Speech by David K. Rehr
President & CEO, NAB
The 2006 NAB Radio Show
September 21, 2006

Thank you, Rick, for that generous introduction. You and the entire steering committee deserve our thanks for putting together a great NAB Radio Show.

Good morning everyone.

For the past ten months it has been my privilege to visit many of your individual stations, state association meetings and group events.  I’ve been all across this great country, from Carthage, Texas to Kenai, Alaska …  in large and small stations. Your input has been invaluable to me, and your great ideas and enthusiasm for the radio business leave no doubt that our future is bright.

It is simply amazing what radio broadcasters do every day.

Frankly, I wish every American could spend one typical day at a local radio station, to experience the energy and dedication you devote to your communities and towns.

Everywhere I’ve gone, broadcasters have asked me how I view the radio business. 

I believe, and the NAB Board believes, we must take the best from the past and focus on the future. This attitude can be helpful when confronting the enormous changes taking place in media. Change can be uncomfortable. But change is good. It is part of every vibrant business.

Many, even in our industry, forget that radio has always experienced change – and challenges – from new competitors. And radio has always come out on top. 

Each time a change has occurred, people have been quick to write the obituary on radio.

First it was TV, then LP’s, then cassette tapes – then my favorite – eight-tracks – then CD’s – now it’s I-PODS. But each time, radio has prevailed. And today is no different.

In 2006, we have satellite and Internet radio.  And barely a day passes without the introduction of a new competing device or service. But we have news for our competitors:   “We will beat you – as we have beaten those change agents in the past.”

The NAB Radio Board and the NAB Joint Board of Directors recognize the importance of going on offense – of advancing our interests going forward and using the NAB as a vehicle for positive change for radio. Here are just some of the areas where we are going on offense to help shape the future.

First:  We are building our future on our greatest asset – localism. No one can compete with us in this arena.

We have a highly coveted product. And we are strengthening our brand – as the source for the most immediate and often the most critical information.

There are 260 million people who listen to local radio every week, and they do so for a reason – our compelling content. This content offers high value to consumers, advertisers and manufacturers of future high-tech devices.  For example, it is not by accident that FM adaptors for I-Pods are now in the marketplace. Listeners want local content and connection.

A recently released Omnitel/American Media Services study showed that 21 percent of those surveyed in August say they're listening to terrestrial radio more than five years ago. And another 51 percent say they’re listening about the same.

The study also shows that 63 percent of Americans rate radio as their primary source to learn about new music – 20 points ahead of its nearest competitor, which is a category called "talking with friends."  Radio’s key role in introducing new artists is something the record labels might want to keep in mind.

The NAB will use all its tools to help educate legislators, our regulators and the public on how over-the-air radio is unique in offering compelling local programming. No competitor has this unique value proposition.

Second:  We are widening our reach to new platforms, including personal media devices.  For radio to triumph, our broadcast signals must go everywhere. Our future is local radio on every gadget – computer, cell phone, PDA and those yet to be invented.

To help this effort, the NAB Board created a Technology Advocacy Committee. For the first time, NAB is reaching out and fostering the adoption of new technologies to advance broadcasters. Technology is a top priority of NAB Joint Board Chair Bruce Reese of Bonneville International – and Radio Board Chair David Field of Entercom.  These two broadcast leaders recognize that our future depends on embracing technology.

Manufacturers of new personal media devices recognize that local radio is a basic necessity. Many of Apple's I-Pod competitors are producing MP3 players with FM tuners. It is no accident that Microsoft has included an FM tuner in its just-launched portable media player “Zune.”  Manufacturers understand that a mobile device that can’t receive local radio is missing something fundamental and extremely valuable. 

Three. We are moving aggressively into the digital era –and making sure radio consumers know the value of that movement.  The HD Radio Alliance is loudly proclaiming the benefits of digital radio to car manufacturers, consumer electronics companies and to consumers. And we must all work to speed the adoption of HD radio receivers into the marketplace. 

Digital radio is creating excitement on Wall Street and in the wider financial community. More than 1000 radio stations are currently broadcasting primary signals in HD Digital, reaching 75% of the U.S. population. Experimentation with new formats and additional local programming is accelerating.  And it’s exciting to see local stations thinking creatively about multicasting.

But digital radio is also important in small markets. It is important because your lender stays current on the radio broadcast industry. If your lender believes we are in a dinosaur business, the next time you seek financial assistance – it will cost you more to obtain – or you might not get it.

The often-missed additional value of HD radio to small markets is that it moves us away from being on defense to being on offense. It is helping to create excitement about our industry.

Now, we must bring more listeners on board. All of us must do even more to promote the exciting possibilities of HD radio. Its adoption will lead us to a brighter future.

Four:  NAB is holding satellite radio accountable.

Satellite radio and its modulator devices should not and cannot interfere with over-the-air radio. These devices are used by consumers to transmit audio signals from their satellite radio or MP3 player to their in-dash car radio. But they are causing FM listeners – nearby in their vehicles – to receive unwanted satellite radio programming. And this illegal interference appears to be increasing.

We discovered, in tests conducted by independent engineers, that several of satellite radio’s devices failed Part 15 FCC regulations.
NAB moved quickly to provide the results to the FCC and to Congress. And we are glad that the Commission responded – forcing XM and Sirius to suspend production of illegal devices. 

Unfortunately, nothing has been done yet about the satellite products that are in FCC violation and are still in use in cars and available in stores. Today, NAB is releasing a letter to the CEOs of XM and Sirius, demanding them to replace all non-compliant receivers in satellite radio subscribers’ hands and available for purchase. Unless they are replaced, we will see interference continue. It is the minimum they should do.

We are all aware that Sirius CEO Mel Karmazin came from radio.  He knows the importance of spectrum integrity. In fact, he certainly would demand that devices interfering with his signal be stopped immediately. Mr. Karmazin is duty bound and personally obligated to keep Sirius satellite radio from interfering with over-the-air signals.

And when it comes to satellite radio – they cannot have it both ways.

They cannot be both a subscription and a free service.

XM and Sirius cannot continue to tell the FCC that they do not fall under indecency regulation, because they are a subscription service – and then give away their service for free.

Of course, if you were XM or Sirius, you would want it both ways – to create an unfair advantage against your competitors.  But they must and will be forced to choose. And we have made the point to the FCC that the free ride must end.

And when people ask us are you focused on satellite radio because you’re afraid of the competition – we say, “No.”

Satellite radio says it has at most 10 million subscribers, notwithstanding those 500,000 subscribers in empty car lots. But 260 million people listened to broadcast radio last week alone!

Their business models are bankrupt.  And we are all aware of the most recent issues affecting their subscriber numbers, CEO stock sales and other internal issues. To no one's surprise, XM Satellite Radio says it has received a staff inquiry from the Securities and Exchange Commission (the SEC) about how it counts subscribers and calculates the costs of achieving its subscriber targets. The company is already facing lawsuits over those very issues by investors who claim they were misled by XM's methods of counting.

Five  - NAB is strongly encouraging the FCC to adopt HD Radio rules and standards.

NAB has worked aggressively to coordinate with broadcasters, the Consumer Electronics Association (CEA) and related groups to move digital radio forward.  We've seen great momentum.  The number of available HD receivers is increasing, and promotion to consumers is off to a good start.  But now we need the FCC to act.

It was April 2004 when the Commission sought comment on the use of AM digital radio at night. This was in response to a request from NAB. Yet, more than two years later, AM broadcasters are still handicapped with daytime-only digital service.

It was 2005 when the Commission set the simplified terms for the experimental authorization of HD Radio multicasting.  Today, one-and-a-half years later, multicasting is still considered an experimental service by the FCC.  Those who manufacture HD radios don’t consider it an experiment. Broadcasters don’t consider it an experiment. And the FCC should no longer consider it an experiment.

In June 2005, NAB and CEA submitted the NRSC-FIVE technical Standard for digital radio to the FCC.  Today, over one year later, the Commission has still not incorporated this industry standard into its technical rules. It needs to, and it needs to do it now.

Six: NAB is urging the FCC to allow AM stations to use FM translators. Here – we applaud the Commission for placing the petition on public notice and taking comments so quickly.  The FCC deserves a lot of credit for moving forward on this critical issue, and we sincerely appreciate this action.

Our NAB Radio Board approved this initiative. And our “AM Stations on FM Translators Task Force,” chaired by Gunther Meisse, President of WVNO and WRGM, Mansfield, Ohio, moved quickly to initiate this effort – to make sure those in the broadcast business can use these translators.

Seven:  NAB is working to prevent the Recording Industry Association of America (RIAA) from achieving their long-term goal of imposing a performance tax on radio.

The record labels have had difficult years – and they’re looking for new sources of revenue. One of their initiatives is to put a broadcast tax on every radio station for every song that is played. The record label executives have conveniently forgotten about the mutually beneficial relationship their companies have shared with performers and broadcasters since the inception of radio.

This performance tax is not about parity with other music distributors. And it is not about piracy.  It is simply about profit. We will work with RIAA to fight piracy and on other issues that benefit both our industries.  But we are adamantly and successfully opposing taxing radio stations for simply playing music.

My last point, number eight, – and if you don’t remember anything else you hear this morning, please remember this. Eight: We are transforming the NAB into an aggressive advocacy organization.  

The NAB staff and I work for each of you, and in working for you we are obligated to stay on offense – to build more value for your membership.
 
As we do so, we are moving away from using the word "lobbyist.” Having been a lobbyist in Washington for nearly 25 years, I nevertheless believe that term has become defensive and reactive. 

The term lobbyist comes from the 19th century – when people waited for Members of Congress in the lobby of the Willard hotel in Washington, DC – to react.

Our industry can no longer wait. It can no longer react. Instead, we must adopt  the word "advocacy” – to convey positive offense in framing the debate – and the future. 

It may be only a change in wording, but it reflects a major change in attitude and direction. And in our new efforts, we will call upon each and every one of you to be more involved as advocates for our industry – not just in Washington, but at home.

We must build and strengthen our personal relationships with legislators and regulators. We must anticipate. We must set the terms of the debate. We must stay on offense.

As we go forward, we know there will always be a few naysayers who predict the demise of free, over-the-air radio. I will simply repeat what former President Ronald Reagan said so well, “You ain’t seen nothin’ yet!” 

To stay on top, we must believe the future will be brighter than the past. And when all is said and done, we will shape the future.

Our core belief in ourselves and in our future success comes from knowing that we provide that local foundation that cannot be replicated.

Managing change and taking risks are not easy. Working out the copyright, technology and business models will not be easy.  Ensuring that Capitol Hill and our regulators understand the realities of radio will not be easy.

But the future goes to those who take risks. And those who shrink from change – will be left behind.

We have a great business.

We have a bright future.

Now we need to work together to control our own destiny.  

Thank you. God bless you. And God bless the USA.