"It's a critical moment like in the '70s,
when cable made its blue-sky promises," says Chester.
"The last time, we made the big mistake
of letting cable own both the content and the conduit."
This time, the result may be the same.
Pivotal decisions ahead on public TV's fiber future
APTS goal: free or discount carriage on the infohighway
Originally published in Current, May 25, 1992
By Steve Behrens
The last time a throng of entrepreneurs sought government favor to go into the TV business, they--the cable TV operators--gave the cities a bunch of channels and a piece of their revenues to serve public purposes.
Such a time is coming again--when the telephone companies ask Congress to let them add video service and ask the state utility commissions to permit a huge investment in broadband wiring to American homes.
Decisions made in this coming period will be pivotal in fulfilling the potential of the age of fiber optics--and also in maintaining or expanding public-service uses of television, including public TV.
Unless noncommercial and educational programmers get free or affordable access to multiple fiber channels, they may have only a minimal presence on tomorrow's electronic menu of highly specialized video services.
On this question of free or affordable carriage, the moment of least resistance from the phone companies may not come for a year or more at the national level, but public TV's lobbyists have begun talking with Congress, the telephone companies ("telcos") and other interests.
Timing will be critical. It will be no good to push the telcos for a concession before the pivotal moment, says Richard Grefe, v.p. of America's Public Television Stations (APTS)--"If you start making demands, they don't have to deal yet." And too late will be no good, either: after the telcos get the go-aheads that they want, public TV will lose its leverage and have to fight for special rates, state by state.
For now, APTS has said its piece: public-service programmers should have access to reserved broadband channels "at no charge or at reduced rates."
But policy mavens and broadcasters who have looked into the fiber future say that obtaining the telco transmission capacity is only one requisite for a strong nonprofit presence in the fiber age. Public TV will also need to:
- make alliances with educators and other public-sector clients to set up local, regional and national networks that make sense in a completely new decentralized digital environment;
- find ways to pay for the programming on all those channels; and
- continue to build links with the cable TV operators, who may compete for years against the telcos and eventually marry into joint ventures with them.
As of now, there are no guarantees that the coming convergence of computer and video technology will offer even the same proportion of noncommercial, educational fare as cable systems provide today.
The potential, as we have all heard, is enormously greater.
"I would hope that we can make it just as convenient for a student in Hawaii or New Mexico to get instruction from a master science teacher located hundreds of miles away as it is for a Queens (N.Y.) cable subscriber to watch Thelma and Louise," APTS President David Brugger testified in the Senate in February. "But that is by no means a given."
"The policies for the next television system are going into place now without any kind of public-interest agenda or any kind of debate about what kind of television system we should have," warns Jeff Chester, a communications reform activist and co-director of the Center for Media Education in Takoma Park, Md.
Chester fears that fiber's menu of video selections will be dominated by narrowly targeted advertising vehicles and pay-per-minute information that only the affluent will be able to afford.
Not this year
We may not see how this turns out for years. Telcos say it may be economically feasible to bring high-capacity fiber to subscribers' homes within a few years, but they're not expected to start doing so until they get federal telco-entry legislation and state permission to invest hundreds of billions of dollars. Here's where things stand in the approval process:
- The FCC: Last October, the commission put forth its "video dialtone" proposal, which APTS supported in comments. FCC staff probably will give the commission its recommendations for action this year.
- Congress: Busy with bills that would reregulate cable TV rates--not to mention the election year--committee leaders have put off consideration of telco-entry bills that would open the door wider for telephone industry ownership and sale (not just electronic distribution) of TV programming.
- States: Telcos are already experimenting with video and fiber projects in a number of states, trying to stimulate and demonstrate demand for new broadband services that would justify a huge investment in fiber.
On the federal level, Congress and the FCC have both looked at proposals that would start to define the new fiber medium. "You see both of them wanting the other to take the lead," says Grefe. "It's something that in an election year is very difficult."
The commission nevertheless moves ahead while Congress delays.
"The commission can't wait to see whether a bill will survive before it goes ahead," says Henry Rivera, a former FCC member who is now an attorney for APTS.
The commission's "video dialtone" proposal would set new rules for telcos transmitting video as a common-carrier service. Telcos would transmit video for a standard fee, much as they provide voice service to customers who pick up the phone and get a dialtone. Customers could choose programs from an electronic menu or use an electronic search capability.
But the plan lacks the must-carry laws that assure free carriage of broadcast TV signals on cable TV, as well as the franchise fees and public access rules that apply to cable.
To keep a place for public TV on fiber, APTS urged the commission in February to require free carriage or preferential rates for nonprofit video services.
Rivera, who worked on APTS's comments on the rulemaking, expects the commission to restrict the telcos' role in much the same way it did in its 1990 Computer III ruling on information services: they can't use their control of the transmission facilities to disadvantage their competitors.
Under last fall's video dialtone proposal, telcos wouldn't be allowed to own or sell TV programming that they transmit, but the commission simultaneously raised this "telco entry" question in a notice of inquiry.
"That issue is something Congress has to rule on," says Robert Pepper, chief of the FCC's Office of Plans and Policy. "But whatever happens on the content side, we need a regulatory framework that would permit the development of video dialtone."
Opening the door wider
FCC Chairman Alfred Sikes has already indicated what he'd like to see. Aligning himself with Administration policy, Sikes endorsed telco entry during February hearings on the Senate telco entry bill, S. 1200, sponsored by Sens. Conrad Burns (R-Mont.) and Albert Gore (D-Tenn.).
The bill uses telco entry as a carrot to encourage telcos to lay fiber. It would repeal Cable Act restrictions that keep telcos out of the TV business, permitting them to program up to 25 percent of the video channels they transmit. Reps. Rick Boucher (D-Va.) and Michael Oxley (R-Ohio) cosponsored a similar bill in the House (H.R. 2546), but it hasn't come to hearings. The telecom subcommittee instead has spent its time struggling with legislation to reregulate cable rates.
Unlike many broadcasters and other media interests, which warn against telco entry into programming, public TV has avoided taking sides on the issue and offending either the mammoth cable industry or the ultramammoth telephone interests.
"Throughout the discussion of fiber and telco ... we don't take any position on whether telco entry is good or bad, or how the commercial aspects of the transaction occur," says Grefe.
However that turns out, public TV has urged Congress and the FCC to give noncommercial and educational programmers access to the new fiber networks. APTS has formulated its appeal for access in two different ways, but they amount to much the same thing.
At a Senate hearing Feb. 28 , APTS President David Brugger suggested Congress should set aside 30 percent of fiber capacity for noncommercial services--"the 1990s equivalent of the 1950s channel reservation" for public TV broadcasting. "This is approximately the portion of broadcast spectrum set aside by the FCC for noncommercial educational uses," APTS testified.
In that hearing and in comments to the FCC about video dialtone, APTS has also asked for noncommercial TV to have access to fiber transmission "at no charge or at reduced rates."
The idea of reserving a percentage of all channels is a clear and appealing one, but according to Grefe and APTS attorney Rivera, it doesn't fit precisely in a future when fiber's huge capacity and electronic switching will make available a virtually infinite number of channels.
If noncommercial programmers--or any other users--need more transmission capacity, common carrier law will require the operator to provide it, even if that requires opening up more circuits, according to Rivera. "There's plenty of law on that subject."
Also, Rivera observes, reserving capacity on fiber networks could be regarded as an illegal taking of private property, because fiber is a privately owned transmission medium, unlike the airwaves.
There's a clearer rationale and precedent, however, for noncommercial programmers to ask for free or discounted carriage.
APTS reminded the commission in February that telcos could offer free or discount carriage "without running afoul of the prohibition against ... confiscatory rates by providing that carriers that offer service on this basis be compensated by subsidies paid by the carriers' for-profit customers."
A commission staffer notes that the Public Broadcasting Act of 1967 provides a precedent, permitting satellite companies to charge lower rates to noncommercial broadcasters.
A more familiar precedent is the old Bell System practice of subsidizing local phone service by charging higher long-distance rates, Rivera observes.
But that longtime subsidy is gone now and "hidden taxes" are politically out of favor. Consumer groups and possibly the phone companies themselves could be expected to oppose any new breaks given to educators or public TV on video transmission costs.
"The danger is the common carriers will usually turn and say, 'We are in effect raising everyone else's rate,' [to maintain the subsidy]" says Steven Vedro, a telecom consultant with Network Resources Inc., Madison, Wis., and a former technologist at WHA. Vedro predicts the telcos will already be under fire for proposing the enormously expensive fiber networks with "whizbang applications" that consumers don't need and have never seen.
Though even the notion of discounted rates may draw flak, pubcasters won't readily surrender the goal of completely free carriage. "Our bottom line is that we want to be available to our potential users, regardless of delivery system," says Hal Bouton, president of WTVI, Charlotte, N.C. "Public television has the right to access to all American homes at no cost."
In the state capitals
The telephone industry traditionally has been regulated most closely by state governments, and the new fiber networks will be no exception. "In the next few years, that's where the dramas are going to be played out," Vedro predicts.
And the first fiber deals between PTV and carriers also will develop locally, says Stuart Brotman, a communications consultant and author based in Lexington, Mass. He predicts it'll happen where aggressive stations make deals to supply programming to a new network.
In other places, PTV may opt to handle its own transmission, at least for the time being. Iowa PTV, for instance, was named to manage a new statewide fiber network now under construction.
That may be the exception rather than the rule, however. Richard Hezel, an edtech consultant in Syracuse, N.Y., said in recent national survey report that he sees a "waning inclination" of states to build their own networks for education and public service--in favor of leasing capacity from telcos, which requires much less capital.
Other states will weigh the options of satellite transmission versus transmission over new telco networks. In Georgia, for instance, a fiscal windfall for the state may provide $50 million to help equip schools for distance learning and hospitals for telemedicine.
The funds may create new customers for the phone companies, which already are demonstrating video hookups between schools in the state. Building that base of educational customers will be important for the telcos, according to Ottinger, because they can't go into fiber unilaterally.
State utility regulators will be involved because consumers' phone bills will be paying for the big investment in fiber. "In order for the phone company to pull out the copper," says Ottinger, "the Public Service Commission is going to have to approve the acceleration of depreciation of the copper."
If the phone companies can show that schools are demanding more broadband service than the telco can provide, "that's the greatest leverage they can have," Ottinger figures. "They could carry that to Congress. This demand could be translated to pass all the laws necessary, even make funds available to subsidize the conversion. That's what it opens the door for."
Though the phone companies expect that home entertainment--i.e., competing with the cable companies--will be their big payoff for wiring America with fiber, the education market will be an economically and politically important "early adopter" of fiber transmission.
Get off your knees
"The negotiating strategy should not be, 'We're here on bended knee,' but flipped around," says Vedro. "We do the telcos a favor in partnering with them."
"I think we're in a good position to take the lead," says Bouton, who has been holding joint talks with the local phone company and cable operators about linking WTVI's program resources to schools in the Charlotte area. Two high schools are part of Bell South's Vision Carolina fiber experiment and others are served by cable. WTVI is adding a second control room and has commited to operate three or four cable channels under its own logo when the cable operators expand their channel capacity with digital compression, a few years from now.
At the same time, Bouton is trying to convince Charlotte educators to regard WTVI as their main origination center for video. "The bottom line for public television stations is if we're going to be a player in the education arena, we better darned well build some alliances."
With the decentralized networks that fiber will make possible, however, educators may not need to or want to give public TV the coordinating role that it enjoys in some regions. School systems and colleges want to produce and exchange programs themselves, says Vedro. "Many of them are looking at digital networks as a way to get out from under their perception of being passive recipients of what public broadcasters think is good for them."
For educators, this will be an "incredibly empowering experience" comparable to that of office-workers who get their first personal computers. But Vedro also anticipates that public TV can eventually find a role as editor, packager and consultant, supplying nationally distributed "great library of master teachers and wonderful animation" that the schools can integrate with their homemade programming. In the analogy to computers, pubcasters would serve as "service bureaus" or "a massive video file-server" of compressed digital video.
Many stations have been rebuilding their bridges to education, he observes. "Those that are busy developing those relationships have nothing to fear. Those that perceive themselves primarily as a monopoly gatekeeper on a single channel, I think they'll have a rude awakening when the technology allows their customers to create their own networks and bypass them."
Whether public-service programmers get reserved capacity or discounted rates, that will take care of only the transmission end of television.
"We're all looking at the wrong end of it," says Henry Geller, a former FCC general counsel and now a prominent advocate of media law reform. "The cost of the transport system ought to be very cheap. The real enormous cost of this is the money to produce television programs."
For public-service programmers, transmission will be a shrinking part of the job. In the video-on-demand world that many foresee, what matters is making the programs people will want to dial up, says Brotman.
Some believe the fiber carriers could help out with programming and other costs. To open the door into the TV business, telcos may even be willing to pay a franchise fee similar to the one cable companies pay for the right to put their lines along public streets, suggests John Carey, a consultant based in Dobbs Ferry, N.Y. This fee, however, would be designated to help support public TV, says Carey, who studied the fiber scene for APTS. "If Congress said to them, 'We'll let you [into video programming] if you pay a franchise fee,' I think they'll pay it. Once that door is open, they will not pay a dime."
In the past, he says, advocates of noncommercial broadcasting haven't spoken up soon enough. If they had pushed for a fee on TV sets in 1948, Carey speculates, it would have been enacted. But that wasn't suggested until years later, when many Americans were accustomed to having TV sets without fees attached. Spectrum fees on satellite frequencies and other FCC give-aways faced the same problem, he says. "It's difficult to get anyone to pay for something they already have for free."
Phone companies are positioning their claim that they deserve to be allowed into TV without strings attached, says Carey, while cable and other opponents say telcos should be shut out entirely. "Public television should have a third position: if we're going to open the door, they should pay a franchise fee."
Geller has argued for a similar tax on cable and commercial broadcasters to support public-service television. In a report for Northwestern University's Annenberg Washington Program last year, Geller proposed that Congress deregulate commercial broadcasting in exchange for gross-receipts taxes of 1 to 3 percent on broadcasters. And he'd subtract 2 or 3 points of the 5-percent cable franchise fees that now disappear into municipal treasuries and redirect the money to produce national public-service programming.
Together, the fees "would make available roughly a billion dollars to serve markets still left unserved by commercial media, including children and education."
But this and other "spectrum fee" proposals have gone nowhere, and Geller himself holds out little hope for them. "In theory, we ought to do what I said in the report," Geller told Current. "The problem is, I don't see that happening in the political world. There's no indication anyone wants to unscrew the system and do what's right here....The fact of the matter is, in the budget crunch, the government doesn't really want to fund public television at the clip it should be funded, and doesn't want to let go of it. They really want it on a short leash."
Reforms for the meanwhile
It's tempting to picture a rational future in which local common-carrier phone companies become the universal fount of TV, but for decades the reality is likely to be much messier. Though the phone companies are sometimes painted as an unstoppable force in the fiber future, there's no guarantee they'll have the expertise and the name-brand programming needed to succeed in video, Brotman suggests. Consumers may find the cable and phone companies competing in both TV and person-to-person services--with cable dominant in some cities and telcos in others. "There won't be any national norm," says Brotman.
In other words, cable TV, with its present regulatory and corporate structure, may be with us for decades to come. Cable will multiply its channel capacity with digital compression and possibly also by adopting fiber optics itself.
If public TV is to avoid becoming a single channel on a zillion-channel keypad, it will have to secure additional channels on local cable systems without the help of must-carry laws, which apply only to channels that originate as local broadcasts. Even if the cable system expands to 300 channels, public TV will have no right of access to additional channels, warns Carey.
"What public television needs is some percentage of the system," says Carey. In a 300-channel system, it would get perhaps 30. "At the moment, there's no guarantee any of that would come to pass."
Over the longer term, cable TV and telcos are likely to disappear as proprietors of competing distribution systems. "I think the newspaper publishers will lose and the telcos will be allowed to get into information services and, if they wish, buy cable TV operations," says John Carey. "I think that door will open completely to them." Even if Congress continues to bar telcos from buying cable companies, they can virtually merge operations by forming joint ventures, according to Carey.
"Cable will bring programming expertise to the telephone companies," Rivera predicts, "and the telephone companies will bring their network operation expertise, and together they will ride off happily into the sunset."
With them will go HBO, CNN and many of the other name-brand networks that will probably prosper in the fiber era. To an extraordinary extent, content and conduit would be owned and controlled by Tele-Communications Inc., Time Warner and other cable-based conglomerates, with their partners in the phone companies.
"It's a critical moment like in the '70s, when cable made its blue-sky promises," says Chester. "The last time, we made the big mistake of letting cable own both the content and the conduit." This time, the result may be the same.
"The policy history of the last 20 years has shown no interest in separating content and conduit," says Carey. "That's a dead argument."
Public TV and other public-sector services may remain exceptions to that web of vertically integrated commercial monopolies, but their service to the public and its economic vigor will be determined by the fiber transmission capacity and the program funding they secure during the coming period of decision-making.
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