INSIDE THE FCC: What You Should Know

By: Mark N. Cooper, Director of Research, Consumer Federation of America

The public has become used to the fact that the end of the year brings a flurry of activity in Congress these days, but a similar pattern at the FCC is less widely known. Last year December saw the negotiations over network neutrality in the AT&T-Bell South merger. This year we have furious activity in the areas of media ownership and the auction of spectrum that will be freed up when the nation switches to digital broadcasting in February 2009.

Media ownership: FCC Chairman Kevin Martin has issued a proposal to lift the ban on newspapers owning TV stations in the same market in what some have called a “Further Notice of Press Release.” Chairman Martin wrote an op-ed in the New York Times (Nov. 13, 2007) and then stated in a press release that his proposal would presume mergers in the largest 20 markets to be in the public interest (i.e. automatically approved) if the mergers met certain conditions: (1) they did not involve a TV station ranked in the top four of the market, (2) there were eight major news outlets in the market after the merger (i.e. eight newspapers and/or TV stations), and (3) the combination did not involve ownership of two TV stations, a TV duopoly.

The fine print told a different story, however. The proposal would allow mergers to violate the above conditions after an evaluation of several factors, including (1) its impact on market concentration, (2) whether the newspaper was in financial distress and a showing that the merger would (3) increase the amount of news in the market, and (4) the TV and newspaper would maintain “independent” news judgment.

Worse still, the way the proposal is worded, although mergers in markets outside the largest 20 markets would not be presumed to be in the public interest, the FCC would allow the companies to use the four factors to rebut the presumption, which would enable the FCC to find that the merger is in the public interest. Ironically, the conditions that Chairman Martin would place on mergers in the largest 20 markets do not apply to markets outside the top 20, yet it is the smaller markets that need the greatest protection against domination by a single media outlet (hint: Chairman Martin is from North Carolina, Commissioner Robert McDowell is from Virginia and Commissioner Deborah Taylor Tate is from Tennessee and Media General, which owns both TV stations and newspapers in the smallish markets in the south east, is one of the biggest advocates of lifting the newspaper-TV cross-ownership ban).

Since the factors are completely undefined, media democracy advocates are interpreting this as a blank check for approving mergers. The FCC still has not issued reports on localism and minority ownership and did not provide an opportunity to comment on the proposed rule, so objections to the rulemaking process are being voiced by members of Congress (with hearings and legislation introduced by Senator Dorgan) and the Democratic members of the Commission.

The Spectrum Auction: In 2006, Congress set a deadline of February 2009 for broadcasters to switch to digital broadcasting and return the spectrum (in the 700 Mhz band) they had been using for analog over-the-air broadcasting. It mandated that the freed-up spectrum be auctioned off. The rules for the auction were hotly debated over the course of this year and ultimately included requirements that some of the spectrum be obligated to operate as an “open access” network. Media advocates pushed for this as an extension of the battle to ensure that a neutral network is available for Internet access; they were joined by E-companies like Google.

When the FCC determined that some of the spectrum should be “open access” (the D-block), Google officially declared its intention to bid. In response, Verizon declared that it would also run an open platform, allowing any devices and applications to run on its network. Some commentators suggest that Verizon was trying to differentiate itself from AT&T, the largest wireless operator in the U.S., which had received a boost from its deal with Apple to sell iPhones, an extremely closed platform. Others believe Verizon is strategizing to keep Google from bidding and will pull back from its commitment if it wins bidding in the auction, which will start in early 2008. Conveniently (suspiciously), Verizon announced that it will hold a technical conference to define what it means by open platform, soon after the bidding is likely to be done. Ironically, after Verizon won press attention on this issue, AT&T suddenly discovered that its network was really an open network, too.

Combined, the media ownership proceeding and the 700 Mhz auction could have a huge impact on the media space, certainly the biggest since the passage of the Telecommunications Act of 1996. I know you’ve heard that before, but these events are likely to play out early in 2008. Stay tuned.