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Statement of  ROY STEWART ?CHIEF  MASS MEDIA BUREAU [ FEDERAL COMMUNICATIONS COMMISSION 0Before the  SUBCOMMITTEE ON COMMUNICATIONS UzCOMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION UNITED STATES SENATE Lon  MASS MEDIA BUREAU OVERSIGHT  X-  X-)May 19, 1998 ă T  X- "|0*0*0*"   Mr. Chairman, Ranking Member, and Members of the Subcommittee, thank you for the opportunity to discuss the activities of the Mass Media Bureau of the Federal Communications Commission. I have been Chief of the Mass Media Bureau for more than eight years and have worked on issues of broadcast policy for much of my career at the FCC. I can safely say that this is the most exciting time in my memory to be working in this area. Many people think of television and radio as mature industries industries that change only incrementally and that operate within a longestablished, fixed regulatory framework. The fact is, however, that the broadcast industry is in a time of enormous change and challenge and the regulatory scheme that applies to it must, and is, changing to keep pace. The conversion from analog to digital technology, the emergence of new competitors to overtheair service cable, DBS and even the Internet and ownership consolidation within broadcasting all are changing television and radio dramatically for consumers and broadcasters alike. Much of this change is directly traceable to the Telecommunications Act of 1996. In my testimony today, I would like to highlight some of the Mass Media Bureau's efforts over the past two years to achieve the policy goals established by Congress in that statute and to respond to the ensuing changes. I would also like to address briefly other challenges before the Bureau and some of the Bureau's major accomplishments. Finally, I would like to discuss key initiatives intended to improve the Bureau's efficiency, to reduce the burdens we impose on licensees and to enhance the broadcast service provided to the public.":&0*(($"Ԍ  X- Telecommunications Act of 1996  X- The Telecommunications Act of 1996 brought broad, and in some cases dramatic, changes to broadcast regulation in the interest of fostering competition and deregulation. The Commission has dedicated itself to implementing these changes as effectively and quickly as  X -possible. In the broadcast area, the Commission has adopted sixteen notices and orders drafted by the Mass Media Bureau implementing portions of the 1996 Act. The Act extended the term of radio and television broadcast licenses to eight years and eliminated the comparative renewal process for all licensees. The Act also provided the framework for the television program ratings system and V-Chip technology, which the Commission has recently implemented through orders accepting the voluntary rating system presented by the broadcasting, cable, and motion picture industries and implementing technical rules for the Vchip, consistent with the requirements of the Act. These actions will help put important tools in the hands of American parents. The dominant broadcast provisions of the Act, however, relate to two critical areas digital television and broadcast ownership which have been the focus of the Bureau's efforts during the past two years.  X"-  Vh$-  ":&0*(($"Ԍ V-Digital Television Digital television represents nothing short of a tidal change in one of this country's fundamental communications infrastructures. The transmitters and often the associated towers, studio equipment, and television receivers will all change. And they will change in a remarkably short time. All this means that the transition to digital television will require very careful and continuing attention by the Commission if we are to avoid unpleasant surprises. I can assure you that the Mass Media Bureau is fully committed to that task. While the changes are enormous, so are the potential benefits. The digital television provisions of the Act enable the transformation of television from an analog service to a digital service capable of providing free television with moviequality picture and CDquality sound. Digital television will allow broadcasters to offer High Definition Television (HDTV), multiple streams of standard definition TV programs, and the transmission of new information services such as sports data and stock market updates. The technology also makes possible broadcasts in multiple languages, picture and information inserts or viewer selection of camera angles. In the Telecommunications Act, Congress authorized the distribution of additional broadcast spectrum to each TV broadcaster so that they could introduce this new DTV service while simultaneously continuing with their current analog broadcasts during a transition period while consumers gradually purchase DTV receivers or converters. The FCC has adopted several":&0*(($"  X-orders to select a transmission standard, to specify applicable service rules for digital licensees, and to create a final table of channel allotments to be used for digital stations during the transition. The Commission has resolved several hundred petitions for reconsideration, mostly regarding requests for changes in assigned channels. A final table of allotments for DTV was recently adopted. This decision was made with special consideration for causing the least possible disruption to UHF and lowpower television. In addition, the Commission resolved issues such as: how to preserve free, overtheair services on the digital spectrum; what subscription services should be permitted; and how long licensees will have to build facilities and begin to offer services. The Fifth Report and Order in the DTV proceeding set out an aggressive timetable for the construction of DTV facilities under which the majority of Americans are scheduled to have access to DTV by the end of next year and everyone in this country is scheduled to have access to commercial DTV service by the year 2002. Affiliates of the top four networks (ABC, CBS, Fox, NBC) in the top ten markets must be on the air with a digital signal by May 1, 1999. Twentyfour of these stations have volunteered to begin digital television service by Nov. 1, 1998. In markets 11 through 30, the same network affiliates must be on the air by Nov. 1, 1999. All other commercial stations must be constructed by May 1, 2002. ":&0*(($"ԌThe Commission set these deadlines in order to ensure that the public's valuable spectrum would be utilized in a timely and efficient fashion for the purpose Congress intended: to provide new digital services for the American public. I am pleased to report that we received construction permit applications from 36 out of the 40 early builders two weeks ago, on schedule. We must finish implementing the rules governing digital television. This includes determining the appropriate level of fees digital broadcasters are required to pay under the 1996 Act when they offer pay ancillary and supplemental services. The Commission has launched a proceeding to implement this provision of the Act. The Commission also said last April when it finalized service rules for DTV that it would at some point in the future issue a Notice to collect and consider all views on the issue of broadcasters' public interest obligations in the digital environment. Finally, the 1992 Cable Act requires that we review our mustcarry rules for digital television. In addition, we will continue to work closely with broadcasters and our Local and State Government Advisory Committee to address Federalstatelocal issues relating to the placement of transmission towers. The Bureau is committed to processing within five days of receipt applications to construct digital TV stations which conform to their original allotment sites. I am personally committed to working with all interested parties to bring the benefits of DTV to the American public as quickly as possible. ":&0*(($"Ԍ V-ԙ  Ownership  X- The Telecommunications Act's relaxation of radio and TV ownership limits has resulted in a dramatic increase in assignment and transfer applications, especially in radio. For example, in 1995 (the year before the passage of the Act), we received 2300 radio sales (assignment and transfer) applications involving stations valued at about $1.5 billion. In 1996 the Act was passed and these numbers increased to 3700 applications worth some $14 billion. In 1997, the applications increased to over 4100 with a value of about $18 billion. During the first three months of 1998, radio sales applications have continued to come to the FCC at a higher rate than even in 1997. Most analysts expect the acquisitions to continue, with larger companies buying into midsize and smaller markets. The Bureau has maintained its published speedofdisposal goals despite the dramatic increase in sales applications which these statistics document. For noncontested, nonwaiver applications, disposal time is less than two months from filing; for others, the average disposal time is six months. The Commission is currently reviewing all of its broadcast ownership rules as required by Section 202(h) of the Telecommunications Act. Some of these review proceedings had already begun when the Act was adopted and were reopened to permit comment in light of the Act. These ongoing proceedings examine: ":&0*(($"Ԍ X-x1.` ` The TV Duopoly Rule. A pending proceeding examines whether to relax this rule, which prohibits ownership of more than one TV station in a market.  Xv-x2.` ` The Radio/TV CrossOwnership or "OnetoAMarket" Rule. The same proceeding examines the possibility of relaxing or eliminating the rule which prohibits common ownership of television and radio stations in the same market. It also proposes to extend the existing standard for waiver of the onetoamarket rule from the top 25 markets to the top 50 markets, as the Telecommunications Act requires.  Xb-x3.` ` Newspaper/Radio CrossOwnership Waiver Policy. The FCC has a pending Notice of Inquiry to review whether new criteria should be adopted to determine when to waive the prohibition on newspaper/radio crossownership in the same market.  X-x4.` ` Broadcast Attribution Rules determine what interests are cognizable for multiple ownership purposes. The FCC has a pending rulemaking proceeding to ensure that these rules are well tailored and reflect current industry practices. The proceeding also seeks comment on whether television local marketing agreements should be attributable for ownership purposes. If they are deemed attributable, the Commission has sought public comment on extending grandfathering rights to existing TV LMAs.  X"- ":&0*(($"ԌThe remaining broadcast ownership rules are under consideration in a Notice of Inquiry proceeding adopted by the Commission in March of this year. The rules addressed in this proceeding include:  XH-x1. ` ` The National Television Ownership Rule which limits the national audience reach of TV station owners to 35 percent.  X -x2.` ` Local Radio Ownership Rules which limit the number of stations that may be commonly owned in a market depending on the market size and the types of facilities involved.  X-x3.` ` The Dual Network Rule which is a general prohibition against networks merging and which was modified by the Telecommunications Act's provision to allow mergers under certain circumstances.  XN-x4.` ` The Broadcast/Newspaper Cross Ownership Rule which prohibits common ownership of a broadcast station and a newspaper in the same market.  X -x5.` ` The Cable/Television Cross Ownership Rule which prohibits common ownership of a cable system and a broadcast TV station in the same market. ":& 0*(($"Ԍ X- Other Activities In addition to our responsibilities under the Telecommunications Act, the Bureau will devote significant resources to several other important areas of concern.  V -Digital Radio I have already discussed the enormous implications of the conversion of the American television broadcast system to a digital format. A similar although perhaps less dramatic transformation waits in the wings for the radio industry. Working together, the electronics and broadcasting industries are now testing a technology that would permit terrestrial digital audio broadcasting in the existing AM and FM bands. Called "InBandOnChannel" or IBOC, this technology would permit the superimposition of a digital radio signal on the same channel as the existing analog radio signal. Both could be used at the same time. Thus, without the need for additional spectrum, the developers believe they can provide a new digital radio service. They also believe that both the AM and FM digital signals will far surpass in quality their analog counterparts. The Bureau has been working closely with IBOC developers and has granted several experimental licenses to permit equipment and system testing. Later this year, we expect to receive a petition for rulemaking proposing a digital audio broadcasting system. ":& 0*(($"Ԍ V-Children's Television  X-x1.` ` Commercial Limits  Xv- A recent Bureau review of television renewal applications revealed that 26 percent of commercial television broadcast station licensees reported that they could not certify to full compliance with the children's television commercial limitations contained in the Children's Television Act of 1990. The Commission is taking action to bring this level down. The Chairman has announced that the Commission will implement a program of broadcaster audits and will also reach out to broadcasters to provide information on the most frequent causes for overcommercialization cited by broadcasters in their renewal applications and to advise them that failure to comply with the commercial limits will continue to subject them to the Commission's full panoply of sanctions, including the imposition of forfeitures, shortterm renewals and reporting requirements.  XN-x2.` ` Children's Informational and Educational Programming. The first annual filing by television licensees of the Children's Television Programming Reports on January 10, 1998, indicates that vast majority of licensees have complied with the children's television educational and informational programming regulations by airing at least three hours of core programming per week. ":& 0*(($"Ԍ V-ԙAuctions The Balanced Budget Act of 1997 expanded the Commission's competitive bidding authority under Section 309(j) of the Communications Act to include mutually exclusive applications for broadcast licenses. This new auction authority will greatly expedite the broadcast licensing process and ensure that the public receives new broadcast service more rapidly. The Commission has initiated a rulemaking proceeding to implement this important legislation.  V-Enforcing Political Programming Rules The Mass Media Bureau implements statutory rules on political programming, including those requiring that broadcasters (1) afford "equal opportunities" to legally qualified candidates; (2) comply with limits on the rates they charge to such candidates; and (3) allow "reasonable access" to candidates for federal office. Because this is a midterm election year, during the next six months we expect to receive approximately 1000 phone calls a month from broadcasters, political candidates and their media buyers. And, of course, the Bureau will continue to meet its daytoday responsibilities, including the review and disposition of facilities modification applications for radio and television stations, processing sales applications and license renewal applications, and responding to inquiries and complaints from the public. ":& 0*(($"Ԍ X-ԙ Streamlining  X- The Commission has initiated a proceeding to fundamentally change our broadcast application and licensing procedures. The goals of this proceeding are:  X -x o` ` Reduce applicant and licensee burdens  X -x o` ` Realize fully the benefits of the Bureau's electronic filing initiative  X -x o` ` Preserve the public's ability to participate fully in broadcast licensing process  Xb- The NPRM invites comment on whether to adopt mandatory electronic filing for 16 key application and reporting forms, including the Children's Programming Report, Form 398, which is currently available in electronic form. The Bureau is committed to a transition to electronic filing by the end of next year that will result in lessened filing burdens, faster application processing, and more accurate Commission databases.  XN- The NPRM also proposes to totally overhaul all application forms. Questions have been recast in yes/no format to facilitate electronic filing and processing. The new forms are shorter, simpler and better organized. We propose dramatic reductions in form length. For example, the license assignment form, Form 314, would shrink from 9 to 4 pages and from 8 to 3 exhibits in most cases. Part of this form reduction reflects the Bureau's belief that it can rely increasingly on applicant certifications in lieu of detailed informational disclosures to monitor compliance with rules and policies. Broadcasters will be aided in this process":& 0*(($" through electronic edit checks that automatically identify problems and errors, expanded application instructions and detailed worksheets. Overall, as the Commission moves to deregulation, we have adopted a new paradigm for enforcement that relies more on companies to certify that they are in compliance with our regulations, but increases enforcement for noncompliance. Swift, predictable, and sufficient enforcement is critical as we move toward deregulation.  X- In addition to the forms streamlining initiative, the NPRM proposes substantive policy changes to reduce burdens on regulatees. Two of the most significant changes are:  X-x 1.` ` A new construction permit policy that will afford permittees more flexibility during their initial construction period and dramatically reduce the number of filings that a permittee must file when construction delays are encountered.  XN-x 2.` ` Lessened ownership report filing requirements  X- The Bureau is also moving aggressively to develop a comparable streamlining initiative to promote technical flexibility by existing broadcasters. Since October of 1993, the Mass Media Bureau has reduced in size from 351 to 270 positions, a 25% decrease. I expect that our streamlining initiatives, when fully implemented,":&0*(($" will permit the Bureau to reduce its staffing needs by an additional 10%.  Xv- Conclusion Mr. Chairman, broadcasting industry is changing dramatically and the Mass Media Bureau is changing as well so that we can continue to implement the goals that Congress has set forth as efficiently and effectively as possible. We are excited by the opportunities that broadcasting has to deliver more and better services to the public in the future. We are committed to reviewing our policies and our procedures to ensure that we are doing the most we can to encourage competition and deregulation so that the American people receive these benefits. Thank you, Mr. Chairman, for the opportunity to appear before you today. I'd be pleased to answer any questions you may have."|0*(("  X-Q&A topics radio mergers competition/processing concerns low power radio pirates HDTV medical devices free time kidvid buildout deadlines Canada and Mexico processing dtv applications EEO hard liquor ads Bechtel/auctions LMAs