Media Diversity at Risk

Corporate Research E-Letter No. 35, May 2003


by Mafruza Khan

On June 2, the Federal Communications Commission (FCC) will vote on proposed changes to longstanding government rules on media ownership. It is widely believed that FCC chairman Michael Powell, and the two other Republican commissioners on the five-member Commission, will vote in favor of loosening government rules which limit the size and reach of the nation's largest broadcasting, newspaper and cable companies.

The rule changes that will be considered by the Commission are part of a regular, congressionally mandated review initiated under the 1996 Telecommunications Act. However, this is the first time the review will involve such drastic changes. Michael Powell has not made his full plan public, but it reportedly calls for the most extensive rewriting of the ownership rules in decades. As Jeff Chester of the Center for Digital Democracy points out, "The rationale for these policies is that they help provide for a diverse media marketplace of ideas, essential for a democracy. They have not been perfect. But these rules have helped constrain the power of the corporate media giants."

According to the Pew Research Center for the People and the Press, only a third of all Americans realize that the public owns the airwaves, and about a tenth are aware that the FCC gives stations licenses for free. In 1997, broadcasters lobbied and received portions of the digital broadcast spectrum - worth, according to some estimates, upwards of $70 billion - for free. The proposed rule changes would further increase media concentration and have a deleterious impact on independent production. At the same time, the changes are expected to result in the loss of local content in favor of homogenized national programming. That has been the experience in the radio market after the restrictions on ownership were eased with the passage of the 1996 telecommunications bill, which, for example, paved the way for Clear Channel Communications to expand from 40 stations to 1,225 and in the process exert unprecedented control over the industry.

Michael Powell has rejected a request from two commissioners to delay the vote even though there is precedent for granting such a request. Michael J. Kopps, one of the two Democrats on the Commission who requested the extension, said that that the chairman was rushing to vote on proposals that could change the media landscape in ways not fully understood.


The six key rules that are being considered for change are:

1) The newspaper/broadcast cross-ownership ban that prohibits the combined ownership of a major newspaper and broadcast station in the same urban market;

2) The national television station ownership cap that prohibits any one entity from owning TV stations covering more than 35% of the national audience;

3) The dual network ownership rule that prohibits mergers among the four major television networks;

4) The television/radio cross-ownership rule, which limits the number of stations that can be jointly owned in any one market;

5) The local television duopoly rule that limits common ownership of television stations in the same market; and

6) The local radio ownership rule that limits the number of radio stations any one entity can own in a single market.

Commission chairman Michael Powell has said that today's ownership rules don't reflect the realities of the modern media marketplace. They are irrelevant in a multi-media landscape where consumers have choices among hundreds of cable channels, millions of websites and satellite radio. Powell's spiritual father is Mark Fowler, Ronald Reagan's first FCC chairman, who said that public interest rules for television were unnecessary, since TV was just another appliance, "a toaster with pictures." When asked in 2001 what he thought the term public interest meant in the FCC's mission, the current FCC chairman responded, "I have no idea...I try to make the best judgment that I can in ways that benefit consumers. Beyond that I don't know."

A recent analysis by the Consumer Federation of America and Consumers Union, two of the nation's largest consumer advocacy organizations, debunks the notion favored by chairman Powell that a revolution has taken place in the media and communications market that renders the current rules irrelevant. The analysis uses FCC data that show that TV is the American public's dominant source (56 percent of survey respondents) of news and information, while newspapers are the second (23 percent) most important source. Cable and the Internet play a small role as a source of local news - 11 percent and six percent respectively. Internet users, however, use the websites of newspapers and TV stations as their primary source of information. Radio has almost disappeared as an independent source of news.

Critics have also correctly pointed out that while there may be hundreds of channels, there is a paucity of choices. Five major corporations are the gatekeepers and decision makers for the programming choices of the vast majority of the American people. Right wing powerhouses are also expected to grow. The proposed takeover of DirecTV, the country's most powerful satellite service, by Rupert Murdoch's News Corporation is the obvious example. Companies such as the Sinclair Broadcast Group, which reaches 24 percent of the national TV audience, has created repackaged "faux" local news - local broadcasting combined with prepackaged news - like Clear Channel in the radio market.


The major media companies have been engaged in the campaign to loosen government regulations for a number of years. As noted in a study by the Center for Public Integrity, media companies' strategies for winning friends and influencing people have included time-honored techniques such as lobbying, campaign contributions and taking politicians and their staff on junkets. They have often gone either first to the FCC or to Congress to achieve their agenda to end any federal limits on their size and power. Failing legislative or regulatory intervention, they have also launched a powerful attack of the rules in the courts, arguing that the rules violate their right to free speech and are no longer needed to ensure that consumers have access to competing sources of news and entertainment programming. The U.S. Court of Appeals court for the District of Columbia struck down FCC rules or demanded that they be rewritten three times between February and April this year.

The media industry's political power is much greater compared to other industries. In his memoir, "You Say You Want a Revolution," former FCC chairman Reed Hundt comments, "The media industry does not mobilize great numbers of voters and it actually is not comprised of America's largest economically most important companies..." The media's significant and political clout comes from its near ubiquitous, pervasive power to completely alter the beliefs of Americans. Politicians are afraid to take on the news media directly for fear that they will simply disappear from the TV or radio airwaves and from news columns.


Five companies - Viacom (owner of CBS), Disney (ABC), News Corporation (Fox), General Electric (NBC) and AOL Time Warner - control about 75 percent share of production of prime-time viewing. Research conducted by the Project for Excellence in Journalism finds that larger companies and network owned TV stations produce lower quality news shows than do smaller media companies. These five corporations are now on the verge of controlling the same number of television households as the big three broadcast networks did forty years ago. In the past, when three or four broadcast networks controlled so many households, the Commission protected the public's interest in competition and diversity of viewpoints by requiring independent production of programming.

No such policy protects the American public today. Tom Wolzien, a Wall Street analyst terms this "programming oligopoly" and shows that it exists both in the distribution and production of programming. For example, NBC owns outright or holds a significant financial interest in one hundred percent of the new series on its schedule. The other networks are not far behind. Rather than compete fairly in the marketplace of ideas, the networks leveraged their control of the publicly owned airwaves to take over television program production, driving small businesses and creative entrepreneurs, many of whom were women and minorities, out of business.

The biased coverage of the war against Iraq by the mainstream media, particularly by Fox, demonstrates the pitfalls of media concentration. Interestingly, Michael Powell makes the connection between the war and his agenda. He says that bigger media companies are needed more than ever because only they can cover the war the way the Iraq war was covered.


* Viacom - 2002 revenues $24.6 billion. Owns 39 broadcast television stations and 185 radio stations. Cable networks include MTV, Nickelodeon and BET. Other businesses include CBS, UPN, Paramount Pictures, Simon & Schuster and an 80.4 percent equity interest in Blockbuster Video.

* News Corporation - 2002 total revenues $17 billion. Owns (80.6 percent) the Fox Entertainment Group, which includes 20th Century Fox, Fox Television Stations, and Fox Cable (includes sports and movie channels, National Geographic Channel). Fox Television owns 60 television stations and has 188 affiliates. News Corporation is the world's largest publisher of English-language newspapers, including the New York Post. Also owns HarperCollins Publishers.

* AOL Time Warner - 2002 revenues $40.9 billion. Businesses owned include America Online, CNN, Time Warner Cable, Warner Bros. Pictures, Turner Networks (includes TBS Superstation) and HBO. The Warner Music Group's major record labels include Elektra and Atlantic. The publishing business conducted primarily through Time Inc. includes Time, People, Sports Illustrated, Fortune and Money. The Securities and Exchange Commission and the Department of Justice are conducting investigations into accounting and disclosure practices of the company.

* General Electric - 2002 revenues $31.7 billion. NBC provides network television services to more than 220 affiliated stations, produces television programs, operates 28 television-broadcasting stations, operates four cable/satellite networks around the world, and has investment and programming activities in the Internet, multimedia and cable television. Also owns Telemundo, one of the two largest hispanic broadcasting networks.

* Walt Disney - 2002 total revenues $25.3 billion. Operates the ABC Television Network, which has 226 primary affiliated stations. ABC Radio Networks provide programming to more than 4,600 affiliated radio stations. Radio Disney is carried on 51 stations, including 32 that are owned by the company. ABC Radio Networks also produce the ESPN Radio format, which is carried on more than 700 stations, including 215 full-time (four of which are owned by the company), making it the largest radio sports network in the United States. Disney also owns 10 television stations, 44 standard AM radio stations, and 18 FM radio stations.


As Virginia Riskin, President of the Writer's Guild of America, said in her remarks at one of the FCC hearings on the proposed rule changes in February, "The media are the modern-day American Town Square, the place where people from different backgrounds and points of view share their stories and the public learns about the world." Ensuring broadest participation at this modern American town square is an essential precondition for a pluralistic democracy to flourish. The First Amendment rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public. As the Supreme Court has reiterated, "Assuring that the public has access to a multiplicity of information sources is a governmental purpose of the highest order, for it promotes values central to the First Amendment."