Background: In June, the Federal Communications Commission voted to modify a variety of rules restricting the ownership of radio and television stations.Specifically, the FCC:

• Increased the limit on how many TV stations can be owned by one firm, from stations that can potentially be viewed by 35 percent of U.S. households to 45 percent,
• Expanded the number of TV stations one firm can own in one market to two in markets with five or more stations, three in markets with 18 or more stations,
• Allowed cross-ownership between newspapers and TV stations and radio and TV stations in larger markets; and
• Redefined the definition of a radio “market,” thereby reducing the number of stations that can be owned by one entity.

Status: The FCC’s modifications have been challenged on a number of fronts.The House of Representatives included a rider in the FCC’s fiscal 2004 appropriation bill preventing implementation of the new national TV ownership.A similar rider is pending in the Senate, with a floor vote expected the week of October 27.A “resolution of disapproval” under the Congressional Review Act, which would overturn all the changes, is also pending, as well as stand-alone legislation approved by the Senate Commerce Committee.The rules are also being challenged in federal appeals court.

Discussion: The FCC’s ownership rules – which date back as far as 1941 – were written for a very different media world than that which exists today.As late as the 1960s, for instance, viewers in Washington, D.C. could channel surf only four TV stations.Today, there are 15 broadcast stations, plus some 150-cable channels.National news in the 1960s was limited to three networks providing maybe ½ hour of coverage per day.Today, viewers can choose from a variety of new channels – ranging from Fox to CNN to MSNBC, all providing news on a 24-hour basis.And this doesn’t even include the nearly limitless choices available on the Internet.

Given this increase in choice and diversity, the FCC’s restrictive ownership rules are of questionable benefit to consumers.In fact, they probably hurt, by limiting the ability of media companies to use resources effectively.Joint ownership of stations, for instance, can create valuable synergies – NBC, for example, uses overlapping resources and expertise to provide news via a variety of outlets – including local stations, MSNBC and the Internet – increasing the quality of each – and its ability to compete with rivals such as Fox and CNN.Though counter-intuitive, joint ownership can also increase diversity, because owners with multiple outlets are able to target niche markets with different programming on each station.

Action item: The FCC’s reforms should be allowed to take effect.

This brief was prepared by Heritage Research Fellow James L. Gattuso.

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