The winds of deregulation blew through Los Angeles last weekend when the worlds of Hollywood and Washington converged to discuss the future of television networks.
While the hegemony of the three commercial "webs" -- ABC, CBS and NBC -- provided the butt for the predicatable flurry of criticism from producers and public-interest activists, the boom in the new video technology supplied the backdrop for much of the two day symposium here sponsored by UCLA.
The growth of "superstations," the promise offered by multi-channel optical fibers and satellite transmission, the development of pay and cable television systems, and the geometric increase in the use of home video recording devices are all rapidly changing the face of an industry which just 30 years ago included only 12 television stations and 14,000 households with TV sets nationwide.
Now with sets in more than 73 million U.S. homes, and more than 1,000 television stations -- commercial, non-commercial, VHF and UHF -- in operation, regulators are struggling to keep pace with a business limited only by public acceptance of its rapidly multiplying technological offerings.
"We are sitting at the very low ebb of an explosive growth cycle," observed Richard H. Frank, president of the television distribution division of Paramount Pictures Corp. "The next step... will only be dictated by the hardware available," he told the approximately 300 persons attending the conference.
Frank's comment represented the flip side of a theme struck earlier in the conference by Judge David L. Bazelon of the U.S. Court of Appeals for the District of Columbia, the court which hears appeals of Federal Communications Commission decisions. "For the first time in 50 years of regulation, we stand on the brink of major changes in the regulatory framework governing telecommunication," Bazelon noted in his keynote address.
With much of the country in the throes of tax cutting, budget slashing deregulation faver, the message from both the FCC and the administration was unmistakable. In the words of Henry Geller, assistant secretary for communications and information at the Department of Commerce: "Our goal is clear. It is deregulation, that buzzword you heard earlier. It serves the public interest to have that."
FCC Chairman Charles D. Ferris predicted to his luncheon audience that it will not take 30 years to eliminate television network rules as it did in radio, stating that the FCC should not inhibit the development of additional television networks.
"Where additional services are desired by viewers, and where entrepreneurs are willing to provide those services, the commission normally should stand aside, permitting marketplace foces to determine the issue," Ferris explained, echoing a previous comment by Judge Bazelon.
However, acceptance of this noninterventionist stance was not overwhelming. Economist Allan Pearce, a former FCC staff member, noted that deregulation is the "politically fashionable" thrust in Washington and issued a warning: "Don't hold your breath; deregulation does not necessarily promise us a better future."
"The so-called free marketplace doesn't exist," Pearce continued. "And in any event, the marketplace generally results in the haves attempting to perpetuate their poser sometimes -- not always, but sometimes -- at the expense of the have-nots."
Katrina Renouf, a partner in the Washington law firm of Renouf, McKenna and Polivy, took aim at the FCC, arguing that the commission ever the years has replaced the marketplace with "a regulated network monopoly."
"To cancel the regulation, this doesn't do anything except enshrine the monopoly," suggested Renouf, another former FCC staffer who represents the National Association of Independent Television Producers and Distributors. She proposed that, without "radical preliminaries" such as forcing the networks to divest themselves of their owned-and-operated TV stations, deregulation by the FCC represents an abdication of leadership.
With all the heady official rhetoric about abandoning current rules and regulations and letting the marketplace take its course, a common thread in many speeches indicated a desire not to deregulate as much as to shift regulatory weight.
Judge Bazelon, setting a tone for those who followed him, called for structural regulation of the telecommunications industry without government involvement in program content.
Regulation of the industry has produced an "abysmal record," Bazelon stated. "We reluctantly accept this content regulation in order to promote diversity. Yet we have not achieved significant diversity, and all we are left with is content regulation."
Edward Bleier, exedutive vice president of Warner Bros. Television, called for creation of more television stations and urged regulators "to devise a system that gets the critical mass programming that can attract those eyeballs to move the advertiser economy" to a greater number of TV stations in each market.
The historical reason for the existence of three dominant commercial networks "is that the FCC's allocation system allocated only three VHF stations to most of the major markets in the early Fifties," Bleier maintained.
FCC head Ferris reiterated Bleier's point. "The real problem we face concerning networks today is not that they exist but that there are so few of them."
"There is no magic in the number three," he said, noting that "seeds of change in television networks" already have been planted. As examples, Ferris pointed to the prime-time-access rule, satellite interconnection of public television stations, the growth of pay cable television, the effort to improve reception of UHF TV outlets, and ongoing research into the feasibility of using low-power television stations and translators.
Ferris said all these factors mean more competition for the existing networks, the growth of new networks, and the creation of mor indepandent stations. "Predicting that what happened to radio eventually will also happen to television is a bit like predicting that the rain is going to stop," he stated.
New rules regulating the industry are expected to be promulgated as a result of the FCC's ongoing inquiry into commercial television network practices. The study, first announced in January 1977, was precipitated in part by a petition brought three months previously by Westinghouse Broadcasting Co. Inc. alleging undue power and influence of the networks over their affiliated local stations.
According to Stanley Besen, codirector of the FCC's "Network Inquiry," the first phase of the Investigation -- an examination of the behavior of the three commercial networks in their dealings with their affiliates, advertisers and suppliers -- is expected to be completed some time this summer.
Besen, one of the symposium's 27 participants, said that the second phase of the inquiry will include an examination of the use of the new technology, from home recording machines to direct broadcast satellites to forms of cable television.
Bruce Owen, adjunct professor of law at Duke University's law and business school, offered a vision for the future not likely to be received enthusiastically by network executives.
"Cable and pay (television) and superstations, and video recorders and discs will eventually chip away at network power," he speculated. "And some year, we will all notice that they're gone."
Paramount's Frank also predicted the gradual erosion of the power of the three commercial networks as a consequence of "technological pressure."
Fragmentation of the video audience is inevitable, he said, anticipating that the networks' current hold over 80 to 90 percent of the audience will not last long.
Superstations, for example already are beginning to slice up larger and larger pieces of the audience time. Southern Satellite Systems Inc. of Tulsa, Okla., operates two such stations whose signals are beamed to cable systems around the country via satellite.
Kip Farmer, vice president of Southern Satellite, said that one of those stations -- WTCG-TV in Atlanta -- reaches 3 million-plus subscribers to more than 600 cable television systems nationwide. Each of the systems is equipped with its own earth station -- a large parabolic disc costing from $25,000 to $30,000 -- capable of receiving the signal transmitted by RCA's orbiting Satcom I.
Farmer stated that he expects WTCG-TV's subscriber count -- which he said already constitutes 25 percent of the cable industry -- to double at least in the next three years.
Similar exponential growth can be expected in the home video field. According to Steven Roberts, president of the telecommunications division of 20th Century Fox, some (750,000 halfinch video tape recorders already are in consumers' hands. He said he expects sales of an equivalent number this year, as well as sales of a significant number of a relatively recent development: video disc machines offering prerecorded programs.
Other developing video technologies also threaten to entice substantial portions of the television audience. Twoway cable television whcih can poll its viewers is being tested in Columbus, Ohio, by Warner Cable using the trade name Qube. And Rand Corp.'s Walter S. Baer suggested linking video games by telephone to allow long-distance "Pong" playing.
But in years to come, cable companies will present the trickiest problem for regulators. In the opinion of Robert Hadl, corporate attorney for MCA Inc., pay cable networks are taking on all the characteristics of commercial broadcast networks.
The recent merger of American TV Communications into Time Inc. (the parent of Home Box Office, which Hadl said controls 80 percent of the pay cable market) and the integration of Teleprompter Inc.'s cable television system into Sy.howtime Entertainment have created what Hadl describes as "pay cable systems with owned-and-operated stations."
"What a great chance for somebody to consider that, and do something about it before it gets too entrenched," he invited.
Another potential problem presented by the growing use of paid television was outlined by Richard Frank, who explained that initially the major source of theatrical programming for the pay systems will be already existing programs.
However, if it becomes more rewarding both financially and in a creative sense, then producers and their talent are likely to turn to pay television. The result, he suggested, would be a two-tiered system with a second level of talent producing more mediocre programming for the advertiser-supported television system.
This might accelerate the decline of the commercial network, said Frank, but it also would mean that those least able to afford the higher costs of pay T.V. -- the poor, the aged and the ethnic minorities -- will be watching the less-expensive, and presumably lower-quality and less-diverse, programming on the network.
"Diversity will only exist for the privileged," warned Frank.
The innovations in video technology are "all very attractive prospects because they're all romantic dreams," said Edward Bleier of Warner Brothers. "It is easier to dream than to plan, and to see the future solutions coming from new technologies that are not now in place, and that will immediately solve all the problems once they're in place."