Video Divide: The Unrecognized Threat Right Before Our Eyes

Government is chiefly responsible

Twenty-five years ago government officials, politicians, social commentators and scholars thoughtfully expressed concern about a future rift in American society in which the well-off would participate fully in the bounty of the Internet while the less affluent would be left behind, unable to use the new technology and new services to compete in schools, businesses, and the marketplace and to participate in the enriched culture of the twenty-first century.  This threat was appropriately labeled the "Digital Divide”.

In contrast, unpublicized and unremarked upon today is the emergence of a new and stark societal “divide” -- the “Video Divide.” Being unnoticed, it has generated no expressions of concern, no proposals for remediation; and yet its consequences are serious.  Oddly, and unlike the Digital Divide, this societal rift is not the result of a new technological breakthrough that naturally tended to create “haves” and “have nots.” Instead, we ourselves created this new Divide and continue to exacerbate the problem.

EXAMPLES OF THE VIDEO DIVIDE

Sports may be the most visible example of the Divide, which is why I start with them.  Thirty years ago, it would have been unthinkable that the World Series could be available only to those who could afford a cable subscription, now costing in the vicinity of $100 per month.  Yet the post-season League championships in the past few years have largely migrated to pay services away from channels available to all the public.  The same is true for our country’s access to coverage of the Olympic games.  Yet both are in jeopardy of being available only on pay outlets, shutting out the poor. At the track and field trials six years ago in Eugene, Oregon, one of the nation’s preeminent hurdlers told me that he lived off of 100 pound bags of wholesale rice, not for health reasons but because that is all he could afford.  Obviously, therefore, neither he nor his kids could pony up to watch himself compete on pay video.

Pro football unites communities and regions and entertains the country to an extraordinary degree. Thanks to the NFL’s long-term vision and the commitment of broadcasters to serve their viewers’ interests, including their interest in sports, access to this national passion is not restricted to those who can pay.  But it might not have been that way, and there is no assurance that this will continue as a permanent state of affairs.  Boxing, which at one time was as popular as pro football, went a different route by allowing access to premier fights only via pay-per-view arrangements with theaters and cable networks. As a result, it is now a niche sport.

Journalism – national and local – is an even more important example. With the decline of newspapers, free television’s journalism role is ever more important.  Local broadcasters, a group that importantly includes the stations owned and operated by the national broadcast networks, keep state and local governments clean and provide necessary oversight.  Hundreds of examples document this fact. Local cable news channels have largely faded from the marketplace.  The successful ones have usually been operated by local broadcasters and sometimes local newspapers.

Of course, champions of the Internet tell us that local Internet sites will supplant news and provide even better coverage.  Ask them how, as I have, and I doubt you will receive a plausible, if any, response.  Local Internet news sites are, in community after community, dominated by local television stations and newspapers.  There simply is no evidence that other Internet sites will fill the local news function now served by local TV stations and local newspapers. And, Internet services are pay services.  So, they will exacerbate the Video Divide, not cure it.

CAUSES OF THE VIDEO DIVIDE

Three explanations for the Video Divide are possible:  (1) pay services became more attractive; (2) free broadcast services became less attractive; or (3) some combination of the two trends took place.  Pay services did eventually provide more program choices.  But they did not live up to their promise of no or less advertising.  They did not live up to their promise of providing effective “PEG” channels to support local community life and instructional services, a requirement that pay providers have, ever since its enactment, tried to eliminate and to which they have tended to pay only lip service.

Broadcast television quality has not declined.  Contrary to myth, it has improved Broadcast television has effectively pioneered or adapted to new technologies and new consumer tastes. Local television stations provide far more news than ever before.  It is the most relied upon and trusted of all news sources in the country.  Local stations bind communities economically and socially by supporting local and regional markets (a benefit of local television service overlooked by government officials) and by providing a forum for local civic, charitable and governmental groups.

National television broadcasting has brought us coverage of Presidential debates, the walk on the moon, Hurricane Katrina, the events in Charleston a few months ago, and the Arab spring and its relapse. Broadcast entertainment programming has also been dynamic, tackling issues of gender identity, bullying, the challenge of immigration, drug abuse, race.  Market by local market, television stations have served similarly vital, local journalistic and societal purposes.

Instead, it is the government, under both Republican and Democratic leadership, that has been, in my view, chiefly responsible for the creation and widening of the Video Divide  -- strong-armed by industries in inevitable conflict with local broadcasters, while, nevertheless, depending on broadcast stations for content highly valued by their local subscribers. At the beginning of pay-tv services until 15 years ago, the government required local stations to subsidize the growth of MPVDs by giving them the right to carry broadcast content as a critical part of their paid programming line-up.  Until quite recently, most viewing on pay services was of broadcast programming; that programming was also the most viewed by MPVD subscribers.  The compulsory license payments (set by the government) made by MPVDs for that programming were a pittance.

Today, MPVDs are paying stations retransmission consent fees that are still significantly lower than the fees MPVDs pay other providers of far less popular non-broadcast programming.  MVPDs don’t have to make those payments for broadcast content.  They do so voluntarily because their subscribers highly value that content.  Yet, MPVDs hate that fact and incessantly complain to the government about it.

And so, today, in response to those complaints, the FCC is threatening to disrupt the pricing mechanism of the free market and single out television station/MPVD negotiations, alone among all MVPD/program negotiations, for government intrusion.  The FCC is also considering the repeal of network non-duplication and syndication exclusivity rules that help support (but do not create) freely-negotiated market arrangements for MPVD carriage of broadcast station content.

Another factor in the growth of pay video services is the government’s unequal regulation of broadcast content under indecency laws.  It is no coincidence that, when cable began to offer programming that attracted popular attention, it was because of a government-created disparity in the indecency rules that apply to broadcasters but not to pay services. Consider the list of cable program breakthroughs:  “Sex in the City”, “The Sopranos”, “The Daily Show,” “Mad Men”, and more recently “Breaking Bad” and “Game of Thrones.” None of those hit MPVD programs could have been carried on broadcast television because of the far more stringent program standards that Congress and the FCC imposed on it.  (By the way, few of those cable hits achieved viewership that rivaled broadcast frontrunners.)

The disparate ownership restrictions on broadcast stations, compared to cable and other media competitors, is another example of discriminatory government treatment of broadcasting – the people’s medium.  The Antitrust Division has added to the problem by analyzing competition in the local television marketplace, without taking any account of cable, newspaper or Internet services?  Any salesperson in the local advertising field will confirm that the market is a dogfight in which all these advertising media compete.

The FCC has also repeatedly taken spectrum away from local television stations – their main channels and spectrum they use for covering news events outside their studios.  In this process the local station industry has developed accommodations to meet the spectrum needs of other electronic services.  In fact, no other group of spectrum users has worked with the FCC more effectively and more to the benefit of the public to achieve spectrum efficiencies. Broadcasters have played this role despite the unique handicap of not controlling the design and manufacture of receivers at the other end of the transmission system.
Even the FCC’s upcoming so-called “voluntary” spectrum auctions will require non-voluntary channel repacking of up to 1000 television stations and government-ordained moves of some stations to the “duplex gap” which is equivalent to entering a cluttered and uncharted minefield.

REASONS WHY THE GOVERNMENT HAS DEVALUED LOCAL TELEVISION
BROADCASTING AND THEREFORE CREATED THE VIDEO DIVIDE

Ignorance. The FCC is simply unaware, to a very large degree, of the benefits provided by local television stations to the public.  

When disasters, natural or man-made, occur (storms, school shootings, forest fires), however, broadcasting’s uniquely critical role is acknowledged.  The appreciation fades quickly, though FEMA has repeatedly recognized that broadcast coverage is a frontline and crucial force in dealing with emergencies.  Also overlooked is the fact that this irreplaceable service is made possible by the vitality of the overall broadcast model; it is not separable from the full package of services provided by local broadcast stations.

Some time ago the FCC conducted a series of day-long field hearings on local broadcast television service.  Broadcast critics and opponents flocked from all over the country to complain but local citizens stayed away in droves -- a rather sure sign that they had few or no complaints. One of the hearings was held in the Salinas-Monterey, Calif.,  market. There was only one, rather mild, concern expressed about a local television station that took up a few sentences in the voluminous hearing transcript. Yet those field hearings, taken as a whole, were cited as a basis for denigrating local television service.

Congressman and Senators tend to be more attuned to the needs of their local constituents and, therefore, more familiar with the broad and constructive roles local broadcasters play in their home communities.  This may explain why Representatives and Senators of both parties are weighing in against the FCC’s proposals to gut television stations’ intellectual property rights in the content they have produced or acquired in the free marketplace.

The FCC under Chairman  Julius Genachowski did, however, conduct a comprehensive and objective study of local television service staffed by a special group of experts from outside and inside the agency. Its report, entitled “The Information Needs of Local Communities,” 2011, was spearheaded by Steven Waldman of the Columbia School of Journalism. It gave high marks to local station news and other services, while identifying limited reforms to address the practices of a few television stations. One wonders how many Commissioners or Congressional Committee members and their staffs have read that report.

The Allure Of The New. As a culture, Americans are mesmerized by new technologies, new services and new gadgets. Television is considered old hat. Its record of pioneering innovations and adapting to other changes is almost totally overlooked. Yet the list of broadcasters’ technical innovations is long: color television, stereo sound, UHF broadcasting, the switch to digital technology, multicasting and more.  Most noteworthy was how supposedly dinosaur-like television stations, in cooperation with the government, engineered and executed the extremely difficult feat of converting to digital technology 15 years ago, thereby paving the way for other media to follow and creating the opportunity for more spectrum availability and efficiency in the future.  Now, with the most recent round of important broadcast technology breakthroughs, the government reaction to them falls somewhere between indifference and hostility.  

Major political and social changes affecting the country have also been addressed in broadcast content.  The infatuation with the new, resembling at times a grade school crush, has undoubtedly greatly contributed to the government’s solicitude for new services and its tendency to advantage them at the expense of the public served by local television stations.

Television Stations Are Heavily Regulated.  The FCC reviews their performance to decide whether to renew their limited-term licenses, and it reviews whether broadcasters, as a whole, continue to merit the spectrum that has been allocated for local broadcast services.  Broadcaster licenses are subject to government-imposed terms and conditions, and the Courts have held that they are subject to stricter regulation than other media because their services come into the home.  Neither Congress nor the FCC hesitates when social ills arise to consider whether a new requirement imposed on broadcasters might address the issues.  As one of the country’s most regulated industries, broadcasters are a sitting duck for attacks that go beyond criticism to measures that would harm local broadcasting and the public it serves.

Attacks By Industries With Conflicting Business Interests. Business conflicts are largely understandable and even inevitable. Opponents exploit broadcasters’ special vulnerability to regulation and the fact that their contributions are under-appreciated, though irreplaceable.  This deep-dyed prejudice emboldens broadcasting’s opponents to harp constantly on shopworn arguments that are often contrary to fact. Take, for example, the contention, so often advanced by the wireless industry seeking to appropriate broadcaster frequencies, that broadcasters received their spectrum rights for free, while wireless licensees had to pay for their spectrum rights in expensive auctions. The facts are, instead, that the vast majority of existing television broadcasters paid full value when they acquired their stations from previous owners at prices that reflected their spectrum rights. In addition, well over half of the wireless carriers’ spectrum rights, specifically in the large, anchor markets when cellular service was launched, were acquired for free via comparative hearings or lotteries or because of eligibility restrictions in the wireline spectrum bands.

A particularly ironic aspect of rival industries’ attacks on television broadcasting is that these other industries depend on broadcasting.  Noted above is how cable, then the satellite industry and next the telecos’ video services were incubated, protectively, by the government’s intervening to require that broadcaster content was made available to them on way-below market terms – a condition, only somewhat abated, that continues today.  

Broadcast programming is still a critical staple for these pay services, and those service providers continue to seek government intervention to avoid paying market prices for it.  Equipment manufacturers sell television sets to consumers who want to watch local television stations, as well as other content.  They sell transmission equipment to broadcasters to gather and disseminate news and other programming.  Subscribers of pay MVPD services watch and rely on content provided to the MVPDs by local broadcast stations.

Similarly, newer, over-the-top content providers assume that the public will want and will pay for access to local broadcast services.  These newcomers to the field clearly realize, more clearly than many of the incumbent industries, that consumers want local content services and that broadcasters, uniquely, provide those services. Aereo’s entire business plan depended on obtaining access to local broadcast station programming [Blake represented broadcasters in the legal fight against Aereo].  Government officials should heed these unmistakable signals as well.

Public Interest Groups:  Public interest groups are well-intentioned and often effective advocates.  Their views have considerable influence.  But too often they join the chorus of broadcasters’ business rivals in supporting new and burdensome broadcast regulation and in tipping the scales in favor of pay services and other industries that seek to advantage themselves at the expense of the public that broadcasters serve.

As a result, public interest groups too often advocate positions that harm broadcasting, with little regard for the impact on the public. They often demean local television as a way of discrediting broadcaster positions on legislative and regulatory issues.  Public interest groups should, instead, desire and support good local television services.  Public interest groups should face up to the looming Video Divide and devote attention to holding it off and reversing it.  They genuinely want what is best for the public.  To support that goal, they need to change course.

Elitism. It is as plain as day that local television broadcasting is condescended to, looked down upon, disrespected and slighted. This accounts for the dismissiveness that many government officials exhibit toward broadcaster positions in various legislative and regulatory disputes. How many times have you heard cocktail party conversations include comments like “Oh, I never watch television”, comments that are simply untrue?  Before the days of formal ascertainment requirements, television stations used to interview community leaders and ask what programming should there be more of and what programming did those leaders in fact watch. As an example, almost invariably, clergy interviewed by local stations would respond to the first question “more religious programming” and to the second question “Gunsmoke”.

Many expensive and time-consuming government programs are directed at ameliorating the Digital Divide by extending communications services, including Internet services, to rural communities, minorities and the urban poor.  Public interest groups also appropriately champion these programs.  Yet, the inconsistency between the laudable ideals that lie behind these Digital Divide programs and the private-party advocacy and government decision-making toward regulation that deepens and accelerates the Video Divide is stark but goes un-noted, un-explained, un-checked, and un-justified.

The incomprehensible phenomenon of others denigrating a service that so much of the public obviously values and relies on may have been set in motion by Chairman Newton Minow’s famous “Vast Wasteland” speech 50 years ago.  (Actually, in that speech, Chairman Minow praised many of television’s services – contributions that have soared in magnitude and quality. And it is not at all clear that he would have approved the various steps taken or proposed by the FCC or Congress since then that threaten to weaken those services.)

In contrast to Minow’s rhetorical flourish that ventured perilously close to infringing on First Amendment values, the fact is that today the average household watches television seven hours a day.  Sixty years ago that statistic would have been unthinkable.  Doesn’t this evidence from viewers of local TV service’s value counter the negative prejudice of the elite?  Isn’t this a case where the marketplace of ideas is expressing its views?  Senator Barbara Mikulski has said that when she faces a tough legislative decision she asks what the Thursday night bingo ladies in East Baltimore would want her to do. Shouldn’t Congress, the FCC, public interest groups, rival businesses and the elite similarly acknowledge the valuable role of broadcast television in serving the goals of media and communications policy?

THE ADVERSE CONSEQUENCES OF DISMISSING THE VALUE OF LOCAL TELEVISION

They are two-fold and mutually reinforcing.  Government officials resist the positions of local broadcasters on regulatory and legislative matters because the services they provide are unfairly and unjustifiably devalued.  Worse, the government tends to take regulatory steps that harm the public’s broadcast service and today threatens to go even further in that direction. A local television service weakened by these decisions then appears  less worthy of preservation and less worthy of the freedom and flexibility to adapt to new technologies, changing consumer tastes and needs, and expanding business and service opportunities.

The FCC is just now investigating the troubled plight of AM radio, having fallen from its perch at the top of the audio industry 40 years ago.  That response is likely too slow, too tepid, and too late.  Broadcasters submitted a petition to the FCC 30 years ago expressing concern about the “AMization” of local television services.  The petition sat there for 15-20 years before being tossed aside without comment or consideration.  Congress and the FCC should avoid a similar outcome here.

At issue is the future of localism.  Localism was mandated in the original Communications Act of 1934, and that mandate remains today.  It has been affirmed and implemented by Congress, the FCC and the Courts ever since.  No other force contributes to the goal of localism as effectively as local broadcasting, with its important supporting component of national programming, and no service provides such an array of services to all of the public or is so well suited to adapt to the future for the benefit of the entire public.

Localism predates the seminal 1934 Act, however.  The constitution is laced with localism principles, and de Tocqueville, the most astute of commentators on American culture, paid special attention to the practice among the erstwhile colonials to get things done through local groups, whether town hall meetings in Vermont or communities coming together to raise a barn on the prairie.  Few credit broadcasters, commercial and non-commercial alike, for promoting, facilitating, and supporting the creation and operation of these local groups.  No element of local communities serves this need so effectively.  Yet, local broadcast services are being marginalized or driven off the airwaves.

Blake is former partner with Covington & Burling. He has represented both broadcasters and mobile communications companies, including before the FCC, Congress and the courts.