August 14, 2012
While the NAB and other major radio interests have been pushing Congress to legislate the activation of FM chips in mobile phones, ostensibly as a public safety issue, Gary Shapiro and the Consumer Electronics Association have been aggressively lobbying Congress to resist such efforts because he believes such regulation is ultimately a threat to innovation. Here, the outspoken Shapiro details what he believes will be good for not just the electronics industry, but radio and the nation's business as a whole.
How did you first get involved with CEA ... and how did you rise to the top?
I was an outside lawyer and then an inside lawyer. I moved up to be head of the group through sheer luck, determination and passion for the industry, its show and the association. When I attended my first CES show as an outside lawyer, I knew I wanted to be part of this. Nothing is more exciting to me than being part of an industry that's bursting with innovation. It affected every bone in my body. I wanted to be part of it ... and I went after it.
What are the biggest issues facing CEA â€“ and where does the FM chip in mobile phones fit in?
There are over 20 issues we're concerned about, but the biggest issue is the health of U.S. economy. We're totally focused on that in so many different ways. Our industry lives and dies by the health of the U.S. economy. Why focus on that? Innovation is dependent on a strong economy and government, but our nation is in so much trouble, whether it is in raising taxes or cutting spending. Our economy can also grow through innovation. Unfortunately, that's difficult to accomplish today considering where we are and what we have to do, in that we're now finding ourselves having to oppose efforts of old industries trying to protect themselves by restricting our ability to innovate.
The FM chip issue is a minor pimple compared to the economy, but it's indicative of a bigger disease â€“ of old industries trying to get the government to protect their sagging model.
How has the current ultra-polarized Congress impact your efforts to support CEA's interests?
It's not as much that we're trying to get action on CEA interests as we are trying to ensure policies that make sense and encourage innovation. Sometimes that does require legislation. To foster innovation, we need to get the best and brightest around us to work in the U.S. Yet we have immigration laws that get foreign PhDs, scientists and math engineers kicked out of the country. That just doesn't make sense.
Our issues transcend political parties; there are good Democrats and Republicans who are cognizant of the need to remove government from hurting innovation. The bigger problem is that our country faces two political parties that refuse to deal with the tough issues that are starting to affect us.
People can make a difference. When PIPA and SOPA were being considered by Congress earlier in the year, several million people contacted their representatives and within 24 hours, convinced enough Congressmen to stop pushing legislation that restricted the Internet. Congress became very wary of messing with the Internet and innovation. On the other hand, given the lack of consumer demand for the FM chip, even all the lobbying power of the NAB hasn't changed what is still a non-starter.
You don't think their "public safety" reason for a law demanding an activated FM chip in mobile phones will bring more representatives to their side?
"Public safety" is a totally made-up reason; you might as well require chips in pillows, lamps, wallets, purses and everything else. Public safety is not even relevant here, since most people learn about emergencies through TV, the Internet and a variety of other ways. Why do we need just one agreed-upon method? Texting to your phone works really well for everyone I know. So it's not a public safety issue at all; even some radio leaders have been quoted as saying that they believe the FM chip will get their listenership shares up; that's why no one believes the public safety argument.
In terms of forcing phones with FM chips to be turned on, radio stations already have a very good ability to compete through their apps. But they're the last people who should complain about competing fairly. Radio pays no performance royalty, while Pandora pays half their revenue for royalties, so complaining about fairness is hypocritical.
It's unfortunate that every bill supported by broadcasters regulates other industries to help them compete. You know what they should do? Man up and compete in the marketplace. If they think the chip's so great, advertise it enough so consumers can demand it from the phone manufacturers that already have the chip. Better yet, they can pay the carriers to turn it on. This is a free market where there's now a lot of competition for audio. Radio should man up not and rely on crony capitalism to succeed. That party is over.
The thing is ... we don't want radio to suffer. Our industry advertises on the radio. But things have to change ... and radio must innovate or die.
Where did the CEA stand on the charges that Apple's Chinese manufacturers were overworking and underpaying their workers?
That's a headline that's not even accurate and the journalist made up quotes and sources, and even NPR had to apologize. I go to China frequently and in the Chinese view, they get $3 on a $300 product, so they feel like they're getting ripped off in economic terms --but the workers are increasingly better paid. Under China's "one child per family" policy, they're starting to have a shortage of workers. With the high inflation of wages, China is becoming less competitive as a manufacturer. In terms of treatment of workers, they have strict laws themselves -- and our industry has a certification program in place to monitor that, too.
That issue is going away, but our battle should be never be over low-wage jobs. America needs to make things by people with more than a fourth-grade education. I'm not satisfied with the jobs we're developing. We should make factories much like Germany does. We need high-skilled manufacturing and laws that encourage that. Germany doesn't burden manufacturers like we do here. Boeing had its North Carolina facility shut down because of the unions. That's crazy; it discourages all our companies who innovate and want to manufacture here.
We need to change many laws dramatically, especially the ones that encourage companies to go overseas where taxes are lower, where it's cheaper to hire, and that don't have strict immigration laws. Google, Apple and Microsoft are reeling from these laws; they're keeping their money overseas, which is where they invest.
Is CEA involved in the broadband issue?
Over the past 15 years, broadband has been a very important issue for our country. Our strategy for broadband for 15 years has been to encourage competition among broadband providers. To be sure, this issue impacts TV more than radio. Currently there's a whole bunch of wireless broadband competition; we've pretty much stayed out of the disputes, but we do want competing pipelines so the consumer can choose. History has proven that to be the correct approach.
Are you concerned about any election-year legislation that may be in the works?
I'm not worried about anything popping forward from this Congress. I would like to see some action regarding immigration legislation. There are also some pretty good proposals coming out about patents. We also had to deal with a lot of issues involving something called The Lacey Act, which dealt with wood imports. Gibson Guitars was raided and shut down because of an ambiguous law and an overzealous bureaucracy.
Again, we're focusing on the bigger picture and the long term. We want to remove the complexity of doing business, to get the U.S. economy to grow through the minds and efforts of the best and brightest. You know, we haven't had a new free trade deal in five years, while the rest of the world has entered scores of deals cutting tariffs. Our tax policy encourages foreign rather than domestic investment. In short, we're doing everything wrong in this country. Republican and Democrat, our government is failing to create an environment for a healthy economy. Without a healthy economy, everybody loses and unemployment goes up. But that's a result of the policies we've been following the last few years.
When you mention the economy suffering, is the global economy â€“ especially the problems in Europe -- impacting CEA, too?
Certainly the world economic picture is not as bright as it was a few years ago. What has changed is that the U.S. used to be a rock, where everyone invested in our large consumer market and favorable position for business. That has changed dramatically due to the mortgage loan crisis and has gotten even worse thanks to the anti-business rhetoric coming from the Obama Administration. It's divisive, punitive and hostile to business, which discourages investment.
The rest of the world is different, where each of the countries has different strategies to succeed. The EU faces challenges, but so does Asia, which was growing fast but is slowing down. I believe America has antagonized a lot of countries because of a spotty foreign policy, a lack of consistency and our slowness to act on free trade agreements.
There are definite things we, as an industry, can do better in terms of encouraging the economies elsewhere to support free trade agreements and produce products for a dramatically changing world. Remember, digital and online technology has hastened "The Arab Spring" and the seeds of democracy. Today only the most totalitarian governments control technology. Even China, which has been an important business partner, has an economy that's not as healthy as it could be because they block information through technology. There are no Constitutional safeguards there.
If the Obama Administration has been so anti-business, why are corporate profits at record highs?
I've written about 200 editorials and op-eds over the last few years for American Spectator, and one was called "50 Ways The Obama Administration Has Hurt the Economy and Job Creation." Do corporations have record profits? Yes, they have record profits but that has nothing to do with Obama. After the last recession, businesses got skittish and became reluctant to invest in U.S. due to a hostile federal government and crazy tax laws, which made it more favorable to park their money overseas. After Romney wins, there will be more hiring. If Obama wins, there won't be more hiring. It's very simple.
Obviously, you see regulation as the main obstacle to prosperity. Do you believe that's true for radio?
Broadcasters have always argued for regulation, which is absurd. Regulation may have been great strategy 40 years when it was just TV and radio, but now there's media competition everywhere and radio has suffered a tremendous reduction in market share. Their strategy has to change, yet broadcasters, through the NAB, still want to regulate everyone else in every other industry, be it cable, satellite or the Internet. The way to win is to truly compete in a free marketplace. But the NAB wants more regulation on everyone else. That's a failed strategy that won't work with the marketplace ... or in Congress ... anymore.