Monday, July 14, 2008 - The Progress & Freedom Foundation Blog

The Fig Leaf Removed: Competition, Localism, and Diversity Have Become Nothing More Than a Slogan

The FCC for generations has used three words to describe its mission in media regulation: competition, localism, and diversity. In nearly every substantive action it takes in this area, the Commission dutifully recites one or more of its tripartite desideratum as the philosophical underpinning for its work. FCC Critics and supporters alike seem, at least publicly, to agree that the Commission's actions should, at their most fundamental level, promote competition, localism, and diversity. It may be the only active FCC motif on which there is general agreement.

Yet, any serious observer of FCC media regulation has to wonder whether, in fact, the oft-stated mantra of competition, localism, and diversity is anything more than palaver. Indeed, whether the refrain emanates from a party advocate in a pleading or the agency itself in an order, the position espoused and/or defended frequently runs directly contrary to the purported object of promoting competition, localism, or diversity.

Examples abound. One need look no further than recent opposition to the proposed XM/Sirius merger, and the Commission's consignment of the companies to FCC purgatory, to see regulatory machinery used to thwart competition. There can be little disagreement at this point that the companies, separately, will not thrive in the rapidly expanding market for audio entertainment. Indeed, the market is characterized by such an abundance of choice and hyper-competition that, even combined, success for XM/Sirius is far from certain.

It cannot be, therefore, that difficulties obtaining FCC approval are somehow connected to protecting diversity. Nor can one make a serious case that the proposed merger would undermine localism - to the contrary, opponents of the merger have specifically objected to the provision of local programming through digital satellite radio.

Nonetheless, despite the passage of something in the neighborhood of five hundred days, and the recognition by the antitrust authorities that the combination of XM and Sirius will not be anti-competitive, the application to merge the two companies still sits awaiting action at the costive FCC. If the Commission in fact were interested in protecting and promoting competition, it would long ago have permitted these companies to build a business suited to the modern audio marketplace.

Unfortunately, efforts to promote localism in recent years also have been unavailing. The most obvious example has been the strident and fractious opposition to any FCC move that might make it possible for local media to survive and thrive in the 21st Century. Indeed, when the Commission modified its broadcast ownership rules in 2003 to permit more efficient organization of local media resources it warned that local media, such as newspapers and local broadcast outlets in small markets, were threatened by the explosion of new media sources.

Nonetheless, because of perceptions that so-called "big media" is too liberal, too conservative, too bland, too racy, too conventionally doctrinaire, or too heteroclite (one could find evidence of each of these conflicting views in the opposition), the FCC's general liberalization of its broadcast ownership rules in 2003 foundered in the shoals of Washington politics. Consequently, and as predicted, the local newspaper business has withered and local broadcast stations in many small markets have become mere shells, abandoning local news and many other local services.

No lesson, however, apparently was learned. In 2007, the FCC tried once again to provide some relief for struggling local newspapers and broadcasters by liberalizing the rules governing cross-ownership of the two. Once again, political forces gathered, threatening to undo the Commission's work. It would seem, therefore, for all of the meretricious homage to localism and diversity, the final destruction of traditional local media is all that will stop those who continue irrationally to fear "big media" in a micro-media world.

To the chagrin of those who take the FCC's charge of protecting competition, localism, and diversity seriously, local media is not all that is threatened: diversity more generally on cable and satellite systems also may be at risk. Based on press reports, the FCC appears poised to mandate some form of a la carte programming regime. If the Commission were actively seeking to reduce consumer choice and eliminate niche programming services, it could not find a more effective mechanism than mandated a la carte - at the retail or wholesale level.

One may quibble about whether mandatory a la carte programming will reduce or increase costs to the majority of consumers; there is no doubt though that it will reduce the number of programming channels available to consumers and specifically threaten the stations that are targeted at audiences with the most diverse interests. No one can really say which cable programming services will survive in an a la carte regime, but likely as not general interest networks such as MTV and ESPN will do fine, while small religious, ethnic, and specialty services are left forlorn.

Once again, it is a case of actions speaking louder than words. The Commission and those who importune the Commission to intervene in markets can repeat ad infinitum that media regulation should promote competition, localism, and diversity. When the ends sought, however, directly undermine those values, such protestations ring hollow.

posted by W. Kenneth Ferree @ 9:12 AM | Mass Media , The FCC