Stanford law school John m. olin program in law and economics Working Paper 254 May 2003 Regulatory reform: The Telecommunications Act of 1996 and the fcc media Ownership rules Bruce m. owen Stanford Institute for Economic Policy Research, Stanford University This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection http://papers.ssrn.com/paper.taf?abstractid=406261
Stanford Law School John M. Olin Program in Law and Economics Working Paper 254 May 2003 Regulatory Reform: The Telecommunications Act of 1996 and the FCC Media Ownership Rules Bruce M. Owen Stanford Institute for Economic Policy Research, Stanford University This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=406261
Regulatory reform: The telecommunications act of 1996 and the FCC Media ownership rules Bruce M. Owen May 2003 Prepared for the Fourth Annual James h quello Communication Policy and law Symposium Washington dc February 27, 2003 Forthcoming in the Law Review of Michigan State University-Detroit College of Law
Regulatory Reform: The Telecommunications Act of 1996 and the FCC Media Ownership Rules by Bruce M. Owen May 2003 Prepared for the Fourth Annual James H. Quello Communication Policy and Law Symposium Washington DC February 27, 2003 Forthcoming in the Law Review of Michigan State University-Detroit College of Law
Regulatory reform: The Telecommunications Act of 1996 and the fcc media ownership rules Bruce m. Owen May 2003 Abstract The Federal Communications Commission has regulated ownership of mass media out- lets since the 1920s. The Telecommunications Act of 1996 abolished some of these regu lations, changed others, and required the FCC to review its rules regularly and to repeal hose no longer required There is little opposition to the idea that media ownership policy should promote eco- nomic competition( to increase the economic welfare of consumers)and First Amend- ment values(to preserve the political freedom of citizens) This paper examines, from an economic perspective, federal administrative restrictions on ownership of media properties, including both antitrust and First Amendment policy bases for the rules. It concludes that the present rules are duplicative of antitrust law en- forcement and should therefore be abolished as wasteful of public resources and a burden on consumer welfare. It argues that First Amendment goals are not threatened by aboli- Keywords: mass media ownership, FCC media regulation, First Amendment policy, anth trust in media industries, Merger Guidelines, television broadcasting, radio broadcasting, newspaper publishing, cable television, horizontal concentration, vertical restraints, mar ket definition, concentration measures, radio spectrum, scarcity doctrine The author is Gordon Cain Senior Fellow in the Stanford Institute for Economic Policy Research and Professor, by courtesy, of Economics, Stanford University
2 Regulatory Reform: The Telecommunications Act of 1996 and the FCC Media Ownership Rules by Bruce M. Owen May 2003 Abstract The Federal Communications Commission has regulated ownership of mass media outlets since the 1920s. The Telecommunications Act of 1996 abolished some of these regulations, changed others, and required the FCC to review its rules regularly and to repeal those no longer required. There is little opposition to the idea that media ownership policy should promote economic competition (to increase the economic welfare of consumers) and First Amendment values (to preserve the political freedom of citizens). This paper examines, from an economic perspective, federal administrative restrictions on ownership of media properties, including both antitrust and First Amendment policy bases for the rules. It concludes that the present rules are duplicative of antitrust law enforcement and should therefore be abolished as wasteful of public resources and a burden on consumer welfare. It argues that First Amendment goals are not threatened by abolition. Keywords: mass media ownership, FCC media regulation, First Amendment policy, antitrust in media industries, Merger Guidelines, television broadcasting, radio broadcasting, newspaper publishing, cable television, horizontal concentration, vertical restraints, ma rket definition, concentration measures, radio spectrum, scarcity doctrine. The author is Gordon Cain Senior Fellow in the Stanford Institute for Economic Policy Research and Professor, by courtesy, of Economics, Stanford University
Media ownership Bruce m. owen L. Introduction This Article examines, from an economic perspective, federal administrative restrictions on ownership of media properties. I review both antitrust and First Amendment policy bases for the rules. I conclude that the present rules are duplicative of antitrust law en- forcement and should therefore be abolished as wasteful of public resources and a bur- den on consumer welfare. I argue that First Amendment goals are not threatened by abo- The Federal Communications Commission( Commission or FCC) has regulated owner- ship of mass media outlets since the 1920s. The Telecommunications Act of 1996, Pub L. No 104-104, 110 Stat. 56(1996), abolished some of these regulations, changed others and required the FCC to determine".as part of its [biennial] regulatory reform review under [47 U.S.C.$161]. whether any of such rules are necessary in the public interest the result of competition. The Commission shall repeal or modify any regulation it de- termines to be no longer in the public interest. The Commission's third biennial review initiated in 2002, began a comprehensive re-evaluation of the rules affecting broadcast Gordon Cain Senior Fellow in the Stanford Institute for Economic Policy Research and Professor by courtesy, of Economics, Stanford University. This Article originated in invited remarks pre- pared for an October 2001 FCC Roundtable on Media Ownership (http://www.fcc.govlownershin/roundtable.htmlhttr://www.fccgow/realaudio/tr102901.ndf(transcriptofFcc Roundtable on Media Ownership Policies-10/29/01). A refocused version was later submitted in the FCC public record on behalf of several media companies( Comments of Fox Entertainment Group, Inc and Fox Television Stations, Inc, National Broadcasting Company, Inc. and Tele mundo Communications Group, Inc, and Viacom, MB Docket No. 02-277, January 2, 2003). The present final version was prepared for, but on account of scheduling conflicts not delivered at, the February 2003 Quello Symposium. I am grateful to Kent Mikkelsen and Michael Baumann for useful suggestions (47 U.S.C. $202(h). The statutory language is not a model of clarity, and the meaning of the phrase"whether any of such rules are necessary in the public interest as the result of competition has been subject to judicial interpretation. See note 4 infra
3 Media Ownership Bruce M. Owen1 I. Introduction This Article examines, from an economic perspective, federal administrative restrictions on ownership of media properties. I review both antitrust and First Amendment policy bases for the rules. I conclude that the present rules are duplicative of antitrust law enforcement and should therefore be abolished as wasteful of public resources and a burden on consumer welfare. I argue that First Amendment goals are not threatened by abolition. The Federal Communications Commission (Commission or FCC) has regulated ownership of mass media outlets since the 1920s. The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996), abolished some of these regulations, changed others, and required the FCC to determine “…as part of its [biennial] regulatory reform review under [47 U.S.C. § 161] … whether any of such rules are necessary in the public interest as the result of competition. The Commission shall repeal or modify any regulation it determines to be no longer in the public interest.”2 The Commission’s third biennial review, initiated in 2002, began a comprehensive re-evaluation of the rules affecting broadcast- 1 Gordon Cain Senior Fellow in the Stanford Institute for Economic Policy Research and Professor, by courtesy, of Economics, Stanford University. This Article originated in invited remarks prepared for an October 2001 FCC Roundtable on Media Ownership (http://www.fcc.gov/ownership/roundtable.html; http://www.fcc.gov/realaudio/tr102901.pdf (Transcript of FCC Roundtable on Media Ownership Policies - 10/29/01)). A refocused version was later submitted in the FCC public record on behalf of several media companies (Comments of Fox Entertainment Group, Inc. and Fox Television Stations, Inc., National Broadcasting Company, Inc. and Telemundo Communications Group, Inc., and Viacom, MB Docket No. 02-277, January 2, 2003). The present final version was prepared for, but on account of scheduling conflicts not delivered at, the February 2003 Quello Symposium. I am grateful to Kent Mikkelsen and Michael Baumann for useful suggestions. 2 (47 U.S.C. §202(h)). The statutory language is not a model of clarity, and the meaning of the phrase “whether any of such rules are necessary in the public interest as the result of competition” has been subject to judicial interpretation. See note 4 infra
ers. This review was predicated, in part, on D. C. Circuit reversals of Commission actions in earlier biennial reviews. While the fCC will likely have acted in its current proceed ing by the time this article is published, probable judicial review and further FCC pro- ceedings will support the continued relevance of the analysis There are six rules under review in the third biennial. the first four rules relate to local markets while the last two are national in scope s The local TV station ownership rule, 47 C F.R.$ 733555(b), provides that no one may own more than two TV stations in any one market and may own two only under certain conditions s The local radio ownership cap, 47 C F.R.$ 733555(a), provides that a firm may own up to eight radio stations in one market depending on the number of ra- dio stations in that market s The local TV-radio cross-ownership rule, 47 C.F.R$73 3555(b), provides that a firm that owns only one TV station in a local market may own one, four, or seven radio stations in that market depending on not only of the number of radio and TV stations but also the number of cable systems and newspapers The broadcast-newspaper cross ownership ban, 47 C.F.R.$ 73 3555(d),pro- vides that no one may own both a daily newspaper and either a TV or a radio sta- tion in the same market s The dual network rule, 47 C.F. R. $73.658(g), provides that a merger between firms that are among the top four television broadcast networks is not permitted but a top-four network may merge with a network not among the top four The national TV station ownership cap, 47 C F R.$ 733555(e), provides that no company may own a group of television stations that, in the aggregate, can reach more than 35 percent of U.S. households (There is no corresponding nationwide imit on the number of radio stations that any firm can own The courts in 2001 Notice of Proposed Rule Making in the matter of 2002 Biennial Regulatory Review -Review of the Commissions Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 20 of the Telecommunications Act of 1996, MB Docket No. 02-277, released September 23, 2002 Fox Television Stations, Inc v. FCC, 280 F 3d 1027, rehearing granted, 293 F 3d 537 (D.C. Cir 2002), addressed the national TV ownership rule. Sinclair Broadcast Group, Inc v FCC, 284 F 3d 148 (D. C Cir. 2002), rehearing denied Aug. 13, 2002, addressed the local TV ownership rule. These cases held that $202(h)carries a presumption in favor of repealing or modifying the ownership rules
4 ers.3 This review was predicated, in part, on D.C. Circuit reversals of Commission actions in earlier biennial reviews.4 While the FCC will likely have acted in its current proceeding by the time this Article is published, probable judicial review and further FCC proceedings will support the continued relevance of the analysis. There are six rules under review in the third biennial. The first four rules relate to local markets while the last two are national in scope. * The local TV station ownership rule, 47 C.F.R. § 73.3555(b), provides that no one may own more than two TV stations in any one market and may own two only under certain conditions. * The local radio ownership cap, 47 C.F.R. § 73.3555(a), provides that a firm may own up to eight radio stations in one market depending on the number of radio stations in that market. * The local TV-radio cross-ownership rule, 47 C.F.R. § 73.3555(b), provides that a firm that owns only one TV station in a local market may own one, four, or seven radio stations in that market depending on not only of the number of radio and TV stations but also the number of cable systems and newspapers. * The broadcast-newspaper cross ownership ban, 47 C.F.R. § 73.3555(d), provides that no one may own both a daily newspaper and either a TV or a radio station in the same market. * The dual network rule, 47 C.F.R. § 73.658(g), provides that a merger between firms that are among the top four television broadcast networks is not permitted, but a top-four network may merge with a network not among the top four. * The national TV station ownership cap, 47 C.F.R. § 73.3555(e), provides that no company may own a group of television stations that, in the aggregate, can reach more than 35 percent of U.S. households. (There is no corresponding nationwide limit on the number of radio stations that any firm can own. The courts in 2001 3 Notice of Proposed Rule Making in the matter of 2002 Biennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 02-277, released September 23, 2002. 4 Fox Television Stations, Inc. v. FCC, 280 F.3d 1027, rehearing granted, 293 F.3d 537 (D.C. Cir. 2002), addressed the national TV ownership rule. Sinclair Broadcast Group, Inc. v. FCC, 284 F.3d 148 (D.C. Cir. 2002), rehearing denied Aug. 13, 2002, addressed the local TV ownership rule. These cases held that §202(h) carries a presumption in favor of repealing or modifying the ownership rules