The extended drama surrounding Rupert Murdoch’s unsolicited $5 billion bid to take over family-owned Dow Jones media empire, along with the pending $8.2 billion sale of the Tribune Co. has brought renewed attention to the longstanding debate over media consolidation. While these two high-profile transactions have grabbed the spotlight, they are mere flashpoints in a much larger battle between free-market advocates and grass-roots media advocates over the role of government in ensuring equal access to the marketplace of ideas.
At this writing, it appears as if the Bancroft family, which owns controlling shares of stock in the Dow Jones conglomerate, may be close to directing its board to negotiate the price of a final sale. Meanwhile, mogul Sam Zell has been buttonholing members of Congress in his effort to get waivers from the Federal Communications Commission that would permit the ownership of newspaper and television properties within the same market.
Both pending sales have met with criticism from activists and observers concerned about media consolidation. The editors of the Columbia Journalism Review spoke for many in the industry when they likened Murdoch to a scorpion, and pleaded, “We hope [the Bancrofts] find a way to keep this American treasure away from Rupert Murdoch, who will smile even as he raises the stinger.” The United Church of Christ and a coalition of civil rights and other groups have petitioned the FCC to stop Zell from obtaining the waivers that would make the Tribune bid possible.
While these issues have grabbed the headlines, the battle lines over media consolidation spill into other regulatory skirmishes over such issues as Internet radio, cross-ownership rules and the Net Neutrality debate. The debate has further intensified with advent of digital television in 2009, because the FCC will be auctioning off the portions of the broadcast spectrum currently used for analog television.
OJR spoke with two experts on media policy who differ strongly on consolidation and a host of other issues.
Mark Fratrick is an economist who has worked on broadcast regulation issues at the Federal Trade Commission and the National Association of Broadcasters. He is currently vice-president of BIA Financial Networks, a Virginia-based consulting firm. Craig Aaron is the press liaison or Freepress.net, a non-partisan think tank on media issues. Here’s what they had to say about the Dow Jones sale and several other issues related to preserving competition in the media marketplace. Their contrasting views highlight the ways in which technological change is creating new competitive realities and reshaping old debates about the tension between the media’s public service responsibilities and the economic imperatives of capitalist enterprises.
Issue: Dow Jones sale
Fratrik thinks Murdoch won’t sacrifice the Wall Street Journal on the altar of either profit or his brand of politics because to do so would be bad business practice. “I don’t think that Mr. Murdoch would seriously alter the quality and integrity of the Wall Street Journal. That integrity, that quality, that brand name is what the Wall Street Journal is. And Mr. Murdoch buys assets in order to improve the value of those assets and the value of his holding company. I find it hard to believe he would put that in serious jeopardy by diminishing the quality of such a thing.”
Issue: Net Neutrality
FreePress.net is one of the key players in the Save the Internet coalition, proponents of “net neutrality.” Net neutrality advocates say broadband providers are looking for ways to force consumers to pay extra fees for high-speed internet access and other premium services. They want Internet access to be treated as a public resource, much as telephony was 100 years ago. In the early decades of the 20th century, industry leaders and public policy makers made universal telephone service a priority, leading to a chain of business moves and legal decisions that culminated in the Communications Act of 1934.
In 2006, the Communications Opportunity, Promotion, and Enhancement (COPE) Act (HR 5252), a bill that provided for some net neutrality protections passed the House but died in the Senate.
Aaron worries that without FCC action, consumers could find their internet access restricted in the same way that cell phones are limited now. “If you look at your cell phone plan, there are a lot of restrictions in place. Network neutrality is not allowed. They [wireless access providers] can interfere with who gets to you and what kind of information you can get. So we’re looking to ensure network neutrality.”
That argument doesn’t sit well with experts such as Fratrik, who describes himself as “very free market-oriented.” In fact, Fratrik exclained, “Net neutrality makes my hair hurt!” Fratrik echoes the industry-led “Hands Off the Internet” coalition, which argues that “Net Neutrality” is “expensive and unnecessary. Net neutrality opponents say that current laws already provide adequate protections for consumers. Further, they say, the changes that Neutrality advocates want would add expense without benefitting consumers.
It’s not easy to find analyses of the issue that don’t lean to one side or the other. Project Censored has accused the mainstream media of largely ignoring the net neutrality debate in 2005 and 2006, calling it the most censored story in its 2007 list. The issue may get more coverage as the 2008 Presidential election approaches, especially since several candidates have already declared themselves in favor of Net Neutrality.
Issue: Concentration of Media Ownership
The Telecommunications Act of 1996 loosened some of the rules on, for example, how many radio stations a company could own, both nationally and locally. To Fratrik, that regulatory relief was essential: “I think that the competitive environment that both radio and television stations now find themselves in… is incredibly remarkable. Without the deregulation of the ’96 Act, … broadcasters would be even in a worse position than they are now.”
The actual development and implementation of regulatory rules in the years since 1996 has been contentious. In a 2004 decision in the case Prometheus v. FCC, the Third Circuit Court of Appeals stopped plans announced by the FCC in 2003 to further loosen caps on the number of radio, newspaper and broadcast outlets that can be owned in one market. In 2006, the FCC announced that it was seeking public comment on how to respond to the order. In 2004, Rep. Maurice Hinchey (D-NY) introduced the Media Ownership Reform Act, which would roll back much of the deregulation of the last two decades, break up some media conglomerates, and re-introduce the Fairness Doctrine. So far, the bill has not made it out of committee.
The transition to digital television brings a new twist to the consolidation debate with the FCC’s forthcoming auction of the analog bandwidth that over-the-air television broadcasters won’t be using any more. Digital television, which will become standard in 2009, also promises to create a host of opportunities for new interactive media services. FreePress.net’s Craig Aaron is worried that, “the way the auction is taking shape, it very well could be that the same companies that already dominate our broadband market – the phone and cable companies. Phone companies, in particular, are in a position to swallow up this spectrum.”
FreePress.net and its allies are urging the FCC to follow “open access rules” that it says will lead to greater consumer access, more innovation, and more marketplace competition. Those rules include requiring licensees to make bandwidth available, at wholesale rates, setting aside a portion of the spectrum for unlicensed wireless services, and ensuring that customers will be able to connect to wireless services without having to purchase a device endorsed by their wireless carrier. They also support passage of the Wireless Innovation Act of 2007, which would turn these recommended rules into law.
Issue: Diversity of Media Ownership
One of the reasons, the Third Circuit ruled against the FCC in the Prometheus case is because it rejected the FCC’s claim that it could loosen ownership restrictions without further eroding the diversity of media ownership. That lack of diversity remains a serious issue.
Aaron and others point to the June 2007 report, “Off the Dial” as evidence of the the persistently low representation of women and people of color among the owners of the nation’s broadcast outlets. According to that report, African Americans, Latinos and Asians own only 7.7 percent of the nation’s full-power commercial broadcast stations, despite representing about one-third of the US population. An October, 2006 study, “Out of the Picture,” found people of color similarly scarce among commercial television station owners. Women constituted just under 5 percent of television station owners, despite the fact that just over half the US population is female.
Fratrik says diversity of ownership and opinion is “always a valid concern.” However, he adds, “how it should be handled is another question, insofar as how you may hamper the ability of certain stations to operate for not allowing groups to acquire properties, troubles me. I think it’s a very good concern; I think it’s an important part of a democracy. It’s also an important part of communications policy. I’m always fearful if that is the primary driver in some proposals.”
Fratrick added, “If you just look at over the air broadcasting as your group of outlets, then there may be not as much diversity as one would like, but on the other hand, I think the broader media environment should be the environment, what we refer to as the media ecosystem that one should look at. Given the thousands and really unlimited number of outlets that one has available, I think there’s a tremendous amount of diversity.
“I think the current regulatory scheme is fine, insofar as providing enough diversity in that broader media ecosystem, that broader marketplace. I’m thinking of satellite radio, I’m thinking of the Internet, I’m thinking of video-on-demand, cable systems, the hundreds of newspapers, blogs – every day there’s a new avenue.”
“Not everybody has a broadband connection to the Internet, and not everybody has cable, and certainly not everybody subscribes to satellite radio. But when I take a step back and ask, what’s available to the American consumer, and what’s available for free, what’s available for a fee, what’s available online, I’m just wondering, what else more can we be doing?”
Aaron has some ideas that he thinks will lead to more diversity among media owners. “Well, he says, “you could lower the ownership caps, for a start. You can create incentive systems for those properties to be sold to under-represented communities.”
While Fratrik doesn’t expect MORA any bill like it to surface any time soon, he adds, “I’m always concerned when Congress talks about this, because I’m always fearful that they may come back and re-regulate, and I think that would be an unwise decision.”
Freepress.net disagrees. Aaron maintains that whether it’s the Internet, the wireless spectrum, cable or satellite, “they’re all a part of the public airwaves. And it’s the FCC’s job to make sure these airwaves are used in the public interest. And the public interest is lower prices, more options, more space to get faster Internet service, to connect their devices and do different things. Unfortunately, the history of media policymaking has largely gone in a different direction, and that’s taken this great public resource and privatized it in a way that it doesn’t serve the interest of everybody, and it does serve the narrow interest of a few big companies.” Aaron insists that the policies he and his colleagues recommend will yield “benefits in terms of new services, new products new competition.”
Whatever your philosphical predisposition, one thing is clear: the decisions taken by the FCC in the coming weeks and months will go a long way toward shaping the media environment for both journalists and news consumers for years to come.