Technology and the limits of media ownership

Just what was so objectionable about the Federal Communications Commission's decision to slightly relax a few limits on media ownership?

To hear critics assail the change, which is now on hold after last week's court ruling, you might think a constitutional Armageddon was at hand. Columnists warned that the decision "wounded democracy," while The New York Times lauded the old rules as representing "the heart of our democracy." A report the AFL-CIO prepared before the vote even bears the grave title of "Democracy Unhinged."

Huh? You'd never know it from all that anguished bleating about imperiled democracy, but the changes to the FCC's media ownership rules were entirely modest. If anything, they didn't go far enough.

Some background: The FCC voted 3-2 on June 2 to relax rules that limit ownership of TV stations, radio stations and newspapers, saying decades-old regulations are obsolete, in part, because of the rise of the Internet and other new technologies. The new rules said broadcast networks could own TV stations, which combined reach 45 percent of the national audience, an increase of 10 percentage points.

Note: That does not mean a media company may own 45 percent of all stations. It simply means that a company's broadcasting reach may modestly expand, though it would still be far short of the national reach of, say, newspapers, cable networks or Web sites.

What's more, mergers would still remain subject to antitrust review, and the new rule would only apply to about half a percent of stations nationwide. (If American democracy can survive the Civil War, Richard Nixon, Bill Clinton and the California recall, perhaps it could withstand a change of half a percent.)

Michael Powell, the FCC's Republican chairman, has been taking most of the heat for embracing this hardly radical idea. In July, the House of Representatives voted by a margin of 400-21 to reverse part of the FCC's order, and last Thursday, the Senate Appropriations Commitee followed suit. Other portions of the FCC's order entail ownership limits for newspapers and multiple local TV stations, but Congress has not yet taken issue with them.

On Friday, Powell told me that many of his critics seem stuck in the mid-20th century, fighting a battle that ignores alternative forms of news and entertainment that have sprouted in the last few decades. "This is a technology story," he said. "It's a changing technology story. It's one that doesn't get focused on: Most of the harangue in the daily press you read is a battle you could have had in 1944."

Mergers would still remain subject to antitrust review, and the new rule would only apply to about half a percent of stations nationwide.

"People say, 'Why count the Internet? It doesn't count,'" Powell said. "We have a presidential candidate on the Democratic side who's considered the leading or second-leading candidate who's run his entire campaign on the Internet. I'm not sure why we're so slow to embrace the reality that technology is changing the way an individual consumer can get access to news and entertainment."

Reasons for deregulation
Powell actually understates the deregulatory case. Thirty years ago, American families suffered the malaise of three network TV stations and, if they were lucky, PBS (Public Broadcasting Service) and a few UHF (ultra-high frequency) channels. Only about 7,000 radio stations existed.

Today, there's an information overload, not a lack of it. Families can now choose from 500-plus channels of news and entertainment that are delivered via cable or satellites, in addition to movies on demand, VHS and DVD rentals, satellite radio and nearly twice the number of radio stations as before.

Then there's the Internet. Families are no longer tied to one or two local newspapers: They can read virtually any news organization's Web site anywhere in the world. Besides online news organizations like CNET News.com and its competitors, which were founded during the last decade, the rapid adoption of broadband means the Internet is useful for entertainment as well.

Last week, for instance, Movielink--a joint venture of five major Hollywood studios--added more titles to its lineup and announced new features such as the ability to start watching a movie while it's still downloading.

Given this rich media environment, isn't it a tad premature to proclaim the death of American democracy? If anything, the marketplace seems to be becoming more competitive, not less.

That's why it's reasonable to go even further than Powell and his two Republican colleagues did and deregulate the media environment even more. Deregulated industries, as the United States found out after deregulating the airline industry, become far more efficient and offer customers lower prices than before.

Many of Powell's critics seem stuck in the mid-20th century, fighting a battle that ignores alternative forms of news and entertainment that have sprouted in the last few decades.

This may not happen quickly, but if so-called consumer groups have an honest commitment to American democracy, shouldn't they want to get the government entirely out of the business of deciding who may own a TV station or a newspaper printing press? In such an environment, the public can serve as a check on the power of media outlets: If they cease to serve the needs of their viewers, the brutal discipline of the market means that they'll inevitably lose customers and market share.

Congress, though, likes things just the way they are. Powell says "it's hazardous to predict" what the appropriations committees will do, but he and his aides are already eyeing the endgame: a committee that will convene toward the end of the budget process to hammer out differences between the House and the Senate.

"None of it's relevant until it gets to the conference committee in October," Powell says.

Fortunately, the courts seem able to recognize that the First Amendment still exists. In a February 2002 decision, the influential U.S. Court of Appeals for the D.C. Circuit sided with media companies, including Fox Broadcasting, NBC, Viacom International and the National Association of Broadcasters, which had challenged the FCC's old rules.

A few months later, in April 2002, the same appeals court reached a similar conclusion in the Sinclair Broadcast Group v. FCC case. In that case as well, the court tossed the old rules back to the FCC, which led the agency to its June 2 vote. The injunction, granted by a Philadelphia appeals court, is a setback for Powell, but it's hardly clear that the lawsuit that Prometheus Radio Project and left-leaning advocacy groups brought will succeed.

"I think the battle in those courts is to defend what remains of those rules," says James Gattuso, a regulatory policy analyst at the Heritage Foundation who worked at the FCC from 1992 to 1997. Gattuso even predicts that "you'll see these rules overturned, because they still go too far."

Let's hope so. After all, the First Amendment isn't limited to only print or online media. Why should the U.S. government continue to treat broadcasters that happen to hold FCC licenses as second-class citizens?