Remarks of Acting Assistant Secretary Baker at The Media Institute's Communications Forum

November 20, 2008

Remarks of Meredith Attwell Baker, Acting Assistant Secretary of Commerce
(As Prepared)

The Media Institute’s Communications Forum
November 20, 2008 - Washington, D.C.

Introduction

Thank you, Dick, for everything you’ve done and thanks for that kind introduction.  I am delighted to be here, especially on a day of particular historical significance for defenders of the First Amendment. 

It was on this date, November 20, back in 1789 that the First Amendment, and the other nine Amendments that make up the Bill of Rights to our Constitution, received the first vote by a state – New Jersey – in favor of ratification.  Although…   they say that certain elements in New Jersey (like the Sopranos ancestors) were more interested ratification of the Fifth Amendment (self incrimination) than the First.

On this anniversary of sorts, I want to express my appreciation to The Media Institute for its enduring commitment to the protection of our free speech rights and for its advocacy of a competitive media and communications industry.

The year 1789 was particularly momentous for our country.  It was a time of extraordinary change – the election of the first Congress, the enactment of laws establishing the judiciary and the first cabinet departments, and the election and inauguration of the first President.  In the 219 years since, the call for change has been a byword of our political culture.  And it is presently particularly popular.

Two weeks ago, when Americans voted to elect our 44th President, I was in Cairo, Egypt at an international meeting.  It was fascinating to see that the level of interest and anticipation there was nearly as high as it was here at home.  It gave me a perspective and sense of pride we should all feel:  that the world stands witness to a true hallmark of our democracy – the peaceful election and transition of our nation’s highest leader.  We should all be very proud.

The DTV Transition

At NTIA, we’ve been focused on another transition (although my husband thinks I should focus on that one), we’re focused on the one that’s now just 89 days away.  And our goal has always been nothing short of success.  Of course, I’m referring to the DTV transition and NTIA’s TV Converter Box Coupon Program.

We have worked diligently for more than two years to ensure that all Americans are prepared when full power television stations make the switch to digital at midnight on February 17, 2009, particularly those most at risk of losing their television service.  Although we’ve faced challenges along the way (like pronouncing “coupon” instead of “kew-pon”), we’ve also worked hard to address them and keep moving forward. I am really proud of our team and what we’ve accomplished.

As of yesterday, we have distributed nearly 36 million coupons to over 19 million U.S. households.  Of these, more than 14.5 million coupons have been redeemed with the purchase of a coupon-eligible converter box from among the nearly 35,000 retail outlets participating in the Program.  We estimate that as of November 1st, 62 percent of all over-the-air households have already requested a coupon.

Those are pretty impressive numbers for a program that became operational just 11 months ago, and for a product market that previously did not exist.

Believe it or not, that’s about on par with the unit sales of the iPhone.

Despite our progress, this final stretch of 89 days will likely be a race against time to get as many remaining  households prepared as possible.  As I see it, we face several challenges that will make the difference in getting these households across the finish line.

First, the next six weeks are crucial in moving those unprepared households to take the first step and apply for coupons.  That’s because we estimate it will take a minimum of six weeks from the time an application is submitted and a coupon is issued, delivered, and redeemed, to the time the consumer connects the converter and trouble shoots for any reception problems.  A consumer who procrastinates and doesn’t apply for a coupon before the end of this year may not be ready on February 18, 2009.

We are emphasizing, and will continue to urge consumers to, APPLY, BUY, and TRY by the end of the year.  We have also asked our partners to carry that message in their communications with consumers.  Even though Nielsen reported that the number of “completely unready” households in September represented the largest decline in the past six months, we must accelerate the pace of moving those households into the “ready” column before the New Year.

And our strategy seems to be working.  Thanks to great events by many of those in this room and the publicity of 100 days out, coupon requests are at an all time high.  And that’s the plan.  Daily requests for coupons last week spiked to double previous levels.  That’s what we want.

Second, I am concerned that consumers who haven’t completed their preparations in the very final days before the switch may experience difficulties.  I would again suggest that local broadcast stations be creative in serving their viewers, now and after the switch occurs.  They should display their station telephone number on their websites, on air, and on crawls, to provide viewers a local resource to answer questions about such issues as box connections and scanning, and antennas and reception.  As I’ve said before, they might also obtain a small stock of converter boxes as a give away to over-the-air households in need as a stopgap measure.  They need to think about that now.

The legislation pending before Congress authorizing the FCC to encourage and allow the continuation of analog broadcasting for a short period after the switch – to alert viewers about the switch and provide continuity in public safety and emergency messaging as necessary – would also be a helpful step.

Finally, I am concerned about the possibility that some stations’ digital broadcast areas may be smaller and/or different than their existing analog station contour.  If Chairman Martin’s estimate is accurate that up to 15 percent of the markets may have a digital station that will not reach as many viewers as the corresponding analog station, this will undoubtedly cause confusion and frustration for consumers.

The recent FCC order on distributed transmission systems is a step forward, even though it does not require broadcasters to adopt DTS technology and it may be too late for some to construct DTS facilities before February 17, 2009.  It would also be helpful for consumers to know sooner rather than later the stations and the affected markets where the digital service contour will change.

I echo Commissioner Rob McDowell’s call for broadcasters to inform viewers about the potential loss of reception due to service contour changes, and I really encourage the FCC to do the same, in order to minimize consumer complaints when the switch occurs.

The New Video Marketplace

As important as the DTV transition is for consumers and society – freeing up our precious spectrum resource for public safety communications and new advanced wireless services – it really is just one facet of the dramatic changes occurring in today’s media landscape.

Technology has literally transformed the marketplace.  It used to be a company’s service was captive to its platform.  For example, broadcasters transmitted single streams of content, cable companies offered one or two tiers of channels, and telephone companies provided dial-tone.  When wireless service was introduced, well, it was cellular and you had a brick for a phone and maybe a bag to go with it.

Today, communications platforms are immensely adaptable and consumers can get as many, or as few, services as they want – voice, video, games, data – from a single provider.  As a result, “convergence” is no longer just a “buzzword.”  Those of us who have spent a lot of time in Las Vegas – at conventions – see it.  CTIA’s trade show has now features broadcasting; the Cable Show is demonstrating wireless; and all of them feature content.

A recent Nielsen report identifies wireless Internet access as the new “mass media” with 40 million active users of the mobile Internet based on usage in the past 30-days.

Watching and posting Internet videos has become about as commonplace as television viewing, and, according to Media.com, 25 percent of mobile phone users are now accessing video on their mobile devices.  In-Stat predicts that in five years, there may be as many as 11 million TV-PC service subscribers and 16 million converged PC-mobile service subscribers in the U.S.
Digital technology gives broadcasters an opportunity to participate more fully, and a chance to compete more effectively, in this new marketplace.  By seizing the potential of digital technology, broadcasters, like other platform providers, can make many different forms of content available to their customers in addition to one-way broadcasting.

While many stations are already multi-casting using digital technology, the opportunities for interactive broadcasting, data-casting and other new and innovative services seem bounded only by the imagination.

We know that the current economic conditions have impacted some traditional media outlets – newspapers, magazines, and radio.  But our content remains the envy of the world.  I applaud those who have been able to successfully transform their business models and have found new outlets and platforms to keep that content flowing.

Innovation and Competition

The challenge for policymakers is to embrace policies that foster – and not frustrate – private sector investment and innovation, and that unleash – and not encumber – the potential of technology and the forces of competition.

The virtues of this approach are evident in the broadband market.  Over the last eight years, the Administration has promoted a regulatory environment that has produced billions in private investment to deploy modern broadband networks.  The Administration also moved aggressively to ensure that spectrum resources were available to fuel the growth of new wireless broadband networks and services.  And consumers are reaping the rewards:  broadband services are faster, more available, more affordable, and more mobile than ever, and we are just at the beginning.

In such a robust and diverse media marketplace, government would do best to tread lightly.  For example, FCC’s action last year to ease the newspaper/broadcast cross-ownership rules was a sound one.  That these 30-plus year old rules were updated to reflect the current media marketplace was, frankly, long overdue.  A reversal of this action, if it was to occur, would be contrary to the public interest in my view and would represent a backward step in sustaining the viability of traditional outlets in today’s competitive media marketplace.

Likewise, it would be a mistake to reinstate the Fairness Doctrine which was rightly laid upon the scrap heap of media history more than 20 years ago.  Since then, the variety and diversity of information sources available to consumers has grown exponentially.  Broadcasters today not only compete with print media, but also with cable and satellite television, the Internet, satellite radio, IP video, and mobile video.  And as a result, there is little need for government to mandate and, more importantly, to enforce, “balance” on any one outlet.

A return of this doctrine would be like a u-turn on the road of progress.

Further, it seems antithetical to impose new "localism" rules on the one medium that, by its very nature, is responsive to the local communities it serves.  After all, the presence of local television and radio broadcast stations in their communities and the programming they produce differentiates broadcasters from their competitors.

The imposition of new requirements on other media platforms would also be counter-productive.  For example:  proposals to impose retail and wholesale cable a la carte requirements.

I believe neither would in the interest of cable subscribers.  Real prices for subscription television have declined over the past decade, and economic efficiencies have improved by the offering of network bundles.  In addition, consumers would likely end up with fewer programming choices under either proposal as smaller niche networks – for example, those appealing to minorities – would lose prospective viewers and ultimately, their viability.

The reality is that in the absence of regulation governing cable network bundling, the cable market has grown dramatically:  from 28 networks in 1980, to 565 networks in 2007, offering consumers more choice in programming than ever before.

As broadcast television today stands on the threshold of a new and exciting digital future, media companies should defend the freedom and flexibility to explore, create, and meet consumer demand without the rules that governed a less robust marketplace of an earlier generation.  With freedom comes responsibility.  With flexibility comes responsibility.  As we defend these values, so too must we recommit ourselves to exercising them with the best interest of the American people firmly in view.

Conclusion

So, in this time of transition, there’s no shortage of challenges for media market participants, such as your companies -- and for government.

Reflecting on the extraordinary changes in the media and communications market in recent years, I thought about how different the perceptions of our children must be from those of us who have been around a little longer.

For a student entering university this fall, like my own, Mary Stuart Baker, born in 1990, wireline service is probably known best as the way to let people into an apartment building.  And using those mobile handsets for voice service is, no doubt, passé.  She actually asked me how we dated without texting.  IM-ing has taken the place of phone calls, word of mouth directions led to Mapquest which is now Garmin. 

And luckily for this generation, WWW…    that never stood for World Wide Wrestling.  Where to next?

Technological advances are rapidly changing, and will continue to change, the media landscape as we know it.  We must do our best to ensure that the generations that follow, like those first-year university students, have more and better media and communications resources available at their fingertips.  The content in America is the envy of the world.  We must protect it, nurture it and do so responsibly.

One of the strongest defenders of the First Amendment in the 20th century was our 40th President, Ronald Reagan.  He was not only an actor and broadcaster, but also a two-time Screen Actors Guild President.  I leave you with this quote he gave on the First Amendment: "Freedom and incentives unleash the drive and entrepreneurial genius that are the core of human progress…  America must remain freedom’s staunchest friend, for freedom is our best ally."

Thank you.  I will be happy to answer your questions.