When Viacom and CBS merged in 1999 and News Corporation acquired Chris Craft's 10 television stations in 2000, both combinations violated the National Television Station Ownership rule (NTSO), a rule that at that time prohibited any one entity from reaching over 35% of the national households with its owned and operated television broadcast stations. Rather than comply with the Federal Communications Commission's (FCC) condition that these companies meet the 35% cap, they filed suit against the FCC.
In September 2001, the U.S. Court of Appeals for the District of Columbia heard the case of Fox Television Stations, Inc., et al., v. Federal Communications Commission [herein Fox v. FCC] and rendered its decision in February 2002. Fox and co-plaintiffs National Broadcasting Company, Viacom, and CBS Broadcasting had argued that the FCC violated section 202(h) of the Telecommunications Act of 1996, which stated that the Commission must review its ownership rules every 2 years and determine whether the rules are "necessary in the public interest as a result of competition." The court agreed with the plaintiffs' contentions that: 1) The NTSO rule was "fundamentally irrational," and the FCC's justifications for retaining the rule were "correlatively flawed"; 2) The FCC "failed meaningfully" in its 1998 Biennial Review "to consider whether the Rule was 'necessary in the public interest'"; and 3) The FCC did not successfully explain why it departed from its 1984 stance that the rule should be repealed (Fox v. FCC, 2002, p. 1040). The Appeals Court stated that the FCC's decision to retain the regulation was "both arbitrary and capricious" (p. 1033). It remanded the rule, requiring the FCC to address these concerns and provide evidence that the NTSO rule does what the Commission stated it does: protect diversity and competition. The FCC responded to the court's concerns in its 2002 Biennial Review and announced its decision in June 2003: It would raise the 35% cap to 45%, justifying the decision in a manner that again contradicted the 1984 Report but at the same time attempted to placate the business interests involved as well as abide by congressional and court mandates.
Central to the debates regarding structural regulations such as the NTSO rule are the public interest standards of fair competition, diversity, and localism (e.g., Aufderheide, 1999; McChesney, 1993; Napoli, 2001). The NTSO rule, adopted in the 1940s, was one attempt to reel in the abuses of concentration of ownership seen in radio and was justified
by the notion that diversity of ownership leads to diversity of viewpoints. Inherent in this justification is the need for fair competition, as competition should challenge broadcasters to provide more and higher quality informational and entertainment programming. Consistent with the First Amendment, the need for localism in broadcasting was also recognized, as people need to be informed to participate in the political process. It can be argued, though, that once the FCC began allowing and justifying multiple ownership, the concept of competition in the marketplace overpowered all other public interest arguments. This debate remains as the FCC continues to consider regulations regarding cross-media ownership and digital broadcasting.
The NTSO case is significant for several reasons. First, it demonstrates yet again the complexity of the policy-making process, which continues to be an important area of inquiry. Krasnow, Longley, and Terry's (1982) model of broadcast regulation is useful for contextualizing the roles and influence of various stakeholders in FCC policy-making. Their model is based on the premise that the FCC's decision-making process is not necessarily rational nor autonomous; rather, decisions are political in nature, as policy-making is influenced by several forces, including the White House, Congress, the courts, the industry, and citizens groups. A review of the history of the NTSO rule highlights the continued viability of the Krasnow et al. model as a framework for understanding influences on policy decisions. On the other hand, this case also demonstrates the need to re-evaluate and expand the model, as Kim (1992) suggested. Krasnow et al. argued that "the primary channels of influence, information and contact" in policy-making are the FCC, the industry, and Congress (p. 135). However, the NTSO case reveals the increased role of the courts in media ownership policy. Traditionally, the courts have sided with the FCC regarding its philosophical justifications for retaining ownership regulations. With the Appeals Court's remand of the NTSO rule in 2002, the court placed a heavy burden on the FCC to defend its media ownership regulations via "empirical" data and asked the 2002/2003 FCC to justify decisions made 2 decades earlier. As such, it appears that the court asked the FCC to answer questions it could not answer and that judicial oversight rivals congressional oversight as a major factor in policy-making and enforcement. For example, the court's interpretation of Section 202(h) of the Telecommunications Act of 1996 largely influenced the decision-making process, as will be noted. Policy-makers and researchers need to consider the growing role of the courts in media ownership debates, for policy battles are being waged and won in the courtroom.
This case also highlights the "free market" philosophy, and its economic justifications and "empirical" basis, as an additional regulatory force. As can be seen in the 1984 Report and beyond, deregulation of the media marketplace is privileged over traditional notions of the public interest, particularly localism, and is tempered by competing special interests. The NTSO case shows that the "free market" discourse has become so ingrained in the policy-making process that any evidence to the contrary is viewed with skepticism, if not disdain. As such, "expert" analysis, rooted in the assumption that the "free market" is the only legitimate and viable economic system, is advanced. This then eliminates those with alternative views from participating in the discourse.
Lastly, this case demonstrates that the relationships among stakeholders and support for policies develop and change over time. To understand the FCC's 2003 decision, particularly in light of the court's contention that the FCC should explain the 1984 FCC's attempt to eliminate the NTSO rule, an analysis of the history of the rule is not only appropriate but also necessary.
As such, this paper attempts to extend current research regarding the policy-making process in general and media ownership regulation in particular using the NTSO rule as a case study in the politics of regulation. Although scholars have focused on the FCC's 2003 decision (e.g., Blevins & Brown, 2006; Hepp, 2005; McChesney, 2004; Scott, 2004), the starting point of this study is the court's opinion in Fox v. FCC that the FCC failed to explain why it departed from its 1984 stance. This paper examines the FCC record and finds two competing justifications for and against the elimination of the regulation: The 1984 FCC argued that the national cap hindered competition and, as a result, diversity, and that it did not encourage localism; the 2003 FCC argued that a national cap was necessary to maintain localism, defined as the sustainability of affiliates' rights to preempt network programming. Krasnow et al.'s (1982) model of broadcast regulation helps explain these seemingly contradictory stances.
"The Politics of Broadcast Regulation"
Communications policy is hardly a straightforward matter of engineering. It is not a clean, neutral, predictable, mechanical, or routine process. (Streeter, 1996, [paragraph] 9)
Krasnow et al.'s (1982) model, or "broadcast policy-making system," demonstrates that broadcast regulation is influenced by several "reoccurring participants" who often have conflicting interests and competing recommendations (p. 135). One of these participants is of course the FCC itself. The FCC is bound to abide by laws set forth by Congress yet is imparted the power to make and enforce regulations. It is rhetorically an independent regulatory agency yet "politically nonindepend[ent]" (p. 35), made up of Commissioners appointed by the President, confirmed by the Senate, and expected to balance the needs of the industries it regulates and a broadly defined "public interest" standard. It is a bureaucracy that oversees multiple telecommunications industries, each with its own agenda. And because the FCC "is not a static institution but one which changes with its cast of characters," individual Commissioners, particularly chairmen, have an influence over which policies are delineated and enacted (p. 41).
The industries the FCC regulates are another influence on policy-making. The broadcast industry is not monolithic; different factions of the industry as well as broadcasting's competitors have competing special interests that change over time and per issue. They spend much time and money lobbying not only the FCC but also two additional regulatory forces--the White House and Congress. Industry interests also compete with the public interest, for as will be seen, industry definitions of public interest standards such as localism are quite different from definitions presented by public advocacy groups. And as Krasnow et al. (1982) noted, "It is difficult for Commissioners and their staff to work closely with an industry without coming to see regulatory problems in industry terms" (pp. 48-49). As can be seen throughout the history of broadcast policy-making, citizens groups, another regulatory force, are often left out of the process (e.g., Aufderheide, 1999; McChesney, 1993).
Although "only a very small proportion of the FCC's actions are reviewed by the courts ... [j]udicial review ... hangs as a threatening possibility over each administrative or legislative decision" (Krasnow et al., 1982). As Fox v...