Senate Commerce Committee Angered by FCC Liberalization of Cross-Ownership Rule

Published July 1, 2008

The Federal Communications Commission’s (FCC) decision to liberalize a 33-year-old blanket prohibition on newspaper owners also owning broadcast licenses is under fire in Congress. The Senate Commerce Committee approved a “resolution of disapproval” (Senate Joint Resolution 28) to overturn the FCC’s action.

Critics of the FCC’s action, which took place in December 2007, argue newspaper/broadcast cross-ownership would lead to a dangerous concentration of power in the media business. They warn of massive monopolies restricting Americans’ access to news and information.

Diverse, Competitive Landscape

Despite the apocalyptic rhetoric, Americans are in no danger of seeing their news and information monopolized, least of all by newspapers. Instead of increased concentration, recent decades have brought a historic expansion of information sources. Instead of dominating today’s media world, newspapers–and to some extent broadcasters–are struggling to remain viable.

In this dynamic and competitive media landscape, a ban on cross-ownership simply makes no sense. It is unnecessary and downright harmful to consumers–and even detrimental to competition. Moreover, like FCC’s long-repealed Fairness Doctrine, such rules can become a tool for ideologically motivated interference in media content.

FCC was right to liberalize its cross-ownership rule. It would have been even better if the agency had repealed it altogether.

At press time a full Senate vote on the Senate resolution was expected soon.

No Monopoly Threat

FCC’s decision to modify its ban on cross-ownership of newspapers and broadcast licensees was not a precipitous decision: The commission had been studying and taking public comment on the issue for 11 years.

Nor was the change radical. Under the new rules, cross-ownership is still presumed to be contrary to the public interest in all but the 20 largest U.S. markets. Even in those markets, cross-ownership with a television station is presumed to be in the public interest only if the station is not one of the top four stations and at least eight independently owned TV stations and major newspapers remain in the market (not counting Internet-only publications).

These initial presumptions may be rebutted by evidence that a particular deal is or is not in the public interest. The final decisions are made on a case-by-case basis.

FCC’s modified rule does not open the doors for anyone to monopolize anything. Newspapers largely would be allowed to own or be owned by broadcasters only in markets larger than that of St. Louis. In these markets, concentration is hardly an issue–18 of the 20 have at least 10 independently owned television stations, and 17 have at least two major newspapers. On average they have some 70 independently owned radio stations.

Benefits Likely

The new rule promises significant benefits for newspapers, broadcasters, and consumers. This is not just a matter of cutting costs. Joint ownership can give the combined operation the resources to improve its offerings to consumers. Three separate academic studies commissioned by FCC found television stations cross-owned with newspapers provided between 3 percent and 11 percent more local coverage than was provided by standalone TV stations.

Allowing such combinations could preserve competition in a market by allowing a struggling newspaper to keep up with a larger rival.

There is anecdotal evidence, for example, that the cross-ownership ban decreased newspaper competition in the Washington, DC area. For decades The Washington Star served as a strong competitor to The Washington Post, aided–according to longtime WMAL-AM radio host Chris Core–by being under joint ownership with WMAL and WMAL-TV. But when FCC rules forced the sale of the radio station in 1977 and divestiture of the Star in 1978, the paper became a much weaker competitor and folded in 1982.

Failures Prove Market’s Soundness

Cross-ownership certainly is no panacea. Some industry observers doubt the claimed synergies can be widely realized. Not every combination has been a success.

In 2006, for example, The Washington Post entered into a partnership with a local FM radio station to provide “Washington Post Radio,” a broadcast outlet for the Post‘s news coverage, often featuring the newspaper’s print staff. While such partnerships have worked elsewhere, in this case the two media cultures simply failed to mesh, and the venture was abandoned after about a year.

The possibility of failure, however, is no reason to ban such efforts: Few business strategies come with a guarantee of success. In fact, the risk of failure underscores the relative lack of market power held by newspapers, even those as large as The Washington Post.

Room for Improvement

A real problem with FCC’s new rules is not that they liberalize too much but that they don’t liberalize enough. The limitation of newspaper-TV cross-ownership to the top 20 markets, for instance, is unnecessary given the other safeguards provided.

Of even more concern is that the detailed rules provide only a “presumption” any given combination is or is not in the public interest, leaving FCC to make final determinations case by case.

FCC states these determinations will be based on very specific, objective factors, but debates over media ownership have often been driven by the content of media instead of their structure. They are frequently based on ideological concerns over whether this or that cause is being covered and who is providing that coverage.

Much of the current media debate, for example, has been aimed at one individual–Rupert Murdoch. “Help Us Stop Rupert Murdoch,” read an email from the pro-regulation advocacy group Free Press hours after the Senate committee vote on S. J. Res. 28. Last year the same group coauthored (with the Center for American Progress) a report urging FCC to tighten broadcast ownership caps in order to “correct” alleged conservative bias in talk radio.

This is exactly the sort of content issue in which the government should play no role.

Rule Should Be Eliminated

Instead of keeping the door open to such interference with content, FCC would have done better to eliminate its cross-ownership rule completely. Media choice and competition would still be protected through well-established competition laws already enforced by antitrust authorities.

Nevertheless, while FCC should have gone farther, its rule changes are a small step in the right direction that recognizes the twenty-first century realities of the newspaper business.

The Senate should carefully consider the potentially harmful consequences of reinstating twentieth century ownership rules in a media marketplace where they don’t belong.

James L. Gattuso ([email protected]) is senior research fellow for regulatory policy at The Heritage Foundation. An earlier version of this article appeared as Heritage Backgrounder #2133. Reprinted with permission.