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
The method by which the FCC defines local radio markets shapes
how the local
ownership caps will actually be enforced.
From 1992 until 2004, the FCC’s signal-contour market definition
allowed more
consolidation than Arbitron’s market definition would have allowed.
Because of mergers allowed during the signal-contour market definition
era, in 104
markets there is now at least one radio company or organization that
exceeds the local
ownership cap.
Station groups that are over the cap and station groups that are
exactly at the cap offer
less variety in programming formats than station groups that are under
the cap.
Relatively uncommon or “niche” formats like classical,
jazz, folk, tejano, and gospel are
least common among station groups that are over the cap or exactly
at the cap—even
though those station groups have the most spectrum to spend on niche
formats—while
being much more common among station groups that are under the cap.
These findings suggest that increasing the local ownership cap
would have no
demonstrable benefit for programming variety and would instead cause
harm to
programming variety by endangering the smaller station groups that currently
supply
most of the diversity that exists in traditional radio.
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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MB Docket 04-233
January
3, 2005 PDF of document
