Drop Outdated Media Ownership Rules

Drop Outdated Media Ownership Rules
January 1, 2007

Randolph J. May

Randolph J. May is President of The Free State Foundation in Potomac, Md. (read full bio)

The Federal Communications Commission (FCC) is once again reviewing its media ownership rules. These are the rules that dictate the extent to which various types of media outlets may be commonly owned.

The stated purpose of the ownership rules is to promote competition, diversity of viewpoint, and the availability of local news and information. These may be worthy public policy objectives. The problem is that the restrictions were adopted between the 1940s and the 1970s, when most people got their news and information from the local newspaper or a few over-the-air broadcast stations. The rules do not factor in the widespread growth and influence of cable television, satellite TV, wireless networks, and, most significantly, the Internet.

That’s why most of these analog-era ownership rules should be substantially relaxed or eliminated to reflect the realities of the diversity of information sources available in today’s media marketplace.

Given the limits of space, I want to focus on the newspaper/broadcast station cross-ownership rule, which was adopted in 1975, more than 30 years ago.

Blanket Ban Reversed

The Telecommunications Act of 1996 requires the FCC to review periodically all its ownership rules to determine whether they “are necessary in the public interest as a result of competition” and repeal or modify any regulation it determines to be no longer so. Applying this standard, in June 2003 the commission concluded that the blanket ban on newspaper/broadcast station cross-ownership was no longer justified.

The agency found that because newspapers and broadcast stations do not compete in the same economic market, eliminating the ban could not harm competition. There was evidence demonstrating that the efficiencies from co-ownership actually promoted localism because such commonly owned media outlets produce more and higher quality local news and public affairs programming than non-commonly owned outlets.

Finally, the FCC determined, in light of the array of media outlets available in most media markets today, that the blanket prohibition was not necessary to promote viewpoint diversity. Rather than eliminating the restriction outright, however, as it should have done, the agency devised a complicated diversity index (DI) as a means of measuring the availability of outlets that contribute to viewpoint diversity in local markets. The Internet was included in the DI as a source of local information. Applying the complex DI formula, the FCC barred newspaper/broadcast cross-ownership in smaller markets and allowed some common ownership in larger markets.

Upon review in Prometheus Radio Project v. FCC, the U.S. Third Circuit Court of Appeals agreed with the FCC that the blanket ban was no longer in the public interest. But it found fault with the DI’s application to the newspaper/broadcast rule, especially the inclusion of the Internet as a media outlet for purposes of contributing to viewpoint diversity: “[M]edia outlets have an entirely different character from individual or organizations’ websites and thus contribute to viewpoint diversity in an entirely different way. They provide an aggregator function (bringing news/information to one place) as well as a distillation function (making a judgment as to what is interesting, important, entertaining, etc.).”

Diverse Viewpoints

Even in 2004 this was a decidedly old-media perspective. In any event, today there is no doubt that an almost uncountable number of Web sites and blogs of individuals and organizations offer a diversity of viewpoints on issues, including local ones, not only routinely exposing inaccuracies in reporting by traditional media but performing similar aggregation and distillation functions. The court’s refusal to count the Internet as contributing to the diversity of viewpoints exemplifies the disconnect between today’s fast-changing competitive media environment and the decades-old ownership regulations.

We are bombarded almost daily with jarring reminders that the existing rules no longer make sense. Just in October we learned that Google Inc. is acquiring, for $1.65 billion, YouTube Inc., a popular site for sharing video content, much of it original. YouTube didn’t even exist when the court rejected Internet sites as separate sources of information.

While it is past time for the FCC to relax all of its outdated media restrictions, the newspaper/broadcast rule is especially ripe for jettisoning. Indeed, within a short time, there actually might be calls for the government to aid ailing newspaper and broadcast outlets in order to keep them from failing.

That will be another story. For now, the truth is that the American people have never had available such an abundance and diversity of information, including information about local affairs. The government ought to just get out of the way--a stance much more consistent with our First Amendment values--and let the marketplace dictate the ownership arrangements that most efficiently satisfy the very diverse tastes and needs of America’s media consumers.


Randolph J. May (rmay@freestatefoundation.org) is president of The Free State Foundation. A longer version of this article originally appeared in the National Law Journal.

Randolph J. May

Randolph J. May is President of The Free State Foundation in Potomac, Md. (read full bio)