Copyright c 1993 by Nicholas Johnson and American Broadcasting Companies, Inc. Transcript of Ted Koppel's ABC News Nightline, June 23, 1993 (on the issue of whether "must carry" rules requiring cable television systems to carry all local stations should apply to "home shopping" (i.e., 60-minutes-of-commercials-per- hour) broadcasting stations), including participation by Nicholas Johnson Copyright 1993 American Broadcasting Companies, Inc., All rights reserved. ABC NEWS NIGHTLINE June 23, 1993 The Battle Over Home Shopping Stations BODY: TED KOPPEL: [voice-over] Would you consider this an essential service? ANDREW SCHWARTZMAN, Media Access Project: We don't think full-time home shopping is the kind of public service that justifies the benefit of free carriage on cable systems. KOPPEL: [voice-over] But that's exactly what may be about to happen, courtesy of the FCC. NICHOLAS JOHNSON, former FCC Commissioner: I think it's outrageous. Mr. SCHWARTZMAN: I think that if you have two people having sex on the screen, a lot of people will watch it, but I'm not sure that's public good. ANNOUNCER: You're watching America's original shop-at-home television service. KOPPEL: [voice-over] Tonight, the battle over the Home Shopping Network. ANNOUNCER: This is ABC News Nightline. Reporting from Washington, Ted Koppel. KOPPEL: There are those of us who regard shopping, in any form, as an excruciating form of punishment. Listening to a particularly insistent salesperson babble on about the virtues and values of a product I neither want nor need is not, I confess, my idea of entertainment, either. Having said that, I've also come to the conclusion that I must be in the minority. Enough people clearly love shopping via television and telephone to make at least two shopping television networks hugely profitable, and it is readily apparent that we are merely at the beginning of a new age in shopping. When, in a free marketplace, you have those who want to sell and those who want to buy, it behooves the rest of us to stand back and get out of the way. That does not explain, however, why cable systems should be required to carry home shopping stations for free. The Federal Communications Commission appeared to be just on the verge of granting the stations that so-called "must carry" right, but now a lot of questions are being raised about why a television station that exists for the sole purpose of making money should be given free access to cable. Here's some background from Nightline correspondent Dave Marash. DAVE MARASH, ABC News: [voice-over] "All the world's a stage," that's what William Shakespeare thought back in the olden times, back when television was still defining its basic mix of dramatic events, like this.["Miss America Pageant"] ELIZABETH TAYLOR: And the Oscar goes to... MARASH: [voice-over] And this- ANNOUNCER: This is Jeopardy. ["Married With Children"] MARASH: [voice-over] And this- SPORTS ANNOUNCER: It's all over. The Chicago Bulls! MARASH: [voice-over] From those early days on, giving viewers news, or religious programming, or a wide assortment of cultural points of view was part of every broadcaster's FCC-mandated responsibility to gain access to the public airwaves. NICHOLAS JOHNSON, former FCC Commissioner: So they said the broadcasters will be free to use this public property for private profit, but in exchange for that they have an obligation to offer a kind of public service. TV SHOPPING SALESPERSON: Every single one of these flowers is handmade, hand-painted. MARASH: [voice-over] But that was then, and this is now, what Shakespeare would call "a brave new world," where the question is, is shopping an essential public service? The concept of shopping at home by TV and phone actually flourished in the brave old world of the 1980s, when customers had the courage of their consuming compulsions. CRAIG BIBB, Analyst, Paine Webber: The industry's gone from zero in 1986 to north of $2 billion in 1992. It's very hard to think of any other industry that's grown at nearly that rate. MARASH: [voice-over] Today the cable-based shopping channel, QVC, is seen in three-quarters of cable TV homes, and the Home Shopping Network, also on some cable stations, adds to that audience a potential 27 million customers who tune in over the air to more than 100 broadcast affiliates. And recently the big boys of broadcasting - ABC and NBC - have experimented with shop-at-home programming. [on camera] The future of this multi-billion-dollar business may soon be reshaped by the Federal Communications Commission. The FCC will, in the next few days, decide whether home shopping stations ought to be covered by the must-carry rule, whether home shopping stations offer such an essential public service that they must be guaranteed free what they now have to pay for: access to local cable systems. Mr. JOHNSON: I think it's outrageous. MARASH: [voice-over] Former FCC Commissioner Johnson says the proposed extension of must- carry status would contribute to the pollution of TV programming. Mr. JOHNSON: Surely there are enough outlets for advertising in most communities today without requiring that cable systems must carry these stations that are nothing but 24-hour-a-day commercials. ANDREW SCHWARTZMAN, Media Access Project: It's grossly unfair that the stations that do a serious job of serving the public receive a benefit of must-carry, but home shopping stations that don't provide public service also receive the same benefit. MARASH: Ironically, many of the owners of these full-service local TV stations support the extension of must-carry to home shopping. It could mean big money for them, by raising the value of some of their most marginal broadcast properties. [voice-over] One happy owner of three Home Shopping Network network stations say they do provide more public services than just shopping. JOHN OXENDINE, TV Station Owner: Every hour we show four and a half minutes of public affairs programming. We have two news breaks during the day. DELORES McLAUGHLIN: ["Teen Talk"] Good morning. I'm Delores McLaughlin. Welcome to another edition of Teen Talk. MARASH: [voice-over] These aren't real newscasts, Oxendine admits, nor is shopping programming essential to public politics or culture, as some of the offerings that shopping channels are squeezing out of some cable systems. Mr. SCHWARTZMAN: People are paying money to receive programming, not paying money to have people sell them things. MARASH: [voice-over] And there could be other competitive casualties, like newspapers - whose retail advertising may be reduced by TV shopping - and catalog sales retailers, and especially small shops and stores which can't compete with TV shopping channels' efficiencies. Mr. BIBB: And if you're a retailer, six months before you put it on your shelf you've got to go out, source it, bring it into the store, watch it for a month or two months to see if it sells. MARASH: [voice-over] TV shopping channels are big stores with narrow shelves. Customers don't browse through dozens of brands and models, they take a ring or they leave it. And TV retailing not only offers fewer goods for sale, it radically concentrates ownership. The largest stockholder of both the Home Shopping Network and its competitor, QVC, is the same man, John Malone, who is also America's top cable system owner and America's top developer of cable TV programming. Such power, philosophers say, can be corrupting and, in fact, the man John Malone bought control of the Home Shopping Network from stands accused of corruptly controlling who got to offer products on his channel. Former executives say HSN used bribes, kickbacks and hidden ownership agreements to eke extra profits out of its TV store. JOHNNIE ROBERTS, "Wall Street Journal": There is a federal grand jury investigating these allegations in Tampa. The Securities and Exchange Commission are involved, the IRS are involved. MARASH: So far these charges haven't even led to indictments, but investigators note the very structure of a shopping channel creates tempting opportunities for abuse. It's yet another worry, in addition to those about programming standards and economic fairness, for the FCC to consider when it judges whether shopping is the kind of public service the public airwaves are to be used for. I'm Dave Marash for Nightline, in Washington. KOPPEL: The Home Shopping Network declined our invitation to be a part of this broadcast. When we return, we will speak with two former FCC commissioners on different sides of the issue and a media reporter covering the story. [Commercial break] KOPPEL: Joining us now live, two former officials of the Federal Communications Commission, Alfred Sikes, who was chairman under President [technical difficulties]. Former Commissioner Nicholas Johnson now teaches communications law at the University of Iowa. He joins us from Washington, as does Paul Farhi, The Washington Post's business reporter covering the Home Shopping Network vote. Only a couple of days ago, Paul, it looked as though the FCC was going to vote this through without any objections whatsoever. Now it looks as though they're getting sweaty palms. Why? PAUL FARHI, "Washington Post": I think they got a lot of public attention on this, both on Capitol Hill and within the agency. They felt like this was something that might just go by without anyone really paying too much attention, but that's not the way it worked out for them. KOPPEL: What is it that people ought to be paying attention to here? Mr. FARHI: Well, it's a question of what is in the public interest, what kind of broadcast station is in the public interest. As your piece points out, the question that needs to be asked is, is home shopping in the public interest? Broadcasters do have an obligation, or at least had an obligation when they were granted their license - to act in the public interest. Now the FCC's got to decide whether home shopping fits that bill. KOPPEL: Mr. Sikes, during the 1980s, under the chairmanship of Mark Fowler, I get the impression that that was sort of modified, if not totally eliminated, this notion of broadcasters being obliged to operate in- I guess the old phrase used to be in the public interest, necessity and convenience, right? ALFRED SIKES, former FCC Chairman: Well, I think there were great changes that occurred in the 1980s, a lot of additional television stations, and I think there was less emphasis during the period that Mark Fowler was chairman on precisely what kind of programming television stations carried. But I'd like to sort of update that and say that during the period that I was chairman we emphasized the community issues programs obligation of broadcasters. We emphasized, in the late stages, children's television, which was an obligation passed by the Congress, and we took actions against stations for indecent programming, for deceptive programming, and for failure to meet their equal employment opportunity obligations. KOPPEL: Would it be fair, then, to say that when you were chairman the FCC felt again, or still felt, that a station or a network has some sort of social obligation? Mr. SIKES: Yes, we did. We felt in particular that the regulations that required them to report on things that were going on in the community from a public affairs standpoint was something that needed to be enforced, and we- KOPPEL: Now which- which social obligations do you think are met by the Home Shopping Network or, for that matter, QVC? Mr. SIKES: Well, you know, it is not, in my view, the Home Shopping Network that is meeting public service obligations. Presumably it would be an individual licensee broadcaster that chooses to carry the Home Shopping Network, rather than carrying ABC or NBC or one of the, you know, other networks. And so you have to look at that broadcaster and see if that broadcaster's meeting the obligations for children's programming, for community-based public affairs and news, and things like that. If that person is, if that licensee is, and the government decides to discriminate against that licensee because they're carrying shopping rather than Married With Children, then I think you potentially have a legal issue on the basis that the government is discriminating on the content of the programming, given that both broadcasters are carrying- that is, the one that carries the network feed and the one that carries the home shopping are both meeting their individual licensee public interest responsibilities. KOPPEL: All right. Now, Mr. Johnson, let us set aside for a moment the question of whether one of these television stations is, in fact, giving the same kind of news coverage, doing the same kinds of children's programming, doing the same kind of religious programming. Let us simply look at the programming itself. Mr. Sikes focused on Married With Children. Networks, after all, put on a great deal of programming. All that the shopping stations put on is selling product. It's like an endless commercial, isn't it? Do you put those two things in the same category of programming? NICHOLAS JOHNSON, former FCC Commissioner: I think it's important, Ted, to get back to basics. The 1927 Radio Act was re-embodied as the 1934 Communications Act. The notion was that anyone who wanted to operate a station would be using public property for a limited period of time during their- and that there was no right of property in that station. That language is expressly clear in the act that still governs. And what was meant by the notion of a "community resource" and a "public trustee" was that this is a resource for the entire community. Now, it was possible to make private profit from the operation of this public property, but there was no confusion that this was public property and it was there to serve a public purpose. Some advertising is permitted, but to turn over the entire thing to advertising is so far from what we had in mind from the beginning of time with broadcasting in this country. It started during the last 12 years, but I would note even then, in 1984, when they [the FCC] decided that, "We don't care how much you've got by way of commercials," they said, "We think the marketplace will regulate it, and that if anybody gets too many commercials that no one will watch the station, it'll go out of business. And if that doesn't happen, we will revisit it." KOPPEL: All right. Let me just interrupt for a moment because we're going to take a break. And when we come back, I'd like each of you to comment on where the debate goes from here and what the competing pressures are that are being brought to bear on the FCC. We'll be back in a moment. [Home shopping industry sales: 1985, $90 million; 1990, $1.8 billion; 1992, $2.3 billion (Source: Paul Ragan & Associates)]- [Commercial break] KOPPEL: And we're back once again with former FCC commissioners Alfred Sikes and Nicholas Johnson, and Washington Post reporter Paul Farhi. Paul, sometimes it helps to know who's on which side and why. Just broadly speaking, line up the two opposing armies, would you? Mr. FARHI: Well, on one side, of course, you have the Home Shopping Network, which is pushing as hard as it can to get this kind of must- carry status. KOPPEL: Because it's going to save them tens of millions of dollars, right? Mr. FARHI: It's going to save them- KOPPEL: In fees that they would otherwise have to pay. Mr. FARHI: -it will save them both fees, but it will also greatly expand the distribution of home shopping programming if you can also be on the broadcast signal and you can also be on the cable simultaneously, you've got a pretty powerful medium. A lot of these home broadcasting stations are small UHF stations which would benefit greatly from having the carriage of the local cable system as well. KOPPEL: Because it would expand their signal? Mr. FARHI: That's right, get them- KOPPEL: Now- and who now is opposing it? Because this looked as though it was going to breeze through, as I said. Up to a couple of days ago, you were still all but predicting that it was going to be- that it was going to be passed by the FCC. Mr. FARHI: You have a number of parties that are coming out against. For one, the Democrats on the Hill appear to be against this. The public interest community seems to have gotten energized about this and, at the same time, you also have the cable operators who are a bit upset about this, because they'll have to make room for the broadcast signal of the home shopping channel onto their local cable channel lineup. That means they'll have to bump off a cable network that otherwise would occupy that slot. KOPPEL: Now, Mr. Sikes, where do you think the debate is going to go from here, and why do you think the debate has suddenly been joined? Apparently it wasn't for quite a while. Mr. SIKES: Well, I'd have to speculate on what's going on in the minds of the FCC commissioners, and I just can't do that, but I mean, I think essentially- KOPPEL: No, actually I wasn't asking you to do that. Sometimes it's far simpler than that. For example, John Dingell, who is one very powerful congressman, apparently wrote a letter saying that he was opposed to this notion. Mr. SIKES: Right. Right. KOPPEL: I gather that kind of thing carries a little bit of clout, doesn't it? Mr. SIKES: Absolutely. That carries a lot of clout. But, you know, the truth of the matter is there shouldn't be a must-carry obligation in the first place, because what you have is, you've got the government favoring, for example, reruns over perhaps C-SPAN or The Learning Channel or The Discovery Channel. Ironically, the things that Nick Johnson would have had the broadcasters bring didn't come on until you had cable and unregulated service, and then all of a sudden you had educational channels and public affairs channels. And before that, the broadcasters did some of those things, but they typically did them on Sunday morning or they put them in the graveyard shift, and we have gone so far away from that other world that I think we now have a real bounty of television. And the thought- the thought that the government has to get involved in compulsory carriage is, I think, alien. KOPPEL: I think you're right when you put it in a sort of positive sense, that the government doesn't have to get involved in that, but put it another way. If, for example, over-the-air stations were to begin carrying pornography, then clearly the government ought to get involved, right? Mr. SIKES: Well, that's right, and you do have some exceptions where the government can get involved and impinge the rights of free speech, and obscenity is clearly one of those. Mr. FARHI: Ted, if I might interject here, it seems to me that the FCC's in a bit of a bind. It, for the last six or seven years, has in some ways defined the public interest as whatever the public was interested in. Now it's faced with making the hard determination on one service that it licensed long ago, and it's coming to the- having to come to the conclusion whether home shopping serves any public need at all. Mr. SIKES: Well, you see, that can't be done. I mean, you can't make a decision whether public- you know, whether home shopping or Married With Children or Nightline, for example, serves the public interest. What you can do, however, is to find what the broadcasters' obligations are, and I presume there are some HSN licensees that are broadcasting that meet those public interest obligations. Mr. JOHNSON: Congress seems to think that this is something the FCC needs to look at, and they've got some very serious question about it. And when they put this section in the act, they forbid home shopping over-the-air services for nine months, asked the FCC to look at it, see if the FCC could come up with any conceivable explanation as to how 24 hours a day of commercialism was serving the public interest. And that if it was, then they should have must-carry status, and if not, they were going to have to reprogram their stations. KOPPEL: I guess that, Mr. Sikes, is where I have a little bit of trouble with the analogies that you're drawing with some of the programs that exist on commercial television. Good or bad, whether you like them or don't like them, they are at least programs, and putting those programs on then bestows upon the network or the station the right to take a minute, two minutes, three minutes, six minutes, of selling product. How can that be compared with an endless commercial that has no programming whatsoever? Mr. SIKES: Well, I'm not here to carry the brief of Home Shopping Network or shopping services generally. I don't think the government should be doing that and I've already said that. I can, however, say that if an enormous number of people would like to shop that way, for example, people who are older, can't get out of their homes, and if there is some effort to provide competition in home shopping so that QVC has competition from Home Shopping Network, I think you could probably find some underlying rationale that would make that programming as good as some of the junk that's rerun on regular TV. KOPPEL: Absolutely. We're down to our last 20 seconds. The only question is, should they be allowed to do it for free or, since it's a for-profit business, shouldn't they be expected to pay for it? Mr. SIKES: Well, of course, all these are for-profit businesses. KOPPEL: Of course. All right. On that note I thank you all very much. We're out of time. Mr. Farhi, Mr. Johnson, Mr. Sikes, thank you. I'll be back in a moment with a program note. [Commercial break] KOPPEL: Tomorrow, PrimeTime Live will devote a full hour to the subject of waste in federal government. That's our report for tonight. I'm Ted Koppel in Washington. For all of us here at ABC News, good night. # # # *** Copyright c 1993 by Nicholas Johnson and American Broadcasting Companies, Inc. Conditions: This material is copyright by Nicholas Johnson and ABC. The entire transcript may not be used without the permission of American Broadcasting Companies, Inc. However, permission is hereby granted to download, copy and distribute the text of any of Nicholas Johnson's comments contained here if (1) the text is not altered, and (2) there is no charge to the recipient, and (3) this copyright notice and conditions are attached. It is a copyright violation to distribute such excerpts altered, or without the copyright notice and conditions attached, or to use the material in any way for which remuneration is received without the prior permission of Nicholas Johnson and ABC. Contact: 1035393@mcimail.com; Box 1876 Iowa City IA 52244; 319-337-5555. *** END OF FILE