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FMC Comments Filed in FCC Broadcast Ownership Proceeding: Do Radio Companies Offer More Variety When They Exceed the Local Ownership Cap?
On October 23, 2006, Future of Music Coalition and American Federation of Musicians (AFM) filed joint comments in the FCC's 2006 Review of the Commission’s Broadcast Ownership Rules. The complete comments, which can be downloaded here (19 page PDF), demonstrate that large station groups do not offer more format variety. Executive Summary
Introduction In 1996, the U.S. Congress passed a law that launched the transformation of the radio industry over the course of just a few years. The Telecommunications Act eliminated the limit on how many stations one entity could own nationally and raised the limits on how many stations one entity could own locally.1 Advocates of the bill argued that a radio industry with larger firms would be better for business and for the public.2 Before Congress relaxed the previous restrictions on radio-station ownership, radio was an industry of small, “mom-and-pop” radio companies, with a few regional companies as well. By 2001, radio had become an oligopolistic industry populated by national and multinational media conglomerates, large regional companies, and a now-smaller group of “mom-and-pop” companies. Now, a decade after the Telecommunications Act of 1996, we can assess the more complex aspects and consequences of the legislation. The FCC’s Local Radio Ownership Rule, although relaxed by Congress in the Telecommunications Act, still limits the size of station groups. (A station group is a set of stations owned or controlled by a single company in the same local market.) But enforcement of this rule depends on the details. Most important among the details is the particular way the FCC defines a local market. The precise definition of what constitutes a local market determines how the FCC actually enforces cap on local radio ownership. From 1992 to 2004, the FCC used what is known as the “signal-contour” method of defining local markets, based on the overlapping signal coverage areas of radio stations. Because of certain aspects of this method, explained later in this paper, the signal-contour market definition allowed greater consolidation than a geography-based method market definition—for example, defining local markets to correspond to metropolitan areas—would have allowed. In the fall of 2004, the FCC switched to a geography-based market definition, now borrowing its method of market definition from the Arbitron Company, which provides ratings of radio stations in local markets. The Arbitron market definition is more restrictive when used to apply the Local Radio Ownership Rule—it would have allowed less consolidation of ownership if it had been in place since 1992. After this switch in definitions, radio station owners who suddenly exceeded the local ownership caps in particular markets were grandfathered in. These comments attempt to answer several questions that arise once we notice the profound consequences of the perhaps arcane detail of the FCC’s signal-contour market definition: How many markets have owners whose holdings exceed the local radio ownership cap? How many markets have owners whose holdings put them exactly up to the cap? What’s more, analyzing such markets can provide answers
to other questions about the results of consolidation: Do larger station
groups offer more variety? Have the station groups that are grandfathered
above the cap taken advantage of their size to offer more niche programming
formats than the smaller station groups? As these comments will demonstrate,
additional consolidation facilitated by the signal-contour market definition
is widespread, but has not provided the public with additional programming
variety. In fact, the large station groups grandfathered in above the
local ownership cap offer less variety, in aggregate, than smaller station
groups. This suggests that the FCC should not increase the current local
ownership caps; rather, the FCC should either maintain the current rule
or consider lowering the caps.
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