Posted on December 8, 2008 by David Oxenford

As the FCC Transition Progresses, The Broadcast Industry Shows Economic Strains - Tribune and Equity Declare Bankruptcy and NBC Cuts Programming Costs By Putting Leno on at 10 PM, Five Days A Week

As the Obama administration fills its top level government posts, all eyes are now turning to the next levels of government appointments which, at some point, will include a new Chair of the FCC and potentially other new FCC Commissioners. We wrote about our hopes for an Obama administration at the FCC immediately after the election, and now other voices in Washington are weighing in. And, as one might expect, with so many different perspectives, the advice is far from consistent. As we wrote in our analysis, the appointment of the FCC Chair is crucial as it is the FCC Chair, far more than the President or the White House, who sets the tone for Communications policy. This is made clear by the extensive regulations either adopted or proposed for broadcasters by the current Republican FCC, seemingly at the direction of the current chairman, regulations that would not have been expected from a Republican administration.  In light of the economic challenges facing broadcasters, as evidenced by today's news that two television companies - Tribune and Equity - declared bankruptcy, and another, NBC, has announced a cut back in prime time programming, replacing it with a prime time, 5 day a week Jay Leno program. 

So what should the transition team look to accomplish at the FCC?  In one of the most perceptive articles that I’ve seen recently, Harry Jessell in TV Newsday has urged the new Commission to simply do nothing on broadcast regulation for the next year. The current state of the economy and its ramifications for the advertising that is the lifeblood of the broadcast industry simply leaves no room for broadcasters to have to bear new costs for new regulations.  Broadcasting and Cable magazine has echoed that sentiment last week.  Recently, not only have we seen the economy and the state of the broadcast industry been reflected by the actions announced by Tribune, Equity and NBC today, but we’ve seen numerous mainstream press articles about the economic peril in which the entire broadcast industry finds itself.  In one recent article, radio’s dramatic decline in revenues was highlighted, even as the industry's listenership remains high (as confirmed by BIA’s recent prediction that radio revenues will decline by 7% in the coming year, coming after declines this year – perhaps the first two year decline in revenues in radio history). I recently attended the Radio Ink Forecast 2009 conference in New York.   While the conference is off the record, I don’t think that I’d be betraying any confidences to state that there was much concern about the short term health of the radio industry. 

In a New York Times article last Monday, the focus was on TV, where the cost cutting caused by declining revenue has led to the termination of the contracts of many long-serving, high priced television anchors. With the digital transition upon us in just over two months, and the likely disruptions that will cause, along with the slowdown of the economy and the loss of revenue in a non-political, non-Olympic year, TV is in no better position than radio to weather the addition of new regulations. And there are potentially many regulatory issues that could hit television – from the already adopted but never implemented FCC Form 355 (see our summary here and our speculation as to the reasons for the implementation delays here), to potential new rules on violent programs and ads for unhealthy food and prescription drugs, to the potential adoption of rules prohibiting embedded advertising and product placement, the potential for mischief is great. For more, see my discussion of these concerns in my keynote at the Future of Television Conference held in New York last month, video of which is available here.

 

But citizens groups are also pushing their agendas for the new FCC.   Free Press, an advocacy group opposed to media consolidation, has published an ad calling for more citizen participation in the FCC’s agenda, and called for the appointment of FCC Commissioners who share these views. Other public interest groups have made similar comments.

 

Certainly citizens should have a voice in any decision of their government.  But the new FCC must remember that those in the industry are citizens too, and they are usually the best informed citizens as to the economics of their businesses. The transition team needs to take those voices into account, as well as the real struggles of the companies that operate the stations, and take a light touch to broadcast regulation that could further damage the already precarious health of this industry. 
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Posted on November 4, 2008 by David Oxenford

The Promise of an Obama Administration for Broadcast and Communications Regulation

With Barack Obama's historic victory just sinking in, all over Washington (and no doubt elsewhere in the country), the speculation begins as to what the new administration will mean to various sectors of the economy (though, in truth, that speculation has been going on for months).  What will his administration mean for broadcasters?  Will the Obama administration mean more regulation?  Will the fairness doctrine make a return?  What other issues will highlight his agenda?  Or will the administration be a transformational one - looking at issues far beyond traditional regulatory matters to a broader communications policy that will look to make the communications sector one that will help to drive the economy?  Some guesses, and some hopes, follow.

First, it should be emphasized that, in most administrations, the President has very little to do with the shaping of FCC policy beyond his appointment of the Commissioners who run the agency.  As we have seen with the current FCC, the appointment of the FCC Chairman can be the defining moment in establishing a President's communications policy.  The appointment of Kevin Martin has certainly shaped FCC policy toward broadcasters in a way that would never have been expected in a Republican administration, with regulatory requirements and proposals that one could not have imagined 4 years ago from the Bush White House.  To see issues like localism, program content requirements and LPFM become such a large part of the FCC agenda can be directly attributed to the personality and agenda of the Chairman, rather than to the President.  But, perhaps, an Obama administration will be different.

One of the specific proposals of the Obama campaign is the promise to appoint a Chief Technology Officer as a cabinet-level position to help coordinate policy across the many government agencies that deal with technology and communications.  This position would be designed to develop policies that will enhance the competitive position of the United States in the world-wide technology revolution.  Clearly, such a position will create a new executive-level focus on communications policy that will affect the workings of the FCC.  How will this focus impact broadcasters?  With the unanimous bipartisan decision of the FCC on Election Day approving the use of unlicensed devices in the television band, the so-called "white spaces" decision, one might have a glimpse of the kinds of regulatory actions that could be expected from an Obama FCC (though hopefully not an example of the procedures for making that decision).  No longer will the traditional media or established communications companies be favored if there is the potential for some sort of transformative technology that can increase US technological competitiveness.

But the hope for an Obama administration is that the rhetoric of a transformative candidacy, one geared toward uniting the various divides of the country, will seep into the broader workings of the administrative agencies in Washington - that the pitched battles of one industry versus another, or one partisan viewpoint over another, will be replaced by a more cooperative spirit that will move the country, and specific industries forward.  One would hope that this spirit would encourage compromise, and would bring a new openness to government that will allow real discussion to take place on issues, rather than decisions being made based on agendas that are set in stone before the evidence is in and the arguments made.   One would hope that some of the unyielding positions that some regulators have taken on communications policy issues would be more open to persuasion and discussion.

To be more specific, one would hope that an Obama administration would, in the broadcast regulatory arena, be open to recognizing that we have a pretty incredible broadcast service in this country - one that can rapidly adapt to disasters, and can bend and shape itself to the needs and desires of the audience.  While there have been excesses in broadcasting here and there, these tend to be self-correcting, as witnessed by the recent divestitures of many radio and television stations by big groups - helping to bring back some of the localism lost by the industry's rapid consolidation in the early part of this decade. 

Some have feared that the return of a Democratic FCC will result in the return of the kinds of nitty-gritty broadcast regulation that has seemingly been advocated by some quarters of the Democratic party - a return of the Fairness Doctrine, the kinds of detailed programming disclosure requirements that have been adopted but not yet implemented for television broadcasters that impose great costs without any discernible regulatory benefit (see our post here), or the adoption of other specific regulations that increase government mandates without corresponding benefits.

But I am hopeful that an Obama administration would not be one to adopt unproductive regulation.  Clearly, the Obama administration will be one that will want to stress inclusiveness and opportunity for all in the media, and will look for ways to encourage minorities and other new entrants into broadcast ownership.  But if we look at the recent localism proceedings, for instance, we see that many members of the minority community have actually opposed the kinds of specific regulatory obligations that some have attributed to the Democratic Commissioners, as minority broadcasters and other new entrants realize that they need to make a living operating a station - that broadcasting is a business that must generate a profit.  And that specific and detailed regulation take flexibility and innovation away from broadcasters, and usually impact small broadcasters more than large conglomerates.  So an administration that wants to encourage new owners can't engage in a wholesale re-regulation of the broadcast industry.

Do I expect some more regulation?  Of course - but that seems to be a reaction to the current climate for all industries in Washington where there seems to be building a general consensus that that the philosophy of deregulation may have gone too far (see our post here).  But I would look for regulation around the edges, regulation that imposes some public interest obligations on broadcasters but ones that can be lived with - not ones that are imposed simply for the sake of regulation and which can impose a crushing burden on small business. 

From the rumors swirling around DC of the names of potential Chairs of the FCC in the new administration, many have worked at past Democratic Commissions, but many of these have spent time in the business community since leaving the FCC, and are thus familiar with meeting a payroll and the costs of regulation.   I believe that right now, we should keep hope alive and look at the Obama administration as one that may bring a new emphasis to the communications world while not unduly burdening those that are already operating in that world.  It is a new day - let's hope that it is indeed a brighter one for broadcasters.
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