THE FCC IS STILL AT IT

Monday, August 20

THE FCC IS STILL AT IT....

"The FCC is still at it! It is, once again, about to make a serious regulatory error in the auction of public airwaves. Does that surprise you? It shouldn’t.

Let us look at the sad history of this august body:

The FCC, originally, gave us a bad television signal of 525 lines, while other places, Europe, for example, have a standard of 625 lines, providing a much better picture.

When television was first thought of, believe it or not the FCC prohibited the inclusion of commercials. As a matter of fact, the Commission fined a television station for running a commercial.

After World War II, being unable to decide which frequencies (channels) should be allocated to various markets in the U.S., to avoid interference they held up all new licenses, claiming that in a few weeks or months they would make that decision. That was 1948. It took them until 1952 – four years later – to make these decisions, allocating both VHF (channels 2-13, since channel 1 had been given away to the military) and UHF (channels 14 and above) to various communities. In most major markets the FCC allocated 3 VHF channels, with the remainder to be in the UHF spectrum.

Four major entities operated at that time: ABC, CBS, NBC, and to a lesser extent, the Du Mont Television Network.

Applicants for new television licenses in most cases had relationships in radio with the three major networks and obtained the VHF licenses. Du Mont had to be satisfied with lesser outlets, in many, many cases, in the UHF spectrum.

There was just one problem: Between the time the FCC had decided on a “freeze” in 1948 and the time when they allocated the frequencies in 1952 and 1953, it is estimated that approximately 25-30 million television sets were manufactured, virtually none of which could receive UHF. It was not until ten years later, in 1962, that the U.S. Congress mandated that all television sets had to be UHF “able.” But even then the sets were unsatisfactory. That spawned cable television. Eventually, Du Mont went out of business by selling its stations to Metro Media, later sold to Fox, and this became the basis for the Fox Network.

Originally the FCC denied it had jurisdiction over cable television, a position it subsequently had to reverse.

Then color television appeared. CBS had developed a color system which required a high-speed rotating disc to be part of the receiver – a system which was non-compatible. If you owned a set with the CBS color system you could not tune to black and white television. If you had a black and white set, you could not watch color television on the CBS color system sets. Nonetheless, the FCC approved the CBS system. Years later they had to once again reverse themselves and adopt the RCA compatible system.

The restrictions on cable and pay-cable were onerous, while at the same time the FCC claimed that the marketplace should rule. How could the marketplace rule when the playing field was completely uneven? The FCC then ruled that cable systems with more than 3,000 subscribers had to originate programs, a rule which was later scrapped by the Commission. The importation of cable signals had to be approved by the FCC and the exhibition of motion pictures on systems such as HBO or Showtime was severely restricted. A number of other FCC rules restricted cable competition with broadcasting. Eventually a new Communications Act in Congress, and the courts combined to free cable from its restraints.

How can “marketplace regulation” kill an industry? Here’s how: Years ago AM stereo radio made its appearance in the marketplace, having been developed by a number of manufacturers. The Harris Corporation and others designed AM stereo broadcasting systems, but each system required a different receiver. In its infinite wisdom, the FCC decided that the marketplace should decide which system would win out. In order to receive all of them the consumer would have to own several receivers!

To illustrate how ludicrous this decision was, let me cite another example: Let’s say that in my car I have an AM stereo receiver using the Harris system (stations broadcasting AM stereo on systems other than Harris cannot be received on it). I then travel to Philadelphia where two stations are broadcasting AM stereo, but neither used the Harris system, so my car radio becomes useless.

What was the result of this FCC decision? AM stereo was never heard from again.

These are just a few of the FCC’s ill-considered and ill-conceived past decisions. Now let’s look briefly at the future.

In little more than a year from now, the FCC is requiring all television broadcasting to switch from analog to digital service, in the process vacating a substantial portion of the spectrum. But wait: this will cause another problem. It is estimated that 75 million television sets currently in use not connected to cable or satellite service will be unable to receive these digital signals. Owners of the estimated 75 million sets will have to request forms from the government, which upon completion and return, will provide them with $40.00 coupons, only two to a household, for the purchase of converters which, when properly installed, will enable them to receive digital signals. There may be an additional catch: These coupons will only be valid for 90 days and it is rumored that these converters may be initially priced at substantially more than the $40.00 coupon price, especially in the early days before the 2009 deadline. Since the coupons are only valid for 90 days any difference would have to be paid out of pocket. It is said that the price of the converters would eventually drop as the deadline approaches, but the coupons may have expired.

So the owners of these 75 million analog television receivers would have to request the form, send it to the government, wait for the coupons and then go out, purchase and install a converter, all in order to be able to watch television. What a mess!

What is worse is that this has been a well-kept secret and that very few, if any, consumers are aware of this rapidly upcoming change.

What to do with the vacated analog spectrum of these public airwaves is to be decided at FCC auctions in 2008, but the auction rules, once again, as the New York Times, in its August 6 editorial says, mean that this is a only “a half-win” for consumers. The FCC gave in to the established carriers and its auction rules do not require winners at the auction to sell cellular phone capacity wholesale. As the New York Times says, “under the new rules, newcomers’ chances of winning at auction are slim.” The Times continues, “American consumers have once again been denied a truly open and competitive cellular market.”

The FCC prevents a newspaper in a market from owning a television station in the same community in order to ensure that news reports and local voices can obtain maximum exposure. In New York, News Corporation and the Tribune Company obtained a waiver of this rule. Now News Corporation is buying a major newspaper which can compete with every local television and radio station in the country in the propagation of news, editorials and other positions. Why should not the FCC review this matter, as one commissioner has already suggested?

In going back to the long history of FCC errors, or even malfeasance, I am not even going to comment on the long past indictment of a commissioner, the resignation due to conflict of another, its preoccupation with “indecency,” in what may have been a well-organized campaign of complaints to the Commission, or some of the other incidentals. I only wish that, just for once, the Commission would have consumers like me in mind when it makes its decisions."

Emmy Award winner Ralph Baruch is author of Television Tightrope: How I Escaped Hitler, Survived CBS and Fathered Viacom (Probitas Press Spring 2007. As a Senior Fellow at Columbia University he wrote, "How Cable Happened Despite the FCC". Mr. Baruch served CBS Television as a group president and founded VIACOM, Inc. You may contact him through ymaddox@probitaspress.com or visit www.probitaspress.com for more information.