quences, such as increased pollution-related deaths as polluters employ technologies that asing what is not measured In short, choosing a method of measurement of media concentration is not the same as a debate about using the metric system versus the avoirdupois system of weights First, we need to decide what is bad (or good) about such concentration, either in itself, or because of its effects. and then second we must design measurements of concentration or of the effects of concentration that make sense in terms of policy goals or effects Therefore, we cannot jump directly into the measurement debate without consid- ering what it is that we want to measure and why. On the other hand the what and the why are highly contentious issues. There cannot be a single"correct way to measure concentration if people differ about the nature of the problem, its effects, and its proper remedies. Given the limited scope of the assignment here, it seems most effective simply to make, for purposes of this paper, some assertions or assumptions about these matters Then we can turn to the measurement issues without having the ground shifting under foot. Even then there is no single correct way to measure concentration, as will be dem- onstrated below. Different conclusions about measurement may well result, of course, if one accepts assumptions about the nature of the problem that differ from those used here The media Concentration problem Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof, or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of griev ances CONSTITUTION OF THE UNITED STATES OF AMERICA, AMENDMENT I, adopted 1791 (emphasis added) Freedom of speech and of the press from government abridgement is a fundamen tal right conferred on American citizens by the Bill of Rights. Although this right has been much weakened by the Supreme Court's reluctance to accord the same freedom to electronic media as to print, it retains a central position in our constellation of political freedoms. Indeed, many Americans understand this freedom to be broader(or different) than it is. It is common to encounter those who assert or simply assume that freedom of
- 4 - 4 quences, such as increased pollution-related deaths as polluters employ technologies that reduce what is measured by increasing what is not measured. In short, choosing a method of measurement of media concentration is not the same as a debate about using the metric system versus the avoirdupois system of weights. First, we need to decide what is bad (or good) about such concentration, either in itself, or because of its effects, and then, second, we must design measurements of concentration or of the effects of concentration that make sense in terms of policy goals or effects. Therefore, we cannot jump directly into the measurement debate without considering what it is that we want to measure and why. On the other hand, the what and the why are highly contentious issues. There cannot be a single “correct” way to measure concentration if people differ about the nature of the problem, its effects, and its proper remedies. Given the limited scope of the assignment here, it seems most effective simply to make, for purposes of this paper, some assertions or assumptions about these matters. Then we can turn to the measurement issues without having the ground shifting underfoot. Even then there is no single correct way to measure concentration, as will be demonstrated below. Different conclusions about measurement may well result, of course, if one accepts assumptions about the nature of the problem that differ from those used here. The Media Concentration Problem Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances. CONSTITUTION OF THE UNITED STATES OF AMERICA, AMENDMENT I, adopted 1791. (emphasis added) Freedom of speech and of the press from government abridgement is a fundamental right conferred on American citizens by the Bill of Rights. Although this right has been much weakened by the Supreme Court’s reluctance to accord the same freedom to electronic media as to print, it retains a central position in our constellation of political freedoms. Indeed, many Americans understand this freedom to be broader (or different) than it is. It is common to encounter those who assert or simply assume that freedom of
speech and press means freedom from any source of restriction or constriction, public or private. Similarly, many believe, or assume, that freedom of speech and press encom- passes an affirmative duty on the part of Congress to ensure that media content meets various criteria, such as fairness or diversity, or that it contains certain features, such as educational and cultural merit, or not contain certain other features, such as obscenity Unless we make an effort to think in an unusually disciplined way, most of us are capable of believing in contradictory things without discomfort, and beliefs about freedom of speech and press are examples. But a central lesson of economics is that, if resources are limited and production is efficient, it is not possible to increase the amount of diversity except by suppressing speech and also reducing consumer welfare. This means that common interpretations of First Amendment"goals"that transcend the original ban on abridgement are, generally, doomed to result both in abridgement and widely accepted economic policy criteria Self-indulgent, sloppy or sentimental thinking by the public, like any other accu- rate portrayal of human behavior, must be acknowledged and accounted for in policy analysis, but has no place in the analysis itself. Policies implementing basic political freedoms must be designed to protect citizens from the tyrannical actions of the British crown obnoxious to the Framers--and still widely practiced, today, in many parts of the world. Unfortunately, we are up to our ears in sentiment when it comes to media concen- tration, and sentiment deeply infects both academic and judicial analysis of the problem The most recent example was the spectacle, in 2003, of political outrage triggered by the FCC's meager proposed reforms of its media ownership rules The background of the controversy is as follows. The Congress in 1996 adopted by large margins a Telecommunications Act(Pub. L No. 104-104, 110 Stat. 56(1996)), largely deregulatory and pro-competitive in its language and in many of its provisions The Congress clearly anticipated that increased media competition would lessen the fu ture need for current restrictions on media ownership, which were designed to promote diversity and prevent undue concentration. Accordingly, the new law required the fCc to undertake biennial reviews of its ownership policies and to repeal those no longer neces- sary as a result of competition(1996 Act $202(h)). The FCC understood this to be an in-
- 5 - 5 speech and press means freedom from any source of restriction or constriction, public or private. Similarly, many believe, or assume, that freedom of speech and press encompasses an affirmative duty on the part of Congress to ensure that media content meets various criteria, such as fairness or diversity, or that it contains certain features, such as educational and cultural merit, or not contain certain other features, such as obscenity. Unless we make an effort to think in an unusually disciplined way, most of us are capable of believing in contradictory things without discomfort, and beliefs about freedom of speech and press are examples. But a central lesson of economics is that, if resources are limited and production is efficient, it is not possible to increase the amount of diversity except by suppressing speech and also reducing consumer welfare. This means that common interpretations of First Amendment “goals” that transcend the original ban on abridgement are, generally, doomed to result both in abridgement and widely accepted economic policy criteria. Self-indulgent, sloppy or sentimental thinking by the public, like any other accurate portrayal of human behavior, must be acknowledged and accounted for in policy analysis, but has no place in the analysis itself. Policies implementing basic political freedoms must be designed to protect citizens from the tyrannical actions of the British crown obnoxious to the Framers—and still widely practiced, today, in many parts of the world. Unfortunately, we are up to our ears in sentiment when it comes to media concentration, and sentiment deeply infects both academic and judicial analysis of the problem. The most recent example was the spectacle, in 2003, of political outrage triggered by the FCC’s meager proposed reforms of its media ownership rules. The background of the controversy is as follows. The Congress in 1996 adopted by large margins a Telecommunications Act (Pub. L. No. 104-104, 110 Stat. 56 (1996)), largely deregulatory and pro-competitive in its language and in many of its provisions. The Congress clearly anticipated that increased media competition would lessen the future need for current restrictions on media ownership, which were designed to promote diversity and prevent undue concentration. Accordingly, the new law required the FCC to undertake biennial reviews of its ownership policies and to repeal those no longer necessary as a result of competition (1996 Act §202(h)). The FCC understood this to be an in-
struction to deregulate gradually, but found itself in difficulty with appellate courts when it was unable to provide a"rational basis for its devolving regulations. Fox Television Stations, Inc. v FCC, 280 F 3d 1027(D. C. Cir, 2002); Sinclair Broadcasting Group, Inc v FCC 284 F 3d 148(D.C. Cir. 2002) In its 2002 biennial review, the FCC undertook a massive effort to develop an analytical record to support what turned out to be relatively minor or incremental relaxa tions of several media ownership rules Report and Order in the matter of 2002 Biennial Regulatory Review, 18 FCC Red 13620(2003), stayed 2003 U.S. App. LEXIS 18390, appeal pending sub nom, Prometheus Radio Project, et al. V. FCC, Nos. 03-3388, et al (3d Cir. 2003). The most controversial decision was a proposed increase, from 35 percent (47 C FR.$733555(e))to 45 percent, in the portion of the U.S. population that could be cached by the tv stations owned by any one of the major broadcast Tv networks(ABC CBS, Fox, or NBC) The FCC decision met with unexpectedly vigorous public and political opposi tion. A series of resolutions introduced by senators and representatives, most of whom had voted for the deregulatory 1996 Telecommunications Act, was introduced beginning July 15, 2003(108 Bill Tracking S J Res. 17)to repeal the FCC's proposed relaxation of media ownership rules. Ultimately, a compromise was reached with the Bush Admini- stration; Consolidated Appropriations Act, 2004, Pub. L. No. 108-199,$ 629, 118 Stat. 3 (2004). The compromise affected only one of the FCC's proposed relaxations, reducing (from the FCCs proposed 45 percent)to 39 percent the maximum reach of network- owned TV stations This paper takes no position on the merits of the FCC's 2003 proposals, confining itself to analysis of measurement issues, and arguing that appropriate measurement of media concentration is a necessary but not sufficient condition for rational media concen- tration rules. Nevertheless, substantive policy analysis and measurement cannot be sepa rated, because only an examination of the proper objectives of regulatory policy can tell us what to measure and how to measure it I The author submitted several analyses in this proceeding on behalf of Fox, Viacom(CBS),and GE (NBC) 6
- 6 - 6 struction to deregulate gradually, but found itself in difficulty with appellate courts when it was unable to provide a “rational basis” for its devolving regulations. Fox Television Stations, Inc. v FCC, 280 F.3d 1027 (D.C. Cir., 2002); Sinclair Broadcasting Group, Inc. v. FCC 284 F.3d 148 (D.C. Cir. 2002). In its 2002 biennial review, the FCC undertook a massive effort to develop an analytical record to support what turned out to be relatively minor or incremental relaxations of several media ownership rules. Report and Order in the Matter of 2002 Biennial Regulatory Review, 18 FCC Rcd 13620 (2003), stayed 2003 U.S. App. LEXIS 18390, appeal pending sub nom., Prometheus Radio Project, et al. v. FCC, Nos. 03-3388, et al. (3d Cir. 2003). The most controversial decision was a proposed increase, from 35 percent (47 C.F.R. § 73.3555(e)) to 45 percent, in the portion of the U.S. population that could be reached by the TV stations owned by any one of the major broadcast TV networks (ABC, CBS, Fox, or NBC).1 The FCC decision met with unexpectedly vigorous public and political opposition. A series of resolutions introduced by senators and representatives, most of whom had voted for the deregulatory 1996 Telecommunications Act, was introduced beginning July 15, 2003 (108 Bill Tracking S.J. Res. 17) to repeal the FCC’s proposed relaxation of media ownership rules. Ultimately, a compromise was reached with the Bush Administration; Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3 (2004). The compromise affected only one of the FCC’s proposed relaxations, reducing (from the FCC’s proposed 45 percent) to 39 percent the maximum reach of networkowned TV stations. This paper takes no position on the merits of the FCC’s 2003 proposals, confining itself to analysis of measurement issues, and arguing that appropriate measurement of media concentration is a necessary but not sufficient condition for rational media concentration rules. Nevertheless, substantive policy analysis and measurement cannot be separated, because only an examination of the proper objectives of regulatory policy can tell us what to measure and how to measure it. 1 The author submitted several analyses in this proceeding on behalf of Fox, Viacom (CBS), and GE (NBC)
Possibly the most troubling aspect of the media concentration debates is the con fusion of access and success, or more accurately the notion that it would be desirable economically or politically to have a public right of access to commercially successful media. In broad perspective, this is one manifestation of the long and often bitter struggle between those who believe that social or economic justice requires equality of access (EOA)and those who believe that it requires equality of result(EOR). The killer argu ment of the EOA group is that, often, equality of outcome(through its adverse effects on incentives) can and, often does, make everyone worse off, especially those unfortunates who might be thought to benefit the most from outcome equality. The response of the EOR group, quite fairly, is that equality of access in principle often ends up providing neither equality nor access in practice In the media concentration debate the eor side takes the position that completely open access to the means of mass communication does not exist unless all channels are equally accessible to everyone(accessible, say, at equal and low cost). The EOa side points to the very large number of channels, existing and potential, that are accessible al ready at very low cost. The EOR side points out that these low-cost channels have small or no audiences. The EOa side responds that the channels with larger audiences must offer attractive, costly content, and that access to them would induce free riding" and distort incentives. The eOR group counters that the channels with large audiences have market power, often the result of connivance in the dim political past with public offi- cials. The EOA-ers respond that whatever the course of history may have been, in today's competitive environment successful channels are not guaranteed continued popularity. because channel scarcity is no longer a barrier to entry eor proponents counter that tv station licenses in large markets still cost hundreds of millions of dollars-hardly evi- dence of low entry barriers or the end of scarcity A dollop of common sense, while it might not suffice to resolve this debate would at least make clearer what is at stake. The application of common sense begins with distinguishing between supply and demand. Media concentration might result from either, with significantly different policy consequences. First, consider a idyllic world in which there is no scarcity of channels. For example, imagine a billion video channels
- 7 - 7 Possibly the most troubling aspect of the media concentration debates is the confusion of access and success, or more accurately, the notion that it would be desirable economically or politically to have a public right of access to commercially successful media. In broad perspective, this is one manifestation of the long and often bitter struggle between those who believe that social or economic justice requires equality of access (EOA) and those who believe that it requires equality of result (EOR). The killer argument of the EOA group is that, often, equality of outcome (through its adverse effects on incentives) can and, often does, make everyone worse off, especially those unfortunates who might be thought to benefit the most from outcome equality. The response of the EOR group, quite fairly, is that equality of access in principle often ends up providing neither equality nor access in practice. In the media concentration debate the EOR side takes the position that completely open access to the means of mass communication does not exist unless all channels are equally accessible to everyone (accessible, say, at equal and low cost). The EOA side points to the very large number of channels, existing and potential, that are accessible already at very low cost. The EOR side points out that these low-cost channels have small or no audiences. The EOA side responds that the channels with larger audiences must offer attractive, costly content, and that access to them would induce “free riding” and distort incentives. The EOR group counters that the channels with large audiences have market power, often the result of connivance in the dim political past with public officials. The EOA-ers respond that whatever the course of history may have been, in today’s competitive environment successful channels are not guaranteed continued popularity, because channel scarcity is no longer a barrier to entry. EOR proponents counter that TV station licenses in large markets still cost hundreds of millions of dollars—hardly evidence of low entry barriers or the end of scarcity. A dollop of common sense, while it might not suffice to resolve this debate, would at least make clearer what is at stake. The application of common sense begins with distinguishing between supply and demand. Media concentration might result from either, with significantly different policy consequences. First, consider a idyllic world in which there is no scarcity of channels. For example, imagine a billion video channels
available to every viewer for free, aside from payments for content, with zero cost of add- g even more channels if the first billion get used up, and with no one permitted to own or control programming on more than one percent of all channels. What would such a world, one with no transmission supply constraints, look like? In this world of potential plenty, there might well be quite a lot of"concentra tion, attributable to consumer demand. That is, the nature of popular culture is that it popular, which means lots of people pay attention to its components, whatever they may happen to be. Some channels would be quite popular, and people who are good at antici- pating(or creating) popular cultural icons would try to keep them so, and be well re- warded for success Their success of course. has a feedback effect on itself because what is successful is often popular. In the end, a relatively few channels, and owners, would have the lion's share of the audience and the revenues The prediction above is difficult to prove, based as it is on an assumption about the distribution of tastes among the public as well as the existence either of property rights in popular material or a scarcity of talent relevant to production of whatever is popular. The prediction does gain some credence from observation of mass communica- tion media with essentially unlimited physical capacity and very low entry costs, such as magazine and book publishing. If the prediction is correct, it follows that we would ex- perience a degree of media"concentration"even in the absence of anything that might be called a market imperfection or entry barrier. Such media concentration simply would be the result of demand-side forces combined with the likely natural distribution of special ized entrepreneurial skills relevant to any distribution of tastes, rather than supply-side monopolies or government giveaways of our treasured national resource, the spectrum Equality of access to transmission resources would not produce equality of result in audi- ence size and revenue, just as competition among book publishers produces a few best sellers and thousands of failures The economic concentration problem Media concentration has two policy dimensions The first is economic, the second political. The economic problem is not in any significant way different from the problem 8 8
- 8 - 8 available to every viewer for free, aside from payments for content, with zero cost of adding even more channels if the first billion get used up, and with no one permitted to own or control programming on more than one percent of all channels. What would such a world, one with no transmission supply constraints, look like? In this world of potential plenty, there might well be quite a lot of “concentration,” attributable to consumer demand. That is, the nature of popular culture is that it is popular, which means lots of people pay attention to its components, whatever they may happen to be. Some channels would be quite popular, and people who are good at anticipating (or creating) popular cultural icons would try to keep them so, and be well rewarded for success. Their success, of course, has a feedback effect on itself, because what is successful is often popular. In the end, a relatively few channels, and owners, would have the lion’s share of the audience and the revenues. The prediction above is difficult to prove, based as it is on an assumption about the distribution of tastes among the public as well as the existence either of property rights in popular material or a scarcity of talent relevant to production of whatever is popular. The prediction does gain some credence from observation of mass communication media with essentially unlimited physical capacity and very low entry costs, such as magazine and book publishing. If the prediction is correct, it follows that we would experience a degree of media “concentration” even in the absence of anything that might be called a market imperfection or entry barrier. Such media concentration simply would be the result of demand-side forces combined with the likely natural distribution of specialized entrepreneurial skills relevant to any distribution of tastes, rather than supply-side monopolies or government giveaways of our treasured national resource, the spectrum. Equality of access to transmission resources would not produce equality of result in audience size and revenue, just as competition among book publishers produces a few best sellers and thousands of failures. The Economic Concentration Problem Media concentration has two policy dimensions. The first is economic, the second political. The economic problem is not in any significant way different from the problem