Let’s Do the Time Warp Again – The FCC’s Ownership Rules Remain Stuck in 1975
During the past year, a number of industry trade associations have changed their long-standing names. First, the Consumer Electronics Association became the Consumer Technology Association (CTA), as the “hardware” term “electronics” no longer reflected the breadth of its membership. The National Cable & Telecommunications Association then dropped “cable” from its name, becoming “NCTA – The Internet & Television Association,” to better describe its members and the consumer services they deliver. And perhaps most notably, the Newspaper Association of America (NAA) removed from its name what had defined it since the 19th century – the word “newspaper” – and became the News Media Alliance. The change was reportedly made because the word “newspaper” had become meaningless for many of the group’s existing members, and because the group did not want to exclude purely digital news organizations that had no print editions.
Clearly, something matters in these new names. They reflect remarkable changes in technology, in consumer preferences and in the creation and distribution of news and entertainment. NAA’s new name reflects a digital marketplace so challenging that a website called Newspaper Death Watch was created in 2007 to chronicle the decline of that industry. NCTA’s new name reflects the creation of new words, such as “cord-cutters” and “cord-nevers.” All three name changes reflect consumers’ desire to communicate and to access information and entertainment any time, any place, and over any and all types of devices. They reflect the transformative power of the internet. In short, they reflect the 21st century marketplace.
Notably, however, the Federal Communications Commission’s (FCC) broadcast ownership rules reflect none of these fundamental changes. In its long-delayed 2010 and 2014 ownership review order, which was finally published in the Federal Register today, the FCC again asserted that “non-broadcast video programming distributors” are not meaningful competitors in local TV markets, virtually ignoring a host of 20th and 21st century technologies (including cable, satellite, mobile devices and the internet) to retain its local TV ownership restriction. In an even more impressive imitation of an ostrich with its head in the sand, the FCC yet again retained the prohibition on the common ownership or operation of a daily newspaper and a radio or TV station in the same market. In maintaining a ban adopted in 1975, the FCC essentially concluded that little or nothing of import has changed in the news industry and the marketplace position of print newspapers and broadcast stations for the past 41 years – a nonsensical position on its face.
In fact, the FCC appears stuck in a time warp, as merely stating the terms of the print newspaper rule reveals its arbitrariness in 2016. It prohibits common ownership of a broadcast outlet and a newspaper published four or more days per week in the dominant language in the market and circulated generally in the community of publication. The very notion of a rule hinging on a newspaper being printed and circulated shows its analog-era ancestry. It borders on the absurd to contend that the viewpoint diversity concerns supposedly sufficient to ban the common ownership of a station and a newspaper publishing a print edition four days a week magically disappear when the newspaper publishes online every day but publishes in print only three days a week. And this rule is still maintained by the agency that spent millions of taxpayer dollars and countless person hours on producing the National Broadband Plan.
While the FCC saw no need to consider updating its local TV rule, it at least pretended in its quadrennial ownership order to “loosen” the “overly broad” ban on newspaper/broadcast cross-ownership. It’s hard to take that claim seriously, however, when the prohibition on owning a newspaper and a single radio station, even in the largest media markets in the country, remains in place. The FCC’s new “exception” and its vague promise of waivers to the rule are only cosmetic changes intended to disguise its back-tracking from previous quadrennial review decisions that a complete ban on cross-ownership was unjustified.
Under its so-called exception for proposed combinations involving a “failed” or “failing” newspaper or broadcast outlet, the FCC merely adapted the existing (and deficient) standards for failed/failing stations under the local TV ownership rule. These standards, for example, require an outlet to have ceased operation for at least four months, or have had negative cash flow for at least three years. Requiring either a broadcast station or a newspaper to reach such dire straits makes it much less likely that an exception to the FCC’s cross-ownership rule would save the outlet from its downward spiral (even assuming that another same market outlet would want to invest in a station or newspaper near financial oblivion). That outcome would not serve local consumers. And where is the logic in a rule that permits stations or newspapers in involuntary bankruptcy proceedings to qualify as “failed,” but not outlets in voluntary bankruptcy proceedings?
More fundamentally, the FCC has done nothing substantive here. The exception for failed/failing outlets, and the new waiver standard for newspaper/broadcast combinations not “unduly harm[ing] viewpoint diversity,” fail to go beyond pre-existing waiver opportunities for broadcasters and newspaper owners. The FCC’s ownership order specifically says that waiver requests for “good cause” under its general rules (Section 1.3 for those interested) are broader than its new “undue harm” standard and could include any variety of public interest considerations that the applicant believes warrants a waiver. So, if considerations of viewpoint diversity can already be addressed under the FCC’s general waiver rule, it’s unclear what, if anything, the new “undue harm” waiver standard really adds.
This “undue harm to diversity” standard, moreover, only replaces the waiver standard originally established in 1975 to specifically address cases where application of the cross-ownership rule would be unduly harsh. Under its 1975 standard, the FCC has granted a small number of long-term and permanent waivers of the rule, generally due to the poor financial condition of either the newspaper or station involved but also on occasion based on diversity considerations. Replacing its original waiver standard with a new, narrower one cannot credibly be seen as “loosening” the cross-ownership ban. It is only the appearance of action, designed to distract from the FCC’s failure to bring its ownership rules into the internet age.
The FCC’s inaction in the face of the profound changes recognized by the News Media Alliance and the rebranded NCTA and CTA could lead one to paraphrase a famous newspaper column from the 19th century: “Yes, FCC, there is an internet” – and it’s not as fictional as Santa Claus. Or, perhaps the FCC’s recent response to the struggles of newspapers and traditional journalism is more akin to President Gerald Ford’s response to a near-bankrupt New York City, as a memorable 1975 headline said: “Drop Dead.” And while the Ford Administration may seem like ancient history in this presidential election year, it’s no older than the FCC’s print newspaper rule.