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FCC was right to relax ownership rules

June 13, 2003

FCC was right to relax ownership rules

By Ken Marlin

Marlin is managing partner of Marlin and Associates an investment banking advisory and strategic consulting firm focused primarily on firms that provide digital information or information-related software and technology.

June 13, 2003

Last week, the Federal Communications Commission opened the door a bit wider to media concentration in the United States.

Responding to the protestations by individuals and groups on both the left and the right, as well as editorial rants about the pending ruin of western civilization as we know it, several lawmakers jumped on the political bandwagon, saying that they will consider legislation to undo the new regulations. They include Sen. John McCain, R-Ariz., chairman of the Senate Commerce Committee, Sen. Ernest Hollings, D-S.C., Sen. John Kerry, D-Mass., Sen. Ernest Hollings, D-S.C., and Sen. Ted Stevens, R-Alaska. In the House, a bill was introduced by Reps. Richard Burr, R-N.C., and John Dingell, D-Mich.

I understand the concern, in theory. But, when you look at the facts, it hardly seems to warrant the hysteria.

In the early 1960s, the Congress mandated that the FCC protect the "public interest" with regard to broadcast TV stations. (The FCC does not have such a public interest mandate for cable or Internet media.) In 1964, the FCC adopted rules that allowed an entity to own two television stations in a market if one of the stations was not one of the top four in the ratings, and there were at least eight independently owned and operated commercial or noncommercial stations in the market. In 1975, the FCC imposed another rule banning a newspaper from owning a broadcast television station in the same market, and vice versa.

As hard as it is to remember, in those days, newspapers still dominated news. There were three broadcast networks that were growing in influence. There was virtually no cable TV, satellite or Internet. There were only a few TV stations in each market.

Last year, a federal appeals court ordered the FCC to reconsider the rules. The court said that the FCC had not shown that it was still in the public interest to have such limits.

For the past 18 months, the FCC has been working on revisions. Last week, the commission said that, henceforth, in markets with 18 or more TV stations, a company now may own three stations, but only one of these stations can be among the top four in ratings. In markets with nine or more TV stations, the FCC lifted the cross-ownership ban. There were some other changes too. And, the FCC left in place bans regarding mergers of broadcast networks.

Do these changes reflect revolutionary change? Is this the beginning of the end for free press in the United States? I don't think so.

The debate seems to have centered on a few issues:

One argument is that the rule change lets the big media moguls get even bigger – and that's bad. News Corp. CEO Rupert Murdoch seems to have become (again) the favorite whipping boy. Well, OK. It may. There probably will be some more mergers, and some swapping of a newspaper or television station in one market for one another.

But, for a number of reasons, it is not entirely clear that the loosening of the restrictions on cross-ownership (as currently proposed) will immediately cause the large media firms to go on a buying spree. First of all, there are still limits. Second, if they do, they will drive up prices, and drive down investment returns. Third, proposed mergers would still have to meet the FCC's public-interest standard and pass the Justice Department's antitrust test. And fourth, changes to ownership restrictions are but one of several factors impacting the value and desirability of media properties. Americans are changing lifestyle habits – reading fewer newspapers, watching less TV; advertising trends are shifting.

Another argument is that relaxing the cross-ownership restrictions will result in fewer outlets for minority viewpoints – and that would be an abridgement of free speech. But, it's absurd to believe that, as a result of these rule changes, there won't be outlets for minority viewpoints.

To begin, the rules changed in markets where there are large numbers of TV stations. Further, we live in an era in which 85 percent of the U.S. population now has – or soon will have access to 100 or more satellite/cable TV outlets, plus innumerable radio stations (both broadcast and Internet) plus Internet Web sites that give audio, video and text access to content from providers as diverse as BBC, Fox and Al Jazeera.

I understand the longing for the "old days" when morning drive radio station was all about local news and not dominated by a bunch of New York-based, syndicated talk shows. Certainly it calls to mind the days when local families controlled most of the nation's radio and TV stations, and newspapers – and were focused on their local communities.

There are a couple of problems with that argument. First, the FCC strengthened rules about radio ownership. Second, by and large, the local radio and TV programs are still there. It's just that fewer people tune in. That's what happens when you get more media outlets. Some people prefer local news, some prefer sports, and some prefer to listen to Imus in the morning.

Further, in many cases, the local guys aren't all that local any more. The Chandlers sold the Los Angeles Times to the Tribune Company, which not only controls the Times and The Chicago Tribune but another dozen dailies as well. The company also owns more than 20 TV stations. The Hearst Corporation is still privately held, but it too controls a tad more than just The San Francisco Chronicle. Its holdings now include nine or 10 other newspapers, a dozen or so TV stations and interest in a half dozen cable channels, a couple of radio stations, and more. The New York Times is similar, still family led, but now with nearly two dozen newspapers, a half dozen TV stations, and a couple of radio stations.

The FCC came to a fair and reasoned conclusion. While it could result in some merger activity, it is clear that the public interest remains intact. Under virtually every scenario after the rule change, the United States still will have far more media outlets than it had when the rules were conceived. And, we will have far more than most other countries.

Free speech is alive and well.

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