[DMCA-Activists] Adelstein on Media Deregulation

[Seth Johnson]

> http://www.fcc.gov/Daily_Releases/Daily_Business/2003/db0602/DOC-235047A8.pdf

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STATEMENT OF
COMMISSIONER JONATHAN S. ADELSTEIN
DISSENTING

Re:     2002 Biennial Regulatory Review – Review of the Commission’s Broadcast 
Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the 
Telecommunications Act of 1996

This is a sad day for me, and I think for the country.  I’m afraid a dark storm 
cloud is now looming over the future of the American media.  This is the most 
sweeping and destructive rollback of consumer protection rules in the history 
of American broadcasting.

The public stands little to gain and everything to lose by slashing the 
protections that have served them for decades.  This plan is likely to damage 
the media landscape for generations to come.  It threatens to degrade civil 
discourse and the quality of our society’s intellectual, cultural and political 
life.  I dissent, finding today’s Order poor public policy, indefensible under 
the law, and inimical to the public interest and the health of our democracy.

In the end, this Order simply makes it easier for existing media giants to 
gobble up more outlets and fortify their already massive market power.  It 
capitulates too many of the longstanding demands of the media companies we 
oversee.

This approach shatters most of the last vestiges of the consumer protections 
that weren’t eliminated in the 1980’s.  This decision pulls the teeth out of 
the remaining rules, leaving the FCC a toothless tiger.  As big media companies 
get bigger, they’re likely to broadcast even more homogenized programming that 
increasingly appeals to the lowest common denominator.  If this is the toaster 
with pictures, soon only Wonder Bread will pop out.

It may take a while for the public to feel the full effects of today’s 
decision.  Consolidation in the media markets could take place over a number of 
years, just as it did in radio.  But people will notice every time a new merger 
goes through that eliminates a voice in a community.  Their anger will flash as 
they surf through their channels only to find more sensationalism, 
commercialism, crassness, violence, homogenization and noticeably less serious 
coverage of news and local events, just as many Americans warned me they 
expected to happen if we allowed further consolidation.

It didn’t have to turn out this way.  Congress and the courts forced a massive 
review.  They did not force massive deregulation.  We had a choice.  The courts 
required us to justify our rules, not to gut them or replace them with pale 
substitutes.  Certainly, the media markets have changed, and our rules must 
keep pace.  But the majority chose to go much further than Congress or the 
courts required.  They chose to pursue gratuitous deregulation.  This is by far 
the most dramatic weakening of our media ownership rules this country has ever 
seen.

This has turned out to be a painful process.  I had hoped for a better outcome 
I could support, or at least oppose less strenuously.  The Commission undertook 
the most comprehensive review of its rules ever.  It was designed as an effort 
to produce a judicially-sustainable, intellectually-coherent framework.  But 
those good intentions and good faith efforts didn’t pan out.  The comprehensive 
framework never materialized.  An effort begun with serious intellectual 
aspirations descended into an incoherent, outcome-driven political document, 
the likes of which the Commission has too often seen and sought to avoid.

A new regime for a new era never materialized.  Instead, we’re left with a 
muddled patchwork of meager protections.  The only consistent elements are 
market-driven philosophies and deregulatory outcomes.  The Order is rife with 
references to market efficiencies but virtually devoid of references to 
consumers.

It’s been difficult for me to watch a group of colleagues whom I genuinely 
respect, like and admire move in a direction with which I so strongly disagree. 
 I feel compelled to speak out, but take no joy in taking such strong exception.

The majority implies that Congress and the courts forced this outcome.  I 
disagree.  We had much wider latitude than this suggests.  The biennial review 
provides a simple directive – to determine whether the rules “are necessary in 
the public interest as the result of competition,” repealing or modifying them 
only if we deem them “no longer in the public interest.”

The linchpin of Congress’s statutory guidance is two words – public interest.   
 The American citizenry should benefit from each decision.  All American 
citizens must benefit, including minorities, women, and non-English speaking 
citizens.

In the context of media ownership, no matter what others think the Circuit 
Court may have implied, the FCC still has a special duty to protect what the 
Supreme Court referred to as an “uninhibited marketplace of ideas.”

I’m afraid this decision departs dramatically from our statutory mandate, which 
is to establish rules in the “public convenience, interest or necessity.”  Let 
me explain why today I think we fail to meet even that flexible, broad standard.

Judging from our record, public opposition is nearly unanimous, from 
ultra-conservatives to ultra-liberals, and virtually everyone in between.  We 
have received about three-quarters of a million comments from the public in 
opposition to relaxing our ownership rules, a new record, and only a handful in 
support.  Of the hundreds of citizens I heard from directly at field hearings 
across the country, not one stood up to call for relaxing the rules.  Of the 
thousands of e-mails I personally received, I saw only one didn’t oppose 
allowing further media concentration.

The American people appear united in believing that media concentration has 
gone too far already and should go no further.

I’ve heard it said we can’t make this decision by polls or by weighing 
postcards.  Fair enough.

But the statute doesn’t let us simply dismiss the public’s views with a passing 
reference in one paragraph, as this item currently does.  The public apparently 
has no interest in further media concentration.  Does the majority really know 
what’s better for the public than the three quarters of a million citizens who 
are motivated enough to contact the Commission or attend field hearings?  We 
should not assume that those people who took the time to alert us to their 
deep-seated concerns, with 99.9 percent in opposition, are wrong unless there 
is overwhelming evidence proving it.  Here, just the opposite is true.  There 
is plenty of evidence the people are right.

The public is joined by bipartisan chorus of caution from over 150 Members of 
Congress.  Organizations from nearly every political stripe, from the National 
Rifle Association to the National Organization for Women, expressed grave doubt 
about the wisdom of allowing greater consolidation.  We heard from artists, 
academics, media moguls -- Republicans, and Democrats.

It has been said that the public comments we received are too simple and offer 
no substantive basis from which to make our decision.  I beg to differ.  I have 
read a lot of their comments, and I’ve listened to hundreds of people firsthand 
in city halls, schools churches and meeting rooms.

Let me tell you, the Americans we heard from know what they’re talking about.   
This is the media they view every day.  They take it very personally, and they 
are very articulate and substantive in what they say.

We have heard from people who have collectively spent billions of hours 
watching TV, listening to the radio and reading newspapers.  There is no better 
expert witness than the American people.  There is no more objective jury.

But today’s decision overrides their better judgment.  It instead relies on the 
reasoning of a handful of powerful media companies who have a vested financial 
interest.  Those who stand to benefit by buying and selling the public airwaves 
won out over the public.

Anyone who questions whether consolidation can cause harm need only look to the 
experience of radio.  The most constant refrain I heard from coast to coast was 
complaints about the homogenization and loss of news coverage on the radio dial 
since 1996.  People begged us not to let happen to television what happened to 
radio.  But the majority did not heed this concern.  By ignoring this history, 
we may be destined to repeat it.  Radio is a very sick canary in the coal mine, 
and we’re about to infect television with the same disease.

I suggested and would have taken another approach.  This Order often equates 
the public interest with the economic interests of media conglomerates.  It 
assumes that efficiencies and cost savings created by mergers will translate 
into benefits for the public.  But it makes no effort to ensure that will 
actually happen.

We could have easily addressed these concerns.  I share the view that given 
changes in the marketplace, some of these combinations may make sense.  I could 
have supported greater flexibility to evaluate mergers on a case-by-case, 
market-by-market analysis.  That is the only true way to determine if media 
mergers of this magnitude would actually benefit the public.  But the only way 
to determine the value of a given merger is for the Commission to request 
companies that seek to merge to demonstrate how, in the case of those 
particular entities in those particular markets, any efficiencies gained by the 
merger would be channeled into something positive for the viewing public.

The majority rejected such an approach in favor of bright line rules.  They 
refused even to ask parties that seek to merge to say anything about how many 
news staff would be retained, the number of hours of local programming planned, 
cross-programming plans for TV duopolies or the overall impact on news and 
public affairs programming.

Their stated goal is to achieve more market certainty for entities that seek to 
merge.  They proudly note that establishing set rules facilitates transactions, 
reduces costs and makes deals more attractive to the capital markets.  Another 
stated goal is to avoid the administrative burden that a case-by-case approach 
would impose upon the Commission.

The Order actually makes a special effort to proclaim the Commission has no 
interest in the facts of particular cases since the new rules are the be-all 
and end-all of what’s in the public interest.  This implies the Order divined 
some sort of higher truth as to what works best in every case for the American 
people.  It says we don’t want to be bothered with facts that might point in 
another direction.

In its rigid insistence on fixed rules based on oftentimes arbitrary numbers, 
the Order ignores our statutory obligation to serve the public interest, 
convenience, and necessity in favor of the convenience of those who seek to 
maximize the money they can extract from private sale of the public airwaves.  
And it favors the Commission’s administrative “convenience” ahead of the public 
interest.  We are here to carry out the statute, not subvert it with the excuse 
that it’s too much work to implement.  This just won’t do when our very 
democracy is at stake.

The majority’s approach simply assumes that if we let media companies merge, 
they will channel the resulting efficiencies into better programming for the 
public.  Broadcasters have a long and proud tradition of public service I know 
many will want to carry on.  But in the absence of some other compulsion, the 
logic of marketplace competition and the media companies’ fiduciary 
responsibility to shareholders will require them to maximize profits rather 
than serve the public interest.  The record does not support the dangerous 
assumption that the many mergers contemplated under these rules will invariably 
serve the public interest.

One argument in favor of unleashing the media giants is that free over-the-air 
television is threatened.  That’s a worthy goal, but the rumors of its demise, 
widely spread, are greatly exaggerated.

In reality, just last month, broadcast network advertisers spent a record $9.4 
billion in upfront sales for next season, up 13 percent.  The Wall Street 
Journal recently reported that some networks make $600-$700 million, though 
others are less profitable.

It is quite telling that the best case for consolidation is that the networks 
need to make still more.  It’s not the FCC’s job to make sure every big TV 
network makes money – that’s up to network management.  Our first priority is 
ensuring the American people get a wide range of diverse viewpoints.

The day we will know over-the-air TV is in real trouble is when broadcasters 
start lining up to turn back their licenses.  Today, instead, the value of 
television stations continues to skyrocket because these licenses are so 
scarce.  One station in Los Angeles sold for $800 million.  Why are the 
networks so interested in increasing the nationwide cap or acquiring triopolies 
or duopolies in local markets if this business is on the way down?

It violates every tenet of a free democratic society to let a handful of 
powerful companies control our media.  The public has a right to be informed by 
a diversity of viewpoints so they can make up their own minds.  Without a 
diverse, independent media, citizen access to information crumbles, along with 
political and social participation.  For the sake of our democracy, we should 
encourage the widest possible dissemination of free expression through the 
public airwaves.

Some argue that the concern about the threat to American democracy is overblown 
since it is so strong and resilient.  While our democracy is strong and not 
about to crumble, does it mean we can afford to weaken it?  Doesn’t it matter 
that only half our citizens vote?  The same people argue there is plenty of 
diversity already, so we can afford to lose some.  I just don’t agree.

Despite the  Order’s assumption that technological advancements render 
broadcasters just another voice in a crowd of ever-expanding and fungible media 
channels, a simple fact remains.  No technological advances have made it 
possible for every person who wants to broadcast in a local community to do so. 
 Nobody yet has figured out how to replicate the spectrum for everyone who 
wants to broadcast a message.  The exclusive right to use the broadcasting 
spectrum denies it to all others.

The majority completely ignores the reality that neither cable nor the Internet 
has changed the huge market power granted by federal license to use scarce 
broadcast spectrum, particularly when that license comes with the requirement 
to be carried on cable.

It also ignores that people still get the vast bulk of their local news and 
information from the same places they always have: their local newspaper and 
local TV stations.  And these are the very outlets we are giving the most new 
flexibility to merge.

Today’s bottom line spells an open season on consolidation.  In place of our 
once powerful cross-media limits, only 2.3 percent of the American population 
will now receive full diversity protection.  In contrast, the markets where all 
remaining cross-media protections have been entirely lifted represent 72.58 
percent of the population.

While I agree that some consolidation may be warranted in the very top markets, 
the leap from protecting 100 percent of the population with full 
cross-newspaper/broadcast protections to less than 30 percent is dramatic.  We  
are moving to a world where in larger markets one owner can combine the cable 
system, three television stations, eight radio stations, the dominant 
newspaper, and the leading Internet provider, not to mention cable networks, 
magazine publishers and programming studios which could produce the vast bulk 
of the programming available to those outlets.  In my view, it is no 
exaggeration to say the rules now permit the emergence of a 21st Century 
Citizen Kane on the local level, with perhaps a handful of Citizen Kanes on the 
national level.

In smaller markets, say the town of Great Falls, Montana with a population of 
56,690, under our new rules one entity could own the cable company, the 
dominant television station, the dominant newspaper, and multiple radio 
stations.  Is this safe for democracy?

We have heard that relaxing the rules is appropriate because so many Americans 
can now access so many channels, the Internet and other media.  But it turns 
out the same few vertically-integrated global media firms own the bulk of what 
people see.  Ownership has become more concentrated.  A person can always add 
more electrical outlets throughout their home, but that doesn’t mean they will 
get their electricity from new sources.  The same goes for media outlets.

And we cannot ignore that many citizens have no access to these wonderful new 
options.  Until every American can effectively access these outlets, this 
Commission should protect the diversity available in the outlets that serve 
their needs.

Our task, therefore, should be to encourage maximum diversity, not assure a 
four-voice or six-voice sliver of it.  This Order, to the contrary, concludes 
that there is plenty of diversity already, so we can afford to sacrifice some 
and have enough left over.

The public interest means more than just efficiencies and cost savings.  Every 
community has local needs, local elections, local news, local talent, and local 
culture.  While localism reflects a commitment to local news and public affairs 
programming, it also means much more.  It means providing opportunities for 
local self-expression and reaching out to, developing and promoting local 
talent.  It means making programming decisions to serve local needs.  It means 
allocating resources to address the needs of the community.  Localism’s many 
virtues are hard to capture, but may get easier to ignore as companies 
consolidate.

When this full document is finally made public, I expect it will be torn apart 
by media experts, academics, consumer groups, activists, and most of all, the 
American people.  They will find it riddled with contradictions, 
inconsistencies, false assumptions and outcome-driven thinking.

I would like to recount some of the most glaring inconsistencies and flawed 
reasoning behind these new rules.  I’ve got a much longer written critique I 
will release soon, but will spare you now by summarizing some highlights.

In perhaps the Order’s most inexplicable inconsistency, the Majority decides to 
retain a 50 percent discount for UHF stations in the national television cap, 
yet fails to apply comparable treatment to the local television rule and 
cross-media limits.  To discount some stations for one rule while failing to do 
so in others is arbitrary and unjustifiable.  If the purpose of this exercise 
is to update our rules in light of technological developments, we can’t ignore 
some just because we don’t like the outcome of more stringent limits.

In perhaps the most blatant evidence of a results-driven process, the Majority 
goes out of its way to allow companies to seek waivers of the new bright line 
rules to achieve greater concentration, while it attempts to deny the statutory 
right of opponents of mergers to petition to deny a given transaction.  It is 
fundamentally unfair to allow waivers for corporate interests in extenuating 
circumstances without the corresponding protections to the public.

The Diversity Index was a noble effort that tragically degenerated into an 
ill-conceived rote formula that even Merlin couldn’t decipher.  The Index is 
seemingly nothing more than economic jujitsu, an ornate castle built upon a 
foundation of sand at the ocean’s edge.

After detailing at length the new formula and its underpinnings, the Majority 
stresses that the index is used only as a basis to draw bright-line rules.  But 
the order specifically denies any person the right to apply this new magical 
formula to a particular market.  In other words, no one can use the FCC’s own 
new methodology to show that an application in a particular market harms the 
public interest.

Among its many flaws, the index distorts how it calculates the market shares of 
relevant providers in each local market, resulting in grossly understated 
measurements of the impact of any particular combination.  For example in New 
York, it treats the Shop At Home TV station the same as the local NBC station.  
Similarly, with respect to newspapers, the index treats the New York Times the 
same as the Polish Daily News.

Despite the quest for empirical footing, the index is premised on admittedly 
incomplete data.  Recognizing that the Nielsen study failed to ask the specific 
question of the source of local news, the majority marches ahead, cobbling its 
own data points on local news sources from selective answers to muddled 
questions.

Against all notions of consistency, the majority unwisely decides that even if 
a broadcaster is restricted from acquiring a newspaper, the broadcaster can 
still buy the paper and hold it until its next renewal period – a period of 8 
years.  This simply underscores the outcome-driven nature of this Order.

On the radio front, the retention of some local radio rules appears an 
acknowledgment by the majority that they couldn’t stomach the fallout from the 
rapid consolidation of the past 7 years.  And some actual improvements were 
made in the market definitions.

Yet, for all the talk about tightening the radio rules, in several important 
respects the Order actually further unleashes the industry.  It eliminates the 
radio-TV cross ownership rule.  And it eliminates the current limit on the 
audience or advertising share any one owner can gain through mergers in a local 
market.  For a rule designed solely to address competitive effects of mergers, 
it is mystifying why the majority would cast aside such a fundamental and 
economically sound principle as accounting for the measure of power of combined 
stations.  The revised rule now clears the way for mergers that previously were 
denied or designated for hearing due to the strong likelihood of negative 
competitive effects.

The Order includes a helpful provision that allows only small businesses 
--initially -- to buy grandfathered groups of radio clusters that no longer 
comply with the new market definition.  While useful, it may not get used much. 
 Small businesses will encounter great difficulty in raising the capital 
necessary to buy expensive, large clusters, if they ever even come on the 
market at all.  This is especially true given that the seller could peel off 
one or two stations and then sell both the remaining cluster and the spin-off 
stations with no restrictions to an unlimited pool of potential buyers, which 
will limit the exclusivity of the eligible entity buyer pool.

In my view, adding an admittedly helpful provision that potentially affects a 
only a handful of stations, if it ever gets used at all, doesn’t come close to 
offsetting the sad truth that small businesses, including those owned by 
minorities and women, are going to find it even harder in more concentrated and 
expensive media markets to raise capital, own outlets or have their unique 
voices heard.

Most alarming is that after only two years, the small business can flip the 
grandfathered cluster to any large radio or media conglomerate like Clear 
Channel.  Making this approach so ripe for abuse further diminishes the 
likelihood that it will serve much of a useful purpose, since real 
disadvantaged businesses will have to bid against companies that plan to sell 
to well-capitalized radio giants, raising the price of clusters.  The ultimate 
beneficiaries of this approach could be companies like Clear Channel that could 
add even more grandfathered clusters than it currently controls.

Today the Commission introduces a new behemoth into our media landscape: a TV 
triopoly.  Where is the empirical evidence supporting this creation in our 
record?  As unjustified by evidence as it may be, this leap is in only six of 
top TV markets.

More troubling is the leap in the number of duopolies now permitted.  Duopolies 
are now restricted to sizable markets.  But this Order expands duopolies to 162 
out of 210 markets, or 95.4 percent of the population.  I can’t fathom why we 
would allow such dramatic consolidation across the board with no analysis as to 
how this will impact individual markets.  It’s a breathtaking assumption that 
each of these mergers, all of which will eliminate a local voice, is in the 
public interest.  And I don’t believe the record justifies it.

I do believe the record demonstrates that further concentration of power in the 
hands of networks justifies retention of the national network cap at the 35 
percent level set by Congress.

The majority has not adequately justified the selection of a new 45 percent 
cap.  It relies exclusively on evidence showing that the largest network 
station owners possess no greater bargaining power, measured by prime time 
preemptions, than the smallest network station.  This is a thin reed on which 
to justify a 10-point increase.  Moreover, without access to more data, this 
conclusion is unconvincing.

In the end, we have yet another tradeoff between efficiencies and public 
interest goals such as localism.  Guess who wins.  The social benefit of 
locally originated and oriented programming and program selection to me 
outweighs the efficiencies of further vertical integration.

Finally, let me explain why I cannot join the majority in voting for retention 
of the dual network rule.  I disagree with the Order’s conclusion that 
diversity no longer underpins this rule. But more importantly, a more rigorous 
examination of this rule must be conducted in light of the rising tide of 
Spanish-language broadcasting networks.  Just as the rule is retained for the 
top-four English-language networks, so too should Spanish broadcasting be 
examined separately.  The rapid growth of the Spanish language media in the 
past several years is having a significant effect on the landscape in which 
broadcast networks operate.  I believe that these developments require us to 
consider whether to afford Spanish-speakers the same protections available to 
English-speaking television audiences.

Looking back on how we got here, I am convinced there is little else I could 
have done to change the outcome. In an effort to moderate the extreme proposals 
that emerged, I offered suggestions to my colleagues which unfortunately were 
not incorporated.  The turning point when I realized I could not likely support 
this proposal was when a majority settled on the notion that bright line rules 
were preferable to making case-by-case determinations as to whether mergers 
served the public interest.

The Supreme Court has said that “promoting the widespread dissemination of 
information from a multiplicity of sources” is of the highest order.  So 
safeguarding diversity should not be subject to abstract diversity scenarios or 
arbitrary decisions that reduce the number of voices people can hear.

I don’t mean to suggest that bigness is always bad, or that free enterprise 
will always fail the public.  There is some truth to the arguments that my 
colleagues make today.  There’s nothing inherently wrong with earning profits 
from using public property.

But when it comes to gaining even greater profits at the expense of the 
cornerstones of our democracy, we must carefully question the effect on the 
public.  Today’s rules just don’t let the big get bigger, they will effectively 
prevent smaller entities from breaking in.  I would have relaxed the rules more 
incrementally and shown the public each time how it would benefit.

Since my arrival here 5 months ago, I have approached this proceeding with a 
constructive frame of mind.  I sought to understand the various proposals and 
their underpinnings, and offer my views on their efficacy.  Even after others 
closed in on an approach with which I could not get comfortable, I made 
reasonable attempts to moderate the proposals -- which were refused.  In the 
end, it wasn’t the process that precluded me from participating in drafting and 
supporting today’s Order.  It was the substantive direction the item took and 
the results-driven imposition of bottom line, bright line rules ahead of all 
else.  I am disappointed that a majority of my colleagues could not be 
persuaded to take a more reasoned, conservative, case-by-case approach.

This is far from over.  Congress may prove more responsive to the citizens who 
passionately plea for the independence and diversity of their media.  To 
paraphrase Winston Churchill, this is not the end, or even the beginning of the 
end, but just the end of the beginning.

- FCC -


NEWS

Federal Communications Commission
445 12th Street, S.W.
Washington, D. C.  20554

This is an unofficial announcement of Commission action.  Release of the full 
text of a Commission order constitutes official action.
See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

News Media Information 202 / 418-0500
Internet: http://www.fcc.gov
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