Preliminary Draft-Comments and Suggestions Welcomed Version lo1 Communications Policy, Media Development, and Convergence Douglas a galbi Senior economist Cor DI Common Carrier Bureau, FCC January 18, 2001 abstract In the deliberations of scholars, policy analysts, and policy makers television has exceptional power and influence. Yet the historical record shows that television has not changed the economics of attention not merely a fluke or just ironic. It points to a major impedim onir for large populations in the course of their daily lives. This contrast is development of information societies. State-owned-and-controlled media can be an important policy lever for overcoming this opposition and promoting the growth of more diverse media environments and more diverse ways of interacting with media IThemostcurrentversionwillbeavailablefromhttp://www.erols.com/dgalbi/telpol/think.htmor http://www.galbithink.org The opinions and conclusions expressed in this paper are those of the author. They do not necessarily reflect the views of the Federal Communications Commission, its Commissioners, or any staff other than the author. I am grateful for numerous FCC colleagues who have shared their insights and experience with me. Author's address: dgalbi @fcc. gov; FCC, 445 12'th St SW, Washington, DC 20554, USA
Preliminary Draft – Comments and Suggestions Welcomed Version 1.011 Communications Policy, Media Development, and Convergence Douglas A. Galbi Senior Economist2 Competitive Pricing Division Common Carrier Bureau, FCC January 18, 2001 Abstract In the deliberations of scholars, policy analysts, and policy makers, television has exceptional power and influence. Yet the historical record shows that television has not changed the economics of attention for large populations in the course of their daily lives. This contrast is not merely a fluke or just ironic. It points to a major impediment to the development of information societies. State-owned-and-controlled media can be an important policy lever for overcoming this opposition and promoting the growth of more diverse media environments and more diverse ways of interacting with media. 1 The most current version will be available from http://www.erols.com/dgalbi/telpol/think.htm or http://www.galbithink.org . 2 The opinions and conclusions expressed in this paper are those of the author. They do not necessarily reflect the views of the Federal Communications Commission, its Commissioners, or any staff other than the author. I am grateful for numerous FCC colleagues who have shared their insights and experience with me. Author’s address: dgalbi@fcc.gov; FCC, 445 12’th St. SW, Washington, DC 20554, USA
Contents . Introduction II. Thirty Years of Deliberation of US Broadcast Law Il. Time with Media in Everyday life A Media Use Prior to radio and television B. Radio and Television Time in the late 1990s C. The Boring Story IV. Macro-Economics of Attention Seeking A Advertisings Share of the Economy: Constant Long-Term B Real Advertising Spending Per Media Hour: Constant Long-Term V. Effects of Advertising Prior to Radio and Television A. Visions and Aspirations B Building National Brands C. Commercial Value VI. The Importance of Attention to Government A. The Future Includes state media B. Promoting a Multiplicity of Sources and Outlets VII. Conclusion
2 Contents I. Introduction II. Thirty Years of Deliberation of US Broadcast Law III. Time with Media in Everyday Life A. Media Use Prior to Radio and Television B. Radio and Television Time in the late 1990s C. The Boring Story IV. Macro-Economics of Attention Seeking A. Advertising’s Share of the Economy: Constant Long-Term B. Real Advertising Spending Per Media Hour: Constant Long-Term V. Effects of Advertising Prior to Radio and Television A. Visions and Aspirations B. Building National Brands C. Commercial Value VI. The Importance of Attention to Government A. The Future Includes State Media B. Promoting a Multiplicity of Sources and Outlets VII. Conclusion
I. Introductio Convergence is widely considered to be about television. Anticipated developments ¨ interactive television,”“ TV meets the Web,"“ the coming collision of the Internet with broadcast law, etc -describe enhancements to television, new platforms for television, and the relationship between the regulatory framework for television and that for other media. Policy makers have considered at length how to foster the development of high- density television and digital television. Internet content providers have sought to move from banner advertisements to advertisements more like those on television from the perspective of many advertising agencies and Internet entrepreneurs, streaming media, following the model of television, are necessary to get rich, to be entertaining, and to hold persons attention Television is subject to detailed and distinctive government regulation. Among most scholars, policy-analysts, and policy-makers, television is considered especially powerful and influential. Thirty years of deliberation of us broadcast law demonstrate clearly the power and influence of television on this group of persons. Further scholarly and policy deliberation about the special power and influence of television does not appear to be worthwhile. If convergence is about television, or something like television, convergence will happen only very slowly The historical record indicates, however, that different media have not had dramatically different effects on the mundane personal choices of large populations. Television did not replace reading or other activities; it supplemented them. Over the past seventy-five years, growth in discretionary time can account for all the time currently spent watching television. Moreover, the advent of radio and television has not changed total advertising spending as a share of total output, nor changed significantly total advertising spending per adult media hour. The historical record shows that print media alone were sufficient In its Public Notice indicating approval of the merger between America Online(AOL) and Time Warner, the FCC stated its intention to initiate a proceeding on"interactive television services. See FCC 01-11 focusingonmediaconvergenceinEurope.Seehttp://www.tvmeetstheweb.com.AworkshoponNercter January 11, 2001. TV Meets the Web" is the name of Van Dusseldorp& Partners' website and newsl Generation Internet Policy in Brussels in mid-September, 1999 highlighted"the coming collision of the the forum. See the GIP publication, "Convergence Cyberspace: New Challenges Emerge"(May 2g Internet with broadcast law. " The European Commission and the Global Internet Project( GlP)co-host 2000), p 3. Paper available at http://www.gip.org/publications/classification.asp?classifIcatIoniD=10 licensee for the provision of advanced television, high density television, digital television, or othon 4 In a major industrial policy initiative, in 1997 the FCC gave additional spectrum to each televisi services; the total value of this spectrum has been estimated to be $15-$70 billion dollars. The development of this policy is still widely discussed. See, for example, "FCC Chairman Kennard Calls For More Benefits To Public From $70 Billion Give-Away Of 2nd Digital TV Channel, " FCC Press Release October 10.2000 online at http://www.fcc.gov/bureaus/miscellaneous/newsReleases/2000/nrmc0044.html;rEportoftheAdvisory Committee on the Public Interest Obligations of Digital Television Broadcasters(Dec 1998), online at http://www.ntia.docgov/pubintadvcom/pubint.htmforFccproceedingsinthisarea,see http://www.fcc.gov/dtv/.OthercountriesareencounteringthesamepolicyissuesinAustraliaseefor example, Given, Jock, " Digital D-Day(20 July 1999), online at
3 I. Introduction Convergence is widely considered to be about television. Anticipated developments – “interactive television,” “TV meets the Web,” “the coming collision of the Internet with broadcast law, ” etc. – describe enhancements to television, new platforms for television, and the relationship between the regulatory framework for television and that for other media.3 Policy makers have considered at length how to foster the development of highdensity television and digital television.4 Internet content providers have sought to move from banner advertisements to advertisements more like those on television. From the perspective of many advertising agencies and Internet entrepreneurs, streaming media, following the model of television, are necessary to get rich, to be entertaining, and to hold persons’ attention. Television is subject to detailed and distinctive government regulation. Among most scholars, policy-analysts, and policy-makers, television is considered especially powerful and influential. Thirty years of deliberation of US broadcast law demonstrate clearly the power and influence of television on this group of persons. Further scholarly and policy deliberation about the special power and influence of television does not appear to be worthwhile. If convergence is about television, or something like television, convergence will happen only very slowly. The historical record indicates, however, that different media have not had dramatically different effects on the mundane personal choices of large populations. Television did not replace reading or other activities; it supplemented them. Over the past seventy-five years, growth in discretionary time can account for all the time currently spent watching television. Moreover, the advent of radio and television has not changed total advertising spending as a share of total output, nor changed significantly total advertising spending per adult media hour. The historical record shows that print media alone were sufficient 3 In its Public Notice indicating approval of the merger between America Online (AOL) and Time Warner, the FCC stated its intention to initiate a proceeding on “interactive television services.” See FCC 01-11, January 11, 2001. “TV Meets the Web” is the name of Van Dusseldorp & Partners’ website and newsletter focusing on media convergence in Europe. See http://www.tvmeetstheweb.com . A workshop on Next Generation Internet Policy in Brussels in mid-September, 1999 highlighted “the coming collision of the Internet with broadcast law.” The European Commission and the Global Internet Project (GIP) co-hosted the forum. See the GIP publication, “Convergence & Cyberspace: New Challenges Emerge” (May 20, 2000), p. 3. Paper available at http://www.gip.org/publications/classification.asp?CLASSIFICATION_ID=10 . 4 In a major industrial policy initiative, in 1997 the FCC gave additional spectrum to each television licensee for the provision of advanced television, high density television, digital television, or other services; the total value of this spectrum has been estimated to be $15-$70 billion dollars. The development of this policy is still widely discussed. See, for example, “FCC Chairman Kennard Calls For More Benefits To Public From $70 Billion Give-Away Of 2nd Digital TV Channel,” FCC Press Release October 10, 2000, online at http://www.fcc.gov/Bureaus/Miscellaneous/News_Releases/2000/nrmc0044.html ; Report of the Advisory Committee on the Public Interest Obligations of Digital Television Broadcasters (Dec. 1998), online at http://www.ntia.doc.gov/pubintadvcom/pubint.htm ; for FCC proceedings in this area, see http://www.fcc.gov/dtv/ . Other countries are encountering the same policy issues; in Australia, see for example, Given, Jock, “Digital D-Day” (20 July 1999), online at http://www.comslaw.org.au/research/Broadcasting/19990729_digitalaq.html
to create new visions and aspirations, build national brands, and generate significant commercial value. For the most part, divergence never occurred in the economic effects of media. Hence convergence cannot be slow in coming In any case, communications policy should promote, not convergence, but worthwhile social, political, and economic goals. The historical record shows that over seventy-five years advertising has grown about the same rate as the over-all economy. Thus if policy seeks information industries to serve as an engine for creating new economic opportunities and jobs, policy should seek to develop media not supported by advertising Most persons today spend a large amount of time within the home, sitting down, watching pre-packaged, distributor-scheduled streaming audio and video, i.e. television If the greatest menace to freedom is an inert people, policy should encourage the growth of more diverse media environments and more diverse ways of interacting with media. To promote serious discussion of serious issues, as well as the release of human energy in healthful productive, avocational, social, political, and ludic communications, policy should encourage the development of a multiplicity of communications sources and outlets Stating policy goals is easy; the question is al ways what to do. The growth in the number of participants in the communications industry, the globalization of firms, and rapid technological change make many traditional policies unintelligible or ineffective. In the Microsoft antitrust case, in the aol Time Warner merger, and in formulating pricing policies, policy makers and industry participants are increasingly recognizing the importance of economics of attention. An insightful policy analyst pointed out early in the 1990s When new technologies conducive to increasingly diverse and smaller-scale mass communications emerge, commercial market forces and deeply ingrained media habits pull back hard in the other direction. Communications policy needs to identify effective levers for influencing commercial media development and wide-spread habits of media use Thus for policy purposes television is not something to be made into an appliance like a toaster; it's always been more or less like People magazine with animation The quotation is from the concurring opinion of US Supreme Court Justice Louis Brandeis in Whitney v California 274 US 357(1927). Articles in the trade press indicate that Internet appliances currently under development may foster the growth of more diverse environments for media use and more diverse ways of interacting with media 7 The provision of mere entertainment, while not encouraged, is generally tolerated A key issue in the Microsoft case relates to how control was exercised over the first screen seen when starting Windows. The first screen is important because most users notice it and do not change it Similarly, the FCC's approval of the AOL Time Warner merger included a condition requiring that AOL Time Warner must allowing ISPs providing services over AOL Time Warner facilities to control the contents of the first screen that subscribers see. With respect to pricing policies, Odlyzko, Andrew, "The history of communications and its implications for the Internet"(available at http://www.research.att.com/-amoshowsthathistoricallycustomershavepreferredflat-rate communications services. With such services customers do not have to pay attention to For a short well-written article building on Odlyzko's work, see Cohen, Hal, "The Price is Wrong, The Industry StandardJanuary1-8,2001,onlineatwww.thestandard.com Neuman, W. Russell, The future of the mass audience(Cambridge, UK: Cambridge Univ Press, 1991)p
4 to create new visions and aspirations, build national brands, and generate significant commercial value. For the most part, divergence never occurred in the economic effects of media.5 Hence convergence cannot be slow in coming. In any case, communications policy should promote, not convergence, but worthwhile social, political, and economic goals. The historical record shows that over seventy-five years advertising has grown about the same rate as the over-all economy. Thus if policy seeks information industries to serve as an engine for creating new economic opportunities and jobs, policy should seek to develop media not supported by advertising. Most persons today spend a large amount of time within the home, sitting down, watching pre-packaged, distributor-scheduled streaming audio and video, i.e. television. If “the greatest menace to freedom is an inert people,” policy should encourage the growth of more diverse media environments and more diverse ways of interacting with media.6 To promote serious discussion of serious issues, as well as the release of human energy in healthful productive, avocational, social, political, and ludic communications,7 policy should encourage the development of a multiplicity of communications sources and outlets. Stating policy goals is easy; the question is always what to do. The growth in the number of participants in the communications industry, the globalization of firms, and rapid technological change make many traditional policies unintelligible or ineffective. In the Microsoft antitrust case, in the AOL Time Warner merger, and in formulating pricing policies, policy makers and industry participants are increasingly recognizing the importance of economics of attention.8 An insightful policy analyst pointed out early in the 1990s: When new technologies conducive to increasingly diverse and smaller-scale mass communications emerge, commercial market forces and deeply ingrained media habits pull back hard in the other direction.9 Communications policy needs to identify effective levers for influencing commercial media development and wide-spread habits of media use. 5 Thus for policy purposes television is not something to be made into an appliance like a toaster; it’s always been more or less like People magazine with animation. 6 The quotation is from the concurring opinion of US Supreme Court Justice Louis Brandeis in Whitney v. California 274 US 357 (1927). Articles in the trade press indicate that Internet appliances currently under development may foster the growth of more diverse environments for media use and more diverse ways of interacting with media. 7 The provision of mere entertainment, while not encouraged, is generally tolerated. 8 A key issue in the Microsoft case relates to how control was exercised over the first screen seen when starting Windows. The first screen is important because most users notice it and do not change it. Similarly, the FCC’s approval of the AOL Time Warner merger included a condition requiring that AOL Time Warner must allowing ISPs providing services over AOL Time Warner facilities to control the contents of the first screen that subscribers see. With respect to pricing policies, Odlyzko, Andrew, “The history of communications and its implications for the Internet” (available at http://www.research.att.com/~amo ) shows that historically customers have preferred flat-rate communications services. With such services customers do not have to pay attention to usage. For a short, well-written article building on Odlyzko’s work, see Cohen, Hal, “The Price is Wrong,” The Industry Standard, January 1-8, 2001, online at www.thestandard.com . 9 Neuman, W. Russell, The future of the mass audience (Cambridge, UK: Cambridge Univ. Press, 1991) p. 165
In the right media environment, state-owned-and-controlled media can be such levers consistent with liberal, democratic values. The unattractive history associated with such forms of media, as well as the past limited scope of broadcasting opportunities, ha rightly foreclosed most consideration of such policy instruments. Current and anticipated changes in relevant circumstances suggest that more extensive discussion of state media is now warranted. State-owned-and-controlled media might be used to help change habits of media use, address issues that are hindering the development of business plans for commercial Internet information sources and services, and further the separation of politics and business in the information industry. Recognizing the importance of economics of attention, communications policy could converge with media development IL. Thirty Years of Deliberation of US Broadcast Law Since the late 1960s scholars, policy-analysts, and policy-makers have deliberated extensively about the legality and desirability of regulating broadcasting differently from print media in the US The U.S experience offers rich insight into the special power and influence of broadcasting. In contrast to most countries, in the US there has been private commercially driven broadcasting continually since the mid-1920s. The fundamental US sector-specific statutory law regulating broadcasting has not changed since 1934 Moreover, in contrast to European constitutional law, US constitutional law features greater continuity of texts, a more clearly defined domain of texts, and a more rigidly structured textual hierarchy. In this context, commercial and institutional incentives deep ideological currents of skepticism toward constraints on personal and entrepreneurial freedom, and a rich civic tradition of articulating the public interest have powered deliberatively productive clashes between broadcast law and other legal claim In the US the special nature of broadcasting has been discussed and scrutinized at various levels for over thirty years accepted changes in policy orientation. s The current practical significance ofU ely At the end of the year 2000, highly respected commentators and relevant US governme institutions are deeply divided on broadcast law, and there have been no clear, wide "Unattractive" means here unattractive to most persons living in high-income liberal democracies. Many persons living in formerly communist countries in Central and Eastern Europe now consider the historical period associated with state media to be preferable to their current situation Constitutional law might rightly preclude policies that seem desirable in particular circumstances; clearly a strong constitution is important to public health. I leave to others to analyze questions of constitutional law. Note, however, that observed new practices are consistent with the emergence of state media. See Section v Important early contributions to these deliberations are the Supreme Court case and judgement, NBC v United States, 319 US 192(1943)and Barron, Jerome, " Access to the Media-A New First Amendm Right, 80 Harard Law Review 1641(1967) Recently the FCC's personal attack and political editorial rules have created an unusually dramatic controversy. See Joint Statement of Commissioner Susan Ness and Commissioner Gloria Tristani Concerning the Political Editorial and Personal Attack Rules(Gen. Docket No. 83-484 )[on the web at http://www.fccgov/speecheS/ness/states/stsn819.htmlI,JointStatementofCommissionersPowelland
5 In the right media environment, state-owned-and-controlled media can be such levers consistent with liberal, democratic values. The unattractive history associated with such forms of media, as well as the past limited scope of broadcasting opportunities, has rightly foreclosed most consideration of such policy instruments.10 Current and anticipated changes in relevant circumstances suggest that more extensive discussion of state media is now warranted.11 State-owned-and-controlled media might be used to help change habits of media use, address issues that are hindering the development of business plans for commercial Internet information sources and services, and further the separation of politics and business in the information industry. Recognizing the importance of economics of attention, communications policy could converge with media development. II. Thirty Years of Deliberation of US Broadcast Law Since the late 1960s scholars, policy-analysts, and policy-makers have deliberated extensively about the legality and desirability of regulating broadcasting differently from print media in the US12 The U.S experience offers rich insight into the special power and influence of broadcasting. In contrast to most countries, in the US there has been private, commercially driven broadcasting continually since the mid-1920s. The fundamental US sector-specific statutory law regulating broadcasting has not changed since 1934. Moreover, in contrast to European constitutional law, US constitutional law features greater continuity of texts, a more clearly defined domain of texts, and a more rigidly structured textual hierarchy. In this context, commercial and institutional incentives, deep ideological currents of skepticism toward constraints on personal and entrepreneurial freedom, and a rich civic tradition of articulating the public interest have powered deliberatively productive clashes between broadcast law and other legal claims. In the US the special nature of broadcasting has been discussed and scrutinized at various levels for over thirty years. At the end of the year 2000, highly respected commentators and relevant US government institutions are deeply divided on broadcast law, and there have been no clear, widely accepted changes in policy orientation.13 The current practical significance of US 10 “Unattractive” means here unattractive to most persons living in high-income liberal democracies. Many persons living in formerly communist countries in Central and Eastern Europe now consider the historical period associated with state media to be preferable to their current situation. 11 Constitutional law might rightly preclude policies that seem desirable in particular circumstances; clearly a strong constitution is important to public health. I leave to others to analyze questions of constitutional law. Note, however, that observed new practices are consistent with the emergence of state media. See Section V. 12 Important early contributions to these deliberations are the Supreme Court case and judgement , NBC v. United States, 319 US 192 (1943) and Barron, Jerome, “Access to the Media – A New First Amendment Right,” 80 Harvard Law Review 1641 (1967). 13 Recently the FCC’s personal attack and political editorial rules have created an unusually dramatic controversy. See Joint Statement of Commissioner Susan Ness and Commissioner Gloria Tristani Concerning the Political Editorial and Personal Attack Rules (Gen. Docket No. 83-484) [on the web at http://www.fcc.gov/Speeches/Ness/States/stsn819.html ], Joint Statement of Commissioners Powell and