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Striking Back Against the Empire
Casey Lee • Deregulation should not mean "pandering to big business"
October 2003

NRA and NOW publicly agree on something.

The Federal Communications Commission’s decision to eliminate media ownership regulations has caused an unforeseen stir across the nation. Since the 3-2 vote this past June, calls have flooded the offices of senators and representatives. The backlash ultimately resulted in the Third U.S. Circuit Court of Appeals issuing a stay order that prevented the changes from taking effect as scheduled. In addition, the Senate passed a resolution to undo the changes. Approved by a margin of 55-40, the resolution was supported by a surprisingly eclectic group of senators, from co-sponsor Republican Senator Trent Lott to Democratic Senator Patty Murray. Twelve Republicans voted in favor of the measure.

The two greatest areas of contention lie in ownership and cross-ownership restrictions. Under the FCC-proposed system of regulations, a single media company is now permitted to own enough television stations to reach up to 45 percent of the nation’s television market, up from 35 percent. In addition, a media company can own newspaper, radio, and broadcasting outlets in the same local area.

Critics of the FCC’s decision have been plentiful and diverse, spanning from the National Rifle Association to the Natural Organization for Women, decrying the new measures as unduly compromising “diversity of opinion in media,” “allowing local mores to be decided in Rockefeller Center,” and unjustly reducing competition in favor of coddling “big media.” Supporters justify the easing of restrictions as necessary to allow media firms to better compete with Internet and cable in the broadcast industry. They find accounts of reduced competition baseless, claiming that many competitive media companies exist and that no particular few would be able to dominate a market. In the words of FCC Chairman Michael Powell, “Just because somebody can buy something doesn’t mean that it makes strategic or financial sense to do so.”

The controversy remains yet another battle in the war over whether deregulation really leads to improved competition and benefits to the public interest. Ultimately, in having the power to set and release restrictions on ownership and market share, a regulatory body such as the FCC by its very nature cannot endorse proper free market competition. Instead, the attempt to partially deregulate promotes a system where large media conglomerates can select how much (or little) “competition” they wish to face at any time.

“Big Media”: Not a myth

Chairman Powell’s assertion that media companies will not find it in their interests to purchase all the media outlets they can is in part an effort to dispel the concept of what many have dubbed “big media”: large media corporations that will aggressively merge with others to control the maximum amount of market share across different types of outlets. For Powell, such aggressive mergers will not necessarily occur because they will not be in the interest of media corporations. Recent happenings in the business world, however, have suggested otherwise:

  • Ted Turner merged his networks with Time Warner in 1996, which in 2001 merged with America Online to become AOL Time Warner, the world’s largest media conglomerate. Time Warner currently owns CNN and its sister networks, HBO, the Warner Brothers movie and television studio, the WB television network, Warner Bros. and affiliated record labels, AOL internet service, and Time Inc. magazines, which include Time, Fortune, Sports Illustrated, People, and Entertainment Weekly.
  • Viacom owns the CBS and UPN television networks, the nearly 200-station-strong Infinity radio network; the cable networks MTV, Nickelodeon, VH1, BET, and Showtime; the Paramount movie and television studios; and the Blockbuster Video movie rental chain.
  • Disney, which merged with Capitol Cities, now owns the ABC television network, the ESPN sports cable network, the Disney amusement park and movie empire, including subsidiary studios Miramax and Hollywood pictures.
  • NewsCorp, owns the Fox broadcast television network and cable news channel, 20th Century Fox movie studio, the New York Post, and several major newspapers and television networks in Europe and Australia, including Skyy sports.
  • Bertlesmann, based in Germany, owns magazine publisher Gruner and Jahr, RCA and Arista Records, and the book-publishing giant Random House, including all subsidiaries.

Contrary to what Powell suggests, in fact, companies have found it in their interest to own a plethora of media outlets via acquisitions and mergers. Just from the list above, five parent companies each own and control tens to hundreds of subsidiary companies and stations in widely diverse areas. Given this tendency, a move to allow companies up to 45% ownership is hardly a neutral phenomenon that will usher in the benefits of free-market competition; rather, it partially deregulates the market in the specific ways large media companies desire, while keeping all other restrictions and procedures in place.

“Big media” is not a myth. It exists in reality, and any move to partially deregulate any market via greater market share and cross-ownership must take this into account. Ironically, Ted Turner, founder of CNN networks, publicly criticized the decision in the Washington Post, stating that he would not have been able to compete and succeed in creating his networks had such new freedoms been put in place thirty years ago.

A Look Back: The 1996 Telecommunications Act

The current stir over deregulation is very similar to that which arose in 1996 over the Telecommunications Act of 1996, which stated its goal as allowing “anyone to enter any communications business” and allowing communications firms (i.e., local phone, long-distance, and cable television markets) to compete as freely as possible. According to supporters of the measure, deregulation would serve the public interest via lowered rates and a wider selection of providers.

Fast forward to 2003, where cable subscription rates have skyrocketed; phone charges have fallen, yet have been offset by new FCC charges at the bottom of the bill; variety in service providers have not increased; and ClearChannel now owns over 1,200 radio stations across the country. The benefits named seven years ago are not only unrealized, but trends have only affirmed the opposite.

FCC: Partial Deregulation and the Subsequent Illusion of Free-Market Competition

The main flaw in the FCC’s recent decision lies with its notion of deregulation. Its recognition of the supposed need to allow “more competition” is only a product of a large and successful lobbying effort. Instead of allowing for a true free-market where innovation and new applications of technology compete, the FCC’s attempt at deregulation has created a system in which “more competition” occurs precisely where large media companies support it and want it.

The result is an egregious misrepresentation of a free-market, particularly in light of the fact that the FCC is supposed to be guarding and promoting the public interest. There is no free-market competition, let alone its benefits, when the FCC dictates when there will be free-market competition and when there will not.

Competition is not a buffet. Companies should not have free-market principles and deregulation invoked only when they want it. If the FCC wants to deregulate, it should do so completely. Until then, the FCC’s continued use of partial deregulation and favoritism will only yield bad simulations of a free-market with all its possible faults and none of its benefits.

Casey Lee is a senior in Trumbull College.


 
 

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