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Weekly UpdatesI. INTRODUCTION
While the Telecommunications Act of 1996 ("1996 Act") focused largely on updating common carrier policy, several provisions modified broadcast--especially radio--licensing and ownership. (1) Any change in media ownership policy soon generates hot debate in this era of ever-tighter consolidation across the economy, and these statutory changes and the proceedings they prompted were no exception.
Critics have long lamented that media are controlled by too few big owners. (2) Persuaded that ownership diversity was vital to the public interest, for decades the Federal Communications Commission ("FCC") limited radio and television station ownership at both the local market and national levels. Various FCC policies sought to increase content diversity, economic competition, and ethnic minority entry and participation. (3) Such policies followed the presumption that ownership of print or electronic media outlets affected their content and that diverse editorial points of view are important in a democracy. (4) At the same time, control of advertising outlets (such as radio stations) has been one important factor in determining healthy competition at both market and national levels. (5)
Taking these and other presumptions into account, broadcast ownership policy has traditionally questioned how many outlets (individual media, such as a radio station) may be controlled by any one ownership voice. (6) While the online world is changing the concept of a local marketplace, issues of ownership have typically focused more on market rather than national levels, as audiences select among those media outlets available to them. A New Yorker has little interest in what media are available to audiences in San Diego.
Many factors contribute to the decision to acquire one or more media outlets, the potential for making a profit chief among them. If ownership of several media outlets in one market offers the option of greater return through increased efficiency, such as automation or shared resources, so much the better. In some cases, ownership of multiple media has been pursued to expand economic or political power--Hearst or Murdoch come to mind. Availability of investment capital and low interest rates are also important facilitators. Changing technology has often encouraged consolidation. And obviously, policy changes can affect ownership, as the 1996 Act's provisions have demonstrated over the past decade.
IX. LICENSE RENEWALS
While the 1996 Act increased radio station license terms from seven to eight years, the more important policy change affected license renewals. For decades, broadcasters had pressed both the FCC and Congress to establish some degree of "renewal expectancy" if a licensee provided acceptable service. While few licenses were ever challenged in so-called comparative renewals, and fewer still denied, the issue remained hotly controversial and kept legions of attorneys busy at a high cost to broadcasters even if licenses were nearly always renewed. One notable case involved fourteen licenses worth over one billion dollars, several of which were eventually reassigned. (8) While process seemed at times to overtake substance in these proceedings, the FCC had little choice given the statutory requirements in the 1934 Communications Act ("1934 Act"). (9)
With a sweep of its legislative hand, Congress removed all this with a new subsection (k) added to Section 309 of the 1934 Act. It requires that a license be renewed if the licensee fulfills three requirements: (A) the station has served the public interest, convenience or necessity; (B) the licensee has not been found guilty of "serious violations" of the Act or FCC rules; and (C) the licensee has committed "no other violations" of the Act or FCC rules, "which, taken together, would constitute a pattern of abuse." (10) These generalized standards--none of which speak directly to the quality of the program service provided--are very easy to meet for the vast majority of stations. Only if a licensee is found not to meet these standards, and then only if "no mitigating factors justify the imposition of lesser sanctions," can the FCC deny a license. (11) And only after such a denial may the FCC even begin to consider a different licensee. Put simply, the "comparative" aspect of renewals was eliminated. Renewals became all but automatic, making the eight-year term more a matter of minor administrative review than any real threat of a loss of license for outlets that broadcast for decades. (12)
This change is interesting on two counts. Most importantly, it removes any regulatory discretion from the FCC--the rule is written such that licenses will be renewed save for egregious violations. The burden of proof to deny appears to be on the FCC as competitor consideration is prohibited. It does not get much clearer than that. And to underline its intent, Congress made this provision retroactive to renewals after May 1, 1995, eight months before the 1996 Act was passed--just about the only retroactive enactment in the 1996 amendments.
As best as can be determined, there have been no licenses vacated or not renewed under these 1996 provisions--other than a relative handful of licensees (nearly all AM) that have voluntarily surrendered their permits to operate. Or turning the statement around, the 1996 provisions clearly worked just as broadcasters hoped they would. Lacking comparative renewals--or fear of such--active membership in the broadcast bar has declined accordingly. An issue that for years took up reams of paper and hours of legal billing has virtually disappeared.
III. LOCAL OWNERSHIP
Of presumably lasting impact are the 1996 Act's provisions concerning how many stations one owner can control in a single market. Until 1992 FCC adhered to its duopoly (13) policy forbidding a licensee to own more than one station of any type--AM, FM, TV--in a given market. With the 1996 amendments, Congress (acknowledging the huge post-1945 growth in the number of radio outlets from about 900 to some 12,000) concluded that such a one-to-a-customer rule was no longer necessary in radio. Instead, using a graduated scale based on market size, defined by how many outlets were licensed, legislators allowed ownership of up to eight AM or FM stations as outlined in the following table: (14)
Under examination, however, these seemingly firm limits are actually flexible. The 1996 Act allows for a licensee to own more than the number of stations shown if an applicant can demonstrate that to do so "will result in an increase in the number of radio broadcast stations in operation." (15) Presuming no added interference, this would not seem a difficult standard to achieve where frequencies remain vacant. On the other hand, the law says no single owner can control more than half the stations in any market. The market ownership caps refer, of course, only to numbers of stations--they say nothing about the audience popularity or economic power of those stations. One outlet is seen as the equivalent of another. Yet clearly a multiple outlet cluster located in a major market will rapidly become a jewel in the crown of any multiple station owner.
The 1996 Act also called for continuing reassessment of all ownership policy. Section 202(h) requires the FCC to review all of its broadcasting ownership rules every two years. (16) This has led to a series of FCC studies and proceedings and more than a few court reviews and reversals. Regular reports on the state of radio broadcast ownership appeared through 2001. (17) In a special 2002 staff research report, FCC data showed that since the 1996 Act, there had been a decline in the number of separate station owners in most radio markets. New York saw a drop from thirty-three owners to twenty-two in that five year period, while Los Angeles declined from thirty-nine to twenty-eight, Chicago from fifty-nine to thirty-seven, and Washington, D.C. dipped from thirty-one down to twenty-one. (18) While a few markets remained little changed and a handful actually saw an increase in competition, the predominant trend was clear--fewer owners operated more stations. Indeed, though the overall number of radio outlets rose by 5.4% in the five years following the 1996 legislation, the number of station voices (owners) declined by more than a third (34%). (19)
Armed with industry data and lobbying, as well as three-quarters of a million public comments (virtually all of the latter against further loosening of the rules), the FCC issued an extensive set of broadcast and cable ownership policy changes in June 2003. (20) Included was a rule changing how radio markets would be defined for the purposes of attributing station ownership. Rather than using station signal contours (maps showing predicted coverage areas based on power, antenna location, etc.), the FCC said it would apply geographic market definitions as established by Arbitron, the radio ratings company. Under the Arbitron method, all stations licensed to communities in a market and stations licensed elsewhere but substantially listened to (or "home") in that market will count toward the limits shown in the table--a more stringent definition than had prevailed since 1996. The decision added that both commercial and noncommercial outlets will be counted in determining the number of stations in a market. This change was one of the few to be upheld when most of the remaining FCC rules, including an FCC decision to retain the existing radio ownership caps based on market size, were stayed and then remanded in a court appeal. (21) As is its normal practice in such rulemakings, however, the FCC said it would not require divestiture of radio stations that exceeded the new market definition until and unless they are sold or traded. And several large owners did exceed the statutory limit of eight outlets--in 2003, for example, Clear Channel alone owned from eleven to fifteen stations per market, under the old definition, in sixteen different communities--and controlled nine stations in a dozen further cities and towns. (22) Some of these were smaller and overlapping markets that "allowed"--again, under the old market definition--Clear Channel to control well over half of the audience and advertising revenue, even though such cases appeared to exceed limits set by Congress in 1996. Few of these stations have been sold or traded in the years since.
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