Evaluating the Federal Communications Commission's national television ownership cap: what's bad for broadcasting is good for the country.

• Author: Benjamin, Stuart Minor

TABLE OF CONTENTS INTRODUCTION I. BACKGROUND TO THE INCREASE IN THE NATIONAL TELEVISION OWNERSHIP LIMIT II. WHAT IS REALLY AT STAKE IN THE NATIONAL OWNERSHIP CAP? A. What Is Not Really at Stake B. The Importance of Preemption 1. Why, and When, Do Preemptions Occur? 2. How Does Raising the Cap Affect Preemptions? C. The Costs of Preemption (and Therefore the Benefits of Raising the National Ownership Cap) III. EVALUATING THE RULES: ADVANTAGES OF HASTENING THE DEMISE OF BROADCASTING IV. RAMIFICATIONS A. Will the Migration of Broadcast Channels to Cable and Satellite Produce a Convergence of Broadcast and Cable/Satellite Regulation? B. Will the Practical Demise of Broadcasting Lead to Spectrum Flexibility? CONCLUSION INTRODUCTION

The Federal Communications Commission (FCC) issued a decision in June 2003 on a number of matters that might not seem likely to arouse much public excitement. Its order permits certain combinations of cross ownership for television stations, radio stations, and newspapers; relaxes the limits on ownership of local television stations; slightly tightens the rules on local radio ownership; and increases the national television station ownership limit. (1) But as it turns out, these changes--and in particular the change in the national television ownership limit, which increased the cap on the percentage of households in the nation reachable by a given company's stations from 35% to 45%--produced a firestorm of controversy. The FCC received more comments than it has for any other proceeding (more than 750,000), and the overwhelming majority urged the FCC not to relax its ownership limits. (2) After the FCC did so, the fight moved to Capitol Hill, where the FCC suffered a stunning rebuke: broad bipartisan majorities voted to rescind the FCC's increase in the national television cap--and in fact to codify the 35% limit and leave the FCC with no discretion to raise it. (3) This provision was included in the omnibus spending bill for the 2004 fiscal year. (4) The Bush administration responded by threatening to veto the omnibus bill (full of spending initiatives dear to both the President and members of Congress) if the 35% provision remained in the bill. (5) Eventually, Republican leaders in the House and Senate agreed to change the legislated national ownership level to 39%. (6) That, too, provoked outrage: many members of the House and Senate, from both parties, denounced the move from 35% to 39%. They noted that broad majorities in both houses wanted a 35% limit, and they vociferously opposed any increase. (7) By late January 2004, almost four months after fiscal year 2004 had begun, the pressure to pass the omnibus spending bill was too great, and the 39% compromise was enacted. (8) A significant number of senators, however, restated their outrage at the increase to 39%. (9)

This series of events raises a couple of questions. First, what is at stake in this increase in the national television ownership limit? Is the level of controversy justified, and, if so, why? Second, is the increase in the ownership cap a good idea? Upon what basis should we evaluate that cap, and what is the result of that evaluation?

This Article puts forward answers to these questions. The analysis reveals that most of the reasons proffered by opponents of the increase in the national ownership limit do not stand up to scrutiny--they are largely unrelated to the increase in the limit. (10) The main thing at stake in the ownership limit is the level of influence local affiliates will have in killing television shows. In other words, the question is whether the decision makers who choose to cancel a given television show will be the network executives, as is the case for cable programming, or will also include local television stations. (11) That is not an insignificant question. Those who mistrust the values and priorities of the network executives would prefer that local owners have some veto power over television shows. Those who focus on ensuring the long-term economic viability of network broadcast television, however, would prefer that local owners not have this power. Any difficulties that broadcast networks have in guaranteeing a national audience for their programs constitute a competitive disadvantage for broadcast networks vis-a-vis their cable counterparts. (12) Those who want local veto power and viable networks face a trade-off in which satisfaction of one aim endangers the other.

So how should we evaluate the choice? When local affiliates preempt network programming to send a message to the networks, as they often do, instead of simply to carry a popular local event, such as a local sports event, they often preempt shows they deem inappropriate for their communities. (13) This judgment of inappropriateness has consistently entailed shows that are perceived as beyond the bounds of good taste, as defined in that community. (14) That is, a large number of local vetoes of network programs have arisen because affiliates deemed the material offensive to their audience. Unsurprisingly, then, such vetoes have been a tool of, and have been embraced by, cultural conservatives. (15) If you believe that network executives are too ready to bring sex and violence onto the television screen, you may have sympathy for greater local veto power.

For those who are not sympathetic to the concerns of cultural conservatives, the choice may seem easy: increasing the national ownership limit will have a desirable result, enhancing the viability of broadcast television networks, and keeping the cap at the same level will have an undesirable one--empowering cultural conservatives. But the matter is not so simple. In my view, the demise of broadcast television would be a salutary event. (16) It would free up valuable spectrum, lead to more innovative and more variegated programming, and limit the incentive for and scope of government control over communications. In other words, what is bad for the viability of broadcasting is good for the country.

In Part I of this Article, I briefly lay out the background to the increase in the ownership limit, and the response to that increase. In Part II, I consider the various arguments that one might put forward, and that opponents often did put forward, against the increase. I identify the contentions, evaluate their relevance to this rule change, and conclude that the only apt argument is that an increase in the ownership limit would diminish the likelihood of local affiliates preempting national programs and thereby sending a signal to the national network about the desirability of that program. Such a signal is a cost to networks, as it limits their ability to guarantee national airing of a given program. Thus the axis implicated by the increase in the ownership limit is enhancing the economic viability of broadcast television networks versus enhancing the ability of affiliates to veto programming that they do not want to carry.

In Part III, I evaluate this trade-off, finding that cultural conservatives should strongly favor a lower limit (as they do), but that everyone else--including the liberal groups that opposed the increase (17)--should prefer a lower limit as well. Increasing the ownership cap means not only enhancing the ability of national networks to air programs but also enhancing the networks' viability, and the latter effect is one that America would do well to avoid. The impact of national broadcast networks, I argue, has been more baleful than helpful. We should look forward to their demise, or at least their migration to cable and satellite, so that the spectrum can be devoted to the highest valued uses.

Part IV considers the implications of these arguments, finding that the demise of broadcasting, on its own, will have relatively little effect on the convergence of cable and satellite regulation with broadcast regulation. In addition, we should be able to avoid the worst of all worlds--spectrum dedicated to broadcasting (and only broadcasting), but no one watching via broadcast anymore. The larger point is that broadcasting is slowly dying. As matters stand, its death spiral will take many years. We should cheer developments that speed its demise.

1. BACKGROUND TO THE INCREASE IN THE NATIONAL TELEVISION OWNERSHIP LIMIT

   The national television station ownership rule (18) prohibits any entity from controlling television stations, the combined potential audience reach of which exceeds a given percentage of the television households in the United States. Note that the limit is not on the percentage of households that actually watch one of the owner's stations, but instead is on the percentage of homes to which those stations' signals are available. (19) It is entirely possible that an entity owning stations that reach 35% of American television households is watched at any given time by less than 1% of Americans. Indeed, such a striking disparity between audience reach and actual audience is highly probable. (20)

   A word on the structure of networks may be helpful. Each broadcast network (for example, CBS) puts together programming that it wants to send out to viewers. The network then sends that programming to local television broadcasters with whom it is affiliated. Those affiliates then broadcast the programming to their local viewers. Some of those local stations are simply affiliates (i.e., they are owned by a different entity), and others are both affiliated with and owned by the network. (21) The national ownership cap prevents any one company from owning (as opposed to merely affiliating with) local stations that reach more than a certain percentage of households. (22) Accordingly, what is directly at issue in the national ownership limit is the ownership of affiliates, and the perceived advantages that flow from having multiple owners of affiliates.

   The companies that are in danger of owning stations that reach more than 35% of television households...