The Myth of Media Concentration: Why the FCC's Media OwnershipRules Are Unnecessary

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The Myth of Media Concentration: Why the FCC's Media OwnershipRules Are Unnecessary

May 29, 2003 5 min read
James Gattuso
Senior Research Fellow in Regulatory Policy
James Gattuso handles regulatory and telecommunications issues for The Heritage Foundation.

On June 2, the Federal Communications Commission will vote on whether to modify or even repeal its restrictions on ownership of broadcast stations. Opponents argue that changes to these rules would reduce diversity in an already concentrated market - warning that big media "monopolies" are already limiting what Americans see and hear.

They are mistaken. Despite many mergers in the media industry in recent years, Americans today actually enjoy more diversity and competition in the media than at any other time in history, thanks to cable TV, Internet, the licensing of new broadcast stations and other factors.

Rather than media monopolies, consumers face a bewildering and unprecedented amount of choice. Instead, the real danger to Americans is that outdated and unnecessary FCC restrictions will limit improvements in media markets and technologies, limiting the benefits that they can provide.

Media Marketplace Driving Review
A variety of regulations are at issue - including rules limiting how many television stations can be owned by networks, how many TV stations a company can own in a particular market, and common ownership of TV and newspapers in the same city.

Most ownership restrictions, imposed on TV and radio license holders by the FCC, are decades old, dating back as far as 1941, though they have been frequently modified. There are six such rules formally being reviewed by the FCC in the current proceeding. They are:

  1. The Local TV Ownership Rule, which prohibits TV networks from owning TV stations that reach more than 35 percent of television households. Originally adopted in 1941, the rule was most recently modified in 2000, when the cap was raised from 25 percent.
  2. The Local TV Multiple Ownership Rule, which limits firms from owning more than one TV station in a market, or two if there are at least eight other stations and no more than one of the commonly-owned stations is one of the four biggest in the market.
  3. The Radio/TV Cross-Ownership Ban, which limits the number of radio stations that can be owned by a TV station owner in the same market, using a sliding scale based on the number of broadcast stations in the market.
  4. The Dual Television Network Rule, which prohibits any of the top four networks - CBS, NBC, ABC or Fox from acquiring any of the others.
  5. The Newspaper/Broadcast Cross-Ownership Prohibition, which bars a joint ownership of a TV or radio station and a newspaper in the same market.
  6. The Local Radio Ownership Rule, which limits the number of radio stations in a market that can be commonly owned, using a sliding scale based on the number of other stations in the market.

The current proceeding marks the first time the FCC has conducted an across-the-board review of its ownership rules (although many have been reviewed separately in recent years). There are many reasons the Commission has taken up this challenge. First, two national and local TV rules have been challenged by U.S. appeals courts, which have ordered the FCC to modify or provide justification for them. More generally, the FCC is required by the Telecommunications Act of 1996 to review all its rules every other year, and eliminate those found not to be necessary.

But lastly - and most importantly - the top-to-bottom review was required because of the vast changes in the media marketplace in recent years, and in the decades since many of the rules were initially adopted. At no time was this made clearer than during the recent Iraq war. Americans following that conflict could choose from a half dozen or so news networks - including three 24-hour news channels on cable.

In addition, nearly limitless news was available on the Internet - from which Americans could follow reports from everything from Matt Drudge to Al-Jazeera TV. And they were doing so in large numbers: according to Pew Research, a majority of Americans with Internet access got information about the Iraq war online. Almost one out of every six said the Internet was their primary source of news.

Compare this to the situation a generation ago - when Vietnam War coverage meant catching one of the half-hour network news reports, supplementing newspaper or magazine coverage. Or the 1991 Gulf War, in which only one network - CNN --- provided 24-hour coverage, and the Internet was virtually unknown.

On the local level, similar increases can be seen, with Americans in most cities and towns enjoying remarkably more choice of media outlets than ever before. In Washington, D.C., for instance, channel changers could only surf four TV stations in 1960. Today, there are 15, plus some 150 cable channels. And 300 more on DBS. Radio stations in 1960 numbered 20 twenty. Today, there are 50 broadcasting, plus 100 more on radio, and thousands available by Internet.

Critics, however, point out that the existence of many outlets doesn't necessarily mean more owners. NBC, MSNBC, and are clearly not independent from each other. Media firms today tend to own many outlets - putting broadcast, cable, print and even Internet outlets under the same roof. But despite this expansion of media holdings, ownership concentration has not increased. A study released by the Federal Communications Commission last fall found the number of separately owned media outlets (including broadcast, cable and newspaper outlets) skyrocketed in most cities between 1960 and 2000-growing more than 90 percent in New York, for instance.

Moreover, the ability to own multiple media outlets can provide substantial benefits to consumers. Most directly, it can help make resources available to provide quality programming. It can provide valuable synergies. NBC, for instance can use overlapping resources and expertise to provide news via broadcasting, cable and Internet media - increasing the quality of each - and increasing it's ability to compete with competitors such as CNN and Fox.

Even joint ownership of the same media in the same market (i.e., owning multiple TV or radio stations in the same market) can provide consumer benefits. For instance - though counter-intuitive - common ownership can actually increase content diversity. The reason is simple - while owners with only one station each may all compete for a lowest-common-denominator market, owners with several stations each are able to target niche markets with different programming on each station. This principle is shown in cable TV - with its cornucopia of targeted channels. There is also evidence it has been at work in radio - where the number of radio stations formats increased after ownership limits were relaxed in 1996.

Eliminate Rules Entirely
The case for changing the FCC's ownership rules is clear. They were written in a different era, and don't reflect the diversity and competitiveness in today's media marketplace. And, they are likely hurting consumers, by limiting the ability of media outlets to use resources as effectively as possible. The best course would be for the FCC to eliminate the rules entirely (in which case competition would still be covered antitrust regulation, as it is for most other businesses). It is more likely, however, that the commissioners - in the face of populist rhetoric -- will ease the rules, but leave them substantially in place. Such reform could be an important step forward, but also a missed opportunity to completely free media markets from these unnecessary regulations.


James Gattuso
James Gattuso

Senior Research Fellow in Regulatory Policy