Electronic Media Regulations
The emphasis must be first and foremost on the interest, the convenience, and the necessity of the listening public, and not on the interest, convenience, or necessity of the individual broadcaster or the advertiser.
This chapter is divided into two major sections and a practice note. The first section describes regulation of the electronic media. We begin by introducing the principles that guide regulations and a history of the regulations themselves. We also describe the trend and status of deregulation of the industry, and also briefly describe the structure and function of the FCC. Our description of regulation and deregulation focuses on the broadcast industry because it has spawned the most complex regulations and because broadcasting is the electronic medium that most often influences and is influenced by mass communications practitioners. However, we do introduce regulation of cable, telephone, satellite, the Internet, and other electronic media.
The second section of this chapter describes the prescriptive regulations that require content in broadcast media and the proscriptive regulations that prohibit or punish words and content. This chapter is placed at this location in the book because the discussion of indecency requires some familiarity with the court’s analysis of obscenity, which was described in the preceding chapter. We conclude the chapter with a practice note that describes the limited requirements for reporting public service announcements (PSAs) and explains how public relations or advertising practitioners may use those requirements to encourage placement of PSAs.
The power of the U.S. Congress to regulate electronic media comes from the Constitution itself. Article I gives Congress authority to regulate all interstate commerce. It says, in part,
Section 8. The Congress shall have Power to . . . regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. . . .2 To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.3
Obviously, broadcast and other electronic signals cross state lines and are in interstate commerce. Therefore, Congress has exercised its powers of legislation and regulation over the evolving industry. Because of the changes in technology and social uses of electronic media, Congress has been hard pressed to keep up with the ever-changing communications landscape. In many instances, it has not been able to address and adequately supervise the often conflicting needs of commercial enterprise and the consuming public. Further, the proliferation of laws and regulations over the years bears witness to the lack of any comprehensive or consistent congressional policy in the area.
History and Principles of Regulation
Problems with electronic media regulation have been blamed on poor planning, and the inability to predict and adapt to technological and social change. Other problems include a limited budget that required elimination of regulatory oversight. Whatever the reason, regulation of electronic media is one of the most complex and inconsistent areas of governmental control. From the birth of electronic media through the 1980s, the government layered progressively more regulation on the broadcast industry. Since 1980, broadcast and other electronic media have been progressively deregulated. Both regulation and deregulation create problems for mass communications practitioners and we describe both trends here. We begin with a description of the three sets of beliefs about governmental control that have guided regulation of electronic media.
Approaches to Governmental Control
Three different sets of beliefs about the role of governmental regulation have guided decisions about regulation of electronic media. The first of these addresses the proper role of representatives. The second is concerned with the motivation of individual citizens, and the third relates to what is seen as the appropriate goal of governmental regulation.
Legislators deciding how to control electronic media see their proper role along a continuum ranging from the beliefs of Edmund Burke at one end to Andrew Jackson at the other. Burke believed that representatives served the people but did not serve merely as a conduit for their will. He thought legislators should make decisions based on their own informed views rather than on the uninformed opinions of constituents. Jackson, on the other hand, believed that elected officials were obligated to advocate the view held by the majority of their constituents regardless of their motivation. These two models are called the trustee or independent delegate and the instructed or committed delegate styles of representation.
Motivation of individual citizens can also be divided into two categories and decisions about regulation of electronic media may be guided by those views. The terms used to describe these individual motivations are homo economicus and homo politicus. A citizen motivated by homo economicus is self-centered and interested in those governmental policies that maximize his or her immediate personal benefits. Alternatively, citizens motivated by the homo politicus philosophy are other-oriented and view governmental decisions in terms of whether or not they obtain the greatest good for the largest number of people. Homo economicus constituents expect control of the electronic media for their own benefit, while homo politicus constituents advocate control for the greater good of society. At various times, the U.S. Congress has responded to both arguments and regulation of electronic media has changed as these different approaches gain and lose influence.
Citizens’ views of the appropriate role of government can be divided into three groups based on the individual’s attitude toward government and policies: moralistic, traditionalistic, and individualistic. Moralists believe governments are created and instituted among men for the good of the governed. They are likely to also advocate a homo politicus perspective. Traditionalists view government as a vehicle for the advancement of their particular family or group. They are likely to seek Jacksonian representation and to advocate a homo economicus perspective. Individualists see government itself as the problem and would oppose any regulation of electronic media.
Throughout the remainder of this chapter, we discuss how these three beliefs about governmental regulation and representation influence policies and practices governing electronic media.
History of Broadcast Regulations
The first commercial radio station to broadcast in the United States was KDKA in Pittsburgh. Pennsylvania, which went on the air in 1920. At that time, the technology was new and lacked sophistication. Frequency interference was common. Signals overlapped, bled into each other, and, powerful signals completely obliterated others. In many instances, reception of any signal was impossible. Simply put, it was chaos.
In 1912, Congress had created the first Radio Communications Act, but the act predated commercial radio and did not anticipate the problems to come in the 1920s. That act only gave the Secretary of Commerce authority to approve power levels and to regulate assignment of frequencies; it did not specifically give the authority to grant licenses. In the early 1920s, then-Secretary of Commerce Hoover attempted to penalize Zenith Radio Corporation for operating on an unauthorized frequency. The federal courts held that the Secretary had no power to deny licenses, thereby nullifying the 1912 Act’s effectiveness.4
Because of these problems, a series of National Radio Conferences were held between 1922 and 1925. Those conferences proposed three solutions. The first solution was based on a Jacksonian approach to representation and an individualistic attitude toward government control. That proposal was simply to let the free market take care of the problem. Larger, more powerful broadcasters would be permitted to “jam” the signals of weaker broadcasters until only a few controlling stations remained. Components of this proposal included the idea that the use of a signal frequency would create a kind of “squatter’s rights” analogous to the real estate concept of adverse possession and that courts would be called on to decide who had used a frequency longest and with the most success. This proposal was rejected, largely because it was a free-market approach that had created the problem for which a solution was sought.
The second solution proposed was based on a homo politicus belief about personal motivation and a moralistic view of the role of government. That proposal was to have the government step in and create an entire system of public radio broadcasting and transmitting stations. These would be owned and operated by the government itself. However, even the advocates of homo politicus and moralistic approaches to governmental control could not agree on the details of such a system.
Finally, the radio conferences agreed on a compromise that provided for federal governmental control of assignment of radio frequencies but private ownership of broadcast stations and transmission facilities. This compromise resulted in the Radio Act of 1927.
Congress passed the Radio Act of 1927 under its commerce clause powers and included provisions authorizing the newly created Federal Radio Commission to issue licenses. It thus overcame the problems that had made the 1912 Radio Communications Act unenforceable.
The Public Interest Directive
Under the Radio Act of 1927, the newly created Federal Radio Commission was given the authority to issue licenses for use of the channels of radio transmission for only 3 years, “if public convenience, interest, or necessity will be served thereby.”5
The sponsor of the Act, Congressman White described the importance of the public interest in administration of the Act:
The recent radio conference . . . recommended that licenses should be issued only to those stations whose operation would render a benefit to the public, are necessary in the public interest, or would contribute to the development of the art . . . . The broad-casting privilege will not be a right of selfishness. It will rest upon an assurance of public interest to be served.6
The Communications Act of 1934 replaced the Radio Act of 1927. It created the Federal Communications Company (FCC) and continued the Congressional purpose of protecting the public interest. The FCC was entrusted with formulating a unified and comprehensive regulatory system for the industry. Congress sought to regulate all media of electronic communication under the auspices of one authority, which was directed to promote the public interest.7 Part of the Congressional impetus was the “widespread fear that in the absence of governmental control the public interest might be subordinated to monopolistic domination in the broadcasting field . . . and a desire . . . to maintain, through appropriate administrative control, a grip on the dynamic aspects of” the industry.8
It is interesting to note the clarity of vision and purpose behind enactment of the Radio Act of 1927 and its successor the Communications Act of 1934, as these were pronounced in the Congressional record and interpreted by the Supreme Court in 1940 in FCC v. Pottsville and in 1969 in Red Lion Broadcasting v. FCC. The original communications laws and regulations were passed and promulgated at a time when the industry itself begged for governmental intervention to prevent chaos. Broadcasters wanted a uniform system for frequency assignment and fair trade and business practices for industry development. Congress described its goals to include prohibition of monopolies, establishment and maintenance of federal control over all means of interstate and international communications, and establishment of an atmosphere conducive to communications industry development. Congress also said it wanted to do all of this in a manner that would serve the public interest, convenience, and necessity.
Between 1934 and the passage of the Telecommunications Act of 1996, the public interest doctrine steadily eroded. During this period, the focus of governmental control shifted from the greater good of the listening and viewing public to meeting the political and ideological demands of factious groups. This change was enhanced by major changes in the political philosophies of justices appointed to the U.S. Supreme Court and presidential appointments to the FCC. Congress, too, shifted in response to changes in media technology and the clamoring of special interest groups who demanded ever-increasing governmental control of media content. In the recent past, all branches of government seem to have lost sight of the once-prized public interest directive in an effort to accommodate the interests of competing and often narrow-issue factions.
The FCC: Its Purpose, Tasks, and Divisions
The purpose of the Communications Act of 1934 and later communications laws is
among other things, to maintain the control of the United States over all the channels of radio transmission; and to provide for the use of such channels, but not the owner-ship thereof, by persons for limited periods of time, under licenses granted by Federal authority, and no such license shall be construed to create any right beyond the terms, conditions, and periods of the license.9
To meet this purpose, Congress created the FCC as an independent regulatory agency. The purview of the FCC includes regulating radio and television broadcasting and regulating all interstate and international communications by wire, satellite, cable, or any other communications technology that involves interstate or international commerce. The FCC and its staff are charged with developing and enforcing communication regulations.
To perform these diverse tasks, the FCC is organized into operating bureaus. Each bureau is subdivided into units, offices, or divisions based on the functions it performs, or policies it must supervise. The six major bureaus of the FCC and their functions are described in Exhibit 5.1.
Consumer and Govermental Affairs Bureau
Wireline Competition Bureau
Wireless Telecommunications Bureau
The FCC’s mandate to implement the public interest directive for broadcasting is assigned to the Mass Media Bureau. The bureau is charged with three specific tasks: spectrum allocation, band allotment, and channel assignment.
Spectrum allocation involves reservation of portions of the radio spectrum for particular uses such AM, FM, VHF-TV, UHF-TV, emergency services like police and fire communication, aviation, military, and space communication. Band allotment assigns the number of channels or frequencies available. For example, the FM radio band is between 88 and 108 mega-hertz and includes 100 assignable channels. Channel assignment refers to FCC decisions concerning who is permitted to broadcast on a specific frequency. This task includes assignment and supervision of station licenses.
The FCC is also responsible for many other aspects of the communications industry. Its responsibilities include the establishment of technical standards for station operations, enforcing some standards of employment practices, fair trade and commercial practices, and the creation and enforcement of often controversial regulations on the content of communications. FCC and other governmental regulations involving the content of communication and their conflicts with First Amendment liberties are discussed later in this chapter.
Deregulation: Whose Interests Are Really Being Served?
It is not possible to discuss all the regulatory tasks and processes involved in station licensing in one textbook. Therefore, we describe only a few of the procedures used by the FCC to decide the number, quality, and diversity of voices available to the public. The original purpose of the Communications Act of 1934 was retained in the Telecommunications Act of 1996, but the Congressional focus has changed to deregulation. The impetus for this change in focus appears to be budgetary necessity or administrative convenience, and the change is likely to result in a return to monopolistic control of major segments of the communications industry. We present a description of the trend to deregulation focusing on rules as they existed before and after the 1996 Act. Each of these comparisons shows a shift away from the public interest directive.
The FCC and Broadcast Licensing
All local broadcast stations must be granted a license by the FCC in order to operate legally. Generally, stations located east of the Mississippi River have been assigned identifying call letters beginning with the letter “W,” while those west of the Mississippi River begin with the letter “K.” A license is not required to operate a network because networks own broadcast stations, each of which has been granted a license.
The FCC has authority to assign licenses, frequencies, hours of operation, and power in a manner that is fair, efficient, and provides an equitable distribution of service.10 In the Communications Act of 1934, these licenses were granted for a 3-year term. The current regulation says that the term of a license is “not to exceed 8 years.”11 Licenses are routinely awarded for the full 8-year term. Under current law, license renewals may be granted from time to time for terms not to exceed 8 years from the expiration date of the previous term and “(n)o renewal of an existing station license in the broadcast or common carrier services shall be granted more than 30 days prior to the expiration of the original license.”12
License applicants must meet basic qualifications including technical, financial, character, and ownership requirements. Simply put, applicants must have the necessary technical ability to broadcast programs, the operation and managerial capability to construct and run a station, and must be responsible both morally and financially.13 Of course, it is not necessary for the applicant him or herself to have all the necessary technical skills. The applicant may demonstrate the ability to hire appropriate technicians. The current financial qualification standard is that an applicant must be able to demonstrate the ability to construct and operate a station for 3 months without relying on advertising or other revenues to meet costs. Character of the applicant is the most subjective of the criteria. Applicants have been disqualified for evidence of defective character for misstating facts regarding qualifications, conducting illegal activities on or, in connection with, the station, conviction of drug charges, and fraudulent programming or advertising schemes.
There is no requirement for the Commission to consider the effect of competition on an existing station. The FCC may grant a license to another licensee’s competitor even though it results in economic injury to the existing station.14 The primary objective of licensing is to maximize opportunities for effective use of broadcast frequencies and to provide the greatest service to the public. Licensing is not designed to protect, equalize, or improve the economic or competitive position of an individual licensee.
Prior to 1996, the FCC required each applicant to assess local community needs through an ascertainment study. Applicants were expected to prove that there were distinct programming needs currently not being served. They also had to show how the requested license would meet those unsatisfied programming needs. Furthermore, both initial broadcast applicants and renewal applicants were required to demonstrate their awareness of and responsiveness to local programming needs, through consultation with a cross-section of community leaders. The FCC, as part of the deregulation push, dropped all of these requirements during the 1980s.
Contested Applications: Comparative Process to Wealth-Based Allocation
Contested applications result when there are two or more mutually exclusive applicants and only one available license. The FCC’s procedures for dealing with contested applications exemplifies the change from regulation to deregulation.
The Old Comparative Process. When dealing with decisions about assigning a license to one of two or more mutually exclusive applicants, the FCC’s original assumption was that the public interest directive was best served when there was diversity in available programming. This assumption was based, in part, on court decisions that said the paramount importance of the needs of the public converted the grant of a license into a “public trust.”15 This assumption motivated a drive to avoid monopolistic control and absentee ownership.
In 1978, the Supreme Court said the FCC may use its licensing authority with respect to broadcasting to “promote diversity in an overall communications market.”16 In that year, the FCC added the goal of increasing participation in station ownership and management by racial minorities and women. In order to meet these objectives, all applicants for licenses were required to present information that included an explanation of how ownership and management would be diversified. Also required was information on proposals for public affairs programming, past broadcast record, and applicant character. The FCC then weighted this information and selected the applicant whom, if granted the license, would best serve the public interest.
Under this procedure, on-site, hands-on owner-managers were preferred because of their direct financial interest, because they were more likely than absentee owners to ensure compliance with FCC rules, and because they would respond better to community needs, interests, and programming preferences. However, a federal circuit court ruled that preference for owner-managers was too arbitrary. The court based its opinion, at least in part, on the observation that other businesses did not insist on integration of ownership and management.17
FCC emphasis on assigning broadcast licenses to minorities was supported by court decisions. Responding to a challenge to the FCC’s policy emphasizing minority owner-ship, the U.S. Supreme Court found that “the evidence suggests that an owner’s minority status influences the selection of topics for news coverage and the presentation of editorial viewpoint, especially on matters of particular concern to minorities.”18 The Court also said, “(s)afeguarding the public’s right to receive a diversity of views and information over the airwaves is therefore an integral component of the FCC’s mission.”19 The Court ruled that minority ownership preference was substantially related to the FCC’s programming diversity objective, as well as to its diversity in ownership-management objective.
The courts did not support emphasis on broadcast ownership by women. In 1992, the U.S. Circuit Court for the District of Columbia ruled that the FCC’s preference in favor of women violated the equal protection rights of male applicants implied in the Fifth Amendment.20 Judge Clarence Thomas, writing for the Court, agreed that the Supreme Court had found substantial empirical evidence supporting the relationship between minority ownership and a station’s editorial and programming practices; however, he opined that no such connection was obvious between the views and programming preferences of men and women and ruled that granting preferences to stations owned by women over those owned by men would not lead to increased programming diversity.
The Move to a Wealth-Based System. In the 1980s, during the Reagan administration, the FCC began consideration of alternatives to comparative hearings for deciding contested applications. In 1985, the FCC adopted a procedure titled “random selection,” which they accomplished using tie-breaker lotteries. In 1993, the U.S. Circuit Court ruled the FCC’s system of preference for integration of ownership and management was unconstitutional,21 and the random-selection procedure was approved by Congressional amendments to the Communications Act in the same year.22 A competitive bidding system, including the tie-breaker lotteries was authorized by Congress in 199623 and the procedure mandated by the Balanced Budget Act of 1997.
Currently, the FCC uses a process called electronic simultaneous multiple-round auctions. Applicants are still required to meet minimum technical, business, and ownership rules. However, once bidders have these minimum criteria, contested licenses are simply sold to the highest bidder. Money paid for the license goes to the U.S. Treasury. Bidding covers a number of related available licenses, which are grouped together for simultaneous auction. The auctions are conducted via personal computer (PC) and the FCC’s Web site. Bids are not sealed and the auctions are conducted in multiple rounds wherein the high bid from the previous rounds compete in the next round of bidding. Four months in advance of each auction, the FCC announces the spectrum and channels to be auctioned. Applicants have 30 days from the announcement to present their applications and a refundable deposit for auction preclearance. The number and type of licenses to be bid on determine the size of the required deposit. These auctions have replaced random selection, lotteries, and the old competitive bid system since July 1, 1997. The only exceptions involve license applications pending in 1997.24 The authorization for auctions ends on September 30, 2007. This is the date Congress anticipated additional frequencies might be available because of conversion to digital television.25
In the statutes authorizing both the random-selection and the competitive bidding system, Congress retained language indicating preferences for minorities and women26 and even took care to include a definition of what minority groups should receive preference.27 It said specifically the procedures should
ensure that small businesses, rural telephone companies, and businesses owned by members of minority groups and women are given the opportunity to participate in the provision of spectrum-based services, and, for such purposes, consider the use of tax certificates, bidding preferences, and other procedures.28
Despite this rhetoric, the system currently in place simply sells broadcast licenses to the highest bidder.29
Congress has further encouraged purely wealth-driven allocation of licenses by giving the FCC a direct financial interest in the revenues derived from the sale of public air-waves. The successful bidders’ payments are deposited in the U.S. Treasury. But those payments are reduced by “offsetting collections” of administrative costs that are assigned directly to the FCC. These costs include salaries and expense accounts and are deposited quarterly to augment appropriations to the FCC.30
License Renewals: Old and New Systems Compared
The original Communications Act of 1934 provided for license renewal every 3 years. Today, licenses are renewed every 8 years.31 Also, under the old system, the FCC could decide not to renew a license if it found that a new applicant would better serve the public interest. Changes in the License granting systems are summarized in Exhibit 5.2.
When evaluating applications for renewal and competing applications for the same license, the FCC had to consider both the old licensee’s application and the competing application. When reviewing these renewal applications or competing applications, the FCC considered the same factors used to evaluate new applications. If the old licensee was found to be deficient in any of these categories, the new applicant could be awarded the license. These old rules also required the FCC to consider factors that were material to the public interest directive, and the public being served had a chance to improve its broadcasting service each time a license came up for renewal. However, review of these renewal applications required large amounts of administrative staff time as well as time by the applicants who were required to complete a portfolio of performance documents, verifications, information, and materials.
The FCC began to streamline renewal application procedures during the same period of deregulation that led to the creation of an auction system for new licenses. Under the Telecommunications Act of 1996, license renewal became much simpler for license holders. Today, renewal applications must be filed at least 4 months before the expiration date of the license, but “no renewal of an existing station license . . . shall be granted more than thirty days prior to the expiration of the original license.”32 The Act also creates an assumption that licenses will be renewed. It says, in part,
If the licensee of a broadcast station submits an application to the Commission for the renewal of such license, the Commission shall grant the application if it finds . . . (A) the station has served the public interest, convenience, and necessity (B) there have been no serious violations by the licensee of this Act, or the rules and regulations of the Commission; and (C) there have been no other violations by the licensee. . . which taken together, would constitute a pattern of abuse.33
Furthermore, the 1996 Act specifically prohibits consideration of a competitor’s application.34
In addition, if the Commission finds that the renewal standards have not been met, it can renew the license for a term less than 8 years. The license renewal application may be denied only after notice and an opportunity to be heard, and only if the agency finds that there are no “mitigating factors” to justify lesser sanctions. Furthermore, the FCC may not announce and consider new applications until after this exhausting process.35
Ground Rules for Nonrenewal of Licenses
Because a license renewal can only be denied if a license holder violates specific requirements, it would be useful to know exactly how the courts have interpreted those requirements Licenses have been denied for:
- Lying or making false or misleading statements to the FCC.
- Violation of alien or foreign ownership rules.
- Insolvency or bankruptcy.
- Interference with other stations and/or operating with excessive power.
- Inadequate or bad equipment.
- Refusal to allow inspection of station and transmission facilities.
- Unauthorized transfers of control or assignment of license without FCC authorization.
- Repeated or major violations of content regulations.
- Willful or repeated failure to comply with equal candidate access rules.
- Repeated fraudulent billing of advertisers, or fraudulent promotional schemes.
Competition and financial hardships on older stations are occasionally, but not consistently, considered. Despite the public interest directive, public objections to programming or editorial content of the licensee have never been considered grounds for refusal to grant or renew a license.
The Commission is not required to investigate licensees independently for compliance, but prior to license renewal the FCC must accept petitions to deny applications. Six months prior to the expiration of a license, stations are required to announce, on the air, that their licenses are about to expire, and that informal public comments or formal petitions objecting to the renewal must be filed with the FCC by a particular date. Often at issue, or at least the focus of public attention and FCC interest, is the content of the local public inspection file. This file, required by the rules, is kept by the station and is available for viewing during regular business hours, or on any Web site maintained by the station. A station must eventually maintain 10 items in its public inspection file. As of 2005, those items are:
- A copy of its current FCC license.
- Copies of any applications, including those for renewal, filed with the FCC.
- A copy of the current ownership report.
- Technical maps showing signal range and contours.
- Copies of materials relating to any FCC investigations.
- The equal opportunity file showing annual reports of efforts to recruit minority and women as employees.
- An issues and programs list describing broadcast of information and discussions of specific local concern.
- A political file listing time requested and provided to candidates for federal office.
- Children’s Television Act reports showing compliance with relevant programming and commercial limits.
- Copies of written comments by the public during the licensing period.
To be accepted by the FCC, petitions to deny a broadcast license renewal application must set forth specific allegations of fact that are supported by affidavits of persons with personal knowledge, and not by hearsay, rumor, opinion, or broad generalization. The allegations must also be sufficient to show that the petitioners are parties in interest and that the grant of the challenged application would be inconsistent with the public interest, convenience, and necessity.
To be a party in interest, a petitioner must allege that he or she is a listener or viewer of the station, or a resident of the station’s service area. A party in interest may also be a responsible representative of the listening public, or have a direct economic interest that will be injured by the renewal. Each petition to deny an application for license renewal must be served on the applicant, as well as the FCC. If the FCC finds that a petition actually presents a substantial and material question of fact, then it will hold a hearing on the matter. If the renewal application survives any challenges, then renewal of the original license must be granted for an additional period up to 8 years. If any petition challenging the renewal is successful, then the FCC will announce that the license is available for reassignment.
Diversity Destroyed: 150 Channels and Nothing’s On
In 1943, the U.S. Supreme Court said that the FCC had an affirmative duty to evaluate license and renewal applications. It said the government’s role was not merely to serve as a “traffic officer” for license applications.36 In 1945, the Supreme Court said, it is “axiomatic that broadcasting may be regulated in light of the rights of the viewing and listening audience and that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public.”37
To safeguard the public’s right to receive this diversity of views and information over the airwaves, two consistent themes in governmental control of the licensing and business practices of the communications industry emerged—first to avoid the creation of monopolies, and second to encourage diversity of ownership and voices. To avoid the creation of broadcast monopolies the FCC limited the number of licenses any one individual or corporation could hold. To avoid the creation of a combined media monopoly, the FCC restricted cross-ownerships in certain categories of media.
Congress included provisions in the 1996 Telecommunications Act that would permit multiple media ownerships. This provision was included because of anticipation of the transition to digital TV and the increased frequency availability that would result.38 Anticipating these changes, the FCC has already begun to alter its regulations to modify or eliminate existing limitations on multiple media ownership. These rules are in flux and public objections to media monopolies may motivate reinstatement of some restrictions. Here, we discuss seven of the rules that restricted multiple media ownership. We also describe changes in the rules and their current status.
The local radio multiple ownership rule was developed in the 1940s and prohibited any one entity from holding more than one AM station and one FM station in the same market. This prohibition varied with market size and under the Telecommunications Act of 1996, a market-tiered approach permits from five to eight stations per market. For example, a maximum of eight radio stations per owner is allowed in markets with 45 or more commercial radio stations.
The local TV multiple ownership rule was enacted in 1999 and allows common ownership of two TV stations in the same market area if (a) at least one station is not among the four highest ranked stations in that market, and (b) at least eight full-power independent TV stations will remain in the market after granting of the dual licenses to one owner. Also, two TV station licenses may be owned by one entity if one of the stations is failing, and there is no other viable purchaser available.
The radio/TV cross-ownership rule was developed in the 1970s and was originally referred to as the “one-to-a-market” rule. It is now called the radio/TV duopoly rule. The duopoly rule was changed in 1999 to a three-tiered market system: (a) A single licensee may own one or two TV stations combined with not more than six radio stations, if 20 independent stations would remain, (b) A single licensee may own two TV stations combined with up to four radio stations, if 10 independent stations would remain in that market after the merger. (c) A single licensee may only own one TV and one radio station in a single market area, if fewer than 10 independent stations would remain after the merger. Because of FCC interpretation of the 1996 Telecommunications Act, the duopoly rule is being phased out.
The newspaper/broadcast cross-ownership rule was developed in 1975 and prohibits the FCC from granting a radio or TV broadcast license to the owner of a daily newspaper serving the same market. The reason for this rule was that such a merger would give too much journalistic power to a single owner. Like the duopoly rule, this rule is being phased out because of FCC interpretation of the 1996 Telecommunications Act.
The national TV multiple ownership rule originated in 1953 and limited the total number of stations that could be owned nationwide by a single entity. The original rule was called the “7–7–7 rule,” and limited the broadcast licensee to a combination of no more than seven AM, seven FM, and seven TV broadcast licenses. In 1984, this rule was relaxed to a “12–12–12 rule.” In 1992, this rule was changed again to allow a single owner to have 30 AM and 30 FM radio station licenses and up to 12 TV station licenses, as long as the combination accounted for no more than 25% of the national market. Some small and minority broadcasters saw this relaxation of the rules as a concession to media conglomerates. Under the 1996 Telecommunications Act (a) all national limitations or caps on nationwide ownership of radio licenses were repealed and the 12 station cap on TV ownership was replaced with a “35% of U.S. market” rule. This means one person may own an unlimited number of radio stations and TV stations reaching up to 35% of all U.S. households. Even this rule has been reconsidered by the FCC, which in 2003 proposed new rules advancing permitting ownership of TV stations reaching up to 45% of U.S. households. As of 2005, Congress has forced reconsideration of the proposed change.
The dual network rule was established in the 1940s. It prohibited any entity from operating more than one radio network. The 1996 act permits TV stations to affiliate with more than one broadcast network. But, it prohibits networks created by merger or cooperation between ABC, CBS, NBC, or FOX. The 1996 Act also permits broadcast networks to provide multiple program streams simultaneously, but prohibits any merger of licenses or stations by the “big-four networks.”
Statutory license restrictions against foreign ownership have been created by Congress. Specifically, a foreign individual or foreign corporation may own no more than one fifth of a broadcast license. If the license holder is a subsidiary that is owned or controlled by another corporation, the foreign ownership may be one fourth.
Except for the restrictions on foreign ownership, FCC rules are evolving to permit conglomerate broadcast domination. This factor combined with the 8-year licensing and renewal expectancy serves to allow monopolistic control of multiple means of mass communications. Current ownership rules repudiate the “public interest” directive clearly stated in the Communications Act of 1934.
Cable Regulation or Deregulation: That is the Question
Nearly all consumers receive their television programming through one of three delivery systems: broadcast television, cable, or satellite. We have discussed broadcast regulations. Now we look at some of the obvious and distinguishing characteristics of cable television services. In the next section of this chapter, we describe some of the regulations associated with satellite TV, telephone, and the Internet. We dealt with broadcast in some detail to describe the patterns of regulation and deregulation that apply to all FCC actions. We address cable and the other electronic media more briefly because they follow patterns similar to those described for broadcasting.
Brief History of Cable Television Regulations
Radio and television broadcasting stations transmit electromagnetic signals over the air to be captured for free by any receiving antenna within range, and broadcast stations are supported by advertisers. By contrast, cable television systems distribute their signals to subscribers over a network of coaxial cable, and the primary source of revenue for cable systems is subscriber fees. About 20% of U.S. households rely exclusively on broadcast distribution while more than three times that number receive cable service.39 Although cable subscribers have to pay for the services, they usually obtain better reception and a wider variety of programming. Currently, 84% of cable systems offer their subscribers at least 30 channels, including programming that is not available on broadcast systems.40
Cable began as community antenna television (CATV) systems in the early 1960s. This service was especially attractive in rural areas, long distances from transmitters or where the mountainous terrain blocked signals. CATV systems involved a single operator with a large-capacity antenna atop a hill or mountain who transferred the signal from that antenna via cable to subscribers’ homes.
At first CATV systems were left unregulated. Their only legal requirement was to obtain a right-of-way or easement for their cables. The cable system operators were totally free to determine which of the broadcast signals they captured and retransmitted to subscribers and what fees to charge.
Copyright laws were modified to impact the growing cable industry. In 1968, during the ascension of cable television, the Supreme Court evaluated application of the Copyright Act’s performance rule and held that “CATV operators, like viewers and unlike broadcasters, do not perform the programs that they receive and carry.”41