Captive audience

Introduction

As Federal Communications Commission Chairman Michael Powell mulls over whether the FCC should loosen rules on media ownership, he might want to take a ride through Birmingham, Ala., the town of his birth.

If he flips on his car radio, he will find that of 40 commercial radio stations within a 40-mile radius of the city, 15 are owned by three giant out-of-state companies. (Another eight are gospel or Christian stations.) If he stops at a diner to read the paper and watch the news, he will find that one of the largest private media companies in America owns the Birmingham News and the local cable television system.

For those few people left in the city who receive their television signal over the air, of the four major commercial network affiliates in Birmingham, one is owned by Media General Inc., the second by General Electric, the third by Australian billionaire Rupert Murdoch’s News Corp. and the fourth by Allbritton Communications.

A survey of the hometowns of each of the five FCC commissioners by the Center for Public Integrity reveals a heavy concentration of ownership by large, out-of-town media companies in four of them. Only Commissioner Jonathan Adelstein’s hometown of Rapid City, S. Dak., is still mostly in local hands.All are huge media companies. None is from Birmingham.

The experience of those who live in the home cities of the commissioners is not unique. Similar situations can be found in virtually every mid-sized and larger market in the nation, the Center discovered.

The new site is going up in advance of a scheduled June 2, 2003 FCC meeting which will be conducted to decide whether rules restricting ownership in cities like Birmingham and Rapid City should be relaxed. The meeting is part of a biennial review mandated by the Telecommunications Act of 1996.In an effort to help people learn more about media ownership in their communities, the Center has created a searchable database containing information on virtually every television station, radio station, cable system and telephone company in the United States. It also identifies the top 100 newspapers and who owns them.

The commission will consider revising six rules that govern how much of the national media can be controlled by a single company. Some date back to 1941; two have been invalidated by federal court decisions.

When the FCC considers restrictions on media ownership, it is primarily concerned with individual communities. In an effort to understand the media landscape at the community level, the Center has examined the hometowns of each of the five commissioners.

Of the 203 commercial radio stations identified in the Center analysis, 50 are owned by four publicly traded, out-of-state radio conglomerates. Twenty-seven of those are owned by radio giant Clear Channel Communications.Among the findings of the survey:

• The cable systems in the five communities are controlled by four companies. AOLTime Warner owns systems in Charlotte, N.C., and Milwaukee; Birmingham’s system is owned by Advance/Newhouse, which is also programmed by AOL Time Warner; Louisville’s system is owned by Insight Communications Co., the nation’s ninth-largest cable company.
• Of the 20 network affiliates in the five cities, 14 are owned by out-of-state companies, including two each by News Corp. (Fox Entertainment Group) andHearst-Argyle Television Inc. (a division of Hearst Corp.).

Birmingham to Louisville

As commissioners review the six rules, they are to consider three basic principles: diversity, competition and “localism” (local control). At the same time, commissioners will also look into the proliferation of other media sources now available to the public, including cable and satellite television and the Internet.

Almost due north of Birmingham, about 360 miles along I-65 is Louisville, home of the Kentucky Derby and birthplace of Republican FCC Commissioner Kathleen Abernathy.

The Louisville Courier-Journal is a Pulitzer-prize-winning newspaper which has for years enjoyed the reputation as one of the best dailies in America. In the mid-1980s, the family-owned Courier-Journal was bought by Gannett Company Inc., publisher of USA Today. Gannett is the nation’s largest newspaper publisher, with 100 dailies, and the eighth-largest television station owner by audience reach.

McLean, Va.-based Gannett does not own any television stations in Louisville. In 1975, the FCC decided to ban ownership of a television station and a newspaper in the same market. Gannett has lobbied against the restriction and would like to see the FCC throw it out on June 2.

“We have finally taken this one by the reins,” Powell told a meeting of the Newspaper Association of America. “It’s difficult to maintain the rule in its current form.”Indications are the company may get its wish.

At the National Association of Broadcasters convention in April, commissioners Abernathy and Kevin Martin went on the record in support of relaxing or eliminating the ban, making the demise of the rule all but certain. A simple majority of the five commissioners is required to adopt new rules.

Gannett was recently criticized by the Media Access Project for failing to cover a forum on the ownership issue in Phoenix, where the company owns the dominant newspaper and an NBC affiliate.

Gannett issued a statement which was quoted in the trade paper Broadcasting & Cable: “KPNX and The Arizona Republic have filed extensive comments throughout the commission’s ongoing review of its ownership rules. Our consistent position is that given the tremendous increase over the past 28 years in the number of information/entertainment sources available to consumers, the newspaper-broadcast cross-ownership rule is outmoded and should be repealed.”

When Gannett bought the Republic in 2000, it did so betting the FCC would kill the cross-ownership rule, according to published reports at the time.

Louisville plays host to another media giant. Clear Channel Communications owns 10 radio stations in the Louisville area, the Center database shows.

The San Antonio, Texas-based radio giant owns 1,184 stations and reported $8.4 billion in revenues last year. The company controls more of the AM/FM dial than any other broadcaster.

Clear Channel built its radio empire thanks to the 1996 act, which removed the national cap on radio station ownership and dramatically loosened it in individual markets. Clear Channel and other large publicly traded corporations have taken advantage of the looser caps by centralizing operations.

According to FCC Commissioner Michael Copps, there are 34 percent fewer radio station owners than before 1996. “If you like what you hear on radio today, you’re going to love what’s going to happen to newspapers, television and cable,” he said.

Clear Channel has been blasted for cutting news departments and broadcasting radio shows far from where they are aired. The company also received some harsh criticism for an incident in Minot, N.D, where it owns six of the city’s eight radio stations. Emergency workers responding to an ammonia spill say they were unable to reach anyone at the radio stations so they could warn the public.

Abernathy, who has been in favor of deregulation, has nevertheless expressed her desire to change the way radio markets are configured in an effort to loosen the company’s stranglehold. “Because of the way our markets are defined, in certain markets they’ve clearly acquired more power than we would have wanted,” she said at a news conference. “Everyone agrees this is something we have to fix.”

Despite the concerns, the FCC will consider revising a 1941 rule that allows radio companies to own a maximum of eight stations in the largest markets. Clear Channel wants this rule eliminated; consumer groups want it retained.

On to Charlotte

About 490 miles southeast of Louisville is Charlotte, N.C. A southern town at heart, Charlotte has enjoyed remarkable growth in the past decade and has become a regional financial center.

The radio business in Charlotte is dominated by two major players, Clear Channel, with seven stations, and Infinity, the radio division of media giant Viacom Inc., also with seven stations.Republican Commissioner Kevin J. Martin relates that he “grew up on a gravel road in Waxhaw,” a small town just outside of the city.

While Viacom’s radio holdings are considerable – Infinity is No. 2 behind Clear Channel in revenue – it is the company’s television holdings that have drawn scrutiny. Viacom is the No. 1 television broadcaster in the U.S. based on audience reach. Another FCC rule up for consideration would allow the company to get bigger.

In 1941, the FCC limited the total audience reach of a single television broadcast owner to no more than 35 percent of the nation. The FCC is expected to raise that limit, possibly to 45 percent, according to those close to the issue, or throw it out altogether. Regardless, commissioners have to do something about it – the U.S. Court of Appeals for the D.C. Circuit found that there was no legal justification for the limit and remanded the issue back to the commission.

Viacom’s television stations reach 38.8 percent of the nation, according to Broadcasting & Cable, meaning the company is currently over the limit. In reality, Viacom reaches a great deal more of America than that. When the FCC measures market reach, it discounts UHF stations by half, a method instated when the UHF band was new and barely used. If the full reach is calculated, Viacom actually reaches 44.8 percent of the American audience. News Corp.’s Fox network is also currently over the limit and has lobbied hard to have it raised.

Charlotte is also home to two stations owned by Capitol Broadcasting, a North Carolina company run by third-generation broadcaster Jim Goodmon. Goodmon strenuously opposes raising the national ownership cap.

Speaking at a forum on media consolidation sponsored by the New America Foundation recently, he said that the elimination of the cap will have a negative effect on one of the three goals outlined by the FCC, that of promoting local control in the media.

“We cannot continue this consolidation and have any localism left,” Goodmon told the panel.

Goodmon also disagrees with the idea that deregulation will enhance competition by creating a free market, noting that there is only a limited amount of space on the television airwaves.

“This is not a free market – there are only 1,300 television stations,” he said.

Goodmon’s position, along with that of other independent broadcasters, has split the powerful broadcasting lobby, the National Association of Broadcasters. Large owners like Viacom, GE and Fox support eliminating the national cap. Smaller independent broadcasters in the NAB oppose it.

Martin himself has been something of a wildcard in the debate. He has close ties to the Bush administration, but he bucked Powell on a vote on telephone competition, and will be a key vote on the ownership issues.

Milwaukee and the historian

Milwaukee is home to Journal Communications Inc. The employee-owned company owns the dominant newspaper in town, the Milwaukee Journal-Sentinel, as well as two television stations in the city – WTMJ-TV, the NBC affiliate, and WPXE-TV, a PAX affiliate. It also owns two powerful radio stations, the 50,000 watt WTMJ-AM and adult contemporary station WKTI-FM.North and west of Charlotte is Milwaukee, hometown of Democratic Commissioner Michael Copps, who served for more than 12 years as chief of staff of U.S. Sen. Ernest “Fritz” Hollings (D-S.C.) after a brief stint as a history professor at Loyola University in New Orleans. Copps has been the most vocal opponent of loosening ownership rules and has been adamant that Powell is not giving the issue enough public input. A single FCC-sponsored public hearing was held on the rules earlier this year, but Copps and fellow Democratic Commissioner Adelstein have been holding their own hearings all over the country.

Deciding whether this type of media dominance is healthy is something the commission has been looking at for decades.

In 1964, the FCC banned a single company from owning more than one television station in a defined market. Dual ownership is legal if there are at least eight separately owned competitors and only one of the dually owned stations is in the top four in the market, as is the case in Milwaukee. Large broadcasters are also lobbying to have this rule tossed out. Odds are good that they will succeed. The rule was remanded by the D.C. Circuit.

The FCC also restricts how many total radio and television stations a company can own in the same market. The cap in large markets is two television stations and six radio stations, or one television station and seven radio stations.

Among the opponents of that rule is Clear Channel, which in addition to owning about 1200 radio stations, is also the 15th largest television station owner in the country. Joining Clear Channel in that view is the National Association of Broadcasters.

The final rule up for consideration is a ban preventing one company from owning two of the four major television networks. This one dates back to 1946 when NBC was forced to divest itself of its “Blue Network,” which would later become ABC. CBS (Viacom), Fox (News Corp.) and NBC (GE) are all in favor of eliminating the ban.

So while Journal Communications owns a newspaper, two television stations and a pair of radio stations in Milwaukee, it is not breaking any rules, not even the ban established in 1975 on owning a newspaper and network in the same town. Journal Communications, like a number of other old media companies across the nation, owned the station and the newspaper before the rule was issued and therefore received a compliance waiver.

A 90-minute drive south of Milwaukee is Chicago, home to the Tribune Co.

In June 2000, Tribune vastly expanded its holdings with the purchase of the Times Mirror Co. for $8.7 billion. The purchase included the Los Angeles Times, Newsday, and the Hartford Courant.

The merger made Tribune the only media company with major newspapers and television stations in the top three markets in America – New York, Los Angeles and Chicago. It also made Tribune the dominant player in Connecticut. While Tribune is grandfathered in Chicago, it is not in its new markets. Despite the FCC rule, the company went ahead with the merger.

The FCC can’t do anything about the Times Mirror deal until the stations have to renew their licenses, which isn’t until 2006 in Los Angeles and 2007 in New York. Tribune is betting the FCC will change the cross-ownership rule at the June 2 meeting.

Viacom and Fox, now over the limit on national television audience reach, are betting the national cap on that rule will go by the wayside as well.

Last stop, Rapid City

Of the five cities we surveyed, Rapid City, South Dakota is the only one virtually devoid of major national media players. Even the cable company is local – Black Hills FiberCom. The sole big media chain is Knight-Ridder, which owns the local Aberdeen News.

Smaller cities don’t offer the same profit potential for large media companies, so markets are often left to small-town, local providers.

“I’m afraid we’re about to create a new Citizen Kane for the 21st century,” Adelstein told an audience at a recent ownership forum. “Or a handful of them.”Rapid City native Jonathan Adelstein was a senior aide to fellow South Dakotan, Sen. Tom Daschle, and advised him on telecommunications policies before being named to the FCC. Adelstein is a Democrat, but he is the son of a Republican state representative. Adelstein has been as vocal as Copps on the ownership issue, perhaps even more so.

Kane of course was the fictional newspaper tycoon portrayed in the classic film by Orson Welles. The character was loosely based on William Randolph Hearst, whose media fortune lives on through a trust set up by his will. Hearst Corp., incidentally, would also like to see the media rules loosened.

Adelstein believes the review is moving too fast and that the media has done a poor job of covering the ownership issue. “I’m beginning to wonder if the media is capable of covering itself,” he said.

Despite that lament, Adelstein and Copps have been getting a good deal of attention because of their cross-country meetings.

Powell and Abernathy would not talk to the Center, but their arguments in favor of deregulation are well known, and fall into two basic areas: the courts are going to throw the restrictions out anyway, and the propagation of new media outlets make the old rules irrelevant.

“We have only done one review since 1996, and we have a really bad batting record,” Powell told the Financial Times in an April 30 story. “We are 0-5 in the courts.”

Commissioner Abernathy made her feelings clear in a speech at the Museum of Television and Radio in New York.

“Some have argued that despite the court decisions and the statutory mandate, we should nevertheless continue to embrace the status quo. But that isn’t really an option because if we don’t commit to this undertaking, our rules will most certainly be appealed and may be remanded or vacated by the courts,” she told the audience.

While the courts have been giving the FCC fits, the rulings are not always without sympathy. For example, on the reversal of the national television ownership rule, the court stated: “Although we agree with the Commission that protecting diversity is a permissible policy, the Commission did not provide an adequate basis for believing the rule would in fact further that cause,” the opinion, Fox Television Stations, Inc. v. FCC, reads.

The other argument is more pragmatic. The rules themselves are so old as to be irrelevant. Three were written in the 1940s, one in 1964, one in 1970 and another in 1975. When written, cable television either did not exist or was not a significant presence. Neither was the Internet nor direct broadcast satellite television and radio. New ownership limits should reflect the significant increase in outlets available to Americans, the argument goes.

“We need to recognize that there are new voices in the marketplace,” Commissioner Martin told the Financial Times.

Cable and the Internet

When the FCC wrote the rules, it was before the Internet age and the prevalence of cable television. But these outlets may not be as wide open as many people think.

As for cable television, the consolidation of that industry has been dizzying. While there are 9,168 cable systems, 87 percent of subscribers are signed up to one owned by one of 10 companies.For one thing, the most popular Internet sites are owned by most of the same large media companies active in other areas. By far the largest and most dominant Internet service provider is AOL Time Warner, with 35 million customers. The huge, diversified media company also has 10.9 million cable subscribers in addition to entertainment, cable channel and publishing holdings.

What’s more, the top cable networks, like ESPN, CNN and Nickelodeon, are largely controlled by media giants AOL Time Warner Inc., Viacom Inc. (CBS), Walt Disney Co. (ABC) and Hearst Corp. These four companies own 12 of the top 20 cable networks.

Finally, hope that the newest consumer electronic technology – direct broadcast satellite television – would create a real competitor, has raised new concerns. DirecTV, with more than 11 million subscribers, has emerged as a real competitor to the cable television industry. But a recent $6.6 billion deal that would give controlling interest to News Corp. and Fox has consumer advocates and competitors worrying that News Corp. head Rupert Murdoch may use the direct broadcast pipeline to push his own programming. The deal is currently awaiting federal approval.

Until recently, the White House has been silent on the FCC’s upcoming meeting. But a recent letter mailed to commissioners by Commerce Secretary Don Evans makes it plain that some change is expected and that the White House is opposed to a delay supported by 15 senators who wrote a letter to the FCC on April 9, 2003, asking for more time.

“On behalf of the Bush administration, I urge the commission to adhere to the schedule you have outlined,” he wrote. “This proceeding presents an important opportunity for the commission to update its rules to reflect the realities of the modern media marketplace with its unprecedented proliferation of outlets for news and information.”

Diller dismissed the idea that the unprecedented proliferation of media outlets has created any more competition than the days when three networks ruled television and radio.One issue that has gotten little attention during the review has been the idea that the airwaves are the property of the public, and the companies that use them have a responsibility to the public at large. Media titan Barry Diller, former programming chief at ABC, chairman of Paramount Pictures and creator of the Fox Network, said as much to an audience at the NAB convention in April.

While the network oligopoly of the past “might have controlled 90 percent of what people saw,” he said, “they operated with a sense of public responsibility that simply doesn’t exist with these vertically integrated giant media conglomerates driven only to fit the next piece of their puzzle for world media dominance.”