marketplace regulation

We’ve written extensively about the FCC’s proposals to turn back the hands of time, and return to the regulatory scheme that existed prior to the early 1980s by mandating that broadcasters serve their local communities – in a manner dictated by the FCC.  In the 1980s, the FCC decided that it did not need to micromanage

In recent months, the broadcast industry has experienced one of the most active periods of regulatory activity in recent memory. Since November, the FCC has adopted enhanced disclosure obligations concerning the public interest programming of television broadcasters and requirements for an on-line public inspection file; rejected most calls for increased deregulation of broadcast ownership (allowing only the cross-ownership of broadcast stations and newspapers in the largest markets); established specific prohibitions against advertising practices that involved “no Spanish, no urban dictates”; placed mandatory disclosure obligations on television broadcasters in connection with promotion of the DTV transition; proposed rules that could favor low power FM stations over improvements in full-power broadcast services and existing FM translator licensees; and proposed sweeping regulation of broadcasters which could potentially require specific amounts of nonentertainment programming by all stations, restrict the flexibility of broadcasters’ location of their main studios, require 24-7 live staffing for all stations that operate on that basis, and perhaps even evaluate the music selection process of radio operators. Rumored to be in the offing are proposals to regulate embedded advertising, to adopt enhanced rules on sponsorship identification in connection with video news releases and payola-like practices, and perhaps even expand EEO reporting requirements (as the FCC recently asked for public comment on the employee-classification information for its long-suspended requirements for the filing of FCC Form 395 – the Annual Employment Report in which stations categorize all their employees by their employment duties, race and gender). And Congress has not been idle, with proposals introduced for the adoption of a performance royalty on over-the-air radio for the use of sound recordings, hearings about potential restrictions on prescription drug advertising, and a proposal to roll back the limited ownership reform adopted by the Commission in December.

With all this activity in a six month period under a Republican administration with a Republican majority on the FCC, during a time of great turmoil in the broadcast industry itself, as television prepares for the digital transition and broadcast revenue growth is slow or nonexistent (based on a variety of factors including general economic conditions and competition from the plethora of new media choices), many broadcasters are wondering what’s going on? And some fear even more changes could come about in any new administration that may come to Washington after the November elections, no matter what the result of that election. The one candidate with the most experience in the regulation of broadcasting, Senator McCain who has chaired the Senate Commerce Committee which regulates the broadcast industry, has by no means been a captive of the broadcast industry – leading efforts to enhance the use of LPFM and at one point pushing a spectrum tax proposal for television broadcasters for the use of the digital spectrum.


Continue Reading Broadcasters and the Regulatory Pendulum – Swinging Toward More Regulation

Just prior to the filing of comments in the FCC’s Localism proceeding on April 28, one FCC Commissioner has spoken out, condemning these proposals as being unnecessary in a world of vast media competition, and likely unconstitutional.  According to press reports, Commissioner Robert McDowell last week argued that the rules were unnecessary and counterproductive in a world of media plenty.  The Commissioner pointed to all of the competition from digital and traditional media and asked why the Commission should impose on broadcasters rules abolished 20 years ago – rules which will put them at a competitive disadvantage in the new media world.  These are sentiments that we have repeatedly echoed here.

Today, as comments were being submitted to the Commission, a letter from 23 Senators was sent to the Commission making many of the same arguments.  The letter suggests that the Commission was imposing unreasonable costs on broadcasters when these broadcasters have an economic incentive to serve the public or risk the loss of their audience and the resulting loss of advertising and income.  In other words, they are arguing that the Commission had it right 20 years ago when it decided that marketplace competition would insure that broadcasters served the public interest.  This letter is a companion to the letter sent to the FCC the week before last by members of the House of Representatives, about which we wrote here.


Continue Reading As Comments are Filed in Localism Proceeding, Commissioner Speaks Out

In the early 1980s, the FCC deregulated many of the very detailed programing rules that governed broadcasters,  based on the theory that the marketplace would assure that broadcasters provided programming of interest to their local community.  The FCC looked at the marketplace, and decided that broadcasters either had to program to the needs of their community, or risk the loss of their audience to competitors.  Now, the FCC is proposing to bring back many of these rules with a vengeance (see our post on the FCC’s current efforts) – imposing rules even more detailed than those that were abolished over a quarter century ago.  A look at this week’s news raises the question of why now – when there are more media choices than ever (and when, particularly in the radio industry, revenues with which to meet such requirements are shrinking) – the FCC cannot rely on the marketplace to assure service to the public.  When marketplace forces require that broadcasters use their most important asset – their localism – to compete against all the new competition, the FCC is now looking to require that broadcasters meet their public interest obligations in a very specific, cookie cutter, government-mandated fashion.  Some of the announcements made this week highlight the extent of the competition that broadcasters now face.

On the most basic level, there are simply far more stations than there ever were.  According to an FCC Report published in 1980, there were 4559 commercial AM stations, 3155 commercial FM stations, and 1038 noncommercial FM stations.  While the number of AM stations had not increased substantially by the end of 2007 (4776), the number of commercial FM stations has doubled to 6309, and the number of noncommercial FMs has increased even more substantially, to 2892.  TV shows a similar increase in service – from 746 commercial and 267 noncommercial stations in 1980 to 1379 commercial stations and 380 noncommercial stations.  In addition, thousand of LPTV stations have been created, and over 800 LPFM stations – services that didn’t even exist in 1980.  Clearly, the over-the-air competition is far greater than when the FCC initiated its deregulation efforts.


Continue Reading I-Pod Radio, Internet in Cars and More Broadcast Stations Than Ever – Why Can’t the Marketplace Decide?