DBS satellite slot. The amount didn't matter at all. Who am I kidding? I can now reveal the truth about the auctions. Don't pass it on. We intended all along to raise in auctions of the airwaves more money than Bill Gates has. Last week we hit the target, and we're now at $15.8 billion with dozens of auctions yet to go. Our auctions are doing a lot of business. Almost as much as Lion King. But the auctions do worry us a little if they are taken to be further evidence that you can't compete in the entertainment, communications, information, media business unless you have huge scale and scope. Is it possible that just as the President announces in truth that the era of big government is over, the era of big media takes charge? At the same time, the great majority of Americans are concerned as never before about the impact of the media -- especially the big and powerful media -- on children. And they are looking for new and creative ways to ensure that kids watch less of the programming that steers them in the wrong direction and more of the programing that steers them the right way. Maybe the wonderful invention of digital television provides new opportunities, new outlets for the kind of programming I believe you want to produce but are frustrated by market forces, programming that truly educates and informs. I'll come back to this. I was one of the privileged few, along with Mr. Valenti, to be present in the magnificent Library of Congress when the President signed into the law the momentous Telecommunications Act of 1996. This Communications Act marks the end of the era of big government in communications. As a result of this new law, I see a great boom in channels, in conduits, in carrying capacity, in ways to create and reach audiences. I see your programs finding audiences over the air, down pipes, across the mysterious unknown land of cyberspace, passable only with the guidance of the gophers and navigators that feed on a diet of applets as they trip invisibly through the world wide web. I have no idea what that means. Jack Valenti does. He says it's "magic verging on sorcery." I am not sure that reflects a scientific understanding of the new software inventions. But whatever underlies the science, as long as your government resists the business impulse to monopolize, to construct bottlenecks, and to seek overconcentration of power, then you can create and reach audiences with more freedom than ever before in the history of art. That's an optimistic statement. And it's true I am an optimist. Yet I'm also a realist. I am well aware that even as the communications revolution is daily inventing new tools for the media, Americans are becoming increasingly dissatisfied with the impact of the media on our children and our society. Many people in your government, and many people who are trying to get elected to be in your government, have been reflecting this dissatisfaction by complaining in strong terms about the media. You might be thinking that this wave correlates with the fact that we are in a presidential election year. You might harbor the notion that when the election is over the complaining will fade away. I myself don't think that view is right. I believe the pace of change of modern life has so stressed our social fabric that many responsible people are for the first time asking what the media are doing that they ought not do (excessive violence), and what the media are not doing but they ought to do (educate our kids). But suppose you're not convinced. Do you just say shrug your shoulders at all the hue and cry? I hope not, because even if politics comes and goes, our regrets about not doing right by our children will live with us forever. And every year we have a new crop of 6 year olds; a new group of 12 year olds; and new class of 18 year olds. We have an inexhaustible supply of youth. We have an unextinguishable duty to do right by them. And America desperately needs you to use your power to do good by it's children. Teenagers in the U.S. right now know that July 4 is a holiday. But more than three-quarters can't identify the event that occurred in Philadelphia on July 4, 1776. If you don't know the story of the Declaration of Independence -- if you don't understand the risks that need to be taken, that have been taken, in the cause of freedom -- then how can you help keep the American dream alive? When Rich Frank told a convention of TV broadcasters that they should do more to teach kids, it wasn't because he cared whether or not it would silence the attacks from Washington. Broadcasters should provide more educational programming, he said to them, "because it's right and you have the power to get something done." My own view is that Rich, like Barry Diller a few weeks earlier, is finding the ear of many in Hollywood. I reject the suggestion of some that the entertainment business doesn't care about America's kids. I don't think the problem is that you want to be "culturally corrosive," as some have described it, but I do believe that market forces put you in a real bind. You invent Bill Nye the Science Guy, but then stations air it at times when it can't build an audience or won't even clear it in the first place. You produce Schoolhouse Specials, but advertisers won't support it. You think about creating the next Sesame Street but on commercial TV, but you can't go with the idea because you,re certain that stations won't air it on the ground that it would place them at a competitive disadvantage in their market. Here's where we can and should work together. I believe we can identify ways to solve these problems. I believe, for example, that there are ways to shield you, for just a few hours each week, from market forces that limit your ability to produce and distribute educational programming. And I believe parental advisories can be prepared that will foster creative freedom. As far as I can tell, NYPD Blue has only thrived since advisories were placed on it. A few weeks ago there was an episode about racism that was one of the finest shows I've ever seen on television. It was adult content, labelled as such, and enjoyed by millions. We don't need many rules to get better results. And after all let's be candid and acknowledge that the entertainment industry is one of the least regulated industries in the country. And it's less regulated now than when President Clinton was elected and I got to the FCC. In the last two years alone, for example, we repealed the financial interest and syndication rules, which had blocked studios like Disney from buying networks ilke ABC. And we repealed the prime time access rule. No FCC Chairman ever has been more deregulatory, market- oriented than I have been. And I'm proud of that. I don't think governent accomplishes anything worthwhle for Americans by micromanaging commercial competition in media markets. Yes, I think government can and should adopt targeted and carefully tailored rules to prevent harm to kids, to ensure that kids have access to educational programming that the market doesn't generate on its own, and to give parents more control over what their kids watch. And yes I think the FCC should continue to promote free TV in every market, diversity of programming and viewpoints, and localism in broadcast. But I'm not in favor of writing rules that would in any way regulate Hollywood's opinions or ideas, or would constrain creativity, or would restrict freedom of expression. Digital television will be a test for whether the Commission can see its way to adopting a procompetitive deregulatory approach to a wonderful new broadcast service, while at the same time guaranteeing that digital TV helps us teach kids and empower parents. I don't see any reason, for example, why the government should tell broadcasters that for some or all of the day they should use their digital capacity for just one kind of signal, the highest resolution of the several that the Grand Alliance standard allows: high definition. There are many possible formats. Let the market decide. You wouldn't want the government telling the New York Times not to print five sections next Sunday on regular paper but instead to print just one section on high glossy paper. That's what the so-called high definition issue is all about: keep the government out of this question. Many of you are concerned about the impact of the aspect ratio the Grand Alliance proposes on the appearance of your work on television's small screen. For too long you have struggled with the narrow window mandated by fifty-year-old technology. "This motion picture may have been altered to fit your television screen" is not the opening message you had in mind. Other groups have expressed concerns with other aspects of the Grand Alliance standard. Some in the computer industry have objected to the proposed scanning formats. But it is my belief that the role of government does not include making artistic decisions that are better left to artists, nor technical decisions better left to consumers and the marketplace. My approach is to let the market sort out these issues. Trust in markets, as long as they are competitive, and as long as there is no evidence that the market is failing to provide something the public rightly insists on. In the next few months, the Commission will issue a Notice of Proposed Rulemaking seeking comment on the Grand Alliance standard. Let me and my colleagues hear from you as we go through the process. There was a great debate in Washington on the eve of passing the telecommunications law about whether the new digital TV spectrum should be sold in auction or given to current broadcasters. Senator Dole, Senator Leiberman, Congressman Barney Frank, Bill Safire, the National Taxpayers Union and others call the award of the spectrum to broadcasters a giveaway. They would have us auction the licenses, and collect the $20 billion or so that we could conceivably raise. The issue was resolved by postponing the spectrum auction debate until April while passing the law now. The auction issue must be decided by Congress. The FCC has no power to auction broadcast licenses. Remember we are talking here about the ability to broadcast digitally as many as 50 or more channels in, say, Los Angeles. It's a wonderful new medium. Whoever gets the rights, the fundamental question is what do we want digital TV to give the country? Should it be that we require all free channels? Or let some be subscription? Should we seek in all this new channel capacity free time for political broadcasting? Educational tv? More capacity for PBS? More news? More entertainment? Whatever the market will generate? These are the key questions, regardless of whether the licenses are given to broadcasters or are sold at auction. When I think about the prospects of multiplying the country's TV channels by five through digital technology I think of what awesome power you have in your hands, in your minds, in your dream machines. A few weeks ago I went to Poland as part of a continuing effort to open world markets to communications. I met with the communications ministries from Poland and the other former members of the Soviet bloc, and we made a great deal of progress. Exports are booming for California generally, and Hollywood is leading the way. Entertainment and high-technology, marketed at home and abroad: this is what's driving the comeback of the California economy. After the negotiations in Poland were done I stayed an extra day -- which I have never done in my two years of diplomacy. I stayed to visit the concentration camp of Auschwitz Birkenau. If you have been there you know words cannot describe the monstrous tragedy of that single train track running under the guard house to the fake train station and then parallel to the platform down to the twin creamatoriums. And yet there is now a place on the internet where a chat group continuously discusses what they consider to be the "fact" that the train track I saw did not carry 1.5 million people to unjust death, that the Holocaust never happened. In a free society we must tolerate even the most repugnant views. Our government should not close down that chat line or censor the internet. But who then will tell the truth? And how can we be sure it will be understood? It is impossible to visit Auschwitz without feeling a tremendous sense of gratitude to Stephen Spielberg and everyone who helped him make and deliver Schindler's List. That tells the truth and in a way that can never be forgotten. That is true art. I wish all our children would read the real history of the Holocaust in their books in school. But nothing can do more to communicate the truth of the Holocaust -- and to refute conclusively the madness of that internet chat group -- than this wonderful film that you here in Hollywood created. It's not just Schindler's List, of course, but so many movies, TV shows, interactive videos, and so forth that you can and will create to teach our children truths and values and to give them the opportunity to become full and active participants in our economy and our democracy. We have to use our new services like digital TV to give you a chance to find the audiences. We have to remember that the iron laws of economics mean someone has to pay for all shows. But working together, a small but effective government and a large and creative Hollywood can forge a new partnership that will do America proud.