Deregulating Media Ownership rules – the debate Essay

Synopsis

A deregulatory media ownership regime, provoked important changes in the American media environment in 1996. Several arguments have been advanced to support the FCC decision to further deregulate the media. These were principally that ownership deregulation would result in benefits for all sectors: for the traditional media, an emerging new media and the public. The traditional media would be released from restrictions, which had prevented it from competing with new media; from accessing new customers and opportunities. The new media would be free to develop, expand the boundaries of what has been labelled as newly–emerging citizen journalism and interactions with the old media. At the same time, the public interest would be served as increasing numbers of media sources and outlets enhanced diversity in the delivery of information and entertainment. But there is debate about whether they have delivered promised benefits. It is possible to argue that the American experience suggests that the public interest may not be well served by media ownership deregulation

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Introduction

The concentration of ownership was common before the start of the past century, especially with regard to newspapers. More recently wehave witnessed the development of cross-media ownership as a result of diversification and internationalization. This has given rise to cnsiderable anxiety about the possible development of monopolies in ownership and recently the legislations around the world particularly in the Europe and particularly America by the FCC regarding deregulation,  has created panic. During the earlier decades of this century, concentration of ownership did not generate much public concern. However some concern was expressed by politicians, trade unionists and church leaders that there should be a better spread of media ownership in order to avoid single viewpoints being pressed on to the public (Denscombe, 1996)

In response to a congressional mandate to review its media ownership rules every two years, the Federal Communications Commission (FCC or Commission) on June 2, 2003 voted 3-2 to set new limits on media concentration. Of the six media ownership rules reviewed by the Commission, one was strengthened (the Local Radio Ownership Limit), one was left unchanged (the Dual Network Ownership Prohibition), and four were relaxed slightly (the National TV Ownership Limit, the local TV Ownership Limit, Cross-Media Ownership Limit, and the regulation on Radio and TV license transferability).The law requiring the FCC action is the Telecommunications Act of 1996

(Telecom Act), which directed the FCC to eliminate the cap on the number of television stations any one business may own and to increase to 35 from 25 the maximum percentage of American households a single broadcaster may reach[1]. The Act also requires the Commission to review its broadcast ownership rules every two years, and “repeal or modify any regulation it determines to be no longer in the public interest as a result of competition[2].”

The FCC has been subjected to a number of court challenges in its implementation of the law, and the recent trend has been to strike down specific limits on the number of broadcast entities that one company may own. Since its 1998 review, the Commission has lost five out of five cases that challenged its media ownership rules[3]. According to the U.S. Court of Appeals for the District of Columbia Circuit, the Telecom Act “carries with it a presumption in favor of repealing or modifying the ownership rules[4].” This places a burden on the Commission to provide sufficient justification for the retention of any ownership cap, and it tips the balance in favor of repealing or relaxing current rules.

The FCC (Federal Communications Commission), under the leadership of Chairman Michael Powell, has been contemplating the elimination of all remaining media ownership limits, clearing the way for even more media consolidation. However, congressional and public pressure has been mounting against Powell’s deregulatory trend. Over the past few months the FCC took public comment on this issue and received an unprecedented number of letters and email messages from the public, media outlets and organizations. The majority of comments expressed opposition to scrapping remaining ownership limit.

Public policy could not support one company, or a small group of companies, dictating the breadth of television content or the tenor of news coverage, so concerns about the effect of media consolidation are worthy of careful analysis. Fear that greater consolidation will squeeze out local voices and result in homogenized, lowest-commondenominator programming animates the arguments of those critical of the Commission’s decision. However, the Commission majority and its supporters contend that, had the FCC not acted, the courts would continue to side with media companies, and in due course those companies would have begun to ignore the rules altogether. The Commission majority also notes that much of the empirical evidence compiled during the review did not support the belief that greater consolidation would erode local influence or diversity. Because it lacked sufficient empirical evidence that the public interest was better served in maintaining the current caps, the Commission – in response to Court of Appeals’ interpretation of the Telecom Act – had no choice but to modify the rules, say the majority[5].

Deregulation of the ownershiplimit

One of the court cases that conditioned the FCC’s decision was Fox v. FCC, which remanded the 35-percent cap on national station ownership to the Commission for further review. In Fox, which was decided in February 2002, the court said that the FCC’s action was “arbitrary and capricious and contrary to law” because it “failed to give an adequate reason for its decision” to keep the 35-percent cap. Moreover, the court argued, the Commission “provided no analysis of the state of competition in the television industry to justify its decision to retain the national ownership cap[6].” In remanding the decision, the court allowed the FCC to provide reasons, “either analytical or empirical,” to justify a continuation of the rule. The FCC already was devoting assiduous attention to this issue as a result of its 2000 biennial review. Over 20 months, the Commission received over 750,000 public comments, conducted numerous field hearings, and commissioned 12 Media Ownership Working Group Studies (empirical analyses prepared by FCC staff and independent academics) to analyze the nature of competition in the industry. The result: the majority of commissioners contend the 45-percent ownership cap promotes the “public interest” as defined by the Commission’s three goals of competition, diversity, and localism.

Although the June 2 decision represents an affirmation of the Commission’s role in regulating media ownership in the face of palpable judicial skepticism, many analysts and commentators have assailed the new rules as a sop to media conglomerates and an affront to the “public interest.” These critics argue that the Commission should have retained the old caps, such as the 35-percent national television ownership limit, and cite concerns that media empires now will gobble up more media outlets and diminish local coverage. What follows is a description of each of the FCC’s rule changes, and comments representing the concerns of both proponents and opponents.

1. Dual Network Ownership Prohibition: (originally adopted 1946)

The FCC retained its ban on mergers among any of the top four national broadcast

networks. This rule prevents a merger between NBC, CBS, ABC, or FOX.

2. Local TV Multiple Ownership Limit: (originally adopted in 1964)

The FCC relaxed the rule as follows:

• In markets with five or more TV stations, a company may own two stations, but only one of these stations can be among the top four in ratings.

• In markets with 18 or more TV stations, a company can own three TV stations, but only one of these stations can be among the top four in ratings.

• In deciding how many stations are in the market, both commercial and noncommercial TV stations are counted.

• The FCC adopted a waiver process for markets with 11 or fewer TV stations in which two top-four stations seek to merge. The FCC will evaluate on a case-bycase basis whether such stations would better serve their local communities together rather than separately.

The previous local TV multiple ownership rule allowed common ownership of two television stations in the same local market if one of the stations was not among the four highest ranked stations and eight independently owned, full-power, operational television stations remain in the market after the merger. This rule was struck down by the D.C. Circuit Court of Appeals in Sinclair Broadcasting v. FCC as “arbitrary and capricious” because the Commission did not explain why the role of other community voices – i.e., radio and newspapers – were not included in the Commission’s rule[7]. Although this is perhaps the least controversial of the three major rule changes.

3. National TV Ownership Limit: (originally adopted in 1941)

The FCC incrementally increased the 35-percent limit to a 45-percent limit on national ownership.

• A company can own TV stations reaching no more than a 45-percent share of U.S. TV households.

• The share of U.S. TV households is calculated by adding the number of TV households in each market in which the company owns a station. Regardless of the station’s ratings, it is counted for all of the potential viewers in the market. Therefore, a 45-percent share of U.S. TV households is not equal to a 45-percent share of TV stations in the U.S. Of all of the June 2nd rule changes approved by the Commission, this one has probably generated the most controversy.

4. Local Radio Ownership Limit: (originally adopted in 1941):

The FCC found that the current limits on local radio ownership continue to be necessary in the public interest, but that the previous methodology for defining a radio market did not serve the public interest. The radio caps remain at the following levels:

• In markets with 45 or more radio stations, a company may own 8 stations, only 5 of which may be in one class, AM or FM.

• In markets with 30-44 radio stations, a company may own 7 stations, only 4 of which may be in one class, AM or FM.

• In markets with 15-29 radio stations, a company may own 6 stations, only 4 of which may be in one class, AM or FM.

• In markets with 14 or fewer radio stations, a company may own 5 stations, only 3 of which may be in one class, AM or FM.

This rule change will likely serve to limit further consolidation in the radio industry by changing the method the Commission uses to define local markets. The Commission’s “contour method,” which measures radio markets by the size of the signal contours, will be replaced by a geographic market approach assigned by Arbitron, an international media and marketing research firm. As a result, the rule will allow Clear Channel, a radio conglomerate that owns over 1,200 radio stations, to maintain control of the stations it currently owns, but prevent the group from acquiring any more stations in most of its markets.

5. Cross-Media Limits:

This rule replaces the broadcast-newspaper and the radio-television cross-ownership rules and establishes a Diversity Index (see appendix) to provide guidance on permissible media combinations. The new rule states:

• In markets with three or fewer TV stations, no cross-ownership is permitted among TV, radio and newspapers. A company may obtain a waiver of that ban if it can show that the television station does not serve the area served by the crossowned property (i.e. the radio station or the newspaper).

• In markets with between 4 and 8 TV stations, combinations are limited to one of the following:

(A) A daily newspaper; one TV station; and up to half of the radio station limit for that market (i.e. if the radio limit in the market is 6, the company can only own 3) OR

(B) A daily newspaper; and up to the radio station limit for that market; (i.e. no TV stations) OR

(C) Two TV stations (if permissible under local TV ownership rule); up to the radio station limit for that market (i.e. no daily newspapers).

• In markets with nine or more TV stations, the FCC eliminated the newspaperbroadcast

cross-ownership ban and the television-radio cross-ownership ban.

6. Radio and TV Transferability Limited to Small Businesses

The FCC’s new TV and radio ownership rules may result in a number of situations where current ownership arrangements exceed ownership limits. The FCC grandfathered owners of those clusters, but generally prohibited the sale of such abovecap clusters. The FCC made a limited exception to permit sales of grand fathered combinations to small businesses as defined in the release that accompanied the Order. This portion of the rule will prevent companies like Clear Channel, who own more local radio stations than the cap permits in several markets, from selling its stations in clusters in those markets, unless they are sold to small businesses, many of which are minority- or female-owned. However, opponents of the decision argue that this provision creates a loophole for new consolidation. After only three years, small businesses would be able to sell the stations purchased from radio conglomerates to anyone else without restriction.

Conclusion

Traditional media owners in America contend that media regulation is a relic of the past.

They say it hinders transition processes for the old media to assist it to cope with a dynamic and changing media landscape. Large corporations in particular insist the removal of cross–media ownership restrictions will help them deliver better quality news and public affairs[8]. They accuse critics of further reform of relying ‘on emotion, utopian visions, and anecdotes’ to the detriment of sound media policy making’.[9]

American media owners insist the media is not more highly concentrated as a result of the Telecommunications Act. They argue the Act has delivered a more vibrant landscape that allows major players to change market positions frequently, to appear inexplicably and, at times to disappear. They see this as representative of a strong, competitive market, which in turn functions in the public interest.

Supporters argue that critics falsely claim a loss of diversity in the industry. One makes the point that twenty five years ago there were few programming choices, but:

Today there are three 24-hour news channels (CNN, Fox News, and MSNBC), plus the

financial news channels CNBC and CNNfn. There are regional all–news channels like New England Cable News. Channels such as the History Channel and Biography Channel provide daily programming similar to the documentaries that used to be ‘specials’ on the broadcast networks and PBS [Public Broadcasting Service]. The programming on these channels comes from many sources, including independent and freelance producers[10].

Further, supporters of ownership deregulation dismiss the idea that diversity is fostered by smaller media entities and that these entities produce better quality and quantity of news and public affairs. They continue that claims commonly–owned media in the same market create a single voice are equally invalid. They cite proof from the Federal Communications Commission Media (FCC) Ownership Policy Working Group reports. These indicate that local television stations owned by large broadcast networks receive more awards for news excellence and produce more news and public affairs programming than non–network–owned affiliates[11].

The notion that local owners are inherently more objective than large corporations is equally contentious they say. Some of the most biased United States newspapers of the past for example were locally owned and local owners are more likely than corporate owners to have ties to local political and business establishments[12].

Arguments for ownership deregulation favour mergers and acquisitions because they consider these play an important role in the evolution of the media. Mergers are a defensive strategy that achieves economies of scale to meet the demands of modern media consumers and to respond to competition from new outlets and technologies[13].The economics of the mass media in the twenty first century ‘are not those of a lemonade stand’ according to one commentator. Scale and scope is needed to provide information and entertainment at a reasonable cost and small outlets are not able ‘to provide coverage from the front lines of an overseas conflict one minute and then switch back to coverage

of a local trial the next’

In opposition, American consumer groups in particular maintain regulation serves the public interest well. Regulation should not be abandoned therefore unless it can be clearly shown that to do so would further enhance that interest.193 From this perspective, there are profoundly negative implications for democracy if cross–media ownership rules in particular are relaxed. It is argued further that if further ownership deregulatory changes are introduced in America by the FCC they will produce media custodians able to dominate local political and cultural discourse and prevent people from voicing opinion or hearing the opinions of others[14]. Retention of cross–ownership rules are crucial therefore in preventing media monopolies which would be able to constrain reporting by ‘carefully avoiding some subjects and enthusiastically pursuing others[15]’.

American critics have keenly embraced the notion of tradition in mounting their arguments to retain media regulation. Profit, they contend, has not been the sole intention of United States’ communications policy; public interest has been the crucial component. This is inevitably diminished if media discourse is increasingly provided by one voice, albeit over different formats[16].

Moreover, the American critics of deregulation cite United States’ jurisprudence support for the proposition that acceptable media policy is about more than economics; it requires

‘concern for preservation of a vigorous debate that includes the presentation of a diversity of views on a broad array of issues[17]’.

Supporters of regulation conclude that the media represents not a marketplace, but a

‘marketplace of ideas’ in which there will be long-term and transitory effects from

concentration; long–term effects, such as censorship, and short–term effects, such as the

manipulation of opinion for specific purposes or gain[18].

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Reference:

B. Bagdikian A. (1987). The Media Monopoly, (Second edition). Massachusetts: Beacon Press.
Boyd-Baret O., Mc Kenna J., Winseck D., ; Mohammedi S.A.(Eds.). (1997). Media in Global Context: A Reader. London: Arnold.
Telecommunications Act of 1996 (Telecom Act), (P.L. No. 104-104), 110 Stat. 56 (1996) Section202(c)(1)(A)
Mohammedi S.A.(1991) The Global and Local in International Communication. In Curran J. and Gurevitch M (eds) Mass Media and Society, London: Arnold.
Backgrounder on the FCC’s New Media Ownership Rules, Republican Policy Committee, communique dated June 16, 2003
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Notes

[1] Telecommunications Act of 1996 (Telecom Act), (P.L. No. 104-104), 110 Stat. 56 (1996) Section

202(c)(1)(A)
[2] Telecom Act, Section 202(h)
[3] Michael Powell, FCC Chairman, CNBC’s Capital Report, May 28, 2003.
[4] Fox v. FCC  (280 F.3d 1027, 350 U.S.App.D.C. 79, 30 Media L. Rep. 1705 D.C.Cir. Feb 19, 2002).
[5] Backgrounder on the FCC’s New Media Ownership Rules, Republican Policy Committee, communique dated June 16, 2003.
[6]  Fox v. FCC.

;
[7] SinclairBroadcasting v. FCC (284 F.3d 148, 350 U.S.App.D.C. 313 D.C.Cir. April 2, 2002).
[8] See The National Association of Broadcasters comments for example at

http://www.tvweek.com/news.cms?newsId=10938 or the Newspaper Association of America’s

views at http://www.naa.org/ppolicy/NAA_Media_Ownership_Remand_Comments.pdf

Accessed 7 November 2006
[9] B. Compaine, ‘Domination fantasies. Does Rupert Murdoch control the media? Does anyone?’

January 2004. http://www.reason.com/news/show/29001.html Accessed 14 November 2006.
[10] Compaine, op. cit
[11] Ibid
[12] Ibid.
[13] Thierer, op. cit.
[14] I. Teinowitz, ‘Groups weigh in to FCC on media ownership’, TV Week,

http://www.tvweek.com/news.cms?newsId=10938 Accessed 7 November 2006
[15] B. Bagdikian, The Media Monopoly, (Second edition), Beacon Press, Massachusetts, 1987,

p.17.
[16] Gomery, op.cit.
[17] For example, Associated Press v. United States, 326 U.S. 1, 20 (1945); Fox Television Stations,

Inc., v. FCC, 280 F.3d 1027, 1047 (D.C. Cir. 2002). Red Lion Broadcasting v. FCC, 395 US

367, 390 (1969) Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 638-39 (1994).

Associated Press v. United States, 326 U.S. 1, 20 (1945). Red Lion Broadcasting v. FCC, 395

US 367, 390 (1969).
[18] Comments of Consumers Union, Consumer Federation of America and Free Press to FCC’s

2006 Quadrennial Regulatory Review. See

http://www.hearusnow.org/fileadmin/sitecontent/2006_-_1023_Comments_-_CU-CFA-FP.pdf

Accessed 14 November 2006.

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