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Appendix D. Innovative Approaches to Public Interest Responsibilities: A Comparative Analysis

Appendix D. Innovative Approaches to Public Interest Responsibilities: A Comparative Analysis

The purpose of this appendix is to offer some discussion of various possible innovative approaches to public interest obligations, and to compare them to more conventional approaches.* Our shared ground is that broadcasters should attempt to contribute to the educational, civic, and democratic goals of a well-functioning democracy. The question is what methods are best suited to achieving those goals and whether it is possible to think of more creative means for doing so. Thus we discuss a wide range of proposals, from deregulation to spectrum auctions to a system of “digital drop-ins,” by which government would support a substantial amount of public interest programming.

Some of the most interesting proposals below attempt to promote public interest goals by allowing considerable flexibility for broadcasters, as, for example, by allowing them to provide public interest broadcasting or instead to pay for someone else to do it, or by paying a spectrum fee (from an auction or from a set price) that might be used to support public interest broadcasting.

We have been greatly assisted by a number of presentations and documents, including those by the Media Institute, a working group of the Aspen Institute, and Hugh Carter Donahue. The public through electronic mail submissions, faxes, and attendance at meetings has also made substantial contributions to the Committee. We are very grateful for the creative thinking and assistance provided by these organizations and individuals. These ideas were vigorously debated within the Committee. Given the innovative and new approach taken by many of these proposals, the Committee chose not to reach any final judgment and conclu- sions or make any specific recommendations.

I. TRADITIONAL REGULATION: THE PUBLIC TRUSTEE MODEL

The traditional approach to regulation of broadcasting has treated broadcasters as public trustees, obligated to meet a large set of public service responsibilities. Because broadcasters get exclusive use of a scarce public resource—the airwaves, it has been deemed appropriate to subject them to national commands designed to ensure promotion of the public interest. Perhaps the public trustee model should be “carried over” to the digital era, though there are complexities in deciding exactly how the model applies in a new setting. There are serious questions about the extent to which federal commands should be specific (so as to ensure compliance) or vague and general (so as to allow room for private adaptation).

Advantages: It is reasonable to think that direct mandates are the simplest way to ensure compliance with public interest responsibilities. If, for example, broadcasters are told to provide three hours of educational programming per week, or five hours of free air time for candidates per year, the public interest may be well-served simply by virtue of the mandate. Other approaches might be easier to evade and less effective.

Disadvantages: In general, this approach may be anachronistic in light of the new communications market, with so many more options. As historically understood, the public trustee model also has a degree of rigidity -- a kind of “one size fits all” notion that is ill-suited to varying needs on the part of stations and viewers alike. Command-and-control approaches can also be counterproductive and have unintended bad side-effects.

II. ECONOMIC INCENTIVES: PAY OR PLAY, SPECTRUM CHECKOFF

In the environmental area, there have been many innovations designed to create efficient, or low-cost, ways of promoting regulatory goals. A creative illustration consists of “emissions trading,” by which polluters are given a right to pollute a set amount, and permitted to trade that right with others.(1) The basic idea is that pollution is a public bad, and therefore people should be able to save money from doing less of it (and in that way lose money from doing more of it). If the right to pollute can be traded, there will be strong incentives to come up with low-cost ways of reducing pollution, and the result should be a system in which we obtain pollution reductions most cheaply. Existing experience with emissions trading approaches have shown many advantages.(2)

This basic approach -- using economic incentives -- might be adapted to the area of public interest programming. Indeed, the Children’s Television Act now authorizes licensees to meet part of their obligation to children by demonstrating “special efforts . . . to produce or support [children’s educational] programming broadcast by another station in the licensee’s marketplace.”(3) The idea might be generalized. Suppose, for example, that public interest programming is considered to be a “public good,” in the sense that the public is better off with more of it. Suppose too that some broadcasters are good at providing such programming, and can do so in a cost-effective manner, whereas others are not so good at it, and can do so only at great expense. Adapting the environmental law model, it might be provided that broadcasters should have a choice: provide public interest programming of a certain defined level; or pay a certain amount to someone else who will do so.

A mild variation on this approach would involve what has been called the “spectrum check-off ” model. On this model, broadcasters are given a choice: adhere to public interest responsibilities as nationally determined; or pay a fee for the use of the spectrum. The payment would be used for public broadcasting of one kind or other. This approach is somewhat less fine-tuned, and somewhat simpler, than the “pay or play” model. Under “spectrum check-off,” there is only one “deal,” whereas under “pay or play,” there could be a number of trades every year.

Advantages: This approach might ensure a high level of public interest broadcasting, and do so in a way that ensures that such broadcasting will be provided by those most willing and able to do it. Thus the “pay or play” approach might combine the virtues of the public trustee model with the virtues of deregulation. Under this approach, people who do not want to provide public interest programming, or who can do so only at great expense, can make mutually beneficial deals with others who are willing to do so. This could serve both broadcasters and the public.

Disadvantages: In the environmental area, emissions trading does not work where it creates “hot spots,” that is, areas that are highly polluted. A problem with “pay or play” is that it may result in the failure, on the part of some or many broadcasters, to do anything but “pay,” with the consequence that many viewers do not see such programming -- and with the further consequences that broadcasters who provide such programming may be hurt in the market- place. In addition, there are symbolic and expressive values to uniform public interest obligations. Some people think that these obligations should apply to everyone and that no broadcaster should be allowed to buy its way out.

III. PAY PLUS ACCESS

Under this approach, broadcasters would pay a fee for a right to use the spectrum; the fee might be determined via auction or might be determined by government. At the same time, public interest obligations would be removed. In addition, broadcasters would be asked to allow a specified amount of programming in the public interest -- in other words, to set aside an identified amount of time for political candidates, educational programming, or diverse viewpoints. It would be possible to imagine various combinations of the three ingredients of this approach: payment, relief from general public service obligations, and access.

Advantages: As compared with economic incentives, this approach would tend to ensure that some public interest programming was on every station. Many people think that this is important -- that certain programming, for example candidate speech, should not be relegated to certain channels that are rarely watched. Thus this approach might do better in serving democratic goals. As compared with the public trustee model, this approach would better ensure that people will provide public interest programming who have the incentive to do so well.

Disadvantages: For those skeptical of “pay or play,” this approach might create similar problems. It also would involve a degree of administrative complexity. It is possible that people would simply change the channel when the “access” material was on the station.

IV. DISCLOSURE OF PUBLIC INTEREST AND PUBLIC SERVICE ACTIVITIES

We have emphasized the importance of disclosure of public interest and public service activities. It would be possible to think that disclosure should be the exclusive governmental mandate, and that the market should be used for all specific decisions. Perhaps, then, government should restrict itself to a disclosure requirement.

Advantages: Disclosure might well trigger public-interested reactions on the part of broadcasters and diverse segments of the public. In the environmental context, disclosure has by itself done enormous good in terms of achieving low-cost pollution reductions.(4) The same may well be true here. If broadcasters are required to disclose their public interest activities, there may well be a kind of competition to have more such activities, and to create a kind of “race” to do better. Moreover, disclosure is a minimal mandate, not by itself requiring anything. Perhaps what emerges from the market, influenced as it is by the pressures that come from disclosure, is best for society, especially in light of the increasing range of programming options.

Disadvantages: In advance, it is impossible to know how much good would be done by disclosure on its own. Perhaps the good results in the environmental area will not be replicated here. If disclosure by itself has few effects, there is insufficient reason to think that whatever results is necessarily “best.” Disclosure may, in short, be too close to deregulation.

V. SPECTRUM AUCTION WITHOUT PUBLIC INTEREST OBLIGATIONS

The FCC has experimented with an auction approach to allocating scarce communications resources. It would be possible to suggest that instead of being required to pay a “fee” for spectrum, to be set by government, broadcasters should receive licenses via any auction, where the market would set the relevant prices. The proceeds from the auction could be used however the taxpayers see fit.

Advantages: It is usually better to have the market, rather than government, set the fees for goods and services. And if deregulation is an appropriate solution, a spectrum auction might well be part of a complete deregulatory package, in which broadcasters purchase “space” (at market prices) and then supply the relevant goods (also at market prices).

Disadvantages: Operation of so general an auction could be somewhat complicated. Some people believe that there would be serious questions of equity if digital “space” were put up for sale anew, especially in light of various investments that have already been made. Most important, this approach is unacceptable if the case for deregulation has not been made out. If, for example, there are various forms of market failure, it is reasonable to think that broadcasters should provide more public interest programming that the market guarantees (see below).

VI. COMPLETE OR NEAR-COMPLETE DEREGULATION

One possible approach, explicit in some of the suggestions that we have received, is to eliminate any public interest obligations. It might be thought, for example, that the market for communications is providing sufficient services for everyone, and that serious constitutional questions are raised by any governmental control of programming content. Even if the constitutional questions are not so serious, perhaps this form of government intrusion into the editorial discretion of broadcasting stations is no longer acceptable.

Advantages: Perhaps deregulation could do as well as any other approach at ensuring that viewers see what they want to see. It would certainly save money and reduce administrative burdens for broadcasters, a fact of general importance for the industry and of particular importance for many small and local stations. In light of the broad availability of options -- including cable -- it might be thought that there is no longer any reason for government control of content. On this view, any public interest programming should be funded by taxpayers, to the extent that they are willing to do so; broadcasters should not be required to pay for that programming on their own.

Disadvantages: There is good reason to believe that the communications market will not meet all social needs. Many people do not have cable television at all, and they rely instead on broadcasting. The market for broadcasting may well underproduce educational programming for children, and also programming relating to elections and other democratic concerns. There are large “external” benefits from such programming, and individual viewers may not adequately take account of those benefits in individual choices.(5) The fact that advertisers are involved in determining program content suggests that the communications market is not an ordinary one; since broadcasters deliver viewers to advertisers -- since viewers are in this sense commodities rather than consumers -- it is not at all clear that the communications market will simply provide viewers what they “want.”(6) In any case people are citizens as well as consumers, and they may well, in their capacity as citizens, want broadcasters to produce more public interest programming than the market produces on its own. And if broadcasters are receiving licenses for free, it makes sense to say that they should be required to provide something in return.

VII. DEGREULATION WITH LICENSING FEE, WITH PROCEEDS DEVOTED TO PUBLIC INTEREST BROADCASTING

Some people have suggested that government should deregulate the market, and allow broadcasters to show whatever they wish, but that it would be appropriate to impose a licensing fee, the proceeds to go to public interest broadcasting. Of course the licensing fee might be established via auction.

Advantages: Like the deregulation option, this one would eliminate any government control of the content of broadcasting. But it would impose a quid pro quo: broadcasters would have to pay a certain amount as a licensing fee, with the proceeds to go to public interest broadcasting on, for example, PBS.

Disadvantages: Like the deregulation option, this approach may well produce too little educational viewing for children and too little attention to democratic and civic affairs. It is risky to leave all public interest obligations with PBS; our tradition has sought to impose minimal duties on all stations who receive broadcasting licenses.

VIII. DIGITAL DROP-INS IN THE PUBLIC INTEREST AND THE QUESTION OF “RESERVING” PUBLIC INTEREST “SPACE”

It has been suggested that when the 1600 channel analog television system becomes obsolete, some part of the spectrum should be specifically reserved, by government, for civic discourse or local and public affairs programming. The networks that produce such programming might be funded by money received from auctioning off a portion of the analog stations. The basic idea would be to ensure “space” for public broadcast stations that would serve civic aspirations. These stations could in turn develop relevant expertise and obtain niche markets, as for example, C-Span has done.

Advantages: This approach would involve little control of commercial broadcasters. At the same time, it would ensure a large level of civic and democratic programming. The goal would be to use new technologies to expand on the PBS model, creating a number of “little,” and private, public stations.

Disadvantages: If it is desirable to ensure a certain level of public interest programming on all stations, this approach will be inadequate. There are also questions about the extent to which it is appropriate for government to reserve “space” for programming of a specific content, and about how strong a role government might have in overseeing those stations.

Endnotes

* The Advisory Committee thanks Angela Campbell and the Aspen Institute’s Communications and Society Program directed by Charles M. Firestone and Amy Korzick Garmer for the submission, Toward a New Approach to Public Interest Regulation of Digital Broadcasting: A Preliminary Report of the Aspen Institute Working Group on Digital Broadcasting and the Public Interest, on which this Appendix is based.

1) See Ackerman and Stewart, Reforming Environmental Law, 37 STAN. L. REV. 1333 (1985).

2) See id.; Robert Stavins, What Can We Learn From the Grand Policy Experiment? Lessons from SO2 Allowance Trading, 12 J. ECON. PERSP. 69 (1998).

3) 47 USC 303b(b)(2).

4) See James Hamilton, CHANNELING VIOLENCE (1998).

5) See C. Edwin Baker, Giving the Audience What It Wants, 58 OHIO STATE L.J. 311, 352-83 (1997); see also JAMES HAMILTON, supra.

6) See C. Edwin Baker, ADVERTISING AND A DEMOCRATIC PRESS (1994).

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Posted 01/22/99