The First Amendment; William Henry III

The First Amendment and a free people weekly examination of civil liberties and the media in the United States and around the world the program has produced cooperatively by WGBH Boston and the Institute for democratic communication at Boston University. The host of the program is the institute's director Dr. Bernard Reuben. What's the story behind the action of the Federal Communications Commission of January 24th 1990 when it stripped RKO general of Channel Seven its television channel in Boston and put in jeopardy all of its other stations around the United States including New York and Los Angeles and the licenses for at least 13 other broadcast properties including those in Boston both on radio and television. With me today to discuss this is the television editor of The Boston Globe William Henry the third and a lawyer and

professor of communication at Boston University. Barton Carter. Need I say that they're both Yale men that sets up their credibility right there. Let me start with William Henry. The third bill. The RKO properties now are going to be in dispute. The FCC has acted but they permit the licensees to go on while there is litigation. As I understand it there are estimates this may take up to five years. My first question to you is why did the FCC which took action really on the basis of a bed parent company should not be allowed to him have these broadcast properties or parent company of the law is or was guilty of no actually I. I have to take issue with that a common claim of RKO and its friends has been that it was solely the actions of

the parent company that were responsible that is general time. In fact there were four principal elements in the CC decision and it was the accumulation of them rather than anyone. Let's go over them one by one. Find the the most important in my mind. The two most important in my mind have to do with RKO directly. One has to do with RKO in general tired jointly and only one is soley the behavior of general Pyar that is that it. By its own concessions in a settlement with the Securities and Exchange Commission it had defrauded its affiliate companies abroad and it engaged in domestic and foreign bribery. Those actions by themselves might be enough to taint the RKO which is a wholly owned subsidiary the federal appeals court is upheld in a Florida case the notion that the actions of a parent can be sufficiently severe to taint a broadcast subsidiary even of the broadcast subsidiaries not involved. But it goes beyond that. One

doesn't have to depend on that principle which has yet to be tested in the U.S. Supreme Court RKO general and General Tire jointly conspired by their own concession in a consent decree with the Justice Department to force companies that wanted to do business with General Tire to broadcast advertisements on RKO stations. And that conspiracy is illegal. You cannot force people to do business with one company in order to do business with another. The other two things. Were outright lies or so the FCC says RKO failed to disclose that the Securities and Exchange Commission was investigating General Tire which it was required to do and it failed to disclose it because its licenses were up for renewal and it wanted to conceal damaging information from the FCC and RKO also lied in failing to disclose in its annual reports of broadcast income. The FCC releases data for each market although not for each station. About 20

million dollars over five years in what's called barter and trade out that is noncash income. You know I put on your commercial you give me X number of airplane rides. That was apparently taxable income. It was not apparently disclosed the IRS either which has investigated this situation and there's been no public disclosure of any resolution of course as is common with tax matters. The it was the accumulation of those four elements that led to the property that can be so long to turn to Barton cardinal. MARTIN How does it sit with you that if what Bill says is the groundwork for now I have no doubt that it is. That this parent licensed C in effect for the next years three four five years will be running these stations.

Well that's my problem. I'd be the last one to defend RKO or General Tire. But the net result of the system is that because they are unfit to hold a license they will have the license for five more years than they would have had it had they been fit. You see the FCC says that when you sell a license you have to be held fit before it can be transferred. They were selling the license at a bargain basement price. Believe it or not 54 million is for that type of license to another group. But it's also considerably more money than they would stand to make out of holding Channel Seven for the next five years. How do you know that maybe maybe five years from now. They would maybe during these five years of be able to make so much money that will be much more than the 54 million not based on their present income and expenses. They haven't been turning that kind of profit we don't know what will happen with inflation. How do you feel about them holding the license and finitely as far as I'm concerned the principle is

what's important here because the principle is overreaching. I don't think we should reward corporations or individuals for illegal behavior. We should punish them. We should not above all hand out broadcast licenses which are a scarce resource and for which we charge no money and which are the principal assets in enabling them to make millions and millions of dollars and not expect them at minimum to obey the laws. Our entire legal system depends on people telling the truth when filing valid documents unmeaning it when they swear under oath that they're telling the truth and RKO violated that principle the attack on the center of our legal no gentleman. Again the Federal Communications Commission could have permitted the sale of the station. And to a biracial group of local investors in Boston there was a hell of a pall RKO was holding 15 other licenses. But I'm saying now my question is

not that I again it's not that I don't agree with you I'm trouble with the fact that I agree with you both. My problem is this. Is there no other way then to have the civil or Caribbean this situation. Is there no other way that we can straighten out the Communications Act so that someone can be stripped of their licenses without this process if they did lie along the line as was held. Well under the current system there are a couple of problems. One is that the FCC has very few alternative remedies when they find wrongdoing. They can give them a fine of up to $10000 an incident which is a slap on the wrist given current prices in the market or they can take away the license which is a rather extreme. The only other remedy would be a short term renewal which becomes expensive to the station because they have to go through a very expensive renewal process and risk losing their license in less than the usual time period. But the FCC has not been given very much

flexibility in that area. The other problem is that all FCC decisions are appealable to the appeals court and the Supreme Court. And it obviously would do permanent damage to the claims of somebody against whom the FCC acted in this case RKO. If a license were taken away in the interim. Imagine how disruptive it would be if the FCC were immediately to strip RKO of the license while the case went into appeals and five years from now the new management was told no the Supreme Court has decided the FCC was wrong and the license goes back to RKO plainly that would not be a tolerable business situation here though Bill where they were planning to sell to the other person. Couldn't some sort of arrangement be worked out it isn't in five years let's say they were held fit then they would get their money whereas if they were not held fit. They would get nothing in other words in either situation. I quickly arche O should not have the license.

Eventually it's not the typical script Well it was in fact it is by no means clear that that sale agreement will remain valid and it is to be borne in mind that the sale was not a voluntary sale. Nobody sells a station in one of the ten biggest television markets. They sold because they thought they could hush up this investigation. Much of which had been initiated by the lawyers for the people that they sold to and it is not as matter of fact I think the people who wanted to buy this station are morally reprehensible as well having used the public interest standard of the Communications Law and having filed on behalf of the public arguing that RKO was not a fit licensee. They then cut a deal with the RKO got themselves the station at half of its open market price and agreed not to pursue any leads they had agreed to back up RKO and in fact backed it more vigorously than the legal minimum they needed to get the sale through. And they did it because they were using the public interest standard for personal gain. Now I

think that behavior is probably dictated in part by the current legislative structure. But there is no way you can change the Communications Law without weakening the rights or privileges of current station owners. And that's never going to get through Congress because every congressman is dependent on the benign influence of the station manager on the local 6 o'clock news. How consistent is the Federal Communications Commission. Barton Carter on the question of parent companies treating other parent companies differently than RKO general. Well they haven't had too many of these cases up till now and in the past licensing has been pretty much a rubber stamp. The current commission is being considered quote a more activist. They have considered a couple of other situations and there is one where they held off they re approved a license because the company had been indicted but not convicted and they depended on the fact

to prove it had to have been indicted I think that was simply an ongoing grand jury investigation. I think in fact what they said was that an indictment would be sufficient grounds to. Disapproval renewal but that a grand jury investigation was not. I wonder how far that would go given you know the constraints of our system. You know innocent till proven guilty I would say that they would be on weak ground. Oh I would think so too but as I recall the language of what they said we think of the Westinghouse Yeah yeah and the Westinghouse case is a grand jury investigation but there's no indictment and they said if there were an indictment they would reopen the case. That does not mean that they would immediately upon indictment strip them of the license. No the RKO people in the various properties seem to be taking steps or at least it appears to the casual observer reading the news to improve their image. For example one of the stations is in New York

City is it not with WOR. TV It appears that wor is becoming more artsy. And more ere you die trying to get Japanese programmes and British programmes. Is this part of the game or is this part of a real program improvement while I'm sure that they coincide. It's partly a PR campaign although in fact the programming of the stations is irrelevant and in fact the strict legal definition everything that's happened since 1969 in programming is irrelevant to this specific case of Channel 7 but the RKO management Channel 7 has been operating the programming too. It's also partly a marketing strategy if you're in for the short run as they were in Boston. You take your money and run. You do as little as you can maximize your profits and go where you

sell or leave or whatever. If they're going to be here for five years they've got to have some kind of image of at least nominal service to the community. And similarly they're now in the same situation in New York that license has technically been taken away from them. They certainly want a maximum appearance of proper performance during that time and bear in mind they have a further economic interest. They've been stripped of three licenses thus far because those were the three that were actively under challenge. Los Angeles New York and Boston they have 12 radio stations and a Memphis television station that are in jeopardy. But the FCC has not acted on any of those yet and it hasn't even scheduled the meeting at which it will do so and they have some hope of persuading the FCC that maybe taking away those three stations is enough and that they don't need to strip them of all the rest. Maybe they could cut some kind of deal for selling them all to minority groups a distress sale

prices. Now that's their basic hope. What we have here is a weak federal regulatory agency which hardly ever slapped down hard in its entire history where effect we know all the cases whether involving Ortiz or anybody else. And we also have a local station in this case in Boston. Which has some very good cheese mints to its credit in the news area and so on and so forth. Yet I have a feeling that the problem of the parent company any parent company running radio and television stations requires us to have new law to control the work that they do in the Radio Television area apart from the work that they do in any other field. My feeling has always been that we should go back to what Herbert Hoover the artist of all people who have been so four sided on this conceive which is that these stations would be local. My feeling is no network should be allowed our entertainment

companies should be allowed to own a station. Nobody should be allowed to own more than one television station. And the majority of the ownership of each station should be resident within the area of service of the station. The model for this is Channel 5 in Boston which was won by a local group at the end of a similarly long and nasty battle. Its ownership resides almost exclusively in Boston. Nobody owns more than 5 percent so it's not somebody who's individual Well they have only one station and add it they produce more local programming than anyone else in the country and much of it is good enough that they do a million and a half dollars a year just about in syndication business selling these programs to other stations around the country because they're good one of the few stations that has produced soap opera drama. Average quality or even above average locally which shows you don't have to depend upon the network. How do you feel Barton about that.

Well I yeah I agree with Bill to some degree that that would be a much better situation I would go one step. Yeah that's the other part I would say getting any of these laws through would be impossible. I would go one step further. One of the problems is that these people have been given something that allegedly belongs to the public for basically no cost and it's worth a great deal of money. The figure of 54 million does not pay for just the equipment. I mean most of it is for the right to do the business that 90 percent get. And I feel that if the public is giving this stuff up they should be paid for it. Well I'm very much in favor of the spectrum fee. I also. I find it really offensive that you can sell this license in the first place. My feeling is if you want to get out of the business hand it back in. In fact nobody will hand it back in. And the reason that sale has been permitted with his vast capital profit on what is a public asset not a personal asset is that it's the

only way that you would have any possibility for new owners entering the market. I do think that it's conceivable that you could get some kind of spectrum used feet through the Congress in exchange for further deregulation. There are kinds of deregulation that are more acceptable than others but I would hate to see us give up the principle that. People who hold broadcast licenses are somehow accountable for good public behavior in exchange for what would eventually work out to be a well would have a nominal sum of money. In fact James Quel of the FCC commissioner who is the mouthpiece of the broadcast industry. I has endorsed some form of spectrum fee in exchange for total deregulation including the abolition of the equal time rule guaranteeing that political candidates would be treated equally and the Fairness Doctrine guaranteeing that if you do coverage on a subject you have to represent all points of view more or less

actively given the practical power of broadcasting in society. I don't think that there is a conceivable sum of money to be come up with that would pay for giving up those principles. Several references both of you have. Giving me the impression that I got time ago that the Communications Act of 1934 is in no danger of being drastically revised as there are too many pressures being pushed and pulled here. Is that a fair assumption. I think that any major overhaul is very unlikely there have been several bills before Congress. The Van Dellen Bill Hollings bill Senator Goldwater even has his version and they've been having him for several years at this point. Then Dylan has gone back and he's pretty much just concerned with the common carrier aspects of the communication even the telephone company and other purely electronic concerns.

One interesting thing about all the models for deregulation is that they all have presumed what had been developed defacto but it's never been the law. There is a vested property right in being a station licensee. They have accepted the accounting that all these stations have carried on their books. That's a license for a three year term is somehow a permanent asset and in the case of network OWN stations in New York for example it's an asset worth maybe three hundred million dollars. Well the FCC is almost taking a position in some of the statements of its members that licenses might be awarded in future in perpetuity and all of this business of regular review unless those Something drastic some want on this is very. Would you agree that apart from deregulation that the standards for review should become as liberal as some of the some of the FCC commissioners would like to see. I think in reality they have been pretty much as I say Up till now a license renewal

has been pretty you know considered a rubberstamp situation where it was in perpetuity whether the law said it was or not and where they have decided to question renewal or sales. You have CC has never really wanted to assert its authority. Right now there's a case before the Supreme Court over whether the FCC should consider changes in format the words taking a classical music station selling it somebody else is going to make it into a rock station. So the fact that there is no other classical music station be a factor in approving that transfer. The FCC s position has been they don't want to consider it. The courts have said they should. We're a long way from free to have a blue book of 1946 in which he talked about the spectrum of ideas which radio television stations I think called the marketplace of ideas was that what it was that never got anywhere. You know I broadcasting has never been primarily informational in this country

it is always primarily an entertainment medium but it does have an indisputable and I think indispensable informational role. And most of the deregulatory proposals seem to me to run a considerable risk of letting that role be abused there. There is a practical difference between television in particular and print that all of the television claims of equal First Amendment protection. To my mind cannot overcome. That is the television looks like reality. We all know that it is possible to edit what people say and how they act in order to create grossly misleading impressions even though you are dealing with absolute fact. Because I I come from Rochester New York as a kid we used to read the Rochester Times Union when Mr.. Unit I think was still alive and I thought that was reality. I read the paper every day when I was in my teens.

I discovered that wasn't reality either. Sure but there is a considerably greater persuasive power to seeing it in front of you. Above the power of looking at World Television is like any photograph. It has its parameters whereas the word can have any subtlety of meaning that you you want to ascribe to it you connect it to other words and you paint the canvas as wide as you want. The best of television and the best of print are version on the same par though. But we have seen so little of the best of television. There is no question the thumb is on the scales a great deal in television is it is it seems to me that it is wrong to take a public resource and make it private. I I don't regard that as progress. Gentlemen what. What do you make of this. This whole situation with our show and with the Westinghouse case do you think it reveals the weakness of the federal government in regulating in

the public. You know I think it's sort of the twilight of the gods and in a way a sort of black comedic network television has passed its peak. We are clearly entering a period of a multiplicity of channels a multiplicity of prerecorded means of getting the program to yours that it is going to get harder and harder for the president to assemble an audience of the nation when he wants to speak to them in a crisis. I frankly think that is a danger and undesirable. It is going to get harder and harder to have national and international news reach more than the small already interested faction. And we are finally getting around to compelling companies to behave with minimum decency and holding the networks. Two of whom have been flogged recently by the FCC for gross misstatements of fact. Particularly in connection with sports long after it would be most useful. We've already had hundreds of stations sold.

Some of them by licensees who are by reasonable standards unfit for very large sums. The network and local station business is a six billion seven billion eight billion dollar business. The figures rise exponentially. And now that it's all winding down we finally see that there is some willingness to regulate. It's rather like the way that Standard Oil was broken up after Rockefeller already made its billion. Barton Carr do you agree with Bill Henry. I think he's right in a lot of ways I think the irony is there. I think that a lot more effect on the power of the broadcasters and on their influence will result from technological changes to the advent of cable video disk video cassette. The greater number of choices that the viewer has then the FCC will ever produce as possible that may be possible.

In some ways that by the time this case of RKO is settled we may all be on channel one hundred seventy three sailing off on the Beagle perennially with Charles Darwin in our own pursuit of excellence rather than in the network's pursuit of profits. I think probably not quite that fast but 10 years 10 15. Much of this depends on cable and cable is enormously expensive particularly in big cities like Boston the guess is it will cost a hundred million dollars here. In other words it will cost as much to cable Boston as it would to get all the Channel 7. Now mind you at the end of that time you get 72. No one but it's a whole lot of money and there isn't all that much loose capital floating around. I think it will take a while before enough of the country is cabled for this social change to take place and even longer for the programming to start to get to be there. That may also depend a lot on the regulatory agencies the FCC in the past has held cable back with a bunch of regulations so to predict how long it will

take. Ironically again may depend on the FCC or maybe while they're holding cable people will make an end run with a video disk. I'll give you another irony Charlie Ferris came into office describing himself as a liberal committed to deregulation and feeling that he was going to do less and instead he does RKO and he was the man who spoke to me first about having to acknowledge the vested property right of the station owner. I don't know that I really I want to thank for an excellent rendition of the background of this situation an RKO General William Henry the third television editor of The Boston Globe and Barton Carter professor of communication at Boston University. For this edition Bernard Ruben. The First Amendment and the free people a weekly examination of civil liberties and the media in the United States and around the world. The engineer for this broadcast was Margo Garrison. The program is produced by Greg Fitzgerald. This broadcast is produced cooperatively by WGBH Boston

and the Institute for democratic communication at Boston University which are solely responsible for its content. This is the public radio cooperative.