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CHAPTER IV - Changing Goals, Changing Regulation

Today’s need for a new policy framework for video is not the first time policymakers have had to adapt due to changes in the market. There was considerable discussion about how both policy goals and the regulatory climate have changed over time. The discussion began with the “Blue Book,” which the FCC first published in 1946. It set forth a number of objectives that public policy in the communications arena should promote:

  • Local self-expression
  • Development of local talent
  • Children’s programming
  • Religious programming
  • Educational programming
  • Public affairs programming
  • Editorials
  • Political broadcasts
  • Agricultural programming
  • News programming
  • Weather and news reports
  • Sports programming
  • Service to minority groups
  • Entertainment programming

While being mindful of these goals, regulation historically sought to encourage the build-out of communications platforms and, at the same time, tried to adapt as technology changed. In the development of broadcast television from the 1940s through the 1960s, policy granted spectrum rights to a limited number of players, held local broadcasters to a public-trustee standard in providing news programming and encouraged a diversity of political views through the Fairness Doctrine. Regulators ensured that programming met standards of decency and that there was ample local educational programming. As deregulation gained favor in the 1970s, broadcast was not immune to this trend; the Fairness Doctrine was repealed, some ownership rules were relaxed and financial syndication rules were eased and eventually disappeared from the landscape.

By the 1970s, cable television was beginning to gain a foothold in the marketplace and regulators took a series of steps that facilitated the build-out of cable infrastructure. Some steps, such as compulsory copyright for broadcast signals, helped make cable television more attractive to consumers. Others, such as allowing cable companies to access city rights of way and utility poles to run cable lines, allowed cable to cover larger portions of the market. Throughout the 1970s, the regulatory adjustment saw the FCC migrating from a posture of protecting broadcasters to aiding the entry of cable into new markets. The 1972 cable rules adopted by the FCC sought to strike a balance between cable and broadcast interests. Even as the rules made it easier for cable to enter local markets, the FCC also established “leapfrogging” rules that restricted cable from importing distant signals to local markets and “syndicated exclusivity” rules that required cable to black out programs from distant signals if those signals duplicated programming offered by local broadcast stations.

As cable and broadcast competed against each other in the 1980s and 1990s, policy continued to recalibrate. The policy issues for this era fall into the following categories: universal coverage, competition, diversity/public affairs, consumer protection, content, deregulation and educational programming. Although policy in this era did not necessarily add up to a common theme, this period coincided with more consumers subscribing to cable television. Basic cable subscriptions rose from 23 percent of households in 1980 to 68 percent by 2000, with DBS adding another 16 percent to the share of households not wholly reliant on broadcast television. The diminishing role of broadcast in people’s TV-watching menu allowed the digital-TV transition to begin in this era, as the FCC loaned broadcasters spectrum that allowed them to move broadcasts to high-definition television, thereby freeing old broadcast spectrum for other uses. To replace local-programming origination rules for cable, funds set aside from local franchising fees provided resources for public, educational and government programming, and emerging DBS providers also had to reserve channel capacity for these purposes.

On competition policy, the FCC’s most forceful move in this era was to ensure DBS competitors had fair access to content for their services. In 1992, the Commission’s program access rules prohibited exclusive contracts among cable networks that were wholly or partially owned by cable operators. This encouraged entry by DBS services, which now had the opportunity to offer consumers programming widely available in the market. On the legislative front, Congress passed the Cable Television Consumer Protection and Competition Act of 1992 in response to rising cable rates since the mid-1980s, which granted the FCC narrow authority to regulate rates (only for a “basic tier” of service that multiple-system operators defined to exclude packages that contained the most desirable programming and only in the absence of effective competition). The most consequential part of the legislation was the so-called “must carry” provision, which gave broadcasters the right to demand that cable systems carry their signals or “retransmission consent,” which prohibits cable from carrying broadcasters without the broadcasters’ consent—something that increasingly comes at the price of cash compensation.

The 1996 Telecommunications Act terminated the FCC’s authority for extensive cable rate regulation. Other provisions of the 1996 Act impacted the video environment, including lengthening the term of licenses for broadcast and radio to eight years and easing the path to license renewals by eliminating comparative hearings that often led to lengthy and expensive proceedings on renewals. The legislation also relaxed ownership restrictions in broadcasting; a company could now own stations so long as the total number of stations reached no more than 35 percent of households nationwide (up from a 25 percent cap).

The late 1990s up to today marks the era where additional platforms—both wireline and wireless—capable of providing access to video content have been built. These broadband platforms enable ubiquitous Internet connectivity and online video. In this era, many of the goals of policy are the same as in prior eras, though the means of attaining them differ. Universal network coverage, which in the 1970s and 1980s meant creating conditions to foster cable build-out while ensuring the viability of broadcasting, now means universal broadband. The value of universality in the broadband era means different things in different contexts:

  • For wireline broadband, this involves transitioning the Universal Service Fund to support-network construction in the mostly rural areas that lack it.
  • For wireless, it means allocating spectrum so that mobile broadband is widely available—and that it fills access gaps where it is too expensive to build wireline networks. For competition, this has meant foregoing regulation of Internet service providers, given the growth in competitive broadband platforms, while allowing statewide franchising for companies with interest in the video market to hasten market entry.
  • For diversity of programming and innovation, the FCC’s Open Internet rules aim at ensuring that Internet Service Providers continue to facilitate the free flow of lawful content from anywhere online without precluding them from managing traffic or offering specialized services, including video services, or otherwise impeding the investment in next-generation broadband platforms. The FCC’s “C Block” device rules are another example of encouraging diversity and innovation in content. As a condition of Verizon’s purchase of C Block spectrum in 2008, the FCC required that licensees “shall not deny, limit or restrict the ability of their customers to use the devices and applications of their choice on the licensee’s C Block network.” The FCC underscored this policy in a 2012 ruling that assessed a $1.25 million fine on Verizon for requiring customers to subscribe to the company’s mobile broadband service if they wanted to tether their handheld devices to laptops for online access.
  • For the Internet and education, the E-rate program has been the vehicle for providing network connectivity for schools so they can use the Internet in the classroom. This program, authorized by the Telecommunication Act of 1996, channels money from the Universal Service Fund to schools and libraries for provision of telecommunications and Internet service. Depending on the level of need at the school, which is determined by the share of students eligible for free or reduced-price lunches, a school can receive discounted rates for service of between 20 percent and 90 percent. The authorizing legislation caps the E-rate fund at $2.25 billion annually; though in 2010 the FCC passed a rule indexing funding levels to inflation.

Legislation also drove policy to promote decency in online content. The Communications Decency Act of 1996 offered Internet service providers a safe harbor from liability for indecent content sent over their networks, while outlawing use of “interactive computer services” to send indecent material to persons under the age of 18. Free speech activists successfully challenged the provisions on indecency on First Amendment grounds. The First Amendment proved to be a strong weapon against legislation trying to regulate indecent content online. The Child Online Protection Act of 1998 was also ruled unconstitutional on the grounds that restrictions on commercial distributors of content considered “harmful to minors” was too broad in its use of “community standards” as the means to determine whether any particular content was indeed harmful to minors. Efforts to protect minors from harmful online content was eventually enshrined in the Children’s Internet Protection Act, which required libraries receiving E-rate funding to install filters on computers that prevent libraries’ online terminals from accessing indecent material. Today, many providers at all levels of the Internet ecosystem offer parental-control tools and support awareness and education programs to empower users to make the content choices that are most appropriate for themselves and their families.

New Policy Principles

With the growth in online connectivity among American consumers in the late 1990s and early 2000s, policymakers began to think anew about principles to guide policy. In 2004, FCC Chairman Michael Powell set forth the following principles, a framework his successor Kevin Martin embraced:

  1. Consumers are entitled to access lawful Internet content of their choice.
  2. Consumers are entitled to run applications and services of their choice, subject to law enforcement.
  3. Consumers are entitled to connect their choice of legal devices that do not harm the network.
  4. Consumers are entitled to competition among network providers, application and service providers and content providers.
  5. All these principles are subject to reasonable network management.

This concise list of principles that focus on consumer rights and protections stands in contrast to the lengthy “Blue Book” rules of the mid-20th century, which focused a great deal on cultivating specific content areas. Although the new FCC list of principles has served informally as a framework for policy for nearly a decade, they are fragile, since litigation has slowed subsequent efforts to modify and codify them (e.g., the current court proceeding on the FCC’s 2010 Open Internet Order). This fragility is the motivation for addressing emerging critical issues and developing a new policy road map.

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