FCC debate: Is the Net enough?

But Monday's expected vote on "broadcast ownership" and "cross-ownership" rules has morphed from an obscure regulatory process into a national debate over modifying rules that currently limit how many television or radio stations a media company may own. It pits traditional fears of media monopolization against arguments that the Internet and other new technologies are radically changing the way Americans find news and entertainment.

Proposed changes up for vote include lifting the ownership cap for television networks from 35 percent to 45 percent of the national audience and ending a ban on newspaper-television cross-ownership in all but the smallest cities. If the proposals are approved, media mergers would still have to be OK'd on a case-by-case basis by the FCC and the Justice Department.

Opponents assert that the proposed changes will curb the number of different perspectives heard on the air and that taken to their logical conclusion, such changes will imperil American democracy.

The FCC's three Republican commissioners, who hold the majority over the two Democrats who fill out the ranks, counter by pointing out how technology has provided a wealth of media alternatives simply not available a generation ago. The argument goes like this: The Internet, 802.11 wireless networks, XM and Sirius satellite radio, DirecTV, hundreds of cable channels, new low-power FM radio, and more magazines and books show that deregulation tends to encourage public discourse.

"We see the Internet itself becoming an essential source of important content," FCC Chairman Michael Powell said in a recent speech. "ABC News has just launched the first 24-hour broadband broadcast. MP3 players like the iPod are rapidly becoming the critical source for music and audio applications. And personal video recorders are revolutionizing the way we watch TV."

At one level, Monday's vote represents a high-stakes power struggle at FCC headquarters between left-leaning groups--along with a few conservative allies like the National Rifle Association--and free-market groups and Republicans in Congress. The FCC's tense internal deliberations also highlight an ideological conflict between two wildly different views of how to keep prices low and competition robust: Is it wiser to increase the number of federal regulations or to gradually rescind them?

The deregulatory camp is led by Powell, a Republican who hopes to relax some of the complex rules that, for example, currently limit one company from owning more than six radio stations in areas where at least 20 independent "voices" exist and permit a firm to own two local television stations as long as one of the stations is not among the four most popular ones in the market and at least eight other competitors exist.

Those rules have come under fire in the courts, where a series of judicial rulings have gradually gutted some of the FCC's media ownership guidelines. In some of the cases, federal judges have declared the rules unconstitutional and have even ordered the commission to rewrite them, in one instance calling the rules "arbitrary and capricious."

"Media ownership rules are intended to protect and advance the cherished values of diversity, localism and competition," Powell said on May 15 after rejecting Democratic requests to delay Monday's vote. "These values and the public interest, however, are ill-served by letting stand a body of rules that are unenforceable. When the judiciary reverses our rules, especially ones intended to promote core First Amendment values, it is incumbent on us to repair the shortcomings as quickly as possible."

For a federal agency, even one sued as frequently as the FCC, Monday's vote is unusual because it takes place against the backdrop of a constant threat of court oversight, review and correction.

Storm warning
The two Democratic commissioners, Michael Copps and Jonathan Adelstein, have downplayed the effect of the litigation and court orders, saying that if the rules are amended through Powell's "extremist" proposal, a wave of corporate mergers will sweep the land.

"When this wave recedes, we'll find far fewer media companies left standing," Adelstein told the Media Institute, an industry group, on May 20. "Some of you in this room today may be swept away by that wave. But its principal victim may be our democracy."

Adelstein warned his audience that new technologies do not render existing regulations obsolete. "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. If these scarce licenses weren't valuable, their price wouldn't continue to skyrocket as they have in recent years."

Adam Thierer, director of telecommunications studies at the free-market Cato Institute, said Adelstein is wrong. Thierer points to the entertainment and news options available 30 years ago--daily newspapers, radio stations and three broadcast networks--compared with the many more available today through sources such as the Internet, satellite radio and TV, VCRs and DVD players.

"Today, the Internet gives every man, woman and child the ability to be a one-person publishing house or broadcasting station and communicate with the entire planet," Thierer said. "While the 1973 family could read the local newspaper together, today's families can view thousands of newspapers from communities across the planet."

Thierer said that left-leaning groups warn of media ownership threats but can't point to any real harm that might happen. "But some people say, 'Oh, no, that's not the right way to look at it. You need to look at who owns what and what they're telling the media to say,'" Thierer said. "This is the puppet master conspiracy theory of media."

The World Wide Web has spawned millions of sites offering a cacophony of viewpoints available to anyone almost anywhere, but there are few statistics to show how well the Internet works as a failsafe against media consolidation.

The Web's ability to break news that might never have gotten play in the traditional media is well documented through examples such as the Clinton-Lewinsky scandal, which was first reported on The Drudge Report, a rumor site. At the same time, there are signs that the Web audience, like that of traditional media, tends to coalesce around just a handful of sources. For example, the Web's top three destinations--controlled by AOL Time Warner, Microsoft and Yahoo--pull in nearly twice the traffic of their next closest rivals, and the drop off continues sharply from there, according to Internet research firm ComScore.

Top destinations for news, such as CNN.com, ABCNews.com and MSNBC.com, are controlled by the same companies that dominate the media in television and newspapers, many of which are subsidiaries of larger media conglomerates. Although readers can in theory find news from other sources if they want it, they face other gatekeepers on the Web: Search engines guide millions of readers to Web pages via proprietary formulas that include openly selling top placement of links to companies that pay for the privilege.

Consolidation frustrations
Another force for online consolidation comes from the cable industry, which is now the largest provider of high-speed Internet access in the United States. That has led some to fear that one service provider may ultimately have control over media delivered to both the television and the computer screen, potentially reducing consumer access to information and diversity of opinion.

Early plans to marry the Internet and interactive information services to traditional media outlets have foundered badly, however, leaving it an open question whether that poses a genuine threat to consumer choice.

AOL Time Warner--the biggest experiment to date in new consolidated media--is sagging under $26 billion in debt and casting off assets in a bid to remain competitive. Similarly, Vivendi Universal is seeking buyers for its U.S. media properties after a failed bid to tie together music, video and other entertainment with wireless and other experimental distribution platforms.

At the heart of the FCC's media ownership squabble is the 1996 Telecommunications Act, which handed the FCC broad authority to deregulate the way the broadcast and cable TV industries worked. It repealed some of the laws prohibiting telephone/cable and cable/broadcast ownership, and made it easier for a single broadcaster to reach a large number of American households.

It also set in motion the process that has led to Monday's scheduled vote. The 1996 law ordered the FCC to review "all of its ownership rules biennially as part of its regulatory reform review" and "repeal or modify any regulation it determines to be no longer in the public interest."

Opponents are determined to prove that it's essential to the public interest to keep the current rules--or something close to them--in place, despite the court orders.

MoveOn.org, a left-leaning advocacy organization, has sent out thousands of messages to its members warning that if the vote goes as expected, "the resulting concentration of ownership could be deeply destructive to our democracy." Jeff Chester, director of the Center for Digital Democracy, warns that it may be possible for one company to control a community's major media outlets, including cable systems and broadband Internet service providers. Even William Safire, a conservative columnist with The New York Times, wrote on May 22 that "no other decision made in Washington will more directly affect how you will be informed, persuaded and entertained."

Taking precisely the opposite view is Rep. Billy Tauzin, R-La., chairman of the powerful House of Representatives committee that oversees the FCC. Tauzin said the advent of the Internet and other new technology makes it high time to review the ownership rules, some of which date back to the 1940s.

In a letter to the two FCC Democrats on Friday, Tauzin stressed that the need to "reassess these rules was made all the more urgent by the recent Court of Appeals decisions (that overturned) four of the commission's ownership rules."

"The enormously competitive and diverse environment within which all media outlets now exist--created by the growth of cable, satellite, and the Internet over the past two decades--necessitates a top-to-bottom reassessment of the present-day validity of the decades-old assumptions underlying these rules," Tauzin wrote.