Showdown at the FCC: Media Companies Expansion

TERENCE SMITH:

The Federal Communications Commission is scheduled to vote early next month on a sweeping revision of the rules that govern media ownership in the United States. If approved, the proposed new regulations would permit the largest media companies to buy additional properties, expand into new markets, and increase their ownership of print and broadcast outlets in a single city. The proposed changes, the most far-reaching in a generation, were delivered by the FCC staff to the agency's five commissioners this week.

Under a proposed new formula, for example, the percentage of local stations that any one network could own — currently capped at 35 percent of the national audience — would be sharply increased. A broad alliance of consumer interest groups, independent stations and some newspapers argues that this would lead to further consolidation of the nation's media outlets, more control and fewer corporate heads.

Meanwhile, most of the nation's largest media companies do want the rules relaxed or scrapped altogether. As the Commission approaches its scheduled June 2 vote, it is being swamped with public comment, nearly 20,000 letters and messages so far.

The proposed changes have not been officially released, but according to published accounts, they include permitting a company to own both a broadcast station and a newspaper in all but the smallest markets; currently such cross-ownership is sharply limited. And permitting a company to own three television stations in a large market; the current limit is two.

Joining me now to discuss this are: Gene Kimmelman, senior director for public policy at the Consumers Union, an independent, non-profit public interest group; and B. Robert Okun, vice president of NBC, who heads the network's Washington office. Welcome to you both.

Bob Okun, what's the basic argument for revising these rules?

R. ROBERT OKUN:

Well, the media landscape has changed. I mean a number of these rules have been in place since World War II. Clearly the media landscape has changed. Ten years ago we didn't even measure the Internet. If you look at the average number of channels into the home now, about 89 or 90 on your normal cable system, the number of broadcast stations has increased dramatically. So this is an update of rules that have been on the books for many, many years.

The Congress reviewed these rules in 1996 after 60 years they rewrote the Communications Act. They directed the commission that every couple of years you need to take a look at these rules. It's actually three years since the commission got around to doing it. So to answer the question why, it's really in order for free over-the-air broadcasting which is what we do for our business to survive.

I think Congress said in '96 we want a robust free over-the- air broadcasting system. Now 15 percent of the country does not pay for their television; most pay for their television through cable, through a subscription fee or through Direct TV or Echostar their satellite services. So 15 percent of the country a lot of that in rural America, some of that in urban areas where people just don't feel like paying or can't afford to pay for television. The question is how do we keep this network affiliate relationship which is able to broadcast television free over the air to make it viable?

What we're looking for, I think, here, you hear us advocating, is some regulatory relief, just to level the playing field. We're not looking for subsidies but to update these rules so that we can compete. Let me tell you who we have to compete against, it's against our pay providers. That is the cable operators who not only control whether we get on our programs on but also do their own programming as well as satellite providers. So this is a bit of a regulatory parity.

TERENCE SMITH:

Gene Kimmelman same question really to you. What's the basic argument for preserving these rules as they are?

GENE KIMMELMAN:

Bob is right. The media landscape has changed. But when you look at the real facts of how ownership of that landscape has changed, you see a startling consolidation with broadcast and cable and across now to satellite with News Corp attempting to buy Direct TV.

Here are the key facts. Look at local markets. These rules are predominantly about local markets. Where do consumers get their news and information? 80 percent of consumers say their major source is local broadcast networks and their newspaper. Of all those wonderful broadcast stations, only about half in local markets offer local news. Cable only offers local news from those broadcast stations. It doesn't do its own news broadcast. Some have one channel. Often it's owned by a broadcaster like here in Washington, Channel 7 owns Channel 8. Most communities still only have one newspaper or at best two. And one is dominant.

So if you allow combinations of these sources and then allow them to be owned by the large national networks, we have fewer competitors trying to find different angles of presenting consumers news and information. We don't have very many today. We need to make sure we're not diminishing that more.

TERENCE SMITH:

What about Bob's point about the introduction of the Internet.

GENE KIMMELMAN:

The Internet is a wonderful source of news and information. A small percentage of consumers rely upon it. When the FCC asked them where do they go? More than half go to broadcast.com. The next largest segment go to newspaper.com. It's the same sources of news and information using a new technology, a new medium but it is not more diversity of viewpoints, it's not more competition in the media.

And the media that provide the news that people rely upon to vote for their mayor, to select city council, to find out whether the garbage collectors are corrupt or not, those sources need to be watching each other to make sure that one isn't providing favoritism to someone it likes or a particular slant on the news. The fewer owners you have, the fewer watchdogs over at media companies we have in local markets. It's truly dangerous for our democratic system should function.

TERENCE SMITH:

Bob, what would be the impact of further consolidation on local news, the very issues that Gene is talking about?

R. ROBERT OKUN:

Well, for example, NBC, which I would argue is the lead network, we own 29 stations, so 14 of those are NBC owned and operated stations. And we have the rest are Telemundo states; we acquired Telemundo, which is the second of the Spanish-speaking.

TERENCE SMITH:

And we should point out that your stations combined reach about 35 percent of the total national audience.

R. ROBERT OKUN:

Perhaps we should get into that, what that measure really is. It's quite an arcane measure. It measures the potential reach that one might have base on market share. It does not measure who is actually watching on an NBC-owned station, be it Telemundo, Spanish speaking or English speaking NBC-owned stations. So it's really more like three percent of all the audience in the country that is actually watching an NBC station. But that is a measurement that we would argue needs to be changed.

But in terms of our own stations, it just so happens that our profit motive, that is, we want to be in the business to be profitable and put on good programming, own more TV stations, happens to intersect with the public interest. Let me just mention one. When we own a station, Channel 4 here in Washington D.C., everybody's got a to know Jim Vance and Doreen and Bob the weatherman and George our sportscaster. They have to be integral to the community in order for us to be number one. That's why we sponsor an AIDS walk and the Adams Morgan Day Parade.

It turns out on the average on an NBC-owned station we do 30 hours or more of local news and information. And in terms of a network-owned station on average we do 30 percent better than a non-network-owned station in terms of local news. So we're in it to be profitable, no question. But in terms of how that profitability intersects with diversity of programming, we would argue we do a heck of a good job, sometimes better than even independent stations.

TERENCE SMITH:

Gene Kimmelman, that proposal to raise that cap, that 35 percent of, as you say, the theoretical national audience that you could reach if everybody watched your outlets….

R. ROBERT OKUN:

I wish.

TERENCE SMITH:

… And not others. The proposal is to raise that at least to 45 percent or maybe more. Take it off altogether. What's wrong with that?

GENE KIMMELMAN:

What's wrong with that is that they're a national company. They get a lot of money from national advertising. They produce a… a lot of the networks produce a lot of their own programming now. And they want second runs, third runs, syndication rights to boost their profits. They want the national programming out there. Any one community at any one time on any one day there might be a telephone, a local basketball game, something that people in that community really want to see, something they care about, a local political debate.

The problem is often the local broadcasters are squeezed by the national networks pressured not to carry local events, things of greater local interest to the community because they want national reach. That's a danger. And when they own multiple stations in those communities, they have every right to make a profit. We want them to make a profit and show better news, but often they close a newsroom or they direct all news through one central focal point. One person selecting what is news, what's the slant on news, what stories to run instead of two.

When you only have about four stations in a market doing local news, losing that one independent voice matters for diversity, for different points of view. They can be as diverse as they want. There's still one owner. If they have one slant they're going to show it in as many ways as often as they want. They have a constitutional right to do that. We just want more choices and more independent players presenting news and information and watching what NBC is doing to make sure it's being straight with the public.

TERENCE SMITH:

Bob Okun, if the 35 percent theoretical cap is too restrictive from your point of view, what's right — 45, 55? What do you need to achieve the profit and other considerations you were talking about?

R. ROBERT OKUN:

Well, I think what has to happen is one needs to remember that the courts have kicked back these rules now to the FCC. The court said the number they had was frankly arbitrary and capricious. The FCC now in this rulemaking which everyone is focused for June 2 has to say what is the econometric underpinnings for the new number that we picked, so far be it from me to suggest what the number should be. I mean, we suggest that there's so much competition out there, so many choices you could probably take the cap off. I don't think that's where the commission is going to go.

There are also a lot of constraining, other things going on, whether it's the Congress overseeing this, whether it's the Justice Department or the Federal Trade Commission, making sure there's not too much concentration. There are a lot of countervailing pressures in the system to make sure we're not out of control.

Let me just make one quick point though about the network affiliate relationship because we own stations, as I said, NBC has 14 owned stations. We have 200-plus other affiliated stations. We need them. In order for any advertiser to want to advertise on NBC, they want to be sure they're reaching the entire country. What we do is we have a contract with those affiliates. And we give them all of our programming. We give them the Tonight Show, the Today Show, all of our prime time programming. In most cases we give them a check; it's called compensation. What they have to do is go sell advertising. We split the national advertising revenue with them. They're also able to sell local advertising. It's a very good business. We need them. We want this to continue because we want free over-the-air broadcasting.

But that's a system that has its gives and takes. In terms of a community that doesn't want to run something and I'll take Salt Lake City for example they don't like running Saturday Night Live. Absolutely fine. We have a contractual agreement with our affiliate to not run programming. Now on the other hand, if they decide that they're coming up short at the end of the month and they need to run something and not run something from the network because they want to capture those local revenues, that's a little different. That's something we might have a beef with…

TERENCE SMITH:

Yes, that local basketball game that Gene Kimmelman was talking about.

GENE KIMMELMAN:

A lot of the affiliates say they're being squeezed by the networks and being pressured not to carry things of local interest. It does need to be a balance but there's no need for the networks to get larger. The courts kicked this back to the FCC and said you just didn't present us the facts. Go get the facts. The FCC now has the facts. The facts show very clearly that with all the explosion in technology, consolidation has overtaken and clamped down on the major sources of news and information in this country with five companies dominating — in most local markets even fewer. This is no time to let it become fewer independent voices fighting with each other to present us different angles on news and information. We need more diversity, not less.

R. ROBERT OKUN:

Could I just comment on one thing in terms of practically what would happen if the cap were to be removed. Frankly these stations are very expensive. I'm not sure there's going to be a spending spree. I think the Wall Street Journal was referencing that as it sort of canvassed the various companies and what they might do.

I think from our perspective by us acquiring Telemundo, for example, the second of the two Spanish speaking networks we have used the resource of NBC to strengthen that. We would probably want to strengthen that network so we would have a national network for the second Spanish-speaking network. So different companies have different business plans and different models I think if this cap were would be removed.

GENE KIMMELMAN:

What we see predominantly is all these companies want to swap properties. They all have one broadcaster here, maybe a newspaper there, another broadcaster here. They don't have to go out and buy a whole lot. They can swap equal value properties to get two or three stations, maybe a newspaper in the same community.

Last year Fox bought a second local broadcast station in Chicago. They very quickly dumped all of the local programming off that station, including a top-rated educational programming channel — program for children. Now that's because they have a different profit maximizing model. But that is not good for the community. It's not good for Chicago. It might have been good for Fox.

TERENCE SMITH:

Okay. Let's talk for a moment, both of you, about the practical politics here. The FCC is five-member commission, three Republicans, two Democrats. Bob Okun, is this a foregone conclusion — or close to it?

R. ROBERT OKUN:

Well, this has been a rulemaking that's been in the process for about three years. Quite frankly I think Commissioner Copps, a Democrat on the commission, has been able to expand the process. We had a number of field hearings over the course of the year. That had a very salutary effect.

TERENCE SMITH:

We should point out incidentally that the Democrats asked for a delay in this vote as did Democrats on the Hill and that just this evening, shortly before the broadcast, Chairman Powell said no. In other words, he said — Michael Powell, the chairman, said we're going to proceed on June 2.

R. ROBERT OKUN:

My guess is they feel like they've gotten enough information whether it's via e-mail or formal comments to the FCC that this is a pretty robust rulemaking. They have a lot of opinion on both sides of it. I think, as I understand, there will probably be three votes for some sort of a combined compromise package. Obviously the Congress is overseeing this. There have been a number of hearings in the Senate and House Commerce Commercial committee on this. This is battling letters. Democrats sent a letter to say delay. A number of House Republican leaders sent a letter to say proceed. So at this point it's a political battle that's not over yet. You still have Congress to go after.

TERENCE SMITH:

That's what I wanted to ask Gene Kimmelman for final words.

GENE KIMMELMAN:

They have three votes. They're rushing it through. I wish Bob's network would put it on the air a few times. We get it in print. The networks don't really cover this issue and it's their own interest. A lot of local stations don't. Senator Snowe, Senator Allard, Senator Lott, all raised concerns about this. Republicans are waking up to the concerns about losing diversity and the ability to get their points of view out just as much as Democrats. The National Rifle Association is now concerned as much as we are concerned.

This is about democratic process. It's about freedom of speech for the public to get the information it needs to be able to make decisions in our political system and in our local communities. We need enough separate, independent voices delivering the news, responding to public opinion in order to make our democracy function.

TERENCE SMITH:

Okay. I have to go, but thank you both, Bob Okun of NBC, Gene Kimmelman of the Consumers Union, thank you both very much.

R. ROBERT OKUN:

My pleasure.