[Senate Hearing 107-1114]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 107-1114


 
                          MEDIA CONCENTRATION

=======================================================================

                                HEARING

                               BEFORE THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 17, 2001

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation


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           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida

               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
                  Mark Buse, Republican Staff Director
               Jeanne Bumpus, Republican General Counsel


                            C O N T E N T S

                              ----------                              

                                                                   Page

Hearing held on July 17, 2001....................................     1
Statement of Senator Allen.......................................    84
Statement of Senator Breaux......................................    82
Statement of Senator Burns.......................................     9
    Prepared statement...........................................     9
Statement of Senator Cleland.....................................     9
Statement of Senator Dorgan......................................    11
Statement of Senator Fitzgerald..................................    12
    Columbia Journalism Review, ownership list...................    12
Statement of Senator Hollings....................................     1
    Prepared statement...........................................     2
Statement of Senator Inouye......................................     6
    Prepared statement...........................................     6
Statement of Senator Kerry.......................................     8
Statement of Senator McCain......................................     3
    Prepared statement...........................................     5
Statement of Senator Wyden.......................................     7

                               Witnesses

Baker, William F., President and CEO, Thirteen/WNET..............    64
    Prepared statement...........................................    66
Frank, Alan, President, Post-Newsweek Stations, Inc..............    26
    Prepared statement and attachments...........................    28
Fuller, Jack, President, Tribune Publishing Company..............    57
    Prepared statement...........................................    59
Karmazin, Mel, President and Chief Operating Officer, Viacom, 
  Inc............................................................    18
    Prepared statement...........................................    20
Kimmelman, Gene, Co-Director, Consumers Union....................    87
    Prepared statement...........................................    89
Noam, Dr. Eli M., Professor of Finance and Economics, Columbia 
  University; Director, Columbia Institute of Tele-Information; 
  former Commissioner of Public Services, New York State.........    93
    Prepared statement...........................................    95

                                Appendix

Paxson, Lowell ``Bud,'' Chairman of Paxson Communications 
  Corporation, prepared statement................................   101
Wades, James A., Radio and Television Broadcast Industry Veteran, 
  prepared statement.............................................   102


                          MEDIA CONCENTRATION

                              ----------                              


                         TUESDAY, JULY 17, 2001

                               U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:35 a.m. in room 

SR-253, Russell Senate Office Building, Hon. Ernest F. 
Hollings, 
Chairman of the Committee, presiding.

         OPENING STATEMENT OF HON. ERNEST F. HOLLINGS, 
                U.S. SENATOR FROM SOUTH CAROLINA

    The Chairman. Good morning. The hearing will come to order. 
I know that there is a good start there with this outstanding 
panel. Let me see if I can include my full statement in the 
record, and summarize it in a sense. We have a hearing this 
morning, of course, on media concentration, and for years now, 
the genius of the American broadcast system, which is the best 
in the world, has emphasized diversity. Diversity in ownership 
creates opportunities for the smaller companies, local 
businessmen and women. Diversity in ownership allows creative 
programs and controversial points of view to find an outlet. 
Diversity in ownership promotes choices for advertisers and 
diversity in ownership preserves localism, promotes 
competition, and in fact, it gives us on the Committee and the 
citizens, generally of the country, our freedom of speech.
    I have heard, ``Wait a minute, we have got to do away with 
these ownership rules to give the owner the freedom of 
speech.'' The truth of the matter is that that is a temporary 
license to amplify his freedom, but to make sure that it is not 
exclusive, we have injected diversity for at least the past 30 
years.
    Now, what's happened is that we are being attacked from 
every particular angle. In other words, you have got the 
insatiable industry. We have got the courts and judges that 
appear to be ignoring the Supreme Court when they set the 
precedent about the government's strong interest in preserving 
a multiplicity of information sources, and, of course, we have 
had our distinguished Chairman of the Federal Communications 
Commission.
    And I read a quote from him at the latter part of last 
year, and Chairman Powell, and I quote: ``I start with the 
proposition that the rules are no longer necessary and demand 
that the Commission justify their continued validity.'' Well, 
that is not the law--which I read again this morning in an 
article about this particular hearing that these are all rules 
dating back to 1970. You should have been here, gentlemen of 
the panel, in 1996, just 5 years ago. The tremendous debate 
that we had about just this, these rules. We had a vote on the 
broadcast ownership cap on the Senate side and it only 
prevailed--at one time it prevailed one way by 1 vote, and then 
on a revote, Senator Dole changed and we had the 
reestablishment--reaffirmment, I should say--of these 
particular rules by 2 votes.
    So it had been thoroughly debated. The Congress has been 
watching these, and the problem is certainly not too little 
mergers, too little consolidations. But we might hear 
differently. We have been preparing a bill, I have been working 
with the colleagues on both sides of the aisle trying to 
fashion a bill because I like to get things done, not just make 
headlines, but see if we can make headway. In that light, we 
really appreciate the appearance of these witnesses here this 
morning. Let me stop there and yield to our distinguished 
Ranking Member.
    [The prepared statement of Senator Hollings follows:]

            Prepared Statement of Hon. Ernest F. Hollings, 
                    U.S. Senator from South Carolina

    Today, we test the claims of those who would further consolidate 
the media marketplace. We will hear from two balanced panels who will 
debate whether our changed media landscape warrants the repeal or 
relaxation of two existing, sensible restrictions on media ownership--
the 35 percent national television broadcast ownership cap and the 
newspaper-broadcast cross ownership rule.
    The last several years have wrought unprecedented concentration in 
the entertainment and media industries. AOL and Time Warner have 
merged, Viacom and CBS have united, and Tribune has acquired Times 
Mirror. These transactions and other consolidation in the industry have 
decreased, rather than increased competition among media outlets. Yet 
some of these vertically integrated entertainment conglomerates would 
like to grow even bigger, and are here before our Committee today 
seeking to eliminate more of the remaining restrictions on media 
ownership.
    These ownership restrictions are based on factors outside the 
bounds of a traditional antitrust analysis. For example, the national 
broadcast ownership cap preserves the balance of power between the 
networks and their affiliates, and thereby serves to promote localism 
and diversity in individual markets. Similarly, the newspaper-broadcast 
cross-ownership Rule enhances the proliferation of diverse, and 
separate points of view in individual markets.
    The reasons for these rules are simple, and they reflect the 
underpinnings of the Commission's statutory public interest authority. 
Diversity in ownership promotes competition. Diversity in ownership 
creates opportunities for smaller companies, and local businessmen and 
women. Diversity in ownership allows creative programming and 
controversial points of view to find an outlet. Diversity in ownership 
promotes choices for advertisers. And diversity in ownership preserves 
localism--so individuals in towns across America are afforded access to 
at least several sources for their local news and information.
    The rules in question have encouraged the growth of locally 
relevant, independent programmers and distributors of media content. 
These critically important, independent voices energize our civic 
discourse and help separate our Nation from those that prohibit the 
free flow of information. And yet, we are having this hearing today, 
because the rules are under attack: (1) from an insatiable industry 
that is unsatisfied with the tremendous consolidation that has already 
taken place; (2) in the courts from judges who appear to be ignoring 
Supreme Court precedent about the government's strong interest in 
preserving a ``multiplicity of information sources'' in the 
marketplace; (3) and, most importantly, at the FCC, from a Commission 
that seems intent on relaxing or eliminating many of the existing 
ownership rules without regard to the tremendous consolidation that has 
already occurred.
    Last year, Chairman Powell stated, and I quote: ``I start with the 
proposition that the rules are no longer necessary and demand that the 
Commission justify their continued validity.''
    That, my friends, is not the law. And that is why we are having 
this hearing today--to set the record straight. The biennial review 
process we set up in the Telecommunications Act of 1996 did not presume 
that the ownership limits ``are no longer necessary,'' and must be 
justified to be retained. It simply requires the FCC to review its 
ownership rules in light of competition in the market and in view of 
their ongoing public interest obligations, which require them to 
promote and protect diversity and localism, values recognized by the 
U.S. Supreme Court as satisfying a ``governmental purpose of the 
highest order.''
    To those who advocate further consolidation, I say, prove your 
claims. The burden must lie with the proponents of deregulation to 
demonstrate that a further loosening of the broadcast ownership cap or 
the newspaper/broadcast cross-ownership rule would be consistent with 
the public interest.
    I would propose a different route. Given the consolidation that has 
occurred already, I believe that we need to take a breather before 
permitting further concentration to occur. Let's recall--
    First, the FCC instituted the Financial Interest in Syndication 
rules (Fin/Syn) in 1970, that imposed significant limitations on the 
percentage of ``in-house'' programs the networks could produce. Those 
rules also prevented the networks from having a financial interest in 
syndicated programming on the second run market.
    In the late 1970s, the Department of Justice entered into consent 
decrees with the major networks to settle litigation dating back to the 
Johnson Administration, that sought to also curb the networks' 
ownership of in-house programming.
    In 1995, the FCC eliminated the Fin-Syn rules, giving the major 
broadcast networks the right to own an unlimited amount of programming 
that they broadcast, and to syndicate programming by selling it 
directly to stations. The DOJ consent decrees lapsed around the same 
time.
    A year later, in 1996, Congress raised the broadcast ownership cap 
from 25 to 35 percent, allowing companies like News Corporation and 
Viacom to purchase yet more TV stations.
    Two years ago, in 1999, the FCC relaxed the duopoly rules to allow 
a single owner to acquire two TV stations in some of the larger markets 
across the country.
    Last year, Tribune acquired Times Mirror and took advantage of the 
FCC's weak enforcement of the newspaper-broadcast cross-ownership rule. 
In practice, the FCC has allowed the owner of a broadcast station to 
acquire a newspaper in the same market without applying the rule until 
the station's broadcast license is renewed, which can be years later.
    Finally, earlier this year, the FCC did away with a portion of the 
dual network rule and permitted Viacom's UPN to exist under common 
ownership with CBS.
    It is directly because of these rule changes and lax FCC 
enforcement that we have these massive, vertically integrated companies 
like Viacom and Tribune which--because of their ability to promote and 
share their content and news products across multiple distribution 
platforms--are immensely profitable corporations. And yet today they 
come before us and ask for more.
    So we've come to a crossroads and there are two paths we can take. 
One leads to further consolidation and an erosion of diversity in our 
local markets. The other provides for maintenance of rational ownership 
restrictions to allow local media outlets to retain some ability to 
control and disseminate locally relevant news and information, as well 
as programming that is uniquely suited to their particular community.
    That is why I am considering legislation, along with Senators 
Inouye and Dorgan, that will hopefully restore some sense to today's 
debate. Our bill, which we may introduce today, requires FCC licensees 
to alert the Commission when they acquire a newspaper that creates a 
cross-ownership situation. The FCC is then directed to review the 
appropriateness of the acquisition, and determine whether any action is 
needed to bring the licensee in compliance with the rule.
    In addition, our bill requires the FCC to report to this Committee, 
and to the House Committee on Commerce, with any proposed rule changes 
that would relax or repeal existing media ownership limits. Such 
proposed changes could go into effect 18 months after we receive such a 
report--which must include the FCC's explanation of how its rules 
changes will promote competition, diversity, and localism in the public 
interest.
    I look forward to testimony from today's witnesses. These are 
important topics--more important in many ways than the typical debates 
between competing industry sectors. Today we debate the impact of media 
ownership on the diversity of outlets, viewpoints, and ultimately, the 
discourse of our democracy.

                STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    Senator McCain. Thank you very much, Mr. Chairman. I also 
welcome our distinguished panel. And I agree that this is an 
important hearing. Existing regulatory caps on broadcast 
station and newspaper ownership were created decades ago to 
preserve competition in a mass media market consisting of a 
limited number of radio stations, television stations and 
newspapers. But since that time, the mass media market has 
expanded exponentially. As a result, broadcasters and others 
are now saddled with anachronistic ownership rules that limit 
their ability to compete in the modern mass media market.
    Changes in the mass media market are self-evident. To put 
the matter bluntly, in the digital era, insight and commentary 
on matters of public policy will no longer be dominated by 
Cronkite, Brinkley, The New York Times and The Washington Post. 
In their place have risen CNN, CNBC, MSNBC, Salon, Wired, 
Slashdot and innumerable other sources of information and news. 
Last night I was flipping through the channels and saw BBC 
News. I hope that our panelists will look at BBC News and take 
a page from their book and cover some foreign news for a change 
as well.
    This new mass media market is dominated not by broadcasters 
and newspapers, but by multichannel mass media entities like 
cable TV, direct broadcast satellite television, wireless 
cable, and of course, the Internet. These new media are not 
only powerful economic competitors, they are also driving all 
forms of media to become more interactive.
    Interactive communications limit mass media's ability to 
dictate public opinion and they allow ordinary citizens to be 
more than passive recipients of institutionalized news. Many 
websites, for example, let readers respond to a story by 
posting their reactions, rebuttals or questions.
    In the face of these new competitors, new technologies and 
new market demands, ownership restrictions on traditional media 
have not only become unnecessary, they have become 
anticompetitive. Faced with new sources and new methods of 
competition, broadcasters and newspapers saddled with 
potentially outdated infrastructure desperately need the 
increased efficiency that relaxed ownership rules permit.
    None of these observations are new to this debate or to 
this Congress. Indeed, Congress recognized all of these points 
when it enacted the 1996 Telecommunications Act that directed 
the FCC to review all of its broadcast ownership rules every 2 
years. But unfortunately, that directive has gone unfulfilled. 
To be sure, the Commission has overhauled some of its ownership 
rules, but it left others in place, including the rules that 
are arguably the most anachronistic and anticompetitive, the 
newspaper broadcast cross-ownership ban and the 35 percent 
national broadcast ownership cap.
    These actions are inconsistent with the letter and intent 
of the 1996 Telecommunications Act. That Act directed the 
Commission to review all of the rules every 2 years because 
changes rendered those rules inherently suspect.
    Unfortunately, change in the market has proved once again 
that it can and will outpace change in government bureaucracy.
    There are several sources feeding the bureaucratic inertia 
that have kept these ownership rules in place even as permanent 
and unmistakable changes in the mass media market continue to 
render them obsolete. Some of these sources sprang from a 
misguided notion that we should more heavily regulate 
broadcasters who profit from the free use of valuable public 
spectrum. Others sprang from ingrained notions about the power 
of the broadcast networks and newspapers. But if we are truly 
to serve the American people, then none of these concerns can 
justify continued inaction.
    I firmly believed that broadcasters should pay for the 
spectrum they use, but burdensome and pointless regulation is 
no substitute for public revenues obtained from a competitive 
broadcast industry. I firmly believe that this Congress and the 
FCC should remain vigilant to prevent undue concentration of 
power in the mass media markets, but punishing yesterday's 
victors will only aid tomorrow's would-be monopolists.
    Mr. Chairman, thank you for convening this hearing today.
    [The prepared statement of Senator McCain follows:]

                Prepared Statement of Hon. John McCain, 
                       U.S. Senator from Arizona

    Thank you Mr. Chairman for having this hearing today regarding this 
very important topic.
    Existing regulatory caps on broadcast station and newspaper 
ownership were created decades ago to preserve competition in a mass 
media market consisting of a limited number of radio stations, TV 
stations and newspapers. But since that time, the mass media market has 
expanded exponentially. As a result, broadcasters and others are now 
saddled with anachronistic ownership rules that limit their ability to 
compete in the modern mass media market.
    The changes in the mass media market are self-evident. To put the 
matter bluntly: In the digital era, insight and commentary on matters 
of public policy will no longer be dominated by Cronkite, Brinkley, the 
Times and the Post. In their place have arisen CNN, CNBC, MSNBC, Salon, 
Wired, Slashdot and innumerable other sources of information and news.
    This new mass media market is dominated, not by broadcasters and 
newspapers, but by multichannel mass media entities like cable TV, 
direct broadcast satellite TV, wireless cable, and, of course, the 
Internet. These new media are not only powerful economic competitors; 
they are also driving all forms of media to become more interactive. 
Interactive communications limit mass media's ability to dictate public 
opinion, and they allow ordinary citizens to be more than passive 
recipients of institutionalized news. Many websites, for example, let 
readers respond to a story by posting their reactions, rebuttals or 
questions.
    In the face of these new competitors, new technologies and new 
market demands, ownership restrictions on traditional media have not 
only become unnecessary, they have become anticompetitive. Faced with 
new sources and new methods of competition, broadcasters and newspapers 
saddled with potentially outdated infrastructure desperately need the 
increased efficiencies that relaxed ownership rules permit.
    None of these observations are new to this debate, or this 
Congress. Indeed, Congress recognized all of these points when it 
enacted a 1996 Telecommunications Act that directed the FCC to review 
all of its broadcast ownership rules every 2 years. But unfortunately, 
that directive has gone unfulfilled. To be sure, the Commission has 
overhauled some of its ownership rules. But it left others in place, 
including the rules that are arguably the most anachronistic and 
anticompetitive--the newspaper/broadcast cross-ownership ban and the 35 
percent national broadcast ownership cap.
    These actions are inconsistent with the letter and the intent of 
the 1996 Telecommunications Act. That Act directed the Commission to 
review all of the rules every 2 years because change has rendered those 
rules inherently suspect. Unfortunately, change in the market has 
proved once again that it can and will outpace change in government 
bureaucracy.
    There are several sources feeding the bureaucratic inertia that 
have kept these ownership rules in place even as permanent and 
unmistakable changes in the mass media market continue to render them 
obsolete. Some of these sources spring from the misguided notion that 
we should more heavily regulate broadcasters who profit from the free 
use of valuable public spectrum. Others spring from ingrained notions 
about the power of the broadcast networks and newspapers.
    But if we are truly to serve the American public, then none of 
these concerns can justify continued inaction. I firmly believe that 
broadcasters should pay for the spectrum that they use, but burdensome 
and pointless regulation is no substitute for public revenues obtained 
from a competitive broadcast industry. I firmly believe that this 
Congress and the FCC should remain vigilant to prevent undue 
concentration of power in the mass media markets, but punishing 
yesterday's victors will only aid tomorrow's would-be monopolists.
    Again, Mr. Chairman, thank you for convening this important hearing 
today.

    The Chairman. Thank you.
    Senator Inouye.

              STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    Senator Inouye. Mr. Chairman, I commend you for calling 
this hearing. I have a rather lengthy statement, but if I may, 
I would like to just summarize it and ask that my full 
statement be made part of the record.
    Last year, we had received reports that all four networks 
turned a profit. And I understand that the newspaper industry 
continues to generate profits at a pace much greater than many 
American industries. Therefore, Mr. Chairman, I believe that we 
must be exceedingly cautious before we give into industry's 
claim that absent regulatory relief, their businesses will 
suffer.
    In many ways, Mr. Chairman, these companies occupy a public 
trust. Broadcasters, through their grant of free spectrum, 
inform the public of local and national relevant news and 
information; and newspapers do the same. The ownership 
restrictions that limit aggregation of these businesses are 
premised on the need to protect that public trust. These 
ownership restrictions help preserve diversity of ownership and 
viewpoints both nationally and market-by-market. In turn, that 
diversity enhances a vibrant localism that keeps our citizens 
informed when they pick up the morning paper and turn on the 
evening news. Such localism permits the coverage in local 
papers and stations to more truly reflect the communities they 
serve
    Mr. Chairman, I ask that my full statement be made part of 
the record.
    [The prepared statement of Senator Inouye follows:]

             Prepared Statement of Hon. Daniel K. Inouye, 
                        U.S. Senator from Hawaii

    I want to commend Chairman Hollings for holding this important 
hearing. It is past time for the Commerce Committee to examine the 
vitally important issues of consolidation in the broadcast and 
newspaper industries, and I look forward to the debate over these 
topics on today's panels.
    Over a decade ago, I chaired similar hearings in this Committee. 
The tale told then was much like the one we'll hear today. The 
marketplace has changed, our business is getting tougher and tougher to 
run in the modern economy. Competition is undermining our profits, and 
without relief, there may be fewer outlets to provide Americans with 
quality news and programming. In short--let us combine so we can 
compete, and if we can compete, news and programming will improve along 
the way. I wish I were convinced.
    Last year, all four networks turned a profit. And I understand the 
newspaper industry continues to generate profits at a pace greater than 
many American industries.
    We must be exceedingly cautious before we give in to industry's 
claims that absent regulatory relief, their businesses will suffer. In 
many ways, these companies occupy a public trust. Broadcasters through 
their grant of free spectrum, inform the public of local and nationally 
relevant news and information. Newspapers do the same.
    The ownership restrictions that limit aggregation of these 
businesses are premised on the need to protect that public trust. The 
ownership restrictions help preserve diversity of ownership and 
viewpoints both nationally and market by market. In turn, that 
diversity enhances a vibrant localism, that keeps our citizens informed 
when they pick up the morning paper or turn on the evening news. Such 
localism permits the coverage in local papers and stations to more 
truly reflect the communities they serve.
    Without these ownership restrictions, I believe that diversity and 
localism would suffer. I believe that these businesses would do what I 
would do--maximize returns to the detriment of our public discourse--by 
reducing costs, promoting efficiencies and synergies, re-running the 
same stories and repurposing the same news and information. There is 
nothing wrong with that. It's the American way.
    But that profit motive is in conflict with another American value--
the exchange of ideas and information that informs our cultural and 
political debate. Accordingly, we have for years had reasonable 
restrictions that prevented a single owner from exercising undue power 
over that debate: nationally, we have prevented the networks from 
owning too many stations. And locally, we restrict the joint ownership 
of stations and newspapers.
    These rules make sense to me. That is why I look forward to co-
sponsoring legislation with Chairman Hollings and Senator Dorgan to 
bring some sense to this debate, by requiring the FCC to explain to the 
Committee how relaxing the ownership limits will serve the public 
interest.
    I expect some of today's witnesses to feel differently about these 
issues. I look forward to the debate.

    The Chairman. It will be included in the record.
    Senator Wyden.

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Mr. Chairman. Mr. 
Chairman I want to commend you because I think you are holding 
hearings on an extraordinarily important subject and I just 
want to walk through briefly an example of what could happen if 
all of these rules on media consolidation are lifted. You are 
correct in noting that there are some in this country who are 
saying let us just throw them all out the window.
    If that was the case, you could have AOL/Time Warner going 
out and buying AT&T Cable, which would give it a huge 
percentage of the Nation's cable market. That new entity could 
go out and buy NBC if all the rules were lifted, and then start 
snapping up individual television and radio stations until they 
had a nationwide chain with a very large presence in most major 
markets. That new, very large entity then could go out and buy 
Gannett, giving them newspapers in many of the same markets 
where they already control cable, broadcast TV, and radio.
    My concern, Mr. Chairman, and why I think your hearings are 
so important, is that if you just went out and lifted all these 
rules as some have proposed, you could have on our watch the 
most radical media consolidation in this country's history and 
so I think it is important that we take the time to think 
through the ramifications of this possibility, and that is why 
I think your hearings are so important and I look forward to 
working with you and our colleagues to examine these questions.
    The Chairman. Very good.
    Senator Kerry.

               STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. Mr. Chairman, thank you for having these 
hearings. Let me just very briefly say that we have been 
through this a number of times in the last years, 1996 most 
recently. We saw the ownership shifted to the 35 percent from 
the 25. And we have seen the shift from sort of the finite 
number of stations to a percentage of national audience, and I 
think that shift reflected a change in the marketplace itself 
and in our perceptions of it.
    Like Senator McCain, I think I would observe that the 
marketplace has changed even further very significantly in a 
lot of different ways, and all of us understand that this 
fight, to a large degree, is over advertising revenues, and the 
structure by which local affiliates are able to make their 
pitch and what kind of package they can present versus the 
consolidated packages that other larger, more diverse entities 
are able to present. Our interest, I think, Mr. Chairman, has 
to still remain to the question of protecting people's access 
to diversity in information, and there is a principle of 
localism which you have very articulately and forcefully 
advocated both in your letter to the FCC and otherwise here 
this morning. I agree with that fundamental concept of both the 
diversity and localism.
    On the other hand, I think it is appropriate for this 
Committee at this juncture to be analyzing whether or not that 
marketplace has changed in a way that the mix is different, in 
the way in which diversity may be protected currently, or the 
way in which people will have access to information, which is 
obviously on its face so different from the original broadcast 
structure that we sought to protect when the principle was 
first established.
    We do notice, however, that there has been this 
extraordinary media consolidation: AOL purchasing Time Warner, 
Viacom, CBS; News Corp. presently trying to get 10 television 
stations from Chris Kraft, so that in the television broadcast 
industry, you have got, I think, the percentage of commercial 
television stations controlled by the largest 25 groups has 
climbed from 25 percent to 45 percent since passage of the 1996 
Act.
    But none of that, none of those percentages adequately 
reflect the other kinds of changes that have taken place in how 
people have accessed information, what information they have 
available to them. I have a sense this issue is probably going 
to be decided either by the FCC or the courts because I think 
they may do so faster than we are capable of, but it is 
entirely appropriate that we look at it, and examine whether or 
not any of those changes in the marketplace currently and in 
the way people get information mandate that we perhaps think 
differently about how we are measuring what the impact in 
diversity and localism really is and how it is best protected. 
So I think it is appropriate that we are measuring today, and 
apologize to the witnesses and to my colleagues. We have a 
markup on two trade bills in the Finance Committee in about 10 
minutes, so I can't be here for all the testimony, but I will 
try to come back.
    The Chairman. Very good.
    Senator Burns.

                STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. I would just ask that my statement be made 
part of the record, and I will listen to the witnesses before I 
make up my mind.
    [The prepared statement of Senator Burns follows:]

                Prepared Statementof Hon. Conrad Burns, 
                       U.S. Senator from Montana

    Thank you, Mr. Chairman. I thank the Chairman for calling the 
hearing on media consolidation today. This is certainly a topic that 
warrants the Committee's full and serious attention.
    I would first like to touch on the debate surrounding the current 
35 percent national cap on broadcast ownership. I strongly support the 
current cap, which was raised from 25 percent as part of the 1996 
Telecommunications Act.
    Many argue that the increasing variety of consumer choices for 
video programming renders the need for any restrictions on broadcast 
ownership obsolete. It is true that the array of multichannel video 
media has increased significantly. Currently, many consumers can choose 
from direct satellite, cable or even the Interent for video 
programming. However, even when consumers do have this variety of video 
distribution to choose from, many of these competing technologies are 
not true alternatives to locally based programming. For rural consumers 
in particular, alternatives increasingly exist only between different 
national distribution networks.
    Free, local, over-the-air television broadcasting still serves a 
vital and unique role in providing community information. The ability 
to receive local television signals is more than just having access to 
local sports or entertainment programming. It is a critical and 
immediate way to receive important local news, weather and community 
information.
    Additionally, natural tensions exist between the desire of networks 
to maximize national audiences and the sensitivities of local 
affiliates to their specific audiences. I am very concerned that any 
lifting of the cap would significantly increase the leverage the 
networks currently have in negotiations with their. affiliates and 
lower the degree of flexibility that stations have in providing local 
programming.
    In a drastically different course of events than has taken place in 
the video marketplace, the number of daily newspapers in the country 
has plummeted significantly in recent years. Since 1975, the year the 
ban on newspaper broadcast cross-ownership was instituted by the FCC, 
the number of daily newspapers has declined from nearly 1,800 to 
roughly 1,500. If community-based newspapers are to survive, they must 
be given the option to increase 3 efficiencies by entering into co-
ownership with local broadcast stations.
    The Commission's outdated position on cross-ownership is of great 
concern to me, particularly given its failure to offer a substantive, 
objective analysis of the actual effect of the cross-ownership ban in 
the current media marketplace. Even though the previous Commission 
announced a Notice of Proposed Rulemaking on the cross-ownership 
restriction as a result of its 1998 biennial review, nothing ever 
happened. I understand that the new Commission plans to rectify this 
situation and I plan to follow developments in this critical area with 
great interest.
    Thank you, Mr. Chairman. I look forward to the testimony of today's 
witnesses.

    The Chairman. Very good. That is a change.
    Senator Burns. Minority status does that.
    The Chairman. Senator Cleland.

                STATEMENT OF HON. MAX CLELAND, 
                   U.S. SENATOR FROM GEORGIA

    Senator Cleland. Thank you very much, Mr. Chairman. I 
understand that antitrust is defined as, ``opposing or 
intending to regulate business monopolies such as trusts or 
cartels, especially in the interest of promoting competition.'' 
Well, these Federal laws that we are talking about were created 
to protect American citizens from the concentration of power in 
too few hands and govern all industries.
    While these laws are enforced by the Department of Justice, 
there are often other agencies involved in merger reviews with 
the responsibility of examining aspects other than antitrust, 
but complimentary to the merger review. With regard to 
broadcasting mergers the FCC has an appropriate role of 
reviewing of broadcast license transfers to ensure they are in 
the public interest.
    Essentially, regulations and laws like ownership caps are 
designed to be additional protections for the public. In this 
case, these regulations promote a diverse and free exchange of 
ideas. When one entity reaches 35 percent of the Nation's 
homes, is that enough to attract the attention of antitrust 
officials? Maybe not. But this single entity is now able to 
reach millions of homes. In this case, I believe that the law 
limiting broadcast ownership enables and promotes diversity, 
above that of antitrust review by itself.
    However, I can certainly understand why a group would want 
to exceed this cap. According to Kevin Saunter in the broadcast 
television industry book, the profit margin for network-owned 
and operated stations can still reach an amazing 25 percent or 
more which translates into yearly profits that can be in the 
tens of millions of dollars, a significant amount for networks 
struggling with decreasing viewership and increasing costs.
    The FCC as the guardian of the public's interest and the 
public's manager of radio spectrum owes the American public an 
appropriate review of the transfer of broadcast licenses. 
Although multichannel service providers have increased the 
number of outlets people can turn to for video information and 
entertainment, about 20 percent of Americans still remain 
dependent on free over-the-air television for their 
information. This portion of the population should not be 
overlooked when contemplating removing or increasing the cap.
    I support the continuation of the FCC's biennial review of 
the broadcast ownership cap and the newspaper broadcast 
ownership cap as they have been directed. Although relaxation 
of these two caps has been rejected up to this point, I will be 
watching closely for the results of the FCC's next review. 
Given the relaxation of the duopoly rules, I believe we will be 
able to see more clearly the potential for greater 
consolidation.
    Antitrust officials play an important role in our economy, 
however, there are additional factors that might be overlooked 
if other agencies are removed from the merger review process. 
When we are discussing the precious and finite commodity of our 
national spectrum, I believe it is appropriate for the FCC to 
examine these mergers.
    I also believe due deference should be given to its 
decisions. I look forward to the Commission's continuing 
examination of ownership rules, keeping in mind that every 
regulation should be continued to be examined for its rlevance 
in this ever-changing world.
    Thank you, Mr. Chairman
    The Chairman. Thank you.
    Senator Dorgan.

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, thank you very much. I 
apologize. I was at a leadership meeting and I missed your 
opening statement, which I am sure would have been illuminating 
for me.
    The Chairman. I did mention your amendment. Don't you 
remember, when we voted with respect to change of ownership. 
Only by 2 votes did we have the 35.
    Senator Dorgan. In 1996, when the Committee reported out a 
bill that expanded the audience cap to 35 percent, I believe, 
and I offered an amendment on the floor of the Senate which 
about 4 o'clock in the afternoon prevailed, Senator Dole was on 
the other side and I actually prevailed and I was the most 
surprised man in Washington, DC., and then I believe Senator 
D'Amato changed his vote at the request of Senator Dole so that 
they can reconsider it, and then dinner intervened and several 
Senators had some sort of an epiphany over their dinner and we 
had a revote about 4 hours later, and I ended up losing. Such 
is the work of the Senate, well within the rules, I might add.
    But I felt the need to offer the amendment at that time 
because I worried about what was going to happen. Even then I 
was worried about what was happening, but we have had since 
then as you know an orgy of mergers in this industry. I think 
in 1996, the largest radio ownership group had 39 stations. 
Now, 1100 stations-plus. What's happening in broadcast, in my 
judgment, is unhealthy.
    There are competing interests. The private interests of 
those who are engaged in this and they have every right to hold 
that interest and want to become big and big and bigger, and 
the public interest, and I would say to the FCC, and I hope 
they pay some attention to this hearing, Mr. Chairman, I am 
pleased you are holding the hearing, the question of whether we 
ought to have ownership limits and the question of whether 
caring about localism is some old-fashioned anachronism is a 
very important question. I answer it one way. Some others might 
answer it another way. But I feel very strongly about it.
    The FCC has a responsibility to us, a responsibility to 
this country to understand that these airways belong to the 
American people and that localism is not some old-fashioned 
notion about what we ought to have as a public policy, and I 
think the burden--the FCC somehow seems to suggest the burden 
is on the Congress to demonstrate why there should be limits. 
That is not the case at all in my judgment. The burden ought to 
be on the FCC and the broadcasters to demonstrate why the 
limits ought to be increased.
    In my judgment, there is no basis and no case that can be 
made to increase these broadcast limits. If anything, we ought 
to go back to the 1996 limits. But I fear that that horse is 
long out of the barn. Mr. Chairman, thank you for calling these 
hearings. They are very important.
    The Chairman. Thank you.
    Senator Fitzgerald.

            STATEMENT OF HON. PETER G. FITZGERALD, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Fitzgerald. Well, thank you, Mr. Chairman. I would 
like to welcome one of my constituents, Mr. Jack Fuller, who is 
from Evanston, Illinois and President of the Tribune Company. 
The Tribune, in addition to owning newspapers and television 
stations, is the owner of the Chicago Cubs, a great baseball 
team, and they are doing very well this year and I hope we can 
have a World Series at least sometime this century. The Cubs 
have not won a World Series since 1908. Anybody can have a bad 
century, I guess, in Chicago.
    Senator Burns. Seven years ahead of time.
    Senator Fitzgerald. But anyway, I am glad that the Chairman 
has called this hearing. I think it is an important issue. I do 
agree that the public owns the airwaves. I do have questions, 
however, as to whether the ownership restrictions make sense in 
today's current climate, where you have so many media outlets, 
so many cable television stations and so many satellite TV 
channels and so many radio and other broadcast outlets, so I 
look forward to this hearing as far as going into depth and 
exploring the issue. I do wonder whether the restrictions that 
date back to the late 1940s or 1946, when there were only three 
broadcast networks around the country, continue to make sense.
    Thank you, Mr. Chairman, for holding this hearing.
    The Chairman. Thank you. In presenting these witnesses, let 
me make it as part of the record, unless there is objection, 
the Columbia Journalism Review ownership listing of Viacom's 
assets, and the Columbia Journalism Review ownership listing of 
Tribune's assets. I was just trying to summarize. For example, 
Viacom has got 19 Paramount stations; and the MTV networks, 
Nickelodeon channels, Showtime Networks, eight channels; Black 
Entertainment Television with six channels; and Paramount 
production and distribution and right on down--and publishing, 
CBS television ownership of some 17 stations there. In radio, 
it is just too much to count. I counted 40 different cities, 
and there are several radio stations in each city.
    [The information referred to follows:]

                 [From the Columbia Journalism Review]

                             Who Owns What

Viacom, 1515 Broadway, New York, NY

Broadcast and Cable

Paramount Stations Group

        WUPA--Atlanta
        WSBK--Boston
        WWHO--Columbus
        KTXA--Dallas, Ft. Worth
        WKBD--Detroit
        KTXH--Houston
        WNDY--Indianapolis
        WBFS--Miami
        WLWC--New Bedford/Providence
        WUPL--New Orleans
        WGNT--Norfolk
        KAUT--Oklahoma City
        WPSG--Philadelphia
        WNPA--Pittsburgh
        KMAX--Sacramento
        KSTW--Seattle
        WTOG--Tampa
        WDCA--Washington, DC
        WTVX--West Palm Beach

UPN
The Paramount Channel

MTV: Music Television

        M2
        MTV
        MTV Asia (joint venture with PolyGram)
        MTV Australia (licensing agreement)
        MTV Brazil (joint venture with Abril S.A.)
        MTV Europe
        MTV India (joint venture)
        MTV Indie
        MTV Japan (licensing agreement)
        MTV Latin America
        MTV Mandarin (joint venture with PolyGram)
        MTV Productions
        MTV Ritmo
        MTV Rocks
        MTV Russia

Nickelodeon

        Nickelodeon Australia (joint venture--includes News Corp.)
        Nickelodeon Germany (joint venture with Ravensburger, and Bear 
        Stearns)
        Nickelodeon Hungary
        Nickelodeon Iceland
        Nickelodeon Latin America
        Nickelodeon Nordic
        Nickelodeon United Kingdom (joint venture with BSKYB)
        Nick at Nite
        Nick at Nite's TV Land
        Nick Jr.
        Nickelodeon Books
        Nickelodeon Magazine
        Nickelodeon Movies
        Noggin

VH1

        VH1 Country
        VH1 Soul
        VH1 Germany (joint venture with Bear Stearns)
        VH1 United Kingdom

Comedy Central (joint venture with Time-Warner)
Showtime Networks Inc.

        SET Pay-Per-View (pay-per-view marketer of Mike Tyson fights)
        Showtime
        Showtime en Espanol
        Showtime Extreme
        Sundance Channel (joint venture with Robert Redford, and 
        PolyGram)
        The Movie Channel
        FLIX

BET--Black Enteratinment Television

        BET on Jazz: The Jazz Channel
        BET Action Pay Per View
        BET International
        BET Movies/STARZ!
        BET Pictures I
        Viacom Interactive Services

Viacom--Film & Television Production/Distribution

        Paramount Pictures
        Paramount Television
        Paramount Home Video
        CIC Video (joint venture)
        Viacom Productions
        MTV Films
        MTV Productions
        Nickelodeon Studios
        Nickelodeon Movies
        Wilshire Court Productions
        Spelling Entertainment Group (80%)
        Spelling Films
        Spelling Television
        Republic Entertainment
        Big Ticket Television
        Worldvision Enterprises
        Hamilton Projects

Viacom--Video and Music/Parks

Retail
        Blockbuster Video
        Blockbuster Music
        Viacom Entertainment Stores

Paramount Parks

        Paramount's Carowinds (located in Charlotte, NC)
        Paramount's Great America (located in Santa Clara, CA)
        Paramount's Kings Dominion (located in Richmond, VA)
        Paramount's Kings Island (located in Cincinnati, OH)
        Paramount Canada's Wonderland (located in Toronto)
        Raging Waters (located in San Jose, CA)
        Star Trek: The Experience (located in Las Vegas, NV)

Other

        Viacom Consumer Products
        Famous Music (copyright owners)
        Viacom Interactive Services
        Star Trek Franchise

Viacom--Publishing

        Anne Schwartz Books
        Archway Paperbacks and Minstrel Books
        Lisa Drew Books
        Fireside
        The Free Press
        MTV Books
        Nickelodeon Books
        Simon & Schuster Consumer Group
        Simon & Schuster
        Simon & Schuster Audio Books
        Simon & Schuster Children's Publishing
        Simon & Schuster Editions
        Simon & Schuster Interactive
        Simon & Schuster Interactive Distribution
        Simon & Schuster Libros en Espanol
        Pocket Books
        Scribner
        Star Trek
        Touchstone
        Washington Square Press

Viacom--Theaters and Film Distribution

        Paramount Theaters
        Paramount (Europe)
        United Cinemas International (UCI) (joint venture with 
        Universal)
        United International Pictures (UIP) (joint venture with 
        Universal)

Music

        Famous Music
        Famous Players

CBS Television

Television-owned and operated stations

        WCBS--New York
        KCBS--Los Angeles
        WBBM--Chicago
        WCCO--Minneapolis
        WFRV--Green Bay
        WWJ--Detroit
        WJZ--Baltimore
        WBZ--Boston
        KCNC--Denver
        WFOR--Miami
        KYW--Philadelphia
        KDKA--Pittsburgh
        KUTV--Salt Lake City
        KPIX--San Francisco
        KEYE--Austin Cable
        TNN: The Nashville Network
        CMT: Country Music Television

Group W Network Services--technology services for the cable and 
        broadcast 
        industries

New Media--Online

        CBS.com
        CBSNews.com
        CBSSportsLine.Com (partial)
        CBSMarketWatch.com (with Pearson PLC)
        CBSHealthWatch.com (partial)
        Office.com (33.3% with Winstar)
        ThirdAge (30%)
        Big Entertainment--Hollywood.com (30%)
        Contentville.com (35% with Brill Media Holdings 34%, Primedia 
        Inc., NBC,
        Ingram Book Group and EBSCO)
        StoreRunner.com (partial)

CBS Radio--Infinity Broadcasting

Atlanta: WAOK-AM; WVEE-FM; WZGC-FM
Austin: KJCE-AM; KAMX-FM; KKMJ-FM; KQBT-FM
Baltimore: WJFK-AM; WLIF-FM; WXYV-FM; WQSR-FM; WWMX-FM
Boston: WBZ-AM; WODS-FM; WBCN-FM; WBMX-FM; WZLZ-FM
Buffalo: WECK-AM; WBLK-FM; WJYE-FM; WLCE-FM; WYRK-FM
Charlotte: WFNZ-AM; WGIV-AM; WBAV-FM; WNKS-FM; WPEG-FM; WSOC-FM; WSSS-
        FM
Chicago: WBBM-AM/FM; WSCR-AM; WXRT-FM; WCKG-FM; WJMK-FM; WUSN-FM
Cincinnati: WGRR-FM; WYRQ-FM; WYLX-FM; WUBE-FM
Cleveland: WDOK-FM; WQAL-FM; WZJM-FM
Columbus: WLVQ-FM; WAZU-FM; WHOK-FM
Dallas: KHVN-AM; KLUV-FM; KOAI-FM; K000-AM; KRBV-FM; KRLD-AM; KVIL-FM; 
        KYNG-FM
Denver: KDJM-FM; KIMN-FM; KXKL-FM
Detroit: WWJ-AM; WVMV-FM; WKRK-FM; WOMC-FM; WXYT-AM; WYCD-FM
Fresno: KMJ-AM; KOOR-AM; KNAX-FM; KOQO-FM; KRNC-FM; KSKS-FM; KVSR-FM
Greensboro, NC: WMFR-AM; WSJS-AM; WSML-AM
Hartford: WTIC-AM/FM; WZMK-FM; WRCH-FM
Houston: KILT-AM/FM; KIKK-AM/FM
Kansas City: KBEQ-FM; KFKF-FM; KXMV-FM; KOZN-FM
Las Vegas: KSFN-AM; KXNT-AM; KLUC-FM; KMXB-FM; KMZQ-FM; KXTE-FM
Los Angeles: KNX-AM; KFWB-AM; KCBS-FM; KTWV-FM; KLSX-FM; KRLA-AM; KROQ-
        FM; KRTH-FM
Minneapolis: WCCO-AM; KSGS-AM; KMJZ-FM; WLTE-FM
Monterey-Salinas: KLUE-FM
New York: WCBS-AM/FM; WINS-AM; WNEW-FM; WFAN-AM; WXRK-FM
Orlando: WJHM-FM; WOCL-FM; WOMX-FM
Palm Springs: KEZN-FM
Philadelphia: KYW-AM; WPHT-AM; WOGL-FM; WIP-AM; WYSP-FM
Phoenix: KMLE-FM; KOOL-FM; KZON-FM
Pittsburgh: KDKA-AM; WBZZ-FM; WDSY-FM; WZPT-FM
Portland: KUPL-AM; KBBT-FM; KINK-FM; KKJZ-FM; KUFO-FM; KUPL-FM
Riverside: KFRG-FM; KXFG-FM
Rochester: WCMF-FM; WPXY-FM; WRMM-FM; WZNE-FM
Sacramento: KHTK-AM; KQPT-AM; KZZO-FM; KNCI-FM; KRAK-FM; KSFM-FM; KYMX-
        FM
San Diego: KPLN-FM; KYXY-FM
San Jose: KEZR-FM; KBAY-FM
San Francisco: KCBS-AM; KFRC-AM/FM; KITS-FM; KYCY-FM/AM; KLLC-FM
Seattle: KRPM-AM; KBKS-FM; KMPS-FM; KYCW-FM; KZOK-FM
St. Louis: KEZK-FM; KYKY-FM; KMOX-AM
Tampa: WQYK-AM/FM
Washington, DC: WHFS-FM; WJFK-FM; WPGC-AM/FM; WARW-FM
West Palm Beach: WEAT-FM; WIRK-FM

Westwood One (equity interest-radio network syndicated program/producer
Metro Networks
        TDI Worldwide--outdoor advertising
Outdoor Systems

Production

        CBS Production
        EYEMARK--marketing and production of syndicated programming
        King World Productions--first-run television syndication

Tribune Company, Chicago, IL

Broadcast and Cable

        WPIX--New York
        KTLA--Los Angeles
        WGN--Chicago
        WPHL--Philadelphia
        WLVI--Boston
        KDAF--Dallas
        WGNX--Atlanta
        KHTV--Houston
        KTZZ--Seattle
        WBZL--Miami-Ft. Lauderdale
        KWGN--Denver
        KTXL--Sacramento
        WXIN--Indianapolis
        KSWB--San Diego
        WTIC--Hartford/New Haven
        WTXX--Hartford
        WXMI--Grand Rapids
        WGNO--New Orleans
        WPMT--Harrisburg
        WBDC--Washington (not owned, but operated under a Lease 
        Managment Agreement)
        WNOL--New Orleans

        Tribune Entertainment--production and distribution
        Qwest Broadcasting LLC
        Tribune Co. holds a 25% stake in Time Warner's WB Network

Cable

        CLTV--Chicago area 24 hour news and sports
        TV Food Network (31%)
        Central Florida News 13 (CFN 13)--24 hour local news channel--
        joint venture between Tribune and Time Warner Communications

Radio

        WGN--AM (Chicago)
        KKHK--FM (Denver)
        KOSI--FM (Denver)
        KEZW--AM (Denver)

Tribune Company--Publishing

Daily Newspapers

        Chicago Tribune
        Fort Lauderdale Sun-Sentinel
        Orlando Sentinel
        South Florida Newspaper Network
        Daily Press (Hampton Roads, VA. and area)
        The Advocate (Stamford, CT)
        The Baltimore Sun
        Greenwich Time (CT)
        The Hartford Courant
        LaOpinion (50%, Spanish language newspaper in Southern 
        California)
        Los Angeles Times
        Los Angeles Times Syndicate (syndication service)
        Los Angles Times-Washington Post News Service (50%)
        The Morning Call (Allentown, PA)
        Newsday (Long Island, NY)
        Tribune Media Services--syndicated content for print and online
        On The Mark Media
        TMS TV--television programming information
        TVData--television programming information
        Zap2it.com--Website offering TV listings

Online Publications

        Black Voices--Afro-centric news and information
        Exito--South Florida Hispanic community news
        Relcon--listing of Chicago area apartments
        US/Express--weekly entertainment news
        Digital City Atlanta
        Digital City Boston
        Digital City Chicago
        Digital City Denver
        Digital City Hampton Roads
        Digital City Los Angeles
        Digital City Orlando
        Digital City South Florida
        cars.com--national Web site for vehicle listings--venture with 
        Times Mirror and Washington Post Co.
        apartments.com--national Web site for apartment listings--
        venture with Times Mirror and Washington Post Co. (cars.com and 
        apartments.com are part of Classified Ventures LLC)
        CareerBuilder.com (16%)--online employment information

Tribune Company--Other

        Sports Franchise
        Chicago Cubs

Tribune Ventures: Investment in and partnerships with the following 
        ventures; percentage indicates how much ownership Tribune Co. 
        has with:

        America Online (1.5%)
        CheckFree (1.0%)--electronic payment processor
        Digital City (20.1%)--local interactive content
        Excite (4.3%)--World Wide Web search engine
        ImageBuilder Software (23%)--software developer
        Discourse Technologies (14%)--multimedia education products
        Infobeat (12.6%)--customized content
        iVillage (7.8%)--online content
        Lightspan Partnership (6.6%)--new--media education products
        Open Market (2.6%)--electronic commerce
        Peapod (10.7%)--online grocery shopping service
        Picture Network International (NA)--online content
        The Learning Company (11%)--multimedia education products
        SoftKey International (NA)--digital education products
        StarSight TeleCast (NA)
        Interealty Corp. (25%)--real estate information
        Knight--Ridder/Tribune Information services (50%)--news wire
        Baring Communications Equity (Asia--Pacific) Ltd. Fund (NA)
        Classified Ventures LLC (33%)

The Washington Post Co., Washington, DC

Newspapers

        The Washington Post
        The Washington Post National Weekly Edition
        The Washington Post Writers Group (syndication)
        The Herald (Everett, WA)
        Gazette Newspapers, Inc. (community weekly newspapers and a 
        monthly business publication, in Maryland; 11 military 
        newspapers)
        International Herald Tribune (50%)--with The New York Times 
        Company
        Los Angeles Times--Washington Post News Service (50% with 
        Times-Mirror)
        Enterprise Newspapers--4 weekly community newspapers in 
        Snohomish County, WA

Magazines

        Newsweek
        Newsweek International
        Newsweek Japan (Newsweek Nihon Ban)
        Newsweek Korea (Newsweek Hankuk Pan)
        Newsweek En Espanol
        Itogi--Russian language newsweekly
        Tempo--Greek language newsweekly with New Communications, S.A.
        Post-Newsweek Business Information--trade magazines and trade 
        shows

Television

        Post-Newsweek Stations, Inc.
        WDIV--(Detroit) (NBC)
        KPRC--(Houston) (NBC)
        WPLG--(Miami) (ABC)
        WKMG--(Orlando) (CBS)
        KSAT--(San Antonio) (ABC)
        WJXT--(Jacksonville) (CBS)
        ACTV, Inc. (20%)--Interactive television for entertainment and 
        education
        Newsweek Productions

Cable Operations

        Cable One--MSO based in Phoenix, AZ

Other

        Kaplan Educational Centers
        Digital Ink Co.--new media and electronic publishing
        Classified Ventures--with Times-Mirror and Tribune Co.
        LEGI-SLATE--online Federal Government and regulatory 
        information
        Robinson Terminal Warehouse--newsprint facility in Virginia
        Capitol Fiber--recycling center in Washington/Baltimore area
        Bowater Mersey Paper Company (49%)--newsprint manufacturer in 
        Nova Scotia
        Dearborn Publishing Group, Inc.--a publisher and provider of 
        licensing training for securities, insurance and real estate 
        professionals

    The Chairman. So, but excuse me, Mr. Karmazin, you are 
behind Tribune. You got to play catch-up ball with the Tribune. 
I am putting them in there also. Let me present and introduce 
Mr. Mel Karmazin, the President and Chief Operating Officer of 
Viacom; Mr. Alan Frank, the Chief Executive Officer of Post-
Newsweek Stations; Jack Fuller, President of Tribune 
Publishing; William Baker, President of WNET in New York. The 
Committee is indebted to each of you for coming.
    Mr. Karmazin, we will start with you, sir.

           STATEMENT OF MEL KARMAZIN, PRESIDENT AND 
             CHIEF OPERATING OFFICER, VIACOM, INC.

    Mr. Karmazin. Thank you, Mr. Chairman, Senator McCain and 
other Members. I really appreciate the opportunity to be here 
today. I did not think you wanted to hear what I was going to 
say. I am sorry.
    The Chairman. I would love to hear what you are going to 
say. If I were running CBS, I'd hire you this afternoon, so do 
not worry about that.
    Mr. Karmazin. By way of background, I do go back a long 
time in the broadcasting business. I went to work in 1967 for 
Mr. Paley's CBS and had as mentors Mr. Paley and John Kluge. 
Both of those fine broadcasters. And, I like to call myself a 
broadcaster who has talked about localism and diversity, so let 
there be no mistake; obviously we are very interested, as are 
all of our television stations and all of our radio stations in 
localism, and certainly are prepared to demonstrate our 
localism in our communities, whichever community you are 
sitting with, as compared to any other broadcaster, whether or 
not they live in the market or do not live in the market. 
Certainly, localism and diversity are something that we think 
is very important.
    I'd like to go back to those days, by the way, if you can 
mandate it, to where there were only three networks, and the 
diversity was just those three. So I do not think that, Senator 
as you said, the horse left the barn. But I think those days 
are gone. When I first started in the business, there were 
three networks, 9 out of 10 people watched prime time on 
network television. The average viewer had seven television 
stations available to them, and there was no VCR.
    Today, the three networks, together in prime time, have 
less than 35 percent of the audience on television. The average 
home has 54 channels available to them. There are VCRs in 
almost 90 percent or actually over 90 percent of the country. 
There are items like TiVo and UltimateTV and the Internet. But 
even more important than what's here today, is there are more 
choices coming and the changes are going to be even more 
dramatic. There is going to be available very soon in every 
car, satellite radio, so that you will be able to receive 100 
radio stations in your car here in Washington, DC. in CD 
quality, controlled by one company. It will be a subscription 
service, so the American public is going to have to pay to 
receive those 100 different radio stations and we, free over-
the-air broadcasting, are going to have to compete with them.
    There is also, if you follow what's going on with 
technology, the Internet which is also going to be available in 
your car. Internet access is available today on your PDA. It is 
available on your cell phone. It is going to be available in 
your car. There are 4,000 radio stations on the Internet that 
you are going to be able to reach in your home or you are going 
to be able to reach in your car, and the whole world is 
changing. Technology is changing dramatically. We are not just 
in a vacuum. Consolidation is taking place in every industry, 
so we are now competing to get advertising dollars from banks 
that are consolidating. We are competing to get advertising 
revenue from airlines that are consolidating. Our advertisers 
have consolidated. There are fewer and fewer of them, as have 
the advertising agencies consolidated.
    And that consolidation is continuing. You mentioned earlier 
AOL/Time Warner, and alluded to the possibility that AT&T might 
do a transaction and possibly AT&T could do a transaction with 
Comcast. And it is possible that DirecTV, which has access into 
100 percent of the homes in America, might even combine with 
News Corp., so we are not sitting here suggesting those things 
should not be allowed to take place. They are wrong to take 
place. But in order for us to compete against them, we need to 
have a stronger, free over-the-air broadcasting system and I 
believe that we need to see changes that have to be made in 
order to be able to have a fair seat at the table with these 
companies that have consolidated.
    A lot has been said about radio consolidation so let us 
talk about that. There is a little over 10,000 radio stations 
in the United States. One company, not ours, owns a little bit 
over 1,000. That is 10 percent of the stations, so the largest 
company in this industry owns 10 percent. To some people, that 
might seem like a lot. To me, it is not Microsoft, as far as a 
consolidated position in this country.
    But the effect of consolidation has not been less 
diversity, it has been more. To take Washington, DC., the same 
number of radio stations exist today that existed in the past. 
Fewer operators, more programming choices. There are far more 
programming choices available today to the people of Washington 
than existed prior to the 1996 Telecommunications Act.
    I think that consolidation, deregulation has been good for 
the American public. I think we need to see the world where we 
can own two networks. We are channel 350 on DirecTV. We are 
channel 20-something here in Washington on some cable systems. 
We are on another channel with DishTV. There needs to be 
consolidation on the network side of things. We need to see 
that 35 percent arbitrary cap removed so that we can make money 
on our TV stations, so we can bid for programming, so we can 
afford to keep good programming on free over-the-air 
broadcasting, and we need to see further deregulation in the 
radio industry to compete with the technology that is 
satellite.
    If somebody is concerned about too much concentration, for 
30 years, I have been dealing with the Justice Department. They 
are pretty good at doing their job, and obviously there is a 
mechanism for unfair consolidation or too much consolidation. I 
see my time is up, so thank you.
    [The prepared statement of Mr. Karmazin follows:]

           Prepared Statement of Mel Karmazin, President and 
                 Chief Operating Officer, Viacom, Inc.

    Good morning, Chairman Hollings, Senator McCain, and Members of the 
Committee. I am Mel Karmazin, President and Chief Operating Officer of 
Viacom. Thank you for this opportunity to testify before you today on 
the topic of media consolidation and broadcast ownership.
    Instead of ``media consolidation,'' I prefer to call it ``media 
competition,'' because that's what consumers are enjoying today. Over 
the last decade, consumers have reaped the benefits of a tremendous 
amount of change in the media industry: the meteoric growth of cable, 
the explosion of the Internet, the expansion of broadcast networks from 
four to at least nine, the birth of DBS, and the proliferation of new 
media devices, such as cell phones and personal digital assistants, 
which are allowing consumers to access information when and how they 
want it.
    It is no coincidence that this enormous growth in content and 
distribution platforms has taken place during a time of consolidation 
in our industry. Horizontal and vertical combination is businesses' 
response to consumers' ever-multiplying demands for more information 
and entertainment tailored to their lives. Given today's marketplace, 
we have seen content providers expand to keep up with the change: This 
personalization of information and entertainment is made economically 
possible through mergers, such as that between Viacom and CBS last 
year. Scale allows companies to accept risks associated with spiraling 
costs of programming, from the cost of talent to sports rights, and 
other costs, such as those required to market, brand and promote our 
products. And scale in the broadcast business brings consumers, for 
free, greater entertainment, sports and news programming choices than 
ever before.
    If we are to understand the media industry, we cannot examine it in 
a vacuum. Because what happens in other industries unquestionably 
affects us in the media, particularly at companies like Viacom, where 
half of our revenues depend on advertising. As airlines merge, as banks 
merge, as consumer product companies merge, the number of our 
advertising customers also declines. Where before, for example, our 
company might have approached Airline X, Airline Y, and Airline Z as 
separate advertisers, we now have one fewer client and, as a result, 
one fewer source of advertising revenue. And, today, the agencies that 
represent the Nation's advertisers have also declined, meaning that 
mergers in that industry have forced us in the media to negotiate with 
only a handful of firms for a crucial part of our business.
    In a world where AOL and Time Warner can combine, where Comcast may 
end up owning AT&T's cable systems, and where News Corporation could 
control DirecTV, it is ironic that today's hearing focuses largely on 
maintaining harmful restrictions on the only news and information 
medium that remains free to all Americans--broadcasting. Right or 
wrong, subscription-based cable MSOs and DBS providers are permitted to 
operate without the myriad ownership restrictions that hinder 
broadcasters. Yet, in a cruel twist of fate, these pay television 
services rely on broadcast television as a key component of their 
offerings: some 80 percent of Americans now tune into their broadcast 
television stations through their cable or satellite provider. Thus, 
while the services that require American consumers to pay fees for 
access to them continue to consolidate largely unchecked, broadcasters, 
of which we are a proud member, face the prospect of being more and 
more marginalized. Television and radio broadcasting are the only media 
today that remain hamstrung by rules governing ownership--of television 
and radio stations locally and nationwide and of broadcast television 
networks--in ways that are far more onerous than those affecting their 
competitors.
    Despite the hyper-competitive state of the television industry, it 
is bewildering and astounding that there is a debate raging anew here 
in Washington over the limits on national broadcast television station 
ownership, which currently prohibit a group owner from reaching more 
than 35 percent of television households. Some, including the broadcast 
networks (ABC, CBS, Fox and NBC), want these limits pared back or 
repealed. Others, including some of the largest media conglomerates in 
the United States (such as Post-Newsweek, Cox, Belo and Hearst-Argyle), 
which count among their holdings broadcast network-affiliated 
television stations, as well as newspapers, cable systems and radio 
stations, are fighting hard to retain the status quo.
    The proponents of the status quo in this debate are clearly 
motivated by an overwhelming fear that their television business is 
changing and that freezing ownership at today's levels is the panacea. 
But we all must recognize that the broadcast business is dramatically 
changing all around us: Our audiences are dwindling, our margins are 
contracting and our share of advertising revenues is declining. The 
impact on consumers, who should be central to this debate, do not 
benefit from the status quo when it is irrational, anticompetitive, and 
an obstacle to expanded choice. After all, it is change and 
deregulation that have brought about the almost dizzying array of video 
and audio options Americans enjoy today.
    History instructs us that the fear of change is best confronted 
with a generous helping of flexibility and an invigorating dose of 
innovation. For instance, take the radio industry in the early 1940s, 
when many feared that a gadget called television would steal away its 
audience. Well, the coming of television did affect the radio business, 
but not in the way those fearful of change imagined. Instead, 
innovative managers prodded radio to recreate itself in the face of 
television's competitive threat, changing it over time from a center-
of-the-living room, sit-down form of entertainment to one that went 
with consumers as they pursued their daily activities. And, as such, 
radio prospered as never before.
    Or look at the broadcast television industry in the 1950s, when it, 
in turn, feared a new technology that took TV station signals and 
delivered them by cable to homes too far away to receive them over the 
air. Broadcasters fought the new technology because they saw it as a 
threat to free, over-the-air television and localism. Yet, today, more 
consumers are able to watch over-the-air television stations with a 
clear, sharp picture than would ever have been possible using rooftop 
antennas and rabbit ears. And over-the-air television stations have 
profited as a result.
    History teaches us that change is uncomfortable and unnerving to 
both government and business as we all undergo the turbulence of moving 
from the older to the newer technologies. But in the end, when the 
change has occurred, we see that consumers have benefited from the 
upheaval because they have been empowered as never before. With 
hundreds and hundreds of programming choices available at their 
fingertips, consumers are the final arbiters of which of these services 
will succeed and which will fail.
    Change is something my company deals with day after day. At Viacom, 
our broadcast networks, our cable networks, our video rental business, 
our publishing arm, our movie studio, and our radio stations are all by 
necessity constantly practicing the arts of futurism and 
prognostication, trying to figure out the next new technologies, 
trends, and regulatory schemes, and strategizing as to how we will 
adapt our business models to keep them relevant in any given new 
environment. Obviously, Viacom is not alone. Any business that is to 
survive must be three steps ahead of the curve or risk obsolescence. 
This includes big media companies with newspaper and television 
interests like Belo, Cox, Hearst-Argyle and others, which have been 
pushing for relaxation of the current restrictions on common ownership 
of a daily newspaper and a television station in the same community as 
one way to realize necessary economies in the face of the continuing 
decline in newspaper circulation. These companies advocating for a 
liberalization of local restrictions are, of course, the very same ones 
fighting deregulation of television ownership on a nationwide basis.
    I empathize with the frustration of these newspaper conglomerates--
deregulation is important for each of our businesses. But the common 
ownership of two television stations and of multiple radio stations in 
a local market consolidates advertising revenues far less so than the 
combination of a daily newspaper and a television station in one 
market. Thus, lifting the newspaper limit should occur only after the 
national television cap is lifted, the dual network rule is modified 
and the local ownership limits on television and radio are relaxed. It 
is these latter changes that promise greater benefits to ensure the 
future viability of the free delivery of entertainment, news and 
information to the American public.
    Over the last decade alone, a worldwide technological tsunami has 
crashed upon the world, flooding the broadcast industry with 
competition in unprecedented proportions. Broadcast radio now competes 
head-to-head with Internet radio websites that offer customized music, 
sports and news. Where offices once turned on a radio for background 
music, individual employees are now ``tuning in'' to favorite websites 
on their PCs for their all-day listening pleasure. And one day soon, 
when wireless Internet access is ubiquitous, people driving in their 
cars may opt to listen to radio websites instead of their local 
broadcast radio stations. Satellite radio, which has been in the 
planning stages for years and is just now launching, is a new form of 
``radio'' which will provide a subscriber with not just one program 
format as do traditional radio stations, but a whole range of them. 
Unlike traditional radio, which can reach only as far as a terrestrial 
broadcast signal, the new technology will let drivers travel far and 
wide without ever losing the clear reception of these satellite 
``stations.'' As for broadcast television, it competes directly with 
cable, which was originally created only to serve as a conduit for 
broadcast signals. That service, subscribed to by nearly 70 percent of 
the country's households, has developed into a multi-channel video 
programming distribution platform that not only carries hundreds of 
cable networks but serves as a high-speed gateway to the Internet and 
the literally millions of websites that offer personalized 
entertainment, news, weather and sports. The World Wide Web itself, 
born around 1994, spawned nearly three million sites from 1999 to 2000 
alone. Direct broadcast satellite, another competitor to broadcast 
television, delivers hundreds of crisp digital programming channels to 
more than 10 percent of the country and also offers high-speed Internet 
access.
    In 1996, Congress fully recognized this formidable competition to 
broadcasters when it passed the Telecommunications Act. Among other 
deregulatory actions, that law eliminated all limits on the national 
ownership of radio stations, raised from 25 percent to 35 percent the 
national ownership limit on television stations while deleting the 
numerical cap of 12 stations, and mandated that the FCC review 
broadcast ownership rules every 2 years.
    Those who fear the further deregulation of television often point 
to the state of broadcast radio ownership in an attempt to paint a 
bleak picture of media concentration. In so doing, they note that the 
largest radio station group owns some 1,200 stations, that this group 
and a handful of others control a large portion of the radio 
advertising market, and that stations in these groups play the same 
programming formats from central feeds in their distant, big-city 
headquarters.
    While their raw numbers are accurate, they give a completely 
misleading picture of a radio industry that is in reality vibrantly 
competitive and is certainly more diverse than the industry serving 
consumers in the pre-Telecommunications Act era. There are more than 
10,500 commercial AM and FM radio stations in this country, so the top 
group owns only about 11.4 percent. The fourth largest radio group in 
terms of numbers, Viacom's Infinity radio division, owns 184 stations, 
representing a mere 1.7 percent of all commercial radio stations. The 
audience for the average radio station in this country is miniscule. 
And, the radio advertising market is so small--totaling only about 8.5 
percent of all ad expenditures nationwide across all media (newspapers, 
magazines, billboard, Internet, cable, television, etc.)--that even if 
a single entity owned every radio station in the country, it still 
would control only a small portion of the advertising pie. In fact, 
under an antitrust review, one owner could not buy every radio station 
nationwide, because there would be limits on the number of outlets that 
that party could own on a local basis. Newspapers, by the way, still 
garner about 21 percent of total ad spending.
    And what of the argument that ownership consolidation limits the 
diversity of formats? No basis in fact whatsoever. That is because the 
multiple owner seeks to diversify formats in order to garner the widest 
cross-section of listeners.
    All we need do is look at the radio scene here in Washington's own 
backyard to see this theory spun into practice. In 1993, the 53 
commercial and noncommercial radio stations in the Washington, D.C. 
market were owned by 39 licensees, who offered 19 different formats. 
Today, 5 years after the Telecommunications Act's liberalization of the 
radio ownership rules, these 53 stations are owned by fewer licensees--
27 to be exact. But these 27 offer more formats: 22 instead of 19, a 
nearly 16 percent increase. Radio listeners in Washington can now tune 
in to a Korean language station, a Mexican station, two ethnic 
stations, a full-time smooth jazz station and a business news station, 
none of which was available 8 years ago or so.
    Consumers in Columbia and Greenville, South Carolina enjoy even 
more diversity of formats--about 45-58 percent more than they could 
choose from before passage of the Telecommunications Act. Since 1993, 
the number of owners of radio stations in Columbia has decreased from 
20 to 13, but the number of formats has increased from 11 to 16, 
including seven new formats and one new Spanish-language station. In 
Greenville in the same time period, the number of owners has gone from 
27 to 23, but the number of formats has gone from 12 to 19, including 
ten new formats and two new Spanish-language stations. Radio 
programming, in short, has become more--not less--diverse, and 
consumers enjoy the fruits of Congress' deregulatory efforts. Moreover, 
broadcast radio is now better poised to compete with the new 
substitutes of the Internet and satellite radio.
    As in the case of radio, we must parse the naysayers' arguments 
against deregulation of the national television ownership cap. Their 
primary contention, intended to incite fear among policymakers, is that 
localism will fall if the cap is lifted. Major media companies such as 
Cox, Belo and Hearst-Argyle--headquartered in Atlanta, Dallas and New 
York, respectively--each operates tens of stations in markets very far 
flung from their home bases. Yet, somehow these huge media companies 
shamelessly argue that they are ``local'' in every market where they 
own a television station while we are not. This pretzel logic does not 
end there. These same companies further contend that because CBS, for 
example, has its headquarters in New York, the stations it owns in 
other markets cannot be ``local,'' and decisions about local news and 
information must be orchestrated from corporate offices in New York. 
This despite the fact that CBS's local station in Boston is just as 
``local'' as the station owned in that market by New York-based Hearst-
Argyle.
    In fact, all we need do is look at a sampling of states to see that 
television stations in only a minority of cases are even owned by 
companies headquartered in the same state. In Massachusetts, of the 13 
commercial television stations licensed there, none is owned by a 
Massachusetts broadcaster. Of the 14 television stations in West 
Virginia, two are owned by in-state broadcasters. And in Kansas, only 
one of the 11 television stations is owned by a Kansas broadcaster.
    The real story is that CBS, like every other broadcaster, knows 
that localism is what makes broadcasting unique and a worthy competitor 
in the burgeoning video programming marketplace. While offering local 
news and public affairs programming may make us good citizens, it is 
also no secret to networks, group owners and individual station owners 
that local programming is a key competitive advantage that attracts 
viewers and differentiates broadcast television from cable channels, 
which are distributed nationally. CBS' owned-and-operated stations 
individually determine how much news they will air, what stories they 
will run and when they air them. As with our Infinity radio stations, 
there is no corporate dictator in New York who orchestrates the 
stations' local news programs. In fact, it's quite the opposite. Our 
stations' news directors have complete freedom locally. This is a 
fundamental CBS policy. And it is good business.
    On average, each of our CBS stations airs 25 hours of local news 
and public affairs programming each week, with actual amounts in some 
markets surpassing every other station. And our stations do not flinch 
from covering stories of local interest, even if it means preempting 
network programming. Just this past May in Minneapolis, for example, 
our WCCO-TV preempted 3 hours of primetime network programming to run 
an emergency weather newscast. For the past 20 years, WBZ, our Boston 
station, has preempted primetime network shows to air the Boston 
Children's Hospital Telethon. WBZ also aired complete coverage of 
Congressman Joe Moakley's funeral, preempting programming from 10 a.m. 
through 4:30 p.m.
    Many of CBS's general managers, news directors and other staff were 
raised in the communities where they work and, as a result, know these 
communities intimately. For example, Peter Brown, the news director of 
WBZ in Boston was born in Newton, Massachusetts and has worked at our 
station for 19 years as of this Labor Day, having worked his way up the 
ranks. And Brian Jones, the general manager of KTVT in Dallas, 
graduated from Plano High School, attended the University of Texas and 
has spent all of his working life in the state. He has been with KTVT 
for 14 years and started there as the station's national sales manager.
    In addition to covering local events, our stations heavily 
participate in public service activities. For example, for the past 10 
years, KPIX in San Francisco and, for the past 20 years, WBZ in Boston, 
have separately aired an adoption series that features local children 
in need of adoption. The KPIX series has led to the adoption of 86 
percent of the children featured.
    As with radio, consolidation in the television industry can result 
in significant benefits to the consumer. Viacom's merger with CBS 
brought under one roof a group of television stations affiliated with 
UPN and a group affiliated with CBS, with overlap in six markets. In 
five of these duopoly markets, we are airing or are about to launch 
half-hour newscasts or hourly updates on stations where none existed. 
As a result, diversity has expanded in Boston, Dallas, Detroit, Miami 
and Pittsburgh, where viewers now have access to more unique local 
news, weather and sports.
    The ``localism-is-dead'' issue, therefore, is a transparent 
distraction from the affiliates' true fear: the inevitable change to 
the broadcast business model which has in the past delivered to 
affiliates a steady, now unrealistic level of revenue. Under the 
traditional business model over the past few decades, networks have not 
only provided affiliates with a multi-billion dollar schedule of 
entertainment, sports, news and public affairs--all free of charge--but 
also cash compensation for carrying that programming. This in addition 
to the commercial positions within network programming which are made 
available to affiliated stations to sell for their own account, 
producing advertising revenues over and above those which they receive 
from the sale of time during non-network programming--revenues which go 
straight to the bottom line.
    Look behind the dust being kicked up in Washington by affiliates 
and what you see is a bold request for government creation of a world 
where the network bears the entire risk and expense of developing 
programming with no countervailing obligations on affiliates--such as 
simply fulfilling their contractual commitments to air this 
programming. If the affiliates get their way, the public will not, 
because networks will be discouraged from engaging in the even more 
expensive and riskier enterprise of creating new shows the public 
wants.
    The broadcast network makes money through only one source, the sale 
of national advertising. Compare this single-revenue business model to 
the dual revenue stream of cable networks, with whom broadcast networks 
compete: A cable network relies on ad sales, too, but is also paid by 
cable operators for carriage of its programming--the exact opposite of 
the relationship which prevails between broadcast networks and their 
affiliates. Moreover, while the ``Big 4'' broadcast networks are 
prohibited from combining, cable networks are subject to absolutely no 
ownership restrictions.
    Broadcast networks, which provide programming free to consumers and 
are limited by regulation in what other television stations or networks 
they can own, cannot continue to compete based on these old and 
outdated paradigms. When the profits made by the top 15 cable networks 
dwarf the earnings of their over-the-air competitors, it is unrealistic 
to continue to restrict combinations between broadcast networks when no 
such restriction exists for cable networks. And when the profit margins 
of network-affiliated stations are several multiples of those of the 
networks that supply most of their programming, it is unrealistic and 
unfair to artificially restrict the number of local stations that the 
networks themselves can own to amortize their enormous programming 
costs.
    With fewer viewers watching more expensive broadcast television 
programming and advertisers unwilling to spend more to pay for it, 
broadcasters must be permitted to participate in the economies of scale 
enjoyed by their competitors. For example, in addition to its 
operations in New York, CBS News staffs bureaus around the world to 
produce network news. If our company were able to own and operate 
another major broadcast network, we could use the combined resources to 
operate more efficiently and to provide more news more often on both 
networks--to all Americans and still free of charge. Even with two such 
networks under one roof, the combined ratings and advertising revenues 
would not come close to dominating the literally hundreds of remaining 
television programming competitors.
    Maybe it's the golden years of television that opponents of 
relaxing the national broadcast television station ownership cap really 
yearn for. And why not? Life was easier then for the few of us in the 
media business. Even in 1976, in the afterglow of those golden years, 
CBS, along with the only other broadcast networks at the time, ABC and 
NBC, claimed nine out of 10 viewers each night. The average home at 
that time had seven channels to choose from. And the VCR was not 
commercially available. That is a status quo any business would want to 
preserve.
    Nostalgia may make us feel better for a time, but neither time nor 
technology stand still. Almost 5 years later, in 1980, there were 734 
television stations, 21 percent of all homes subscribed to cable, 16 
national cable networks existed, and the average home received nine 
channels of programming. In 1991, Americans could select from 33 
channels of programming, the broadcast networks had lost one-third of 
their audience, and VCRs were in 70 percent of all homes.
    Today, there are 1,663 TV stations, 9 broadcast networks, 70 
percent of all homes subscribe to cable and another 10 percent pay for 
DBS. There are 281 national cable networks and the average home 
receives 54 channels of programming. A viewer can tune into several 
all-news cable channels, both national (such as CNN, MSNBC and the Fox 
News Channel) and regional (such as NY1 News in New York and News 
Channel 8 in Washington). Or a viewer can choose to watch an all-golf 
channel, an all-cooking channel, or an all-history channel. Or, 
perhaps, check in on the deliberations of this Committee on C-SPAN. And 
then there is the Internet, a medium none of us can ignore. According 
to the Pew Research Center, as many Americans--33 percent--receive 
their news from online sources as from broadcast networks. For younger 
people, the trend toward new media sources for news and information is 
even more pronounced: more college graduates under the age of 50 
receive news from the Internet than from television news.
    As a result of this robust competition, six of the broadcast 
networks today, the ``Big Three'' plus Fox, the WB and UPN, jointly 
garner only about 35 percent of TV households in prime time. Although 
the population of the United States has grown significantly, fewer 
people watched the final episode of Seinfeld in 1998 than watched the 
final episode of M*A*S*H in 1983. Whereas broadcast network television 
was once the common experience that bound the nation, it is now just 
one of a myriad of television programming choices.
    In the aftershock of such seismic growth in competition, all 
broadcasters, networks and affiliates alike, should embrace change and 
join in advocating rules changes that will put us at regulatory parity 
with our competitors and help to preserve free, over-the-air television 
as a vibrant part of our remarkable media marketplace. Let's start with 
the fact that the 35 percent cap imposed on broadcast television is an 
unrealistic and arbitrary limit. Limiting broadcast television 
ownership doesn't affect competition or diversity in any market at all. 
Viewers watch stations only in their local markets, and consolidation 
in different markets has no impact on competition.
    Congress in its wisdom has always understood that regulatory 
regimes must move in synch with the dynamism of competition. In the 
Telecommunications Act of 1996, Congress directed the FCC to review its 
rules on a biennial basis to ``determine whether any of such rules are 
necessary to the public interest as a result of competition.'' Given 
the undeniably robust State of competition in the video marketplace 
today, it is unjustifiable that television broadcasters continue to be 
unfairly impaired by an onerous regulatory regime attached to no other 
telecommunications segment. Instead, television broadcasters must be 
positioned to withstand economic challenges, as businesses are now 
experiencing in this downturn, in order to compete against the ever-
multiplying array of competitive video program distributors, and to 
commit the huge investments needed to make the transition to digital.
    We therefore urge that the FCC make important changes in its 
upcoming biennial review. First, the national broadcast television 
ownership cap must be lifted. Second, one major broadcast network 
should be permitted to combine with another. And, third, local 
television and local radio ownership should be based on a percentage of 
the market, not on the number of stations and arbitrary numbers of 
``voices.'' We hope that this Committee will support the FCC as it 
undertakes these significant actions.
    Eliminating ownership restrictions, which attempt to regulate by a 
prophylactic method that often ensnares the wrong targets, will not 
mean the end of any review of mergers, of course. Our nation's 
antitrust laws require intensive review by the Department of Justice or 
the Federal Trade Commission on a case-by-case basis to determine 
whether consumers will be harmed by a particular combination. These 
arms of the government, which have the authority and expertise to 
assess concentration, should be permitted to do their jobs rather than 
having arbitrary rules applied that may actually work against 
consumer's best interests. Such tailored assessments of the impact of 
media transactions promote, rather than stifle, competition.
    There is only one status quo we should all fight to maintain, and 
that is the world-class quantity and quality of media choices available 
to Americans. A healthy broadcast industry that delivers entertainment, 
sports and news for free to all Americans is a critical element of our 
society and is only made possible by the incredibly competitive media 
landscape that is uniquely American. It should not be left to struggle 
under the weight of rules that favor a select group of broadcasters at 
the expense of the American viewing public.
    The broadcast industry is at a critical juncture. This Committee 
has the opportunity to make an historic contribution by embracing the 
future and unlocking the shackles that threaten to extinguish 
broadcasting and its essential role in creating and maintaining an 
informed and diverse citizenry. We are prepared to take the economic 
risks to make this new world of choice a continuing reality and to 
follow your lead into a more competitive future that will result in 
empowering Americans more than at any time in the history of this great 
nation. Now is the time to reject interests of the few for the benefit 
of the many.
    Thank you.

    The Chairman. Mr. Frank.

              STATEMENT OF ALAN FRANK, PRESIDENT, 
                  POST-NEWSWEEK STATIONS, INC.

    Mr. Frank. Good morning, Mr. Chairman and Members of the 
Committee. My name is Alan Frank. I am the President of Post-
Newsweek Stations, chair of the Network Affiliated Stations 
Alliance, representing more than 600 local television stations 
affiliated with ABC, CBS and NBC. I also serve on the NAB 
board.
    Both NAB and NASA strongly believe that the national 
television ownership cap should not be increased. We appreciate 
the recent letter from Chairman Hollings, Senator Stevens, and 
other Members of the Committee emphasizing that the 35 percent 
ownership cap should be retained.
    The question facing the Committee as it reviews media 
concentration is not whether I am a better broadcaster than Mel 
Karmazin. I run a high-quality television station in Detroit 
that competes with one of the CBS O&Os, and even though Mel's 
station does no local news, it is a pretty good question. The 
question instead is sometime will there continue to be a 
variety of companies, Mel Karmazin's, my company, Cosmos, 
Benedict, Fisher, Hubbard and dozens and dozens of others 
making critical news and programming decisions in America, or 
at the next ownership hearing 5 years from now, will Mr. 
Karmazin be here alone, one person able to testify for the 
entire broadcast industry because the networks run out of New 
York and Hollywood will own most of the country.
    Localism and diversity are at the core of the American 
broadcast system. Local affiliates are the embodiment of these 
principles. When NBC told its affiliates last fall to air Game 
One of the American League Playoffs instead of the first 
Presidential debate, it was the affiliates that complained and 
ultimately the network relented and allowed affiliates to 
preempt the baseball game for the debate.
    Allowing the networks to own more stations means that next 
time there will be no local pressure to correct the network's 
bad judgment.
    Limits on national television ownership sustain our unique 
form of American broadcasting. Other countries like Japan or 
Britain or France have no such thing as local news. What 
happens in Tokyo or London or Paris sets the agenda. There is 
no community or regional coverage. Increase the ownership cap, 
and you place in peril our balanced national local system of 
strong networks and strong local affiliates.
    Since the ownership cap was increased to 35 percent, the 
networks have gained substantial power, power that is been used 
to diminish the role of affiliate stations. We believe the cap 
should be at 25 percent and the legitimate question for the 
Committee is why not move the cap back to 25 percent, a number 
which many of you supported in 1995. Certainly any increase 
beyond 35 percent would jeopardize localism and diversity. As 
you review the current state of media ownership, please 
consider these three points.
    First, the more stations the networks own, the more they 
will nationalize and homogenize news and programming. The 
networks have one goal. To make certain that 100 percent of 
their programming is carried by affiliate stations. There is 
tension between the network's business model and business 
objective, which is maximum exposure, and my business and legal 
objective, which is to meet the needs of the community I serve. 
My written testimony has several examples of how we preempt 
network programming to meet community needs.
    Let me give you one here. At our television stations in 
Jacksonville, Miami and Orlando, we preempt hours of network 
programming each year to carry the Children's Miracle Network 
Telethon. This program and others like it reflect local 
interests, local concerns and local needs. We make these 
decisions not because we want to harm the network's bottom 
line, but because we seek to meet the special needs of our 
communities.
    If the ownership cap is relaxed further, the networks will 
buy more local stations. How will that change their operations? 
Think about the general manager of an O&O in South Carolina or 
Montana, or Oregon, or Mississippi, who has to decide whether 
to preempt network programming to go carry a local ballgame or 
candidate debate. Trust me. No GM of an O&O wants to call Mel 
saying that the station won't be showing a network program in 
order to carry a debate or high school ballgame.
    Second, I want to dispel the myth propagated by the 
networks that the future of free over-the-air broadcasting is 
at stake unless the cap is raised. Quite to the contrary. 
Localism and diversity are at stake if the cap is raised. In 
1996, when the ownership cap was being debated, the networks 
complained that they were going broke in the network business 
and needed to own more stations. They were granted their wish, 
but are now back repeating this plea. This claim suffers from 
the fallacy of Hollywood accounting. It fails to take into the 
account the profits network companies earn from program 
syndication, cable, and their own television stations.
    The networks are doing just fine, thank you. Wall Street 
reports show that the four networks collectively in the year 
2000 had profits of over $4 billion. Free over-the-air 
television does not need more network ownership to survive.
    And finally, the dramatic changes in the broadcast industry 
since 1996 show that the cap must be retained. Since then, Fox 
has agreed to buy Chris Kraft; Disney bought ABC Cap Cities; 
Westinghouse bought CBS; CBS bought Infinity Broadcasting and 
Viacom bought CBS and this doesn't even touch on the networks' 
aggressive move into the programming and syndication markets 
following the repeal of Fin-Syn, where most of the competition 
has been eliminated. These developments led the FCC to report 
recently that since 1996 competition in the broadcast industry 
was reduced rather than increased.
    In conclusion, while the world of television has changed 
substantially, the need for safeguards has not. In fact, it has 
increased. Whether it is local weather or news or candidate 
forums or sports or charity events, local broadcasters remain a 
trusted source of information and other important service to 
their communities. And for those millions of Americans who do 
not subscribe to pay TV, local broadcasters are their sole 
source of news and programming.
    So although it is easy for the networks to say these 
network rules do not make sense in Internet time, the truth is 
that values of localism and diversity endure and are as much in 
need of protection today as they have ever been. Thank you, Mr. 
Chairman.
    [The prepared statement of Mr. Frank follows:]

 Prepared Statement of Alan Frank, President, Post-Newsweek Stations, 
                                  Inc.

    Mr. Chairman and Members of the Committee: My name is Alan Frank. I 
am President of Post-Newsweek Stations and chair of the Network 
Affiliated Stations Alliance (NASA), a group that represents the more 
than 600 local TV stations across America that are affiliated with the 
ABC, CBS, and NBC networks and that strongly opposes any increase in 
the national television ownership cap. I also serve on the Board of the 
NAB, which shares our view that the ownership cap should not be 
increased. I am pleased to appear at this hearing on behalf of the 
local affiliates in this country who work every day to operate quality 
local stations that present a blend of local programming, news, 
syndicated programming and national network programming. I'm also 
pleased to be here with Mel Karmizan. We want the networks to grow and 
prosper, because their doing so will make them stronger and more valued 
partners to the affiliates. CBS and the other networks have to be vital 
partners in providing our communities with successful programming.
    Before I launch into the views of local broadcasters on the 
important matter of ownership rules, it may be helpful to put some 
basic industry facts on the table, since I appreciate that you have 
lots of industries to keep track of within the broad jurisdiction of 
this Committee. The broadcast television networks are in the business 
of acquiring or producing prime time entertainment, news and sports 
programming, selling advertising time to national advertisers for 
insertion inside the programming, distributing that programming and 
advertising to local stations, and owning some television stations, 
mostly in major markets, to carry that programming and advertising. The 
television networks are anxious to reach 100 percent of the audience, 
because that helps them charge higher rates to advertisers. To 
accomplish this goal, in each of the two hundred or so television 
markets in the country, the networks either own a station, known as an 
owned-and-operated station (O&O), or they enter into a contract to have 
a local broadcaster act as an affiliate. Under current law, no network 
is permitted to own stations that reach more than 35 percent of the 
national audience; thus, 35 percent is the national television 
ownership cap.\1\ As a consequence, local stations that affiliate with 
a network are an important part of the networks' business model. My 
company has a typical arrangement--we run six stations and have 
affiliate agreements with each of the three major networks. In addition 
to arranging to carry network programming, we also produce our own 
local news, public affairs and entertainment programming; we carry some 
local sports; we carry charity telethons and other specials such as 
``Billy Graham Specials;'' and we buy syndicated programming, which 
includes everything from ``Jeopardy'' to ``Frasier'' reruns. We are 
also responsible for selecting the mix of these ingredients based on 
informed views of what best serves the public in our community.
---------------------------------------------------------------------------
    \1\ The Telecommunications Act of 1996 set the national television 
broadcast ownership cap at 35 percent, and this cap is reflected in the 
rules of the Federal Communications Commission (FCC). 
Telecommunications Act of 1996 Sec. 202 (c)(1)(B); 47 C.F.R. Sec.  
73.3555(e)(1). Since the early 1980s, the national ownership rule has 
moved from 7/7/7 (7 AM, FM and TV stations), to 12/12/12 (12 AM, FM, 
and TV stations, with a limit on the aggregate reach of the 12 
television stations to 25 percent of the national audience), to 35 
percent of the national audience.
---------------------------------------------------------------------------
    The system that I just described provides strength and flexibility 
to our broadcast service. Indeed, Chairman Hollings, Senator Stevens, 
Senator Inouye, Senator Burns, Senator Lott, Senator Dorgan, Senator 
Cleland, Senator Boxer, and Senator Edwards, joined by an equally 
bipartisan number of House colleagues, recently made this same point to 
Chairman Powell: Two of the hallmark principles of the Communications 
Act are localism and diversity, and our uniquely American form of 
broadcasting, with its combination of national networks and local, 
independently owned and operated broadcast outlets, reflects these core 
principles. We are committed to making sure that as the media industry 
evolves and consolidates, the voice of local broadcasters is not 
stifled or silenced. The national ownership cap at its current level 
serves a critical role in preserving localism.\2\
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    \2\ Letter to Chairman Michael Powell from Senators Hollings, 
Stevens, Inouye, Burns, Lott, Dorgan, Cleland, Boxer, Edwards, Helms, 
and Represenatives Dingell, Markey, Burr, and Pickering (Attachment 1).
---------------------------------------------------------------------------
    We commend Chairman Hollings and the many Members of the Committee 
for this strong letter in support of localism and against any increase 
in the national television ownership cap. That view, which also is 
backed by NASA and the National Association of Broadcasters (NAB), 
sends a powerful message to Chairman Powell and the FCC as they review 
the broadcast ownership rules.
    The question facing the Committee as it considers the matter of 
national television ownership rules is simple: Will there continue to 
be a variety of companies--Mel Karmizan's; my company; Jim Keelor's 
company, Cosmos; Jim Yager's company, Benedek; Ben Tucker's company; 
Stan Hubbard's company; and dozens and dozens of others--making 
critical news and programming decisions in America? Or at the next 
ownership hearing held 5 years from now, will Mr. Karmizan be here 
alone, one person able to testify for the entire broadcast industry 
because the networks, run out of New York and Hollywood, collectively 
will own most of the country (and will be able to take the rest for 
granted)?
    This scenario cannot be dismissed. Consider how quickly the 
industry has changed in just a few years. Today, Mr. Karmizan has 
stations reaching 41 percent of America. His colleagues at ABC, Fox, 
and NBC control stations reaching 24 percent, 41 percent, and 27 
percent respectively. By contrast, my company has stations reaching 7 
percent, and no affiliate group has stations that reach more than 30 
percent. This growth in network power is remarkable and is felt in 
significant ways across the broadcast community. Before the 1996 Act 
was passed, the three major networks reached no more than 1 in 5 
households through their O&O stations.
    The networks were able to expand their audience reach because in 
1996, the national broadcast ownership cap was increased from 25 
percent to 35 percent. NASA, along with Senators Dorgan and Helms and 
many others, wanted to keep the cap at 25 percent. Many of the members 
of this Committee expressed concern about the repercussion of 
increasing the cap to 35 percent. While we appreciate the compromise 
worked out by Chairman Hollings, Senator Dorgan, Senator Lott and 
others during debate of the 1996 Act, I can tell you that your fears 
were well founded. Make no mistake: as a result of that change the 
networks have increased their holdings and their power just as the 
leadership of this Committee predicted. The result is that today local 
broadcasters have less independence, less ability to make sound 
programming decisions for their local communities. An increase to 45 
percent or 50 percent would be a disaster and I believe that even at 35 
percent we are at risk of becoming passive conduits for the networks' 
daily feed of news and programming.
    As the recent letter from many members of this Committee clearly 
stated to Chairman Powell: The national ownership cap is vital to 
ensuring that television programming decisions remain in the hands of 
local broadcasters, and that media power does not become concentrated 
in New York or Los Angeles. The national broadcast ownership cap is 
not, as some wrongly suggest, just about competition. Local input helps 
keep our broadcast system responsive to the views of local communities 
across the country. That diversity of viewpoint benefits our 
democracy.\3\
---------------------------------------------------------------------------
    \3\ Id. at 2.
---------------------------------------------------------------------------
    The local affiliates share this view that localism is the core of 
our broadcast system and that any increase in the national ownership 
cap puts those values at risk. We greatly appreciate the strong 
leadership that Chairman Hollings and so many distinguished members of 
this Committee have demonstrated on this issue. We also welcome the 
opportunity to set out the case in detail why the networks' bid to 
increase the ownership cap should be rejected. In the past, the 
networks have asserted four reasons why the ownership cap should be 
lifted or repealed: (i) the financial health of the networks and the 
future of free, over-the-air television are at stake; (ii) the world of 
television has changed in recent years and the rules are unnecessary 
and antiquated; (iii) national ownership rules do not promote localism 
or diversity; and (iv) the ownership cap is unconstitutional. Let me 
consider each of these issues in turn.

I. The Networks Do Not Need To Own More Stations To ``Save Free, Over-
                    The-Air Television''

    In 1996, when the ownership cap was being debated, the networks 
complained that they were going broke in the network business and 
needed to own more stations. They were granted their wish and now are 
back here a few years later, repeating their plea: somehow the future 
of free, over-the-air television is again at stake unless Congress 
increases the ownership cap. This claim suffers from what I call ``the 
fallacy of Hollywood accounting.'' In making this claim, the networks 
are asking you to myopically focus on the artificial accounting system 
they've set up, a system that separates the part of the business that 
buys and distributes programming from the part of the business that 
makes, owns, or syndicates programming, from the part of the business 
that owns TV stations, from the part of the business that makes money 
from cable and Internet programming. But this argument proves too much. 
If a single network owned 100 percent of the stations in America, it 
still would show only moderate network profits because the profits from 
syndication, cable and Internet services do not flow to the network 
portion of the balance sheet. For a more accurate picture of network 
profits, one needs only review their financial reports to Wall Street 
analysts. Even a cursory review of those financial reports, shows that 
their vertically integrated programming and distribution businesses are 
highly profitable. CBS Network enjoyed a 19 percent increase in profits 
from 1999 to 2000 after a 59 percent increase in profits from 1998 to 
1999 and a 19 percent profit increase from 1997 to 1998.\4\ The four 
networks, collectively, have 2000 profits (even with ``Hollywood 
accounting'') of over four billion dollars!
---------------------------------------------------------------------------
    \4\ CBS figures for years 1996-99 represent the revenue and profit 
data reported for CBS' ``television segment'' in the Forms 10-K and 10-
K/A for CBS Corp. filed on March 29, 2000 and August 5, 1999, 
respectively. According to these reports, the television segment of CBS 
Corp. for years 1996-99 consisted of three integrated operations: the 
CBS television network, the CBS owned and operated television stations, 
and CBS' television syndication operations.
    On May 4, 2000 CBS Corp. merged with Viacom Inc. CBS figures for 
year 2000 represent the revenue and operating income data reported for 
Viacom's television segment in the Form 10-K for Viacom Inc. filed on 
March 28, 2000. The television segment for Viacom Inc. consists of the 
CBS and UPN television networks, 39 owned and operated television 
stations, Viacom's television production and syndication business.
---------------------------------------------------------------------------
    Over the past decade the networks have benefited from a number of 
rule changes that have allowed them to strengthen their competitive 
position. Remember, in the late 1980s and early 1990s, the networks 
argued for repeal of the financial interest and syndication (``fin/
syn'') rule, which prohibited the networks from producing and 
syndicating their own shows. After much discussion and with some 
trepidation, the local affiliates supported the networks on that issue 
and the FCC repealed the rule. How has this rule change benefited the 
networks? Today, the networks own a substantial part of the programming 
they distribute and many independent programmers have exited the 
market. Some critics have complained that the fact that the networks 
own the programming may affect their judgment, leading them to keep a 
show on the air so that they get to the magic number of 100 episodes 
needed to take the show into syndication. At the moment, there's an 
active debate on whether network ownership of shows impacts the 
primetime schedule and causes independent producers to be squeezed out. 
These debates will cease if the networks owned more local TV stations, 
because the O&O stations will just be passive and quiet conduits for 
the network programmers.
    The networks also benefit from their affiliates when a program is 
made popular by affiliate carriage then goes into syndication. For 
instance, I and other affiliates carry a CBS program such as 
``Everybody Loves Raymond,'' which helps make it a popular program and 
enables CBS to take it to the syndication market. Once a show goes into 
syndication, I could well face a situation in which I have to compete 
against a station across town that is carrying a syndicated CBS program 
that I helped make popular. How did that program become so valuable in 
the market? Because I carried it for CBS. Now, it is true that the 
owners of programming taken into syndication always reaped the 
financial benefits, today the networks gain substantial revenue because 
they now own a significant portion of the programming. This same 
reasoning applies to network programming that is ``repurposed'' and 
distributed on a cable network. The networks reap the value of national 
distribution and branding that the affiliates make possible.
    In short, the networks and their related businesses are growing and 
prospering financially. Because of lifting the fin/syn rule and the 
ownership cap to 35 percent, along with other rule changes over the 
past 5 years such as relaxing the dual network and duopoly rules, the 
networks are doing quite well, thank you, and as a byproduct of these 
changes are expanding their dominance over affiliates. The networks' 
position is that free, over-the-air television is at stake if the cap 
is not lifted, whereas the fact is that localism and diversity are at 
stake if the cap is not retained.

II. The World Of Television Has Changed, But The Networks Continue To 
                    Hold Substantial Power

    On one point, the networks are right. The world of television has 
changed substantially in recent years. Since the last time a 
representative of the network affiliates appeared before this Committee 
to testify on broadcast ownership rules, 6 years ago, the following has 
taken place: Disney bought ABC/Cap Cities, a move that was a direct 
result of repeal of the fin/syn rule; Westinghouse bought CBS, and then 
dropped the Westinghouse name; CBS of course bought Mr. Karmizan's 
company, Infinity Broadcasting; Viacom bought CBS; Fox has agreed to 
buy Chris-Craft. This flurry of deals led the FCC to report recently 
that thanks to mergers and acquisitions, competition in the industry 
lessened rather than increased since the Telecommunications Act of 1996 
was passed.\5\
---------------------------------------------------------------------------
    \5\ Biennial Review Report, at Sec. Sec. 27-28 (Excerpts in 
Attachment 2). Former Commission Chairman William E. Kennard said that 
the consolidation that has occurred since 1996 in the television 
industry, both horizontal and vertical, has been ``unprecedented.'' 
Sallie Hofmeister, ``FCC to Propose Easing Broadcast Ownership Rules,'' 
Los Angeles Times, May 31, 2000, at A-1 (quoting Kennard).
---------------------------------------------------------------------------
    In response to this argument, the networks say that this is just an 
intramural squabble about relative bargaining power inside an industry 
that is challenged to keep pace with the dynamic of competing media, 
and therefore they argue that neither Congress nor the FCC should get 
involved. Thus, the networks focus almost exclusively on the general 
market for video news and entertainment and conclude that any increase 
in television network ownership will not alter the broader competitive; 
landscape. This argument is off the mark because it ignores three 
markets in which competitive conditions have a direct bearing on the 
continued justification for the national ownership rule: (1) what the 
Commission has termed the ``market where networks meet stations,'' (2) 
the market for syndicated programming, and (3) the market for 
advertising.
    (1) Network/Affiliate relations. Under our system of broadcasting, 
networks and local stations are both collaborators and competitors. If 
I have a CBS affiliate (and I have two in Jacksonville and Orlando), in 
many ways I'm in business with Mel Karmizan. When he gets a hit show, I 
benefit. When he needed to spend money for the NFL football package, I 
helped pay for it. In fact, when the bill for the NFL package came due, 
Mel Karmizan emphasized that we were collaborators. But this is 
supposed to be collaboration, not capitulation. Under the strict terms 
of the law, written by Congress into the Communications Act of 1934 and 
reflected in the FCC's rules, I am not supposed to turn over the keys 
to my stations to CBS. I'm there to run local stations. Sometimes I 
produce programming myself, sometimes I buy it from others, and some 
parts of the day I depend on network programming. In that way, we are 
collaborators. Just as I want the network to be successful, my network 
wants me to run good stations.
    But at the same time, we're also business competitors. I 
periodically sit across the table from network executives and negotiate 
affiliation agreements. These are tough, long, important negotiations. 
The competition is not just at contract negotiation time, however. The 
competitive tension between the networks and affiliates is present 
every day. That competitive tension is understandable because the 
business goal of the network is different from the goal of a local 
station operator. CBS has one goal: to make certain that 100 percent of 
their programming is carried by CBS affiliated stations and to achieve 
high ratings for that programming. One hundred percent clearance of a 
program helps generate higher ratings. It also helps CBS if it owns a 
stake in the program. And it helps when it sells time to national 
advertisers. The tension lies between the network's business objective, 
maximum exposure, and my business--and legal--objective, to meet the 
needs of the community I serve. In Detroit, we preempt network 
programming to carry the local Thanksgiving Day parade. In Houston, we 
preempt network programming for rodeo coverage and for the Muscular 
Dystrophy telethon. In Jacksonville, Orlando and Miami we preempt hours 
of network programming to carry the Children's Miracle Network. In the 
Carolinas, carrying ACC basketball is popular, and some of those games 
occur during prime time. For some Mississippi stations, the Billy 
Graham Special a couple times a year gets a big audience. In Montana, 
the state high school sports finals generate lots of viewers. These 
programs reflect local interests, local concerns, and local needs.
    Whatever the reason--and yes, the reason can be that another 
program is more popular and thus more remunerative--a local broadcaster 
makes a decision not to carry the network feed. Local broadcasters make 
these decisions not because they want to harm the network but because 
they seek to meet the unique needs of their community. (A local 
broadcaster should not have to prove they lost money to justify a 
preemption; indeed, getting a big audience is in many ways the best 
vindication that it was a ``good'' preemption.) The competitive tension 
that I describe here has always been part of our business, but in 
recent years the pressure not to preempt network programming has grown 
intense and has been reflected in affiliation agreement provisions that 
are too restrictive. Clearances of network programs are up; affiliate 
preemptions are down. Affiliates are being ``muscled'' to carry network 
shows that they otherwise would not choose to air and their role as a 
disciplining force to the networks is being diminished. Their voices 
against unsuitable network material have become muted. Their 
suggestions for improving network news and other shows grow fewer and 
fainter.
    These trends have increased dramatically since the cap was raised 
to 35 percent and have adverse consequences for the quality of the 
public's broadcast service (whether the viewer is served over-the-air, 
or by cable or satellite). If the ownership cap is relaxed further, one 
of two consequences will result. First, if the networks buy lots of 
stations then the general manager of an O&O in Raleigh or Columbia or 
Jackson or Decatur who has to make the decision of whether to run a 
local basketball game or Children's Miracle Network telethon or a 
special will be answering to Mel Karmizan. Trust me: no G.M. working 
for Mel will want to call him saying that they won't be showing his 
network program to carry a high school basketball game. Alternatively, 
as the networks buy up more and more stations and network power 
increases, the number of independent voices will dwindle and if my 
station remains independently owned, it will become more difficult to 
speak out without the fear of repercussions from the network.
    As this analysis makes clear, increasing the ownership cap would 
harm the vitally important relationship between broadcast networks and 
their affiliates. We're not alone in this view. The FCC reported last 
year that raising the ownership cap would ``increase the bargaining 
power of networks over their affiliates, reduce the number of 
viewpoints expressed nationally, increase concentration in the national 
advertising market, and enlarge the potential for monopsony power in 
the program production market.'' \6\ Because of further consolidation, 
that statement is truer today than it was 12 months ago.
---------------------------------------------------------------------------
    \6\ Biennial Review Report, at Sec. 26 n. 78 (Excerpts in 
Attachment 2).
---------------------------------------------------------------------------
    (2) Syndicated programming. With regard to syndicated programming, 
both Congress and the FCC have recognized that the state of competition 
in that market has a direct impact on whether to repeal or modify the 
broadcast cap. On the supply side, repeal of the Fin-Syn rule has 
allowed networks to purchase major syndicatios or develop their own 
syndication divisions, thereby taking control over a greater proportion 
of non-network program hours. As a result, the number of syndicators 
that control significant amounts of content has declined--from dozens 
in 1996 to a handful today--and most of those that remain are tied to 
the networks.\7\ In addition, on the demand side, further nationwide 
consolidation of station ownership will mean that there are fewer 
viable purchasers for syndicated programming aside from the dominant 
national networks. Repeal or relaxation of the national broadcast cap 
would thus exacerbate both supply side and demand-side concentration in 
the syndication market.
---------------------------------------------------------------------------
    \7\ See David Hatch, ``Independents Fight the Good Fight,'' 
Electronic Media (Jan. 29, 2001) at 1.
---------------------------------------------------------------------------
    (3) Advertising. With regard to the advertising market, the FCC 
concluded recently that an expansion of the 35 percent cap would harm 
competition by ``increas[ing] concentration in the national advertising 
market.'' \8\ In the current marketplace, independent advertising sales 
representatives serve as intermediaries between local stations and 
national advertisers. These ``reps'' are capable of assembling enough 
independently owned affiliates and other local stations to compete with 
the networks as sellers on the regional or national spot advertising 
market.\9\ Because O&Os do not sell advertising in competition with 
the networks that own them, the national broadcast reach cap is 
essential to protecting the ability of affiliated stations to maintain 
healthy competition in these markets.
---------------------------------------------------------------------------
    \8\ Biennial Review Report, at Sec. 126 n.78 (Excerpts in 
Attachment 2).
    \9\ See generally Review of the Commission's Regulations Governing 
Broadcast Television Advertising, Notice of Proposed Rulemaking, 10 FCC 
Rcd 11,853 (June 14, 1995).
---------------------------------------------------------------------------
    In sum, though the world of television has changed substantially, 
the need for safeguards has not. In fact, it has increased. Though 
over-the-air television does not hold the position it once held in 
American society, its impact still looms large. Whether it's local 
weather or news or candidate forums or sports or charity events, local 
broadcasters remain a trusted source of information. And for those 
Americans who don't subscribe to pay-TV service, local broadcasters are 
the sole source of news and programming. So though it is easy for the 
networks to say that these ownership rules don't make sense in Internet 
time, the truth is that the values of localism and diversity endure and 
are as much in need of protection today as they were years ago. And the 
power and proclivity of the networks to override them are greater.

III. The National Television Ownership Cap Promotes Diversity 
                    and Localism

    The foundation of the Communications Act of 1934, and every 
amendment since then, is that a person who holds a spectrum license is 
obligated to use the nation's airwaves to serve the public and to 
maintain control of the station's operations. Since its inception, the 
FCC has applied special rules to the nation's broadcast system with one 
overriding goal in view: service to the public. Central to that goal is 
the principle that the local licensee must be free to choose the 
appropriate mix of programming for the community it serves. As Congress 
has recognized, the balanced system of national networks and local 
affiliates has ``served the country well'' by combining the 
``efficiencies of national production, distribution and selling with a 
significant decentralization of control over the ultimate service to 
the public.'' \10\ To further the public interest, broadcasters of 
free, over-the-air television have long been charged with serving the 
diverse needs of local communities, for example by providing 
programming that is responsive to the issues facing those communities 
and affording equal opportunities and reasonable access to candidates 
for public office.\11\
---------------------------------------------------------------------------
    \10\ H.R. Rep. No. 100-887, pt. 2;, at 20 (1988). See also Turner 
Broadcasting System, Inc. v. FCC, 512 U.S. 622, 663 (1994) (``Congress 
designed this system of allocation to afford each community of 
appreciable size an over-the-air source of information and an outlet 
for exchange on matters of local concern.'').
    \11\ See In re Review of the Commission's Regulations Governing 
Television Broadcast, Further Notice of Proposed Rulemaking, 10 FCC Red 
Sec. 524 at 66 (1995). Notwithstanding competition from cable, DBS, and 
the Internet, broadcast television remains the dominant medium for 
video programming. In 2000, network affiliates and other broadcast 
stations accounted for some 60 percent of television viewership 
nationwide. See Seventh Annual Report, In re Annual Assessment of the 
Status of Competition in the Market for the Delivery of Video 
Programming, CS Docket No. 00-132, at Sec. 22 (Jan. 8, 2001). In a 
recent ratings period, only two of the 100 top-rated prime-time shows 
were cable programs, rather than broadcast. See TVB Press Release, 
Broadcast Television Continues Lead Over Cable Through March (April 18, 
2001).
---------------------------------------------------------------------------
    One of the most effective ways to protect viewpoint diversity is to 
safeguard the important partnership between broadcast networks and 
their affiliates. The ownership cap is a vital way to ensure the 
delicate balance in the network-affiliate relationship is maintained. 
For example, a network-affiliated broadcaster must have the freedom to 
respond effectively and comprehensively to its community by 
interspersing programming responsive to its local community with the 
national programming provided by the network. Even with the cap at 35 
percent, the affiliates' freedom is in jeopardy. The FCC, which has 
studied the industry closely, agrees.
    The Commission stated in its Biennial Review Report: The national 
networks have a strong economic interest in clearing all network 
programming, and we believe that independently owned affiliates play a 
valuable counterbalancing role because they have the right to decide 
whether to clear network programming or to air instead programming from 
other sources that they believe better serves the needs and interests 
of the local communities to which they are licensed.
    Biennial Review Report, at Sec. 30 (Excerpts in Attachment 2).
    The bargaining power of the networks has increased dramatically 
since 1996. For example, the current network affiliation agreements 
typically provide that a network affiliate risks loss of affiliation 
and other serious penalties if it ``preempts'' more than a few hours of 
network programming over an entire; year without the network's 
approval.\12\ This shift in the balance of power threatens the ability 
of consumers to view local programming that meets community needs. 
Concern about this overreaching led the affiliates to ask the FCC to 
rule that the networks' new practices are inconsistent with existing 
Commission rules and the Communications Act, and should stop 
immediately. We have submitted substantial evidence to the FCC on this 
issue, but let me share with the Committee one well-publicized example. 
Last fall NBC told its affiliates to air Game One of the American 
League Division Series rather than the first of the 2000 Presidential 
debates.\13\ Ultimately, after hearing repeatedly from the NBC 
Television Affiliates Association, the network relented and allowed 
affiliates to preempt the baseball game for the debate. Fox, meanwhile, 
insisted that its affiliates air the sci-fi series ``Dark Angel'' 
instead of the debate, and Fox did not back off. Allowing the networks 
to own more stations means that this tendency to hew strictly to the 
network programming line-up will be spread among more stations and will 
affect more communities and viewers.
---------------------------------------------------------------------------
    \12\ Affiliate agreements must be filed with the Commission 
pursuant to 47 C.F.R. Sec. 73.3613(a).
    \13\ See Michael Camey, ``NBC's Swing Vote: Network To Skip Debate 
For Baseball,'' Washington Post, Sep. 23, 2000, at C1. Fox insisted 
that its affiliates air the sci-fi series ``Dark Angel'' instead of the 
debate.
---------------------------------------------------------------------------
    Two networks--Fox and CBS--already exceed the 35 percent reach cap; 
indeed, if the ``UHF discount'' is disregarded, each of these networks 
already has an audience reach of close to 50 percent.\14\ By owning 
more stations, especially in major markets, the networks directly 
control the distribution of information to an increasing percentage of 
the American public, who as a result forego the benefits local licensee 
judgment traditionally exercised by the independently owned network 
affiliates. Network O&Os, for sound business reasons, rarely preempt 
network programming for local programming; of greater interest to their 
local communities. Even when airing a program of local interest would 
be more economically beneficial to the local licensee than clearing 
network-owned programming, the networks have a strong incentive to 
broadcast their own programs via all of their O&Os and affiliates, for 
two reasons. Their ability to sell nationwide advertising time depend 
on their ability to garner high ratings; and also, as the networks 
continue to purchase or develop their own syndication operations, 
nationwide clearance increases the national ``aftermarket'' value of 
their programs. Non-network-owned stations, by contrast, are not 
similarly constrained because their sole interest is in how well the 
programs perform in the local community.
---------------------------------------------------------------------------
    \14\ See ``Sly Fox buys big, gets back on top,'' Broadcasting & 
Cable, Apr. 23, 2001, at 60. Under the Commission's rules, the audience 
reach of an UHF station in calculating the national ownership cap is 
reduced by half, due to the traditional weaker coverage of an UHF 
signal.
---------------------------------------------------------------------------
    The result of all of these changes in the market is two-fold. 
First, the more stations that the networks own, the more you'll see the 
nationalization or homogenization of programming. The networks have a 
strong business incentive to deliver a national feed all the time. 
Nationalization of our broadcasting system sets back the cause of 
localism and diversity. Second, as I explained above, the affiliates 
are at risk of losing power to stand up to the networks, to informally 
ride herd on issues of suitability and taste in programming. We may not 
always succeed, and you may not agree with our judgment, but I'll tell 
you that a critical part of the job of the affiliate boards is to carry 
complaints about programming and how it is promoted to the networks. 
The result is a healthy debate on what is good television. That 
beneficial influence would be lost if the affiliates become, as 
Congress feared, mere ``passive conduits for network transmissions from 
New York.'' \15\
---------------------------------------------------------------------------
    \15\ H.R. Rep. No. 104-204 at 221 (1995).
---------------------------------------------------------------------------
    Let me emphasize that I think Mel and the other networks generally 
run good local stations. The question is not whether I'm a better 
broadcaster than he is. The question is whether we as a society are 
better off having three or four people making those decisions from New 
York or Hollywood, or dozens and dozens.

IV. The Television Ownership Cap Set By Congress Is Constitutional

    Contrary to the contention of the networks, the recent decision in 
Time Warner Entertainment Co., L.P. v. FCC, 240 F.3d 1126 (D.C. Cir. 
2001) (``Time Warner II'') does not affect the validity of the 35 
percent national broadcast ownership cap. In the first place, the same 
court had already held that a cable ownership cap was constitutional 
and that the FCC was empowered to establish a cap. Instead, the problem 
was the lack of justification for the 30 percent cap that it selected.
    In contrast to the horizontal cable rule addressed by the court in 
Time Warner II, the 35 percent ownership cap was set by Congress. The 
statutory backdrop to the horizontal cable rule could scarcely have 
been more different from the one at issue here. In the Cable Television 
Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 
106 Stat. 1460 (``Cable Act''), which authorized the rulemaking at 
issue in Time Warner II, Congress delegated to the Commission the 
authority to set ``limits on the number of cable subscribers a person 
is authorized to reach through cable systems owned by such person, or 
in which such person has an attributable interest.'' 47 U.S.C. 
Sec. 533(f)(1)(A). Moreover, Congress declared that in setting such 
limits the Commission must ``ensure that no cable operator or group of 
cable operators can unfairly impede, either because of the size of any 
individual operator or because of joint actions by a group of operators 
of sufficient: size, the flow of video programming from the video 
programmer to the consumer.'' Id. Sec. 533(f)(2)(A).\16\
---------------------------------------------------------------------------
    \16\ In addition, Congress in the 1992 Cable Act expressly required 
the Commission to ``account for any efficiencies and other benefits 
that might be gained through increased ownership or control.'' Id. 
Sec. 533(f)(2)(d). The 1996 Act contains no equivalent requirement.
---------------------------------------------------------------------------
    Acting pursuant to this delegated authority, the Commission set a 
30 percent limit on the number of subscribers that may be served by a 
single cable operator, justifying this limit in part by pointing to the 
risk that several cable operators might independently deny carriage to 
a given programmer. A 30 percent cap would ensure the presence of at 
least four cable operators in the marketplace, the Commission reasoned, 
reducing this risk and increasing the diversity of media voices 
available to the public. Time Warner 11, 240 F.3d at 1134. In Time 
Warner II, the court concluded that the Commission was not authorized 
to protect diversity by taking into account the potential for non-
collusive action by multiple cable operators, because Congress in the 
Cable Act had given the Commission a more limited mandate. Id. at 1135-
36.
    By contrast, Congress established the 35 percent national 
television ownership cap by statute. The Commission's authority to 
regulate broadcast station ownership in the interests of diversity and 
localism is clear. Moreover, the 35 percent rule does not abridge any 
speaker's First Amendment rights. Unlike the cable must-carry rules 
legislated in the 1992 Cable Act, it is a restriction on ownership, not 
a restriction on (or a compulsion of) speech. The networks have tried 
to claim that as a result of the ownership cap, they are barred from 
speaking to 65 percent of the potential television audience nationwide. 
That is not the case. Apart from the fact that broadcast networks are 
free to own cable programming networks (as all the networks do) and 
radio stations, each of the networks operates a national broadcast 
television network. Through their O&Os and their affiliates, NBC, CBS, 
and ABC now reach over 98 percent of all television households (a 
figure that approaches 100 percent when their owned cable and satellite 
networks are added to the equation) and Fox reaches well over 90 
percent. A rule change allowing them to own additional stations would 
not enable them to speak to a single viewer they cannot reach now.
    We agree with the conclusion that many members of this Committee 
communicated to Chairman Powell on this question: In writing the 
Telecommunications Act of 1996, Congress itself set the national 
television ownership cap and incorporated it in the statute for the 
same reasons the court [in the Time Warner case] found to be important 
governmental interests in the recent litigation addressing the cable 
ownership cap: to promote diversity in ideas and speech and preserve 
competition.\17\
---------------------------------------------------------------------------
    \17\ Letter to Chairman Michael Powell, at 2 (Attachment 1).
---------------------------------------------------------------------------
    NASA, joined by the NAB, has vigorously defended the 
constitutionality of the ownership cap before the D.C. Circuit in a 
suit filed by the networks. Given the statements by the court in both 
Time Warner decisions, we're confident that we'll prevail. However, I 
suspect that regardless of how the court decides this issue may be back 
before the Committee.
    My company and all the members of NASA are in the broadcast 
business because we want to be local broadcasters. We want to be 
partners with the networks; I want them to succeed and I hope they want 
me to succeed. We want them to offer quality programming but ultimately 
we want the ability to carry out our legal mandate to make decisions 
about what works best for each of our communities. Increasing or 
repealing the national ownership cap puts at risk our system of 
diversity and localism. As demonstrated above, all of the networks' 
arguments for altering the ownership cap lack merit. For the sake of 
the public interest and the health of the American system of 
broadcasting, we strongly urge this Committee to preserve and affirm 
the national television ownership cap.

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    The Chairman. Thank you, Mr. Frank.
    Mr. Fuller.

             STATEMENT OF JACK FULLER, PRESIDENT, 
                   TRIBUNE PUBLISHING COMPANY

    Mr. Fuller. Mr. Chairman, as a newspaper man ordinarily I 
wouldn't be here on Capitol Hill asking for anything but 
information, but because of the ongoing revolution in the way 
Americans get their information, I am here to ask you that you 
permit newspapers to compete freely with other media for a 
share of the fragmenting news audience unhampered by legal 
restrictions on ownership of the means of communication.
    Since the cross-ownership rule was established nearly three 
decades ago the news business has been transformed. In addition 
to newspapers, magazines, broadcast television and radio, now 
Americans can get news from a proliferation of national all-
news cable operations such as CNN, Fox News and so on, as well 
as from local cable operations such as New York One News and 
News Channel 8 here in Washington.
    On the Internet, they can get news from a wide variety of 
sites all over the country and all over the world. With a few 
keystrokes, they can search the World Wide Web for news that 
interests them--from what you have said in the Senate and the 
way you cast your votes to information about local schools and 
parks.
    This profusion of news sources is good for the country, but 
it is a challenge for newspapers whose readership has been 
under pressure because of media fragmentation and whose 
advertising revenue is targeted by every new competitor as well 
as by the old ones. This has put newspapers under some 
financial stress. You have probably seen reports of significant 
cutbacks most have had to make in this period of economic 
softness.
    The cost of covering the news, however, is not declining. 
It is increasing. Covering the meetings and activities of 
hundreds of municipal government bodies, local school boards, 
and other public policy events is a huge and expensive 
undertaking. Building teams of journalists who are capable of 
understanding the complexity of public policy issues today and 
translating them for lay people is not easy or cheap. Not to 
mention the cost of serious, sophisticated original coverage of 
the Nation and the world as Tribune newspapers are committed to 
providing.
    In Chicago alone, The Chicago Tribune employs nearly 700 
editorial staffers and hundreds of freelancers, most of them 
devoted to news of local interest. In Los Angeles, the numbers 
are higher--1,130 editorial staff of the Los Angeles Times. 
Even in small markets such as Newport News, The Daily Press 
employs 155 full time editorial staff, which is nearly 3 times 
the size of a broadcast news operation even in the metropolitan 
areas.
    The question is whether in a fragmented media environment 
we will be able to find the economic model to continue to 
support local coverage at this level. I believe we can, but it 
will mean spreading the cost of high quality journalism over 
more than one distribution channel. We will have to reach new 
audiences in the many new ways that people like to receive 
their news. And to do so we have to have the burden of the 
cross-ownership rule lifted.
    In an environment where people's choices for obtaining 
information have radically multiplied, there is no risk of one 
voice dominating in the marketplace of ideas. In fact in the 
clamor of cities like Los Angeles, Chicago, New York and others 
it is frankly a challenge for any voice, no matter how booming 
it may seem, to get itself heard. So long as distribution 
channels continue to proliferate, and the explosion of 
bandwidth guarantees that they will, the public's demand for a 
diversity of voices will always be satisfied.
    The public interest is served by freeing newspapers to 
compete in the new highly competitive news environment. Let 
firms own newspapers and broadcast television stations and 
people who get all their news from broadcasting today will hear 
new voices. Let the cross-ownership rule fall and you'll see 
enriched newscasts.
    Here is an example of what's possible. It comes from 
Chicago, where the Tribune's ownership of the Chicago Tribune 
and WGN have been grandfathered under the cross-ownership rule. 
Last year, more than 40 reporters, editors and visual 
journalists from the Chicago Tribune, WGN, and CLTV which is 
our local all-news cable channel, worked together on a series 
of stories entitled ``Gateway to Gridlock,'' about the effect 
of air traffic snarls at O'Hare Airport on people's lives all 
over the country. Stories appeared in every medium, each medium 
telling the story as it was best for that audience. The public 
was the beneficiary and the Chicago Tribune was honored with a 
Pulitzer Prize for the effort. No broadcast, cable, or Internet 
news operation alone could have devoted the resources it took 
to research, write, edit, and package ``Gateway to Gridlock.''
    So with cross-ownership, public access to high-quality 
local news increases. It does not decrease. And that is why 
neither your files nor those of the Federal Communications 
Commission are filled with complaints from the communities 
where cross-ownership now exists. In contrast, in South 
Florida, the ban on cross-ownership has actually impeded the 
introduction of new voices in broadcast news.
    Just to put the situation in historical context when the 
cross-ownership ban went into effect, there were seven over-
the-air television stations in Miami; cable was in its infancy 
and had little impact there. The Internet information 
superhighway wasn't even a dirt road.
    Today, residents of Miami can watch 15 over-the-air 
television stations. They can choose from 8 daily newspapers, 
or listen to one of 67 radio stations. Cable delivers in excess 
of 75 channels, including all the news channels. Tribune owns 
the Sun-Sentinel in Ft. Lauderdale, and a while back, it 
acquired a group of stations that included small UHF stations 
ranked seventh in the Miami market. That station programmed no 
local news when we bought it. At the close of the transaction 
we got a waiver of the cross-ownership ban from the FCC, but 
the waiver forbade us from putting any local news from the Sun-
Sentinel on the channel.
    So instead of partnering with the Sun-Sentinel and 
providing broadcast viewers access to the work of 370 members 
of the newspaper editorial staff, our television stations had 
to partner with the local NBC affiliate airing that station's 
newscast.
    The combination of two television stations is permitted by 
law, as is ownership of television by the Internet companies, 
by cable providers, by telephone companies, by wireless service 
providers. Anybody, it seems, can own a television station 
except aliens, drug dealers and newspaper publishers.
    I believe the cross-ownership ban is anachronistic in 
today's world. I believe it is making it much more difficult 
for newspapers, which are vital to serve communities with news 
and public service journalism, to compete, and I believe it is 
time for it to be lifted. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Fuller follows:]

   Prepared Statement of Jack Fuller, President, Tribune Publishing 
                                Company

    Good morning. My name is Jack Fuller and I am President of Tribune 
Publishing Company, the newspaper subsidiary of Tribune Company.
    As a newspaperman, ordinarily I wouldn't be here on Capitol Hill 
asking for anything but information. But because of the ongoing 
revolution in the way Americans get their information, I am here to ask 
that you permit newspapers to compete freely with other media for a 
share of the fragmenting news audience, unhampered by legal 
restrictions on ownership of the means of communication.
    The time has come for the elimination of the newspaper-broadcast 
cross-ownership rule. There are many reasons why--from the 
constitutional to the historical to the practical. Let me concentrate 
on the practical.
    Since the cross-ownership rule was established nearly three decades 
ago, the news business has been transformed. In addition to newspapers, 
magazines, broadcast television and radio, now Americans can get news 
from a proliferation of national all-news cable operations such as CNN, 
Fox News, and MSNBC, as well as from local cable operations such as New 
York 1 News and Newschannel 8 here in Washington. On the Internet they 
can get news from a wide variety of sites from all over the country and 
all over the world. With a few keystrokes, they can search the 
Worldwide Web for news that interests them, from what you have said in 
the Senate and the way you have cast your votes to information about 
their local schools and parks.
    This profusion of sources of information is good for the country, 
but it is a challenge for newspapers, whose readership has been under 
pressure because of media fragmentation, and whose advertising revenue 
is being targeted by every new competitor--as well as by the old ones. 
This has put newspapers under financial stress. You have probably seen 
reports of the significant cutbacks most have had to make in this 
period of economic softness.
    The cost of covering the news, however, is not declining. It is 
increasing. Covering the meetings and activities of hundreds of 
municipal government bodies, local school boards, and other public 
policy events is a huge and expensive undertaking. Building teams of 
journalists who are capable of understanding the complexity of public 
policy issues today and translating them for lay people is not easy or 
cheap. Not to mention the cost of serious, sophisticated, original 
coverage of the Nation and the world, as Tribune newspapers are 
committed to providing.
    In Chicago alone, the Chicago Tribune employs nearly 700 editorial 
staffers and hundreds of freelancers, most of them devoted to news of 
local interest. This compares to the 50 or 60 reporters and editorial 
staff typically employed by local television news stations in Chicago. 
In Los Angeles, the numbers are even higher--1,130 editorial staff at 
the Los Angeles Times. Even in the smaller markets, the size of our 
newsgathering operations is significant. In Newport News, Va., for 
example, the Daily Press employees 155 full-time editorial staff, three 
times the size of a broadcast news operation in one of the major 
metropolitan markets.
    The question is whether in a fragmenting media environment we will 
be able to find the economic model to continue to support coverage at 
this level.
    I believe we can, but it will mean spreading the cost of high 
quality journalism over more than one distribution channel. We will 
have to reach audiences in the many new ways that people now like to 
receive their news. And to do that, we will need to have the burden of 
the newspaper-broadcast cross-ownership rule lifted.
    In an environment where people's choices for obtaining information 
have radically multiplied, there is no risk of one voice dominating the 
marketplace of ideas. Today in clamorous cities like Los Angeles, 
Chicago, and New York, it is frankly a challenge for any voice--no 
matter how booming--to get itself heard. So long as distribution 
channels continue to proliferate--and the explosion of bandwidth 
guarantees that they will--the public's demand for diversity of voices 
will always be satisfied.
    The public interest will be served by freeing newspapers to compete 
in the new highly competitive news environment. Let firms own 
newspapers and broadcast television stations and people who get all 
their news from broadcasting today will hear new voices. Let the cross-
ownership rule fall and you will see enriched newscasts. Here's an 
example of what is possible. It comes from Chicago, where Tribune's 
ownership of the Chicago Tribune and WGN television and radio is 
grandfathered under the cross-ownership rule.
    Last year, more than 40 reporters, editors, and visual journalists 
from the Chicago Tribune, WGN-TV and CLTV, our 24-hour cable news 
channel, worked together on a series of stories entitled, ``Gateway to 
Gridlock,'' about the effect that air traffic snarls at O'Hare Airport 
were having on people's lives all over the country. Stories appeared in 
the newspaper, on television, on cable, and on the Internet. Each 
medium told the story in the way best suited to its audience. The 
result was wide dissemination of a thorough analysis of an important 
local and national issue. The public was the beneficiary, and the 
Chicago Tribune was honored with a Pulitzer Prize for the effort.
    No broadcast, cable, or Internet news operation alone could have 
devoted the resources it took to research, write, edit, and package 
``Gateway to Gridlock.'' So with cross-ownership, public access to 
high-quality local news increases. It does not decrease. And that is 
why neither your files nor the Federal Communications Commission's are 
filled with complaints from the communities where cross-ownership now 
exists.
    In contrast, in South Florida, the ban on cross-ownership has 
actually impeded the introduction of new voices in broadcast news.
    Just to put the situation in historical context, when the cross-
ownership ban went into effect, there were seven over-the-air 
television stations in Miami. Cable was in its infancy and had made 
little impact there. The Internet information superhighway wasn't even 
a dirt road.
    Today residents of Miami can watch 15 over-the-air television 
stations. They can choose from eight daily newspapers or listen to one 
of 67 radio stations. Cable delivers in excess of 75 channels, 
including CNN, Fox News Channel, C-SPAN, CNBC, and MSNBC.
    Tribune owns the Sun-Sentinel in Ft. Lauderdale. In 1997, it 
acquired a group of stations that included a UHF channel ranked seventh 
in the Miami market. The station programmed no local news when we 
bought it. To close the transaction, Tribune got a temporary waiver of 
the cross-ownership ban. But the waiver forbade Tribune from any 
newspaper-broadcast joint operations. So instead of partnering with the 
Sun-Sentinel and providing broadcast viewers access to the work of 370 
members of the newspaper editorial staff devoted to covering the local 
community, our television station has had to partner with the local NBC 
affiliate, airing that station's newscast.
    And if that were not enough, CBS/Viacom owns two stations in the 
same market, and will program news on both in competition against the 
Tribune-owned station.
    The combination of these two television stations is permitted by 
law, as is ownership of television by Internet companies, cable 
providers, telephone companies, wireless service providers. Anybody, it 
seems, can own a television station except aliens, drug dealers--and 
newspaper publishers.
    A lot of serious people are asking today what is going to become of 
newspapers in the communications revolution. They worry about this 
because they realize that good newspapers are vital to the health of 
communities and to the health of the national public debate as well.
    I am actually very confident of our ability to get through the 
revolution and still be able to provide the kind of high quality, 
comprehensive news reports that Americans need in order to make their 
sovereign decisions. But we have to be able to adapt to a new, highly 
competitive environment of the sort I described in South Florida, and 
we have to be able to deal with powerful organizations such as AT&T, 
which is the sole provider of cable services to virtually the entire 
Chicago Tribune market area and which sells zoned advertising on 35 
channels. In this kind of environment we have to be unencumbered by 
anachronistic government restrictions that are based only on the fact 
that we own printing presses.
    Great newspapers can survive the information revolution, but not 
with a weight shackled to their ankles. The public interest and the 
Constitutional ideal of free expression demand that the shackle be 
removed.

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[GRAPHIC] [TIFF OMITTED] T9019.024

    The Chairman. Thank you, sir.
    Mr. Baker.

       STATEMENT OF WILLIAM F. BAKER, PRESIDENT AND CEO, 
                         THIRTEEN/WNET

    Mr. Baker. Chairman Hollings and distinguished Senators, 
thank you for inviting me to speak today here about an 
important issue that cuts to the very heart of our national 
spirit and our public vitality. I am President and CEO of 
public television station Thirteen WNET in New York. Before 
coming to Thirteen, I served a dual role as President of 
Westinghouse television from 1979, and then Chairman of Group W 
Satellite Communications, the cable programming businesses, 
from 1981.
    During my years at Westinghouse, five cable networks were 
launched, including Discovery Channel and Disney Channel. We 
also established the successful national ``PM Magazine'' 
program and introduced Oprah Winfrey, along with Alan Frank's 
help, as a talk show host. I'm author of ``Down the Tube: The 
Failure of American Television.''
    This background in public and commercial television 
broadcasting has given me some perspective on the issues the 
Committee is facing today. Arguably, the most important 
entitlements America possesses are the rights to free speech 
and an independent press. These rights are pillars of our 
Constitution and make our way of life a model that is admired 
in every corner of the planet. Today, however, trends in the 
media industry and regulatory policy are severely threatening 
free independent and diverse expression in America. The two 
rules being examined by this Committee, national television 
station ownership caps and cross-ownership of television and 
newspaper outlets in the same market, were put in place for a 
simple and essential reason, to ensure that control over news, 
information and the expression of ideas did not fall into the 
hands of a few powerful players. But this is exactly what's 
happened in a few short years.
    In 1983, 50 companies controlled more than half of the 
media in the United States. On paper at least, a mere 50 
companies controlling most of American media would seem to be a 
cause for concern in itself, but today, just 20 years later, 
the number has dropped to six. Six gigantic corporations 
control the vast majority of television, cable, radio, 
newspapers, magazines and the most popular Internet sites, and 
consequently, the majority of information, public discourse, 
and even artistic expression in the United States.
    We have on our hands what one might call a merger epidemic 
in the media industry, and like any other epidemic, this is an 
unhealthy one. If ownership caps are repealed, television will 
surely follow the example of radio. Since the passage of the 
1996 Telecommunications Act, 10,000 radio station transactions 
worth approximately $100 billion have taken place. As a result, 
there are 1,100 fewer station owners today, down nearly 30 
percent since 1996.
    Before 1996, the largest owner of radio stations in America 
controlled 60 stations. Now one company owns 1,200 and two 
others own about 200 each. Consequently, in nearly half of the 
largest markets, the three largest companies control 80 percent 
of the radio audience.
    The numbers show that competition is not increasing. While 
the numbers of channels may be slightly on the rise, the number 
of owners is dropping, and where free and independent media is 
concerned is the number of owners, not the number of stations 
or channels or formats that matter. The media hold a special 
place in our society. By helping us learn about the world, 
exchange ideas and understand who we are, they help us enable 
our conscience as individuals, and as a free people. When they 
are treated as mere economic products, they simply cannot play 
the vital role, social and cultural role that make them so 
central to our way of life.
    When the local newscast focuses on the real life story 
behind the evening's movie of the week sent down from the 
network, shouldn't we raise our eyebrows? If a television news 
editor is under pressure from top brass to increase ratings, 
which of the following stories will she give priority: Julia 
Roberts' new boyfriend or a school board debate over teaching 
standards? As one independent journalist has written, ``when 
commercial interests are set against democratic or professional 
values, it is predictable that the interests of the market take 
priority. This is self-evident.''
    Cost-cutting to improve margins diminishes diversity. 
Throughout America, media giants are closing newsrooms, merging 
staff, producing multiple newscasts on different stations from 
the same source. A healthy trend for the corporate bottom line. 
But where does it put local viewers looking for varying 
perspectives? Logically we must also be wary of cross-ownership 
between broadcast media and newspapers. There are more and more 
one-newspaper towns.
    Although some have argued that the two industries are 
distinct and should be treated separately, I believe that the 
final measure should be the overall quality, diversity, and 
objectivity of information being delivered in a given market. 
We need various print and broadcast outlets to serve as local 
critics of one another. Can we truly expect the management of a 
company that owns both a broadcasting station and a newspaper 
in the same market to operate those media outlets with 
distinct, discrete and independent editorial voices?
    If the answer is no, and I think it could be, then when 
that situation exists in a given market, we have lost a pair of 
diverse and antagonistic voices in that market and therefore, 
we have lost what the Supreme Court views as essential 
conditions for a vigorous marketplace of ideas.
    The underlying motivation for commercial producers is to 
increase shareholder returns. Good business? Yes. But 
broadcasting is not only a business, and it must not be allowed 
to become only that. It is a public trust. Like our national 
parks, the airwaves belong to the people. The people have 
granted commercial broadcasters free license to this precious 
national resource, with the understanding that they will be 
used in the public interest. This was established by the 
Communications Act of 1936.
    Deregulation has made fundamental changes in the industry, 
and ramifications extend throughout the national and global 
economies. With you, it is not too late to stop, or slow or, to 
even reverse the trend that has been threatening the very 
foundation of free uninhindered independent media in our 
Nation. Thank you.
    [The prepared statement of Mr. Baker follows:]

                Prepared Statement of William F. Baker, 
                    President and CEO, Thirteen/WNET

    Chairman Hollings, Distinguished Senators, thank you for inviting 
me here to speak about an issue that cuts to the very heart of our 
national spirit and public vitality.
    I am president and CEO of public television station Thirteen/WNET 
New York. Before coming to Thirteen, I served a dual role as President 
of Westinghouse Television, Inc. (from 1979) and Chairman of Group W 
Satellite Communications (from 1981). This background in public and 
commercial broadcasting has given me a broad perspective on the issues 
before this Committee today.
    Arguably the most important entitlements Americans possess are the 
rights to free speech and an independent press. These rights are 
pillars of our Constitution and make our way of life a model that is 
admired in every corner of this planet.
    Today, however, trends in the media industry and regulatory policy 
are severely threatening free, independent and diverse expression in 
America. The two rules being examined by this Committee--national 
television station ownership caps and cross-ownership of television and 
newspaper outlets in the same market--were put in place for a simple 
and essential reason: to ensure that control over news, information and 
the expression of ideas did not fall into the hands of a few powerful 
players.
    But this is exactly what has happened in a few short years. In 
1983, 50 companies controlled more than half of the media in the United 
States.\1\ On paper at least, a mere 50 companies controlling most of 
American media would seem to be cause for concern. But today, just 20 
years later, the number has dropped to six. Six gigantic corporations 
\2\ control the vast majority of television, cable, radio, newspapers, 
magazines and the most popular Internet sites--and consequently, the 
majority of information, public discourse, and even artistic 
expression--in the United States.\3\
---------------------------------------------------------------------------
    \1\ ``The Media Monopoly,'' Ben Bagdikian.
    \2\ AOL-Time Warner, Disney-ABC, General Electric-NBC, Viacom-CBS-
Westinghouse, NewsCorp-Fox, and Bertelsmann. (Cited in ``Legal Project 
to challenge Media Monopoly'' by Dorothy Kidd, in Media Alliance's 
MediaFile , May/June 2001.)
    \3\ ``Each of the dominant six firms now owns the major companies 
that create the content of the mass media, like newspapers, magazines, 
book publishing houses, and movie and TV production studios. Each of 
them has also acquired the next step, the national delivery systems for 
the programming they control or lease, like broadcast networks and 
cable. And finally, each has acquired or shared ventures with the 
ultimate delivery mechanism into each American home and office, the 
telephone company lines, cable systems and satellite dishes. (Ben H. 
Bagdikian, The Media Monopoly. Beacon Press, Boston, 2000. p. xvii.)
---------------------------------------------------------------------------
    We have on our hands what one might very well call a ``merger 
epidemic'' in the media industry. And like any other epidemic, this is 
an unhealthy one.
    If ownership caps are repealed, television will surely follow the 
example of radio. Since the passage of the 1996 Telecommunications Act, 
10,000 radio station transactions worth approximately $100 billion have 
taken place. As a result, there are 1,100 fewer station owners today, 
down nearly 30 percent since 1996.\4\
---------------------------------------------------------------------------
    \4\ According to BIA Financial Network, as cited in ``One Big Happy 
Channel?'' by Eric Boehlert (Salon.com, June 28, 2001)
---------------------------------------------------------------------------
    Before 1996, the largest owner of radio stations in America 
controlled some 60 stations. Now, one company owns about 1,200 and two 
others own more than 200 each. Consequently, in nearly half of the 
largest markets, the three largest companies control 80 percent of the 
radio audience.\5\
---------------------------------------------------------------------------
    \5\ ``Making Media Democratic'' by Robert W. McChesney (Boston 
Review, November, 1998)
---------------------------------------------------------------------------
    The numbers show that competition is not increasing. While the 
number of channels may be slightly on the rise, the number of owners is 
dropping. And, where free and independent media is concerned, it is the 
number of owners, not the number of stations or channels, that matters.
    The media hold a special place in our society. By helping us learn 
about the world, exchange ideas and understand who we are, they help 
enable our conscience as individuals and as a free people. When they 
are treated as mere economic products, they simply cannot play the 
vital social and cultural roles that make them so central to our way of 
life.
    I ask you this: Can a journalist objectively cover the news when 
his parent company is one of the world's largest conglomerates, with 
financial interests in nearly every corner of the national and global 
economies? When a local newscast focuses on the ``real-life'' story 
behind that evening's ``Movie of the Week'' sent down from the network, 
shouldn't we raise our eyebrows? If a television news editor is under 
pressure from top brass to increase ratings, which of the following 
stories will she give priority: Julia Roberts' new boyfriend or a 
school board debate over teaching standards? As one independent 
journalist has written: ``When commercial interests are set against 
democratic or professional values it is inevitable that the interests 
of the market take priority.'' \6\
---------------------------------------------------------------------------
    \6\ Bettina Peters, ``Corporate Media Tends in Europe, `' (The 
Campaign for Press and Broadcasting Freedom, November 2000.)
---------------------------------------------------------------------------
    This is self-evident. Cost-cutting to improve margins diminishes 
diversity. Throughout America, media giants are closing news rooms, 
merging staff, and producing multiple newscasts on different stations 
from the same source. A healthy trend for the corporate bottom line, 
but where does it leave local viewers looking for varying perspectives?
    Quality is another casualty. When the main objective behind every 
minute of airtime is to maximize profits, standards take a back seat to 
better margins. Trawling for eyeballs becomes commonplace. No wonder 
the airwaves are seething with sensationalism and empty technical 
glitz. Barely concealed behind every new blockbuster series is the 
fevered battle of media titans over ratings and ad dollars.
    Logically, we must also be wary of cross-ownership between 
broadcast media and newspapers. Although some have argued that the two 
industries are distinct and so should be treated separately, I believe 
that the final measures should be the overall quality, diversity and 
objectivity of the information being delivered in a given market. We 
need various print and broadcast outlets to serve as local critics of 
one another. Can we truly expect the management of a company that owns 
both a broadcaster and a newspaper in the same market to operate those 
two media outlets with distinct, discreet and independent editorial 
voices? If the answer is no, and I think it clearly is, then when that 
situation exists in a given market, we have lost a pair of diverse and 
antagonistic voices in that market. And therefore, we have lost what 
the Supreme Court views as essential conditions for a vigorous 
marketplace of ideas.
    The underlying motivation for commercial producers is to increase 
shareholder returns. Good business? Yes. But broadcasting is not only a 
business. And it must not be allowed to become only that. It is a 
public trust. Like our national parks, the airwaves belong to the 
people. The people have granted commercial broadcasters free license to 
this precious national resource with the understanding that they will 
be used in the public interest. This was established by the 
Communications Act of 1934.\7\
---------------------------------------------------------------------------
    \7\ Peter Franck, of the National Lawyers Guild Committee on 
Democratic Communications, quoted in ``FCC Says to Hell with the Public 
Interest'' by Camille Taiara (Media Alliance's MediaFile, December 
1999.) ``The 1934 Public Broadcasting Act very clearly declared 
airwaves to be public property,'' says Franck. ``It's a natural 
resource that exists by the laws of physics. Yet these corporations 
got, for nothing, spectrum worth millions and millions of dollars. 
That's just welfare for the already very rich.''
---------------------------------------------------------------------------
    Deregulation has made fundamental changes in the industry and 
ramifications extend throughout the national and global economies. But 
it is not too late to slow, stop and even reverse the trend that has 
been threatening the very foundations of free, unhindered, independent 
media in our nation.

    The Chairman. Thank you very much, Mr. Baker. I am learning 
new words today. Everything is ``exacerbating, egregious.'' You 
have a ``dichotomy.'' The best word I learned--and at the time 
I learned it, they eliminated it--that was ``honorarium.'' But 
now it is ``anachronistic,'' old hat, I guess, outdated, never 
considered, nonsense. We debated it and we had the most 
vigorous debate and hangup on the 25, 35 percent. Mr. Frank has 
testified, he would like to go back to the 25.
    The reason we went to the 35 was to get the bill passed. 
When we got that bill out, there were a lot of compromises. We 
had 95 votes, bipartisan, in 1996, but it wasn't an 
anachronistic situation with respect to ownership and the 
numbers. It is not an arithmetic problem. We used to have in my 
hometown three radio stations. All three had news, one had 
popular music and the other two had rock. Now I have got 11 
stations. But I can tell you right now, there is no choice at 
all, other than the public radio.
    In fact, I never before used that little tape deck for 
music. Now I am buying tapes and everything else because aside 
from public broadcasting, there are no worthwhile programs. It 
is interesting. I listen to the music because the other 10 
stations have got out of California, and they are hollering at 
each other and debate, they have got an epileptic fit, they are 
swallowing their tongues and everything else, about to die. I 
can't get music out of it and so I buy a music tape. So the 
fact that I have got 11 radio stations--do not give me the 
numbers problem.
    Back now to Mr. Fuller. Well, for example, when they put 
these limitations on the cross-ownership of a newspaper and a 
TV station, the FCC said, and I quote: ``It is unrealistic to 
expect true diversity from a commonly-owned station/newspaper 
combination.''
    Now, go fast-forward here to just a couple years ago and 
the American Journalism Review article entitled ``Synergy 
City.'' It describes the Tribune Company's attempts to 
repurpose its news content across all its properties, and the 
article states, and I quote: ``entering the news room of the 
Chicago Tribune, your eye is drawn to a massive multimedia 
desk, around which are arrayed editors from WGN TV, WGN radio 
and so forth, the 24-hour local cable news channel, the 
Tribune's Internet edition. In most companies, a Berlin Wall 
separates the different media. At the Tribune, all media units 
report to David Underhill, Vice President for Video and Audio 
Publishing. `The goal of our unit,' says Underhill, `is to be a 
synergy group. I love the word.' ''
    So you can see, the genius--namely, diversity--is not 
anachronistic at all, it is disappearing. Why you have that 
with the Tribune because of lethargic FCC. They are not calling 
the rule about cross-ownership because they are waiting for the 
time for relicensing every 8 years, otherwise, they should have 
called the rule. If somebody is speeding, you do not wait for 
next year's new Chairman of the Highway Commission. You arrest 
him. You stop it. That is a violation right now. Not the case 
with the FCC. They have given everybody--and I do not blame you 
at all, Mr. Karmazin, but like I say, I would hire you. Where 
is that thing, I mean, here, look at the success here.
    The Quarterly Report for CBS network and I quote: 
``achieved double-digit revenue growth in prime time with 
increased ratings and pricing in the first quarter of 2001.'' 
On May 28th, in the edition of Broadcasting and Cable reported 
``fiscal 2000 was a profitable year for ABC, CBS, Fox, and NBC 
with decent profit margins.'' The article indicated that in 
2000, the CBS network enjoyed $200 million in profits. Your own 
TV stations enjoyed $775 million in profits, and your TV 
production and syndication businesses enjoyed $450 million in 
profits.
    Well, it doesn't sound to me like CBS and Viacom need any 
more relief. In fact, I hope Sumner gives you a raise. Please 
comment if you will.
    Mr. Karmazin. Senator, I didn't think making a profit is 
something that I should be embarrassed about.
    The Chairman. I am proud of it. You are not embarrassed, 
are you?
    Mr. Karmazin. Not at all. And by the way, I think that what 
you need in order to make investments is profits. So, I think 
that the profit margin, since you are bringing it up, on a 
television network, is in the single digits. Marginally 
profitable. Not a lot of money for the invested capital. We 
spend about $3 billion a year for programming on our network, 
and news, and of that $3 billion--let us assume that $200 
million number were accurate--that isn't the best return on 
capital that a company could get.
    I think the first point that I would like to make is that 
there are some facts that were wrong, though. We do news in 
Detroit on our television stations. We did it as a function of 
consolidation and we managed to do it as one of the benefits 
that we have, but the sense for me is that in 1996, it was 
probably OK, what the deregulation was.
    Since 1996, a lot has changed in America. The pipe has 
gotten broader. There have become many, many more competitors 
in that market, so there needs to be--as was the intent at the 
time--a biennial review of the rules, because even at that 
time, it was believed that the FCC should take a look every 2 
years to see whether or not there should be any further 
relaxation. Regarding the programming in South Carolina, sir, I 
don't own any radio stations, but if you would give us some 
further deregulation, I will put more stations to your choosing 
on in South Carolina.
    The Chairman. Very good.
    Senator McCain.
    Senator McCain. Thank you, Mr. Chairman. I think we can 
agree or disagree on this specific issue we are discussing 
today. I don't think we disagree that the information 
technology has profoundly affected the way we live, work, are 
entertained and receive information, and a lot of it is in the 
eye of the beholder.
    Mr. Frank, you pointed out that in your statement today, 
Mr. Karmazin's station is reaching 41 percent of America's 
population, and its' colleagues--ABC, Fox, NBC-controlled 
stations--reached 24, 40, and 27 percent respectfully. To 
balance that statement out, I think it is important to 
recognize prime time viewership among the top six broadcast 
networks has declined from 71 percent in 1996 when this law was 
passed to 58 percent in the year 2000. Cable has made 
tremendous inroads. Now 70 percent of American TV households, 
compared to just 13 percent in 1975. Satellite. Internet. The 
list goes on and on.
    I appreciate, Mr. Frank, your powerful argument in support 
of localism, and against any increase in the National 
Television Broadcast Act, and obviously, for local news, 
sports, weather coverage. Yet in your organization, NASA, five 
companies alone that belong to your organization have a 
combined $14.4 billion dollars in revenue, reach 63 percent of 
the Nation. These companies own or have financial stakes in 
cable companies, newspapers, radio stations, magazines, 
websites, and publishing houses.
    Companies that belong to NASA include: Belo, Hearst, 
Argyle, Cox, Gannett, Washington Post. You own stations in 
cities such as Palm Springs, Jacksonville, Seattle, Louisville 
while their corporate headquarters are located in New York, 
Atlanta and Dallas. Is it your belief that these stations, 
including the ones you own, in five different cities across 
America, are able to maintain localism while their headquarters 
are located elsewhere?
    Mr. Frank. Senator, the question about localism is not 
necessarily local ownership. Localism is not the same as local 
ownership, and it is more than local programs. The question is 
where are the incentives for the local community, and it has to 
do with a mindset. If the O&Os have different business 
interests as opposed to local groups that own stations, you 
know, our objective is to serve the local community, period.
    Post-Newsweek as a for instance, sir, has six stations 
around the country and we have two things that unite us. One is 
strong journalism, because we are, after all, a Washington Post 
company, and the other is a belief in serving local 
communities. Therefore, our station in San Antonio looks very 
different from our station in Jacksonville, looks very 
different from our station in Detroit or Houston or Orlando. We 
do not have a Post-Newsweek set. We do not have Post-Newsweek 
pins, we don't have Post-Newsweek blazers. Because each station 
reflects the community it serves and is run by the local 
general manager.
    Senator McCain. So you have that commitment, but the other 
people who own stations across the country do not have that 
commitment. Or are headquartered away from Jacksonville, San 
Antonio, Orlando, Miami, Ft. Lauderdale, Houston and Detroit. 
Stations that you own. You are committed to localism, but CBS 
affiliates, they aren't.
    Mr. Frank. Senator, the question is not us versus them. I 
said before, Mel Karmazin is a good broadcaster. We have no 
problems with the way he runs stations. What I said in my 
testimony, by the way, was that that CBS-owned station in 
Detroit does not have its own news department. They now do 
carry a newscast, as Mel said, from the Paramount station. They 
still don't have their own news department.
    It is not a question of whether they are good broadcasters. 
The question has to do with diversity and the number of 
ownership and the number of owners throughout the country. We 
just do not believe if the cap is raised obviously you are 
going to have fewer owners. We don't believe that's good 
policy, we don't believe that's good for the country, we say 
diversity. We say the more the merrier at the table. Others say 
``mine, mine, mine.'' We think the more the merrier is the 
answer. Not fewer.
    Senator McCain. I won't belabor the subject, but it is 
pretty obvious to me that your commitment to localism because 
you own stations all around the country should not be any 
different from that of others who own perhaps more stations 
around the country.
    Let me move to Mr. Fuller very quickly.
    Mr. Fuller, you are a Pulitzer Prize-winning journalist and 
you have been in journalism over 30 years, as you stated. First 
of all, what was the state of competition when you entered the 
business compared to the state of competition now? What 
specific trends are you seeing given the emergence of new 
technologies, particularly the Internet? If I want to know 
what's in your newspaper tomorrow, I can go the early evening 
news--I do not have to buy your paper at the local news-stand. 
I can also go online, the same way with The Washington Post and 
the same way with every other newspaper in America. I would be 
interested in your comments on the state of competition and how 
it is going to affect your business.
    Mr. Fuller. When I began working in the newspaper business, 
in order to start a newspaper, you had to have tons and tons of 
newspaper presses, a huge facility, a fleet of trucks, and a 
distribution system that got to everybody's doorstep in the 
morning before 6 o'clock. Today all it takes to get into my 
business is a server, a staff to write and report the news, and 
an Internet connection. It is vastly different. That is not 
even to speak of the national distribution of newspapers that 
did not used to be available in other cities. It is also not to 
speak of the proliferation of cable news. CNN did not exist 
when I started in the newspaper business. There were three 
networks.
    The fact is, from where I sit, we are not in a period of 
concentration. We are in a period of radical fragmentation, and 
what you are seeing is serious journalistic organizations 
trying to find ways to deal with that so they can continue to 
support serious journalism for their communities.
    Senator McCain. I thank you, Mr. Chairman.
    The Chairman. I thank you.
    Senator Wyden.
    Senator Wyden. Mr. Karmazin, Mr. Fuller, is it your 
position that there should be no ownership restrictions at all?
    Mr. Karmazin. I think that my viewpoint is that the 
Department of Justice should measure what is unfair 
competition, and that there is the opportunity within that 
Department to assess whether or not one company is buying too 
many. Right now, we go through that process whenever we make an 
acquisition and in a number of acquisitions that we have made, 
they have determined we had too much control in a given 
position and we had to make divestitures.
    What we are saying is, today the concept of the 35 percent 
cap, and the concept of owning one network of the full 
broadcast networks, that rule should go away. I have no horse 
in the race on newspaper-television cross-ownership. I would 
support that relaxation.
    Senator Wyden. You would be troubled, then, by the scenario 
I painted, because the scenario I painted in my opening 
statement is if you have all of these ownership rules lifted, 
you could have a single massive media company in this country.
    Mr. Karmazin. No, you couldn't, sir, with all due respect.
    Senator Wyden. We have done some checking and if you take 
this proposal where you throw all of the rules out the window, 
you start with Time Warner/AOL buying AT&T Cable.
    They could do that--we have reviewed this. They could buy 
NBC and then they start in with newspapers, radio and TV, and 
your theory is that somehow somebody at Justice is going to 
block some of this. But our analysis is if you get rid of all 
the ownership rules whatsoever, you could have this single huge 
media entity. I am curious whether you think there would be any 
down-sides in that for the American people?
    Mr. Karmazin. With all due respect, I don't think that you 
could say without the Justice Department. I mean, there is a 
Justice Department. There is a whole lot of control that would 
potentially stop that from occurring, so I do not think you 
have to worry that is going to happen. I also do not believe 
that the marketplace is going to let that happen.
    What we are saying is that there is probably, between no 
regulation and where it is today, room for significant 
improvement. There is a difference between the scenario you 
outlined and the scenario that exists today. There is a huge 
gap.
    Senator Wyden. There may be grounds, then, for coming up 
with a bipartisan proposal, because what concerns me is that I 
have asked about what's going to happen if you lift the rules 
completely. I am convinced we will have scenarios like I 
described, not very many, maybe two of them, but we will have 
them, and there may be something in between that and leaving 
everything exactly the way it is. That was why I wanted to 
explore it with you.
    Mr. Fuller.
    Mr. Fuller. Well, I am most concerned about the 
restrictions on newspapers which are hobbling our capacity to 
compete in the current environment. My inclination is that 
antitrust law is an effective instrument against undue market 
power. It has worked for more than 100 years in this country, 
and it will work in this industry as well. Frankly, it seems to 
me that the least justifiable place for special restrictions is 
in the area of expression. It is not the most justifiable area, 
it is the least justifiable area. We are willing to live with 
antitrust constraints as we are happy to live with them.
    Senator Wyden. You have to have tools that have the 
opportunity to be effective and if the U.S. Congress or the FCC 
steps in and says the sky is the limit, which is what I have 
been concerned about in terms of those who say there should be 
no rules at all, I think we are headed for trouble. Just a 
couple of other questions, if I might, Mr. Chairman.
    When the cap is lifted, Mr. Karmazin, is there any question 
that what will happen is the major networks will require the 
affiliates around this country rather than having to deal with 
independent stations?
    Mr. Karmazin. Yes. I think there is a big question about 
that because if you take a look at where NBC and ABC are today, 
they are not anywhere near the 35 percent cap. So if, in fact, 
there was such an appetite for that to happen, I would suspect 
that you would be finding all of these companies at the 35 
percent cap level, and in fact, NBC and ABC are not.
    I think the concept of an affiliate that is willing to 
preempt the network and the fact that our own stations aren't 
looking to improve their local relationship is silly, because 
we, too, preempt the network at our local stations. They are 
encouraged to do whatever is serving their local community. The 
other thing that really has come up that is inaccurate, I wish 
we were sworn in for this testimony, you know. The other thing 
that was inaccurate is what happens when there is a merger.
    As Mr. Baker is aware, we own two radio stations in New 
York City. They are all-news radio stations, WCBS and WINS. 
Those two news stations have not consolidated. Those two news 
stations are operated independently. They have a totally 
separate viewpoint and I have not been in the newsroom of those 
two stations or CBS ever, other than to congratulate them.
    Senator Wyden. One last question, if I could. Mr. Karmazin, 
I want to make sure it is your view that when networks own 
distribution channels, if these changes go through, network 
owns the local station. In your view, this would not end up in 
any significant changes with respect to priorities for local 
programming in this country?
    Mr. Karmazin. That is correct. Because I think the only way 
that a television station can be successful, the only way we 
can justify what will be these extraordinary prices that the 
people who choose to sell their stations are going to get, the 
only way you are going to justify those prices is if, in fact, 
you are able to grow that business. The way you grow the 
business is by getting higher audience, and by having better 
programming, so I think the effect is better programming.
    Just one example, if I may. We got back into the business 
of carrying the NFL a few years ago. You know, I guess there 
may be an argument that says it doesn't matter whether the NFL 
is available on free over-the-air broadcasting or is available 
on cable. We happen to think that it should be on free over-
the-air broadcasting and did our part. The way we justified the 
price was not the amount of money we would make at the network, 
because we lost money at the network. At the network level from 
an accounting point of view--legitimate point of view, not 
Hollywood accounting, we lost money. But what we did do was the 
stations that we owned contributed toward that profit, as well 
as our affiliates.
    I think you need to look at the importance of the CBS-owned 
television stations and the profits that they make in 
supporting the news operation. We have 1,500, 1,600 at CBS 
News. It is not being supported based on the half-hour newscast 
that we run at night. In part, it has contributed to these 
other assets that the company has.
    So no, I don't think there is a weakness. I think it is 
better programming. I think if were you to look at the effect 
of deregulation on the radio industry, which consolidated more 
than the television business, today, there are a little over 
1,000 television stations. We own 3.5 percent. We have 35 
television stations. You know, there is room for that and, 
between that and the egregious scenario that you are 
discussing.
    The Chairman. Very good.
    Senator Burns.
    Senator Burns. I think what we have seen here is a classic 
discussion between Mr. Karmazin and Mr. Fuller. As one looks at 
it from a news standpoint and service to the public and the 
other one looks at the bottom line, and in a way that is the 
way it should be. We have always had that clash. And also when 
you had trouble, it is hard, it seems a fruitless exercise to 
lock the barn after the horse is gone. Well, the horse is gone 
and we have been left with what we are left with sometimes.
    Mr. Fuller, the FCC has an obligation--although we all deal 
with it every day. I hate to pass that up. It is a great line. 
Anyway, the FCC has an obligation under the 1996 
Telecommunications Act to review all of its broadcast ownership 
rules on a biennial basis. In closing out that 1998 review in 
May of 2000, the FCC put in an order that they would begin 
rulemaking on broadcast newspaper cross-ownership. Can you tell 
us what they have done to date and when you expect them to act 
and to what do you attribute the delay?
    Mr. Fuller. Well, they have not done it. There has been a 
change in administration. That slowed things down. I think that 
all we have been asking for is that that process go through so 
that we will all have a chance in the Commission to have our 
say. They will be able to evaluate the current state of the 
information market and make a decision as to whether these 
rules are out of date or not.
    Senator Burns. I want to bring up something else. I heard 
everybody is saying that have you an obligation because radio 
and television broadcast companies who operate free over-the-
air, are using the spectrum at no cost, and the American people 
gave it to you. I think we tend to look back in history, back 
when radio was started, the government asked radio stations to 
go on the air. They said you take the spectrum and you put it 
on the air. In the 1950s, they did the same thing to 
television. Take this spectrum, put it on the air, and 
especially your company like WGN. I wish I had Mr. Baker's 
pipes. I would still be back in the farm broadcast business.
    There are only two guys that have got pipes like that that 
I know of and Orrin Samuelson is one of them, you know, a 
Wisconsin kid there. But the government urged you to do that, 
to put these radio stations on the air. Now, both WGN and even 
your publication companies in Chicago, they have positions of 
great prestige. You are looked at as a pace-setter in the 
industry.
    Then they came up with a cross-ownership rule in 1975. What 
has changed in the business that would prompt them to look at 
that differently now?
    Mr. Fuller. Well, at the time of the cross-ownership rule 
and I think we have given you statistics on this, most 
metropolitan areas, including Chicago, had three or four VHF 
stations, a UHF station or two, and that was it. The newspaper 
had no competition for its want ads. The newspaper had no 
competition for retail business, with the exception of the 
over-the-air television which does a different kind of 
advertising. It was a very stable situation. Today it is a very 
unstable situation.
    We have huge organizations going after our classified 
advertising business. Microsoft is in the automotive classified 
business. Monster.com is the biggest provider of online 
recruitment classified in the country. By the way, it provides 
no public service journalism for anybody.
    These changes have been enormous. I, for one, have spent 
much of the last 10, 15 years trying to figure out, to the 
Chairman's point, how to make our organization a synergistic 
one, because I did not want to leave behind an organization 
that was the journalistic equivalent of the railroads. They did 
not change and adapt to a new environment, a new competitive 
situation, and ended up coming to you to rescue them 
financially. That would not be a good outcome from my 
standpoint, and so we are doing what we can to continue to 
build the economic model for doing great journalism.
    Senator Burns. Well, I appreciate that answer very much 
because I think journalism with a great deal of credibility is 
very, very important right now. What I see happening in the 
journalistic end of the world, Mr. Baker would probably agree 
with some of this and Mr. Karmazin would, too, that we seem 
like we have people who are in the reporting business that want 
to be the story instead of report the story, and we have to put 
up with that every day. Everybody wants to get their name on a 
byline above the fold on the front page, and that is very, very 
competitive as anybody knows. So sometimes we embellish. We 
want to be the story instead of report the story, and I have 
fought that.
    I wanted to say before this Committee, on any poll that you 
take in the broadcast industry--and I am very proud of that 
organization that I used to be in and I am still a member of. 
But they always carried a great deal of credibility, and that 
is the National Association of Farm Broadcasters, and because 
we are a specific little market, niche market out there. But 
those people who we serve depend on that news and information 
almost on an hourly basis anymore. We carry a great deal of 
credibility in our business and we take it very, very seriously 
and we also take the business side very seriously because that 
is what enables us to get the news out. I wanted to ask you one 
question while we are in the yellow zone.
    Given the choice, would you rather have the ownership caps 
lifted or cross-ownership allowed? And I will let any of you 
just take a shot at that.
    Mr. Karmazin. This will be obviously self-serving, because 
I am not in the newspaper business, so clearly I would like to 
have the ownership rules lifted. But you know I think the 
competition, as they found out in 1996, was on the local level. 
In other words, The Washington Post may be very important here 
in Washington, but it is less important in Milwaukee, so the 
cap issue is on a national level. There isn't the same degree 
of concentration as there is at the local level, so I think 
there is a greater argument for the national cap to be lifted. 
But I would also support cross-ownership being gone, too.
    Mr. Fuller. You won't be surprised, Senator, that I am 
focused on the newspaper broadcast cross-ownership, and if I 
could get one done, it would be that, in the interest of future 
health of the newspaper business.
    Mr. Frank. Senator, NASA, which I represent, deals with 
network affiliate relations and has no purview at all in 
newspaper cross-ownership and so we are here to talk about 
holding the cap on station ownership and retaining the cap at 
35 percent.
    Mr. Baker. Senator, I do not have a dog in either of these 
fights except I would be delighted to take a job in the farm 
broadcasting business. I am sure it pays better than public 
television. But it is my feeling that neither should be lifted.
    Senator Burns. Thank you, Mr. Chairman.
    The Chairman. I have got to correct the record. We did not 
swear the witnesses because we know the witnesses and that they 
will tell the truth. But the government did not ask the radio 
to go on the air. Wasn't it David Sarnoff on the top of that 
Wannamaker building that picked up the signal from the sinking 
Titanic? I think it was. But in any event, from 1912 to about 
1924, when Herbert Hoover was the Secretary of Commerce, all 
radio stations, wireless came on, jammed each other and the 
radio industry came to the government and said ``Please, for 
Lord's sakes, regulate us, otherwise nobody is going to be 
heard.''
    The government did not ask the radio to go on the air. The 
radio asked the government to please get us on the air because 
we were jamming each other.
    Senator Burns. I don't remember it.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you. I might add also 
the government instituted something called a public interest of 
convenience and necessity test along with that.
    The Chairman. That is a big difference. I was going to get 
to that with Mr. Karmazin. You all go running around now with 
the Department of Justice. This Committee has already 
confronted the Department of Justice on the test for the 
Sherman Antitrust, whereas in the airline industry, business 
predatory pricing ordinarily is not predatory, because the last 
seat of it is a de minimis cost.
    The Antitrust Division has nothing to do with diversity. 
The Antitrust Division of the Justice Department has nothing to 
do with the public interest. We have the public interest charge 
and we have the diversity charge and have had it unless we do 
away with it. Excuse me.
    Senator Dorgan. Mr. Karmazin, I was thinking if someone had 
walked in the door when you said you had 3.5 percent of the 
television stations they would have thought you a bit player in 
this debate, an interesting way to describe your position, I 
might say.
    I want to ask you about where you think all of this would 
move in about 5 years if we had unrestrained ability to buy and 
sell in these industries. Let me preface it by saying that I 
think the antitrust law enforcement in this country has been a 
new nearly constant and pathetic failure. A decade or so ago, I 
threatened to put pictures of antitrust lawyers on the sides of 
milk cartons because I knew we were paying them, but there was 
no evidence they were showing up for work. I have not changed 
my mind much about that. I think antitrust law enforcement has 
been a pathetic failure.
    But let me ask you this, assuming that there are no limits, 
where do you think we end up 5 years from now?
    Mr. Karmazin. Well, I think we have a better chance of 
preserving free over-the-air broadcasting than if there are no 
changes and that we are now forced to deal with the fact that 
the consolidation has totally taken place all around us in this 
non-regulated area, so there is nobody that's regulating 
whether or not, to your point of the Justice Department about 
these airlines consolidating and we are losing advertisers and 
the banks are consolidating and the advertising agencies are 
consolidating. How does a small--relatively to these other 
companies that are consolidating--how do you sit at the table? 
So now let us assume for the moment that somebody acquires 
AT&T, and let us assume hypothetically it is one of the 
existing MSOs.
    We now have to sit with them and get our channel carried 
because we have 80 percent of our viewers who choose to get 
their programming that way. The chance of the American public 
being better served exists for us to be able to sit at the 
table with having it be a level playing field. I believe that 
there is so much competition out there, there are so many 
choices for the American public.
    I think sports rights, I think good programming, I don't 
want to take our most desirable programming and put it on 
cable, because I will have two streams of revenue. Because we 
could do that. There is nothing really that would stop us. Or 
radio, putting it on satellite radio or taking it and putting 
it on Yahoo or taking it and putting it on AOL. But the reason 
you put it on free over-the-air broadcasting is you can make 
some money that way.
    And the way you make money in this world--there are still 
24 hours of the day--so if we now accept that there are 24 
hours of the day, there are more choices that people have. They 
are spending less time with everything. Advertisers are 
spending less money. Well, how do you grow your business? Well, 
one of the ways you do it is through efficiency and one of the 
things that consolidation allows is it allows you to be more 
efficient.
    Senator Dorgan. I must say I watch the television in the 
morning while I shave and brush my teeth and it is hard for me 
to really relate to the notion there are more choices. It 
doesn't matter which knob on the dial you turn, you are hearing 
exactly the same thing. Mr. Baker, Mr. Karmazin in some ways 
makes my point about lack of antitrust enforcement, I think. He 
says there has been this robust merger activity in banks, 
enormous merger activity in airlines and therefore, we must do 
it.
    My point is that antitrust enforcement has been pretty 
pathetic in all these areas, but Mr. Karmazin says just take 
all these limits off and if you did not have limits, the market 
system would work just fine and have Justice be the referee 
over here. What do you think happens in 5 years if all 
ownership limits are removed at this point?
    Mr. Baker. Well, I think we already have seen incredible 
massive consolidation, and earlier we were talking about the 
differences between a local broadcaster of the kind that Post-
Newsweek stations, Alan Frank's stations are, and more powerful 
vertically integrated companies like television networks and 
larger broadcasting entities.
    I think that being scrupulous and looking at these 
regulations and in watching how companies can utilize their 
massive power across multiple distribution systems is one that 
we have to have great concern about in the American public.
    When I was a producer back in my hometown in Cleveland, 
Ohio, 30 years ago, there were 16 radio stations. There still 
are today. This is kind of like Senator Hollings' story. When 
it rained in Cleveland, almost all the owners of the stations 
got wet. There were 10 owners and 9 newsrooms. Now these 16 
stations have 5 owners and 3 newsrooms. So this consolidation 
is a serious business right now.
    Mr. Frank. Senator, if I may. Currently, as to what folks 
can own, what individual companies can own, the networks can 
own, is an interesting list. Here's what can be owned today: 
Enough TV stations to cover 35 percent of the Nation's 
households, all the radio stations they can afford limited only 
by the local radio television cross-ownership rules. All the 
cable systems they can afford, limited only by the local cable 
television cross-ownership rules. All the satellite systems 
they can afford, all the wireless cable systems they can 
afford, all the cable network channels they can afford, all the 
satellite program channels they can afford, all the movie and 
television production studios and facilities they can afford, 
all the television syndicated program companies they can 
afford, all the Internet program production and distribution 
facilities they can afford, all the newspapers they can afford 
limited by local television newspaper cross-ownership rules, 
all the magazines they can afford.
    It seems to us what is available now under the current 
rules, to try and lift the cap on local television stations and 
putting localism and diversity at risk, it may be more 
efficient to have bigger companies, but it is not the 
democratic way. It is not the American system of broadcasting 
where the local licensees, the heart and soul of what the 
American system is built on, it just doesn't fit.
    A network president said to me at one point--not for Mr. 
Karmazin's network--that his vision of a network affiliate was 
to be a McDonald's franchisee. And I would say, that's not our 
vision. Our vision is that we are broadcasters. We are there to 
serve the local communities. We think that the cap is the 
minimum protection we need in this environment.
    Senator Dorgan. Mr. Chairman, if I may just ask one 
additional question. I thank you for your responses.
    Mr. Fuller, you raised the issue of ``serious journalism.'' 
Thomas Jefferson described the role of the free press in the 
sustaining of a democracy and how important it is. In your 
judgment has ``serious journalism'' suffered in the last 5 
years?
    Mr. Fuller. It is a very mixed picture. We were just 
talking about this when we were coming over to the hearing. 
Many of the great newspapers of the country at the time when I 
started in the business did things that would make us blush 
today.
    Senator Dorgan. I am talking about the last 5 years, 
however. I am talking about since the 1996 Act, all this merger 
activity.
    Mr. Fuller. I don't think in the newspaper business there 
has been any significant change in the quality of journalism 
over the last 5 years. There has been cost pressure in some 
places, but I think the standards have been upheld pretty well.
    Senator Dorgan. Just to make an observation. In Grand 
Forks, North Dakota, I think it was last week or the week 
before, there was a picket line including reporters, outside of 
a newspaper that is owned 1,500 miles or 2,000 miles from Grand 
Forks--which is the case of most newspapers in my State, they 
are owned by out-of-state interests. They were constantly 
cutting and cutting and cutting, and finally we had this 
spectacle which you rarely see in North Dakota of people 
holding pickets outside of a Grand Forks newspaper.
    Mr. Baker, would you just answer the same question with 
respect to serious journalism?
    Mr. Baker. That is a fair question, but a tough one to 
answer, so I don't really have an answer to that. All I can say 
is that certainly pressure on the bottom line at every level in 
journalism, in electronic journalism, in newspaper journalism, 
I think it has been widely reported that this is a serious 
matter. People just do not have the time. There are fewer 
people doing more work. My brother, who has been a TV news 
cameraman like these fellas here for the last 35 years in Ohio, 
said that he is now doing the news for two television stations. 
He says he just doesn't have enough time to get the job done 
the way he would like to get it done.
    Senator Dorgan. I thank the panel very much.
    The Chairman. Senator Fitzgerald.
    Senator Fitzgerald. Thank you, Mr. Chairman. I wonder if 
any of the panel that is speaking with respect to the cross-
ownership rule would know whether there was some industry or 
group of individuals that was lobbying the FCC to impose that 
cross-ownership rule back in 1975? Would anybody know the 
answer to that?
    Mr. Fuller. I really do not.
    Senator Fitzgerald. Nobody knows. Because just from my 
experiences around here, most of these ideas for these 
regulations or restrictions do not just pop into some 
regulator's head. There is normally somebody advocating them. I 
am struck, I guess, by the fact that at one time back in the 
1940s or late 1940s, the FCC was actually encouraging 
publishers to buy broadcast stations or invest in broadcast 
stations. That is how Colonel McCormick at the Chicago Tribune, 
started WGN. Is that correct?
    Mr. Fuller. That is exactly right. He was a pioneer and 
bought an experimental radio station at WGN radio, which wasn't 
requested by the government. But later, at the beginning of the 
television era, the government did encourage publishers to 
start experimental stations, and the Colonel did start WGN 
television.
    I suspect that those early enterprises were like Internet 
enterprises are today. They weren't very profitable. They were 
probably big losers for a long time. And what the government 
was attempting to do was get people with some financial 
resources to give it a jump-start.
    Senator Fitzgerald. So there were no restrictions, then, 
until 1975 when the cross-ownership rule was established. Are 
you aware, Mr. Fuller, of any finding of abuse or domination or 
monopolization in a market by any of the existing companies 
that have cross-ownership that were grandfathered from the 
original rule?
    Mr. Fuller. To my knowledge, there has not been any 
significant complaint from the few markets that have had cross-
ownership. Typically, those television stations have been 
pretty good ones and served the communities well, and there has 
just not been a lot of complaints.
    Senator Fitzgerald. None of them have had their licenses 
yanked?
    Mr. Fuller. Not that I know of.
    Senator Fitzgerald. Does the Tribune favor lifting the cap 
entirely or relaxing the cap to some extent?
    Mr. Fuller. You know, the fact is I only really know for 
sure the kinds of markets that we are in. We typically are in 
pretty big major metro markets. That is pretty much where our 
focus is, and I know for sure in those markets, there is really 
no justification that I can see for the cross-ownership rule. 
My inclination is that everywhere there has been a 
proliferation of means of people getting information. Even in 
my grandparents' old home in central Illinois, where we 
practically had to listen to WGN for anything in those days, 
now everybody has computers operating. They are getting farm 
information and so forth from hundreds of different places. I 
suspect that it is probably the same in most places. Certainly, 
in the big metro markets it is a foolish rule.
    Senator Fitzgerald. Mr. Baker.
    Mr. Baker. Yes, Senator, I do not know what the answer is 
to, this, but I would just like to add this thought, and that 
is tied to this concept of the Supreme Court of diverse and 
antagonistic voices in a market. It just strikes me--and I just 
ask this Committee to think about this--it just strikes me that 
if reporters are from the same company, a television station 
and a newspaper, and they both get compensated with bonus stock 
options or bonuses at the end of the year, and they attend the 
corporate Christmas party, you know, is it possible, it 
certainly is possible, I suppose, to be antagonistic to one 
another and to show totally separate points of view. But it 
might be a bit harder, and I just ask you to think about that 
issue.
    Mr. Fuller. If I can give a couple of examples. In Chicago, 
WGN television, our great partner, took considerable glee, at 
least by the lights of the editorial department of the Chicago 
Tribune, when one of the editors of the Tribune was arrested in 
a humiliating way. The story led the newscast of WGN television 
at 9 o'clock at night. I don't think you would find WGN 
believing that our television critics are overly kind to WB 
programs. I know that if you ask most Cubs fans whether the 
Tribune is slanting it toward the Cubs, you would hear very few 
people saying they thought it was doing that. In fact, most 
people think we are more antagonistic toward the Cubs because 
we own them.
    Senator Fitzgerald. Mr. Karmazin, with respect to the 
ownership caps nationwide. The cap is now at 35 percent, and 
that 35 percent means that you cannot be available to more than 
35 percent of the Nation's market. But at any one time, what 
percent of the market, of the whole country is actually 
watching one of the stations that you own?
    Mr. Karmazin. Unlike the rule as it applied to cable which 
the court just set down, you can own 30 percent. In that 
particular case, the cable system is reaching fully the 30 
percent of the households, because in every market, there is 80 
percent of the people in that market that are subscribers to 
the cable system or 70 percent. We would typically have an 
audience that might be 10 or 12 percent, so within the market, 
if in fact, New York City accounts for 6 percent of the 
population, we may be reaching 15 percent of that 6 percent. So 
realistically, we are not reaching 35 percent of the country 
with our local programming.
    Senator Fitzgerald. That would be less than 30 years ago, 
too, wouldn't it, where you are actually reaching?
    Mr. Karmazin. It is far less today than it was when I first 
started in the business.
    Senator Fitzgerald. If I think about an analogous situation 
in banking, I have a background in the banking profession, 
there is a Justice Department rule that no bank may have 10 
percent of the deposits in a given area. But that is how they 
phrase it. You cannot have the actual deposits, but as far as 
being available to people in the area, I would think there are 
companies like Citibank that would be available to almost 
everybody in Chicago, available probably almost to everybody in 
a major metropolitan area anywhere in this country.
    Would it make more sense to structure the rule, instead of 
who your stations are available to, to look at who is actually 
watching it, because you are going to be available to lots of 
people who aren't actually watching it.
    Mr. Karmazin. Senator, we truly believe that the arguments 
are there for the cap to be just eliminated, and that there 
should be no national restriction.
    Senator Fitzgerald. Have you done a First Amendment 
challenge like the cable owners did successfully?
    Mr. Karmazin. Well, I can't tell you successfully, but the 
court has stayed the enforcement of the 35 percent cap, and 
that is why we have 41 percent currently. We believe that we 
have oral arguments, I believe in September on it, so we are 
optimistic. But we would like to see there be no cap. But, if 
what you are talking about the proposal as it related similar 
to Citibank, is certainly more workable than the 35 percent cap 
is, because it is just a misnomer. We are not reaching 35 
percent of the people. There is no television station that 
reaches 100 percent of its market.
    Senator Fitzgerald. Right. That would seem to make more 
sense if the cap were not lifted entirely.
    Mr. Karmazin. I see that viewpoint, sir.
    The Chairman. Go ahead.
    Mr. Frank. The way the measurements work, a show like 
``Survivor'' comes along and the ratings of CBS, thankfully for 
the CBS affiliates that we have, go significantly up. The 
system we operate on has been in place for many years and, in 
fact, if you do reach--the networks reach almost 100 percent of 
all the available audience every week--and that is good for the 
country.
    The problem with raising the cap, or eliminating the cap, 
is that you are talking about a different subject here. You are 
not talking about reach, because CBS is into 100 percent; NBC, 
ABC, they are into basically 100 percent of the homes now with 
their affiliates. What you are talking about is changing the 
balance of the local American system of broadcasting, which is 
based on strong networks and healthy, strong affiliates as 
well. If you do not have the balance of power between them, if 
you raise that cap at all then the local affiliates have no way 
to participate in that.
    In fact, if the cap went to 45 percent--just as a for 
instance--that would mean that a network could own stations in 
the top 20 markets, every one of those markets and that would 
mean then that, in fact, the affiliates would have no say at 
all at the table, no moderating influence, no discussion at all 
about things like a baseball game.
    Senator Fitzgerald. Could I follow up. I know my time is 
expired.
    The Chairman. Go right ahead.
    Senator Fitzgerald. The networks have always had a dominant 
share of say national news, the NBC, ABC, and CBS Nightly News. 
They basically had a monopoly on that 30 years ago as far as 
television, broadcast, national news. The local news is 
Balkanized, because there are local media markets. In my State, 
there are 9 television markets. You seem to be concerned not 
with any kind of a domination at the national level, because as 
you pointed out, the networks reach into virtually 100 percent 
of the homes. You are not concerned about them controlling 
national news, but you are concerned about them controlling 
local news?
    Mr. Frank. Well, the fewer owners that you have of local 
stations, you lose the ability of making independent decisions. 
You have fewer people at the table.
    Senator Fitzgerald. Why are you concerned about the local 
news and not the national news?
    Mr. Frank. We are not. Nationally it is what it is at the 
moment, and the cap has no effect on how that operates at this 
moment. What you are talking about--the ownership cap--is the 
percentage of stations that one company can own throughout the 
country.
    Senator Fitzgerald. But shouldn't you, to take your logic 
to be perfectly consistent, you should not only want to 
continue the ownership restrictions so that there is not a 
domination around the country in the small market, but you 
should want to do something to address the monopoly on national 
news that I think the networks really have. And certainly had 
to a far greater extent many years ago.
    Mr. Frank. Again, sir, we believe that the ownership cap 
issue has to do with diversity and localism and the ability of 
having many owners participate in the choices made by people 
around the country and not a few.
    Senator Fitzgerald. Thank you, Mr. Chairman.
    The Chairman. Senator Breaux.

               STATEMENT OF HON. JOHN B. BREAUX, 
                  U.S. SENATOR FROM LOUISIANA

    Senator Breaux. Thank you very much. I have two points I 
want to get into. First, I think the argument of localism is a 
smokescreen. Because in my State of Louisiana, I got about 30 
stations. The vast majority of them owned by people in New York 
and California and Texas, whether it is a CBS affiliate in New 
York or whether it is a Hearst Argyle conglomeration of 
affiliates around the country.
    I think the real issue here is the bargaining power between 
the affiliates and networks. I think you can always talk about 
localism. We have more local views now on stations in my State 
and everywhere else. It is good because the station, whether it 
is affiliate-owned or network-owned, is good broadcasting. It 
is good business. People buy ads when you see local news being 
covered and community affairs being covered. That is true 
whether it is a CBS-owned station, NBC-owned station, Hearst 
Argyle station, Post-Newsweek station, they are going to put 
local stuff on because it is good business.
    I cannot fathom an argument that somehow some large 
affiliate group in New York owns stations in Louisiana that 
somehow Louisiana is being better covered from a local 
standpoint because someone in New York owns them, versus CBS in 
New York. They are both in New York. And they both carry local 
stuff because it is good business. It is good policy. You sell 
ads, people want to see what's on the local news. They love the 
local newscasters, they love seeing local community affairs 
covered.
    So I think this whole argument of localism is a smokescreen 
as far as the real issue being the marketing power between the 
networks and their affiliates. I understand that. But I don't 
think localism is any better served by a group in New York that 
owns my stations in Louisiana.
    Mr. Frank, can you comment on that?
    Mr. Frank. Thank you, Senator. I have said all along during 
the hearing that this is not anti-network. We appreciate people 
like Mr. Karmazin, they are true broadcasters. The question is 
how many people, how many owners are you going to have? Who is 
going to make the programming decisions in America? It just 
seems to us that it is clear that the fewer owners you have, 
the fewer people make the decisions, it is simply not good 
policy.
    Affiliates are good moderating influences with the network. 
They are disciplining influences and this happens every day 
between the affiliate boards and the network. Every week, we 
talk about different things. Networks make decisions. For 
instance, NBC fed the XFL games this year, and in spite of 
affiliate protests, there was one feed, an 8 o'clock game every 
night for 15 or 13 weeks, whatever the season was. That meant 
on the West Coast those games started at 5 o'clock. In spite of 
heavy affiliate protest, that meant that every week throughout 
the season there was no local news on any NBC station because 
they were carrying XFL.
    Senator Breaux. Mr. Karmazin, can you comment on that?
    Mr. Karmazin. Sure. I guess this proves this has nothing to 
do with the ownership cap, because right now, NBC is 25 percent 
of the country and obviously, if the existing relationships 
between the network and the affiliates are so strong this way, 
then why did they not have the influence against NBC? I think 
it has to do with some group owners who do not want us to 
compete to buy TV stations, because if we are not at the table 
competing, maybe they can get it smaller. Because I guess it is 
possible for one group owner, under 25 percent, to own maybe 
100 television stations in the smallest markets in the country. 
So there you would have one person have 100 stations and that, 
I guess, would be OK, because it is not the ones that are the 
ones that the major group operators are interested in.
    I think the localism, you know, is absolutely not accurate. 
I would argue that when we look at a Post-Newsweek station, a 
great TV station in Jacksonville, and we have a great TV 
station in Baltimore, you could not tell which one is a Post-
Newsweek station, which is a local station. Both preempt when 
appropriate, and both are serving their respective communities.
    Senator Breaux. Let me ask the second point. Is the 
question of the cap, and I think Senator Fitzgerald talked 
about this. It used to be you could only own three stations, 
then we moved it up, I think, to seven stations, then we moved 
away from this concept of how many stations you could own to 
what percent of the audience in the market versus the country 
that you could potentially influence, and we are now at 35 
percent. But it seems to me that the 35 percent is a number 
that has no meaning.
    Mr. Karmazin, you had talked about CBS having 10 percent of 
the actual viewership. The Nielsen ratings that we have seen 
say we are going to tell you it advertises that, but it is less 
than that. All the networks, 3 percent of the actual audience 
watches that station and that feed from that network, as 
opposed to--you may be in a market that you are covering 35 
percent potential audience. But if you have got cable in that 
area, which you would with 125 different channels at any one 
time, you probably average out maybe 3 percent of the actual 
viewing market. I think the 35 percent, if you are going to 
have a standard, I think it ought to be based on something that 
is realistic, i.e. what percent of the market actually looks at 
the broadcasters or affiliates in that area.
    Is there any way we are going to have a cap that would be 
more accurate a reflection of the market influence and 
potential other than just a number that only relates to 
potential owners?
    Mr. Karmazin. Well, taking a look at the radio industry as 
an example and taking a look at what was thought about in 1996, 
the belief was that the area of concern was not the absolute 
number, you know. So what if somebody owns a station in every 
single market in the United States.
    Senator Breaux. If nobody listens to it.
    Mr. Karmazin. There is so much other competition, there are 
so many other choices. That did not seem to be a problem. So 
again, our viewpoint is if, in fact, we owned a television 
station in every market in the United States--something that we 
would not have a business interest ever doing, we would like to 
be in big cities and big markets. If we own 212 television 
stations that would not present, in any given market, any 
concern to anybody locally in that market, because there would 
be so many other competitive choices. Our position would be 
that there should be no cap. If there were a cap, it should be 
more related to what we reach, not the hypothetical number of 
how many people live within that market who conceivably could 
get that station.
    Senator Breaux. Thank you, Mr. Chairman. Thank you.
    The Chairman. Thank you very much.
    Senator Allen.

                STATEMENT OF HON. GEORGE ALLEN, 
                   U.S. SENATOR FROM VIRGINIA

    Senator Allen. Thank you, Mr. Chairman. Let me commend you 
on holding this hearing on these important issues. Let me say 
at the outset, I very much value local broadcasters. As 
Governor--and I know Senator Hollings when he was Governor--I 
understood the value of local broadcasting for the local 
events, the news, natural disasters, local causes, and so 
forth. I think that is very important and I have come from that 
point of view.
    I also think it is just great for consumers these days, all 
the competition there is with satellites and cable and it is 
not just the three networks. There is now Fox, CNN has done a 
great job. I think people love contentiousness. That is why 
``Crossfire'' does so very well and ``Capital Gang'' and so 
forth, and then people like diversity.
    In fact, it all started on PBS with the ``McNeil/Lehrer 
Report.'' They liked people arguing and giving a point of view. 
There is plenty, like the Family Channel, and Nick, which my 
children thrive on, as well as the Nature channels, and sports. 
I do watch the networks mainly for local news and sports, so it 
is smart of you to get the NCAAs and the NFL, as far as I am 
concerned. And I do watch WGN, because I like to watch the Sox 
and the Cubs. There is the variety of others.
    At any rate, the issue here is the broadcast cap, the 
newspaper cross-ownership issue and the third issue, where 
listening to all of you all talk about wanting to get into the 
big markets is an issue that has arisen in broadcasters from 
our Commonwealth of Virginia and smaller markets that have to 
do with a small market ownership restriction rule, so they call 
them duopolies, and I'd like to hear your views on that.
    Senator McCain and Senator Breaux and Senator Fitzgerald 
went through the litany of how things have changed. Things have 
changed and we need to be realistic on it as far as the smaller 
market share for national broadcasters. There is more 
competition. There is more choice for viewers.
    On the issue of the newspaper cross-ownership, newspapers 
have faced some challenges with all this competition. There are 
fewer newspapers, and yes, they are more consolidated, but 
nevertheless, I see no logic in restricting a broadcaster from 
ownership of a broadcasting station to be owned by a newspaper. 
I see absolutely no logic whatsoever. Just as a matter of 
philosophy and principle, what does it matter with all this 
choice and competition? I do not know what the legislation will 
come up with, but certainly on cross-ownership of newspapers 
and broadcasting, I see no reason why that outmoded approach 
would stand and I think it actually would benefit consumers, 
where broadcasters and newspaper owners face financially 
challenging conditions in the newspaper business and also in 
the local broadcasting area.
    That brings me to the issue that I am personally interested 
in. If legislation is going forward in this area, I think it is 
closely related, and that is, folks that were talking to new 
broadcasters from generally the Southwest Virginia/Tennessee 
area, the Bristol/Kingsport area, or the Tidewater area, or the 
Roanoke/Lynchburg area where there are specific restrictions on 
these small market owners that if you have fewer than 8 
stations, you cannot have cross-ownership. Their concern is 
that these restrictions that are put on small markets restricts 
them from producing quality programming for that community, 
whereas the big city areas, the larger markets do not have 
these same restrictions. I think that these local television 
managers confirmed, and in some cases would limit facilities 
and getting revenue sharing that would help keep struggling 
stations alive with better programming and more diversity, as 
well as the quality available to the viewers in some of these 
small markets.
    I would like to see if we can seek some redress to that to 
treat smaller areas, smaller-market ownership the same as all 
the big areas or larger markets. So in sum, I very much agree 
with some of the comments of Senator McCain and Breaux and 
Fitzgerald. Some of these matters are addressed by the must-
carry rules on cable. There is pending litigation of the issue 
of the 35 percent cap. I am going to continue listening to 
that. I have not made a decision one way or the other on that 
particular issue, but I have been listening to all the 
arguments on the issue of newspaper cross-ownership. Boy, that 
is an archaic rule, and I think that ought to be removed if it 
takes legislation. I do think we need to relax the restrictions 
on smaller market ownership. I look forward to working with 
Members of the Committee on a variety of issues here, and I 
commend the Chairman for having this hearing.
    I would just like to ask, since you all have given your 
views on the caps and the cross-ownership issue--and in 
listening to you, Mr. Fuller, carrying on very persuasively, 
expressing your views on restrictions--I would ask Mr. Frank 
and Mr. Karmazin as well, what would your views be on relaxing 
these restrictions on small market so-called duopolies? Would 
you all support addressing that?
    Mr. Fuller. Tribune has supported relaxation of the duopoly 
rules.
    Mr. Karmazin. Again, we do not have any stations in the 
small markets, but we fully support it. I think there may be a 
situation where if there are 5 stations in a market and they 
cannot take advantage of duopoly and consolidation and they had 
5 newsrooms in those stations, there is a risk there will be 
zero newsrooms as compared to there being one or two. I think 
that small market television, small market radio--my son owns 
five radio stations outside of Madison, Wisconsin, and his 
total revenue for his five stations is like about $2 million, 
and believe me, he needs consolidation in order to be 
successful, so I would definitely support it.
    Senator Allen. Mr. Frank.
    Mr. Frank. Senator, NASA has not taken a position on 
duopoly. It is a matter of wide debate. Personally, I testified 
against duopoly some years ago in front of the FCC, but once 
the rule is passed, obviously it is the rule that we have and 
many broadcasters participate in it. And people are looking 
into ways to make it work.
    Senator Allen. If I may, Mr. Chairman, so your position 
personally is that you personally do not like that restriction, 
but your association has not taken any position in favor or in 
opposition of any changes to it?
    Mr. Frank. Yes, sir. That is correct. Our association deals 
with network affiliate relations and concerns and duopoly is 
not on that list.
    Senator Allen. Thank you, Mr. Chairman.
    The Chairman. Let me, on behalf of the Committee, thank 
each of you for your valuable contribution. We appreciate your 
appearance, and we will keep the record open for any further 
questions by the other Members who could not attend, and very, 
very much thank you.
    We have a very important second panel: Gene Kimmelman of 
the Consumers Union and Dr. Eli M. Noam, a Professor of Finance 
and Economics and the Director of the Columbia Institute of 
Tele-information.
    Dr. Noam, Mr. Kimmelman, it is unfair. With these large 
Committees, we used to have 6 and then 13, now we have 23 
Members. With the questions and the answers from the complete 
panel, we never can really get past one panel. But we are 
grateful for your patience. I will be glad to hear, Mr. 
Kimmelman, if you can start us off, and Dr. Noam. The reason I 
am hastening along, too, is because I understand they may have 
a roll call at 12 o'clock.

                 STATEMENT OF GENE KIMMELMAN, 
                  CO-DIRECTOR, CONSUMERS UNION

    Mr. Kimmelman. Thank you, Mr. Chairman on behalf of 
Consumers Union, publisher of Consumer Reports, I appreciate 
the offer to testify and we want to, on behalf of Consumers 
Union, support your efforts to ensure that before these very 
important media ownership rules are adjusted, modified or 
eliminated, that the expert agency, the Federal Communications 
Commission, has actually done its homework and evaluated the 
market realities in media markets.
    All the witnesses, and I believe, all the Members of the 
Committee, have endorsed the very principles that consumers 
believe are at stake here: promoting competition, diversity of 
ownership, and meeting local community needs. And these media 
ownership rules have been absolutely critical and have met 
those goals in the past.
    But the market has changed, as many of you have pointed out 
today, but not quite in the way that some would have you 
believe. To understand how these markets work, you cannot just 
throw everything involving media together and say everything is 
equal.
    Mr. Karmazin spoke quite a bit about outlets, but it is 
interesting when his boss, Mr. Redstone, comes before Congress 
or files an antitrust lawsuit, he highlights market share and 
influence. That is what Viacom looks at when it evaluates 
markets, and it is what the Committee and the FCC should look 
at instead of media outlets
    Nightly broadcast network news has 25 million viewers every 
night. All of the other cable news channels, all put together, 
three million. Add the Internet, hardly anything more. 
Newspapers are monopolies. Monopoly outlets in 98 percent of 
communities in this country. Statistics show that the two most 
important means by which consumers receive news and information 
are television and newspapers. So this isn't an issue of 
whether a lot of broadcasters should own a whole lot of 
newspapers in the community. There is only one newspaper. If 
that newspaper owns a broadcast outlet, that is the issue. 
Whether you support giving away the airwaves or auctioning them 
off, it is not the broadcasters who talk about that. It has 
been in the newspapers where that debate has occurred and the 
danger of lifting that restriction right now involves the loss 
of newspapers challenging broadcasters' business practices.
    We have heard a lot of talk about variety. There is 
enormous variety out there. But that is not the important issue 
when you are promoting a diversity policy at the FCC. The issue 
is who owns it? You can have all the variety you want from a 
monopoly and unless you have a benevolent dictatorship, you do 
not necessarily meet community needs. We have a lot of variety 
on the Internet, but AOL/Time Warner now controls a third of 
the hits on the Internet. If you look at prime time television, 
that is what people watch the most. That is predominantly owned 
now by the national broadcast television networks. And you add 
together the top cable companies and top broadcast networks and 
almost all of the most popular 10, 20, 30, 50 channels are 
controlled by those national networks and the largest cable 
companies.
    When we hear talk about the First Amendment, it is 
important to consider not just the corporate free speech 
rights, but the public's rights as you have pointed out, Mr. 
Chairman, to an open marketplace of ideas. The corporate rights 
are given through privilege by this Congress, the rights to use 
the public airwaves and rights-of-way. You can and have 
restricted their use and the courts have supported Congress in 
doing so. You could have made cable and wireless common 
carriers, just like telephone companies are.
    Telephone companies cannot control what goes over their 
networks, and the courts have said that is within the purview 
of the Commerce Clause rights of Congress to regulate for the 
public's interest. You could do that here, too, since what is 
at stake is the public's right to free speech.
    Let me explain why the variety of outlets do not solve 
consumer problems. Everyone recalls the dispute between Time 
Warner and ABC about carriage of Disney programming. Mr. 
Karmazin is talking about competing against cable. If Time 
Warner had won that battle, consumers would have lost 
programming. But Time Warner could have still raised their 
cable rates. If ABC won, which it finally did, and had its 
programming on Time Warner cable, Time Warner could just keep 
on raising rates.
    What we have in these markets is not direct competition. We 
have separate market segments adjacent to each other and what 
we are seeing more and more without competition in transmission 
or distribution is that the giants in the media business are 
not competing for consumers' interests. They are not competing 
to drive down prices and to offer consumers more of what they 
want. It is a competition of sorts. It is a fight. It is a 
fight over who divides monopoly profits, and that is the 
problem here. We need to go back and look at market structure 
to understand how broadcast and cable fail to compete.
    Now, it is our view that it is absolutely critical for the 
Federal Communications Commission to go back and do a careful 
analysis of these markets. It has not done so in the recent 
past. It is now time to do that. But before the FCC considers 
changing these media ownership rules, we want to make sure that 
any alteration, any modification or elimination still meets 
those public interest goals of competition, diversity of 
ownership and meeting local community needs. Chairman Powell 
has indicated that the marketplace is good enough.
    As you point out, Mr. Chairman, I am not sure that is 
consistent with the law. But I know one thing, the empirical 
research does not support the view that the marketplace itself, 
and it certainly never has in the past, provided diversity of 
ownership automatically, or meets local needs automatically. 
And in this case we do not have anywhere near a competitive 
market. We have massive consolidation within each 
communications and media sector which tends to extend monopoly 
control of each sector rather than compete head-on.
    So Consumers Union very much supports your effort to make 
sure that before the FCC modifies these rules, it gets the 
facts, gets the facts right and makes sure that we are still 
represerving these important public interest principles.
    Thank you.
    [The prepared statement of Mr. Kimmelman follows:]

   Prepared Statement of Gene Kimmelman, Co-Director, Consumers Union

    Consumers Union \1\ is concerned that meaningful public policy 
debate about the need for media and communications ownership 
restrictions has been distorted by ideology and the business interests 
of the commercial players who stand to gain or lose by manipulating 
this debate. We urge policymakers to reaffirm the goals of promoting 
competition, diversity and meeting community needs, and to refocus the 
ownership debate on the fundamental attributes of the various 
communications and media markets. While the antitrust laws can 
effectively prevent substantial reductions in competition, they are not 
effective tools for dismantling monopolies, promoting competition or 
preserving other public interest values. We believe that consumers' 
interests will best be served if the Federal Communications Commission 
(FCC) is instructed to maintain previous media ownership rules, until 
it can demonstrate how the public interest in more competition, diverse 
ownership and the needs of local and minority viewpoints can be met by 
altering or eliminating these rules.
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    \1\ Consumers Union is a nonprofit membership organization 
chartered in 1936 under the laws of the State of New York to provide 
consumers with information, education and counsel about goods, 
services, health, and personal finance. Consumers Union's income is 
solely derived from the sale of Consumer Reports, its other 
publications and from noncommercial contributions, grants and fees. In 
addition to reports on Consumers Union's own product testing, Consumer 
Reports with approximately 4.5 million paid circulation, regularly 
carries articles on health, product safety, marketplace economics and 
legislative, judicial and regulatory actions that affect consumer 
welfare. Consumers Union's publications carry no advertising and 
receive no commercial support.
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    The recent explosion of media and communications technology was 
expected to deliver consumers a brave new world of competition across 
all telecommunications and media markets. There is no doubt that today, 
consumers have the option of receiving news, information, entertainment 
from a far greater variety of media--newspapers, radio, television, the 
Internet--than ever before. Unfortunately, this growth in variety has 
not been accompanied by a comparable growth of independent, diversely 
owned competitive communications services and media voices.
    Rather than the cross-market competition envisioned with the 
enactment of the 1996 Telecommunications Act, virtually every 
communications and media sector has witnessed an explosion of 
consolidation. The study attached as an appendix to this testimony, 
``Mapping Media Market Structure at the Millennium,'' provides the 
detailed empirical and analytical analysis upon which our testimony 
relies. The two major communications wires into the home, telephone and 
cable are now controlled by a few super-regional companies that focus 
their business on dominating their respective markets rather than 
challenging each other's core business. Long distance companies have 
not been able to crack the local phone companies' stranglehold on 
consumers, and the satellite companies still cannot compete on price 
with cable monopolies. Radio and newspaper chains grow larger, and 
national broadcast networks continue to buy more local broadcast 
stations. And on the Internet, where ``the number of potential online 
channels is infinite,'' about one-third of user minutes were controlled 
by cable giant AOL Time Warner last year.\2\
---------------------------------------------------------------------------
    \2\ ``Online Media Consolidation Offers No Argument for Media 
Deregulation,'' Jupiter Media Metrix, Inc. June 4, 2001.
---------------------------------------------------------------------------
    Has this consolidation opened the door to new competition? Hardly. 
Contrary to the claims of the major players in each communications 
sector, Internet service providers, national broadcast networks, 
newspaper and radio chains, and cable companies do not compete in a 
meaningful way against each other for consumers' news, information, 
entertainment and other communications needs.
    A careful market analysis reveals that there are several kinds of 
media markets (e.g., national v. local, primetime television v. daytime 
TV, national network news v. all other news programming), which support 
different business models (e.g., subscription-based v. advertiser-
based). These markets are adjacent to each other rather than in 
competition with each other. This is not to say that there is no form 
of competition or rivalry across media, but newspapers' classified 
advertising cash cow in no way resembles the high-priced pharmaceutical 
and auto advertising splashed across national television network 
primetime programming. These are separate markets that are not yet 
substitutes for one another. For example, the enormous growth of the 
Internet provides no basis for relaxing the national television 
broadcast ownership cap, given that only about half the country is on 
the Internet, and the Internet does not provide a service comparable to 
broadcast television.
    And in moderately or highly concentrated media and communications 
markets, vertical integration--the combined ownership of content and 
distribution channels--can skew incentives to undermine journalistic 
independence. For a news program at a station that is independently 
owned and operated, the overriding concern should be credible and 
professional reporting that will bring viewers back. However, when a 
large media conglomerate gobbles up that same station, it becomes 
unlikely that the station will cover its parent aggressively when 
inevitable conflicts of interest arise. In markets with few direct 
competitors, this bias is more likely to go unnoticed and unchallenged.
    Even when it appears that the giants in one media sector are 
squaring off against the giants in another, each invoking the 
consumer's interest as its sole motivation in battle, often the 
consumer is more a hostage than the beneficiary of the warfare. For 
example, when ABC, backed by its parent, the Walt Disney Company 
(Disney), squared off against cable monopoly Time Warner over carriage 
terms for Disney's programming, consumers faced the following 
prospects: either Time Warner would win and consumers would still pay 
inflated cable rates without receiving Disney programming, or Disney 
would win, and Time Warner could increase consumers' rates in return 
for carrying Disney programming. And when cable and Internet giant AOL 
Time Warner sounds like it wants to challenge the national broadcast 
networks' dominance in TV news coverage through its popular CNN and 
Headline News cable channels, analysts believe this really means that 
AOL Time Warner wants to merge or partner with either ABC News or NBC 
News.\3\
---------------------------------------------------------------------------
    \3\ Jim Rutenberg, ``Mix, Patch, Promote and Lift.'' New York Times 
(July 15, 2001).
---------------------------------------------------------------------------
    The fundamental failure of media and communications policies to 
develop competitive transmission/distribution systems has left 
consumers at the mercy of powerful content and transmission companies 
whose most antagonistic, ``competitive'' behavior consists of fighting 
with each other over who gets the larger share of monopoly profits from 
consumers, and who often control content delivered to consumers.
    As the FCC reviews its national television broadcast ownership cap, 
and newspaper/broadcast cross-ownership rules, it is critical that the 
Commission take a careful look at the fundamentally different 
characteristics of each media and communications market, in determining 
what regulations are appropriate to meet Congress' goal of protecting 
the public interest. And Consumers Union believes that it is important 
for the Commission to preserve critical elements of previous judicially 
and Congressionally approved definitions of the ``public interest''--
promote diversity based on independent ownership designed to expand 
competition, meet local community needs, and protect the viewing/
listening public's First Amendment rights to hear and be heard--rather 
than drifting toward a definition where variety (even if owned and 
controlled by few) equals diversity.
    Past Commission reviews of these ownership rules have involved only 
cursory analysis of the most critical economic forces at play in media 
markets and we believe it is time to correct that flaw. Especially at a 
time when the D.C. Circuit Court of Appeals can find a way to read an 
act of Congress (the 1992 Cable Act, Public Law 102-385, which was 
designed to promote cable competition by limiting concentration of 
ownership) as potentially allowing a single cable company to own 
systems serving as many as 60 percent of all cable customers, \4\ it is 
obvious that Congress' expert communications agency must do a better 
job in gathering data, analyzing market forces, and then demonstrating 
how congressionally mandated rules address market dysfunction.
---------------------------------------------------------------------------
    \4\ Time Warner Entertainment v. Federal Communications Commission, 
No. 94-1035 (D.C. Cir., Mar. 2, 2001).
---------------------------------------------------------------------------
    However, we are troubled that the FCC's current Chairman has 
characterized the broadcast ownership cap as based on ``a romantic 
notion, an emotional one,'' \5\ that limits ``are almost always poorly 
calibrated'' \6\ and that ``there is something offensive to First 
Amendment values about that limitation.'' \7\ We certainly hope that 
Chairman Powell will engage in a thorough analysis of the market forces 
that are affected by this rule and all others, rather than reach 
conclusions based on past shortcomings in the FCC's research. And we 
hope the Chairman has not forgotten than the First Amendment protects 
the public's free speech rights, not just the more limited right of 
commercial media enterprises.\8\ As we point out above, just because 
many media ownership rules are old and markets have changed does not 
mean that markets, without these rules, can adequately promote 
diversity of ownership and competition.
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    \5\ Labaton, Steven, ``F.C.C.'s Chairman Would Curb Agency, 
Reach,'' New York Times, Feb. 7, 2001.
    \6\ Srinivasan, Kalpana, ``FCC Chief Wary of Broadcast Rules,''  
Associated Press, April 25, 2001.
    \7\ Id.
    \8\ Red Lion Broadcasting Co., Inc., et al v. Federal 
Communications Commission et al, 395 U.S. 367 (1969).
---------------------------------------------------------------------------
    Recent research on the economics of radio and newspaper markets 
raises fundamental concerns about whether deregulation of ownership in 
media markets can produce the kinds of consumer benefits and a robust 
marketplace of ideas, that are usually associated with competitive 
markets.\9\ For example, data show that people whose tastes in radio 
programming differs from the largest group of listeners in a community 
tend to receive less content than they desire in the marketplace, and 
that this is likely the case for other media:
---------------------------------------------------------------------------
    \9\ Waldfogel, Joel and George, Lisa, ``Who benefits Whom in Daily 
Newspaper Markets?''  National Bureau of Economic Research (2000). 
Waldfogel, Joel, ``Preference Externalities: An Empirical Study of Who 
Benefits Whom in Differentiated Product Markets''  National Bureau of 
Economic Research (1999).
---------------------------------------------------------------------------
    A consumer with atypical tastes will face less product variety than 
one with common tastes. The market delivers fewer products--and less 
associated satisfaction--to these groups simply because they are small. 
This phenomenon can arise even if radio firms are rational and entirely 
non-discriminatory.
    The fundamental conditions needed to produce compartmentalized 
preference externalities are large fixed costs and preferences that 
differ sharply across groups of consumers. These conditions are likely 
to hold, to greater or lesser extents, in a variety of media markets--
newspapers, magazines, television, and movies.
    Radio programming preferences differ sharply between blacks and 
whites, between Hispanics and non-Hispanics and (to a lesser extent) 
across age groups.\10\
---------------------------------------------------------------------------
    \10\ Waldfogel, ``Preference Externalities'' at 27-30.
---------------------------------------------------------------------------
    These findings indicate that, given the large fixed costs involved 
in offering media services, the wide variety of tastes in media 
markets, and the drive to maximize profits through maximum advertising 
revenue/audience size, market forces are likely to leave more local 
tastes under-satisfied by national firms, and more minority tastes 
under-satisfied even in local markets. It is therefore necessary for 
the government to continue regulating--either through structural 
constraints like ownership caps, or behavioral requirements like 
``equal time,'' ``reasonable access,'' or network/affiliate rules--to 
pursue the public interest goals of meeting local community needs and 
promoting diversity of views in media markets, even where competition 
exists.
    Consumers Union therefore believes the FCC should leave the current 
national television broadcast ownership cap in place, while it 
initiates a much more detailed and extensive analysis of market 
structure than it has in the past. The current cap, which allows a 
national broadcast company to own local television stations that reach 
as many as 35 percent of the national television viewing audience, is 
already set at a level that often triggers antitrust scrutiny over the 
ability to control programming decisions in the marketplace. With four 
national television networks already dominating primetime television 
viewing and the massive advertising dollars that come with it, there is 
a substantial danger that further ownership of local stations would 
lead to increased pressure on local stations to carry nationally 
oriented programming which maximizes national advertising revenue, at 
the expense of locally oriented programming. And the fact that the 
national television networks, no longer constrained by limits on 
vertical integration (the financial interest and syndication rules), 
have a financial incentive to favor programming they produce and 
syndicate is likely to increase pressure on local stations to carry 
network owned rather than locally popular programming. Certainly the 
local network affiliates--who may also be doing less than they should 
to meet community needs--are complaining about an excessive national 
profit orientation by the networks at the expense of local programming 
needs.\11\
---------------------------------------------------------------------------
    \11\ Network Affiliated Stations Alliance, ``Petition for Inquiry 
into Network Practices.'' (Federal Communications Commission, Mar. 8, 
2001).
---------------------------------------------------------------------------
    Consumers Union urges the FCC, as part of its review of the 
broadcast ownership cap, to initiate an investigation which answers the 
following critical questions:
    1. Since the national television broadcast ownership cap was raised 
from 25 to 35 percent, how much has local programming designed to meet 
community needs suffered?
    2. How much has elimination of the financial interest and 
syndication rules affected local station's ability to preempt network 
programming to show programs that reflect community tastes?
    3. How much does l, as opposed to theoretical, enforcement of the 
Commission's network/affiliate rules protect local broadcasters from 
unfair leveraging by the national broadcast networks?
    4. Are these rules adequate, without a national ownership cap, to 
prevent unfair leveraging?
    5. When there is no interference from the national broadcast 
networks, are local broadcast licensees meeting their obligations to 
serve local community needs, or is greater public intervention 
necessary to ensure diversity of local programming?
    The FCC's newspaper/broadcast cross-ownership rule plays a very 
different role from the national broadcast cap in promoting a 
marketplace that protects the public interest. Consumers Union believes 
that this prohibition on a local newspaper owning a local broadcast 
outlet in the same community has much more to do with promoting checks 
and balances in media coverage of news and information (including 
matters affecting the business interests of newspapers and 
broadcasters) than competition. The fact that virtually every community 
in this country has only one financially stable community-wide 
newspaper, and that broadcast does not compete effectively with 
newspapers, should give the FCC pause as it considers relaxing or 
eliminating the cross-ownership rule:
    Wasn't it television and radio that were going to kill newspapers? 
``I don't really consider them competition in that old-school way,'' 
stresses Florida Sun-Sentinel editor Earl Maucker. ``They reach a 
different kind of audience with a different kind of news--
    Publisher Gremillion, a former TV executive himself, seconds the 
point, ``I don't believe people are watching TV as a substitute for 
reading the newspaper--'' --Many newspapers are increasingly writing 
off local TV news as a serious threat, treating local stations instead 
as potential partners who can help spread the newspapers' brand name to 
new and bigger audiences.\12\
---------------------------------------------------------------------------
    \12\ Stepp, Carl Sessions, ``Whatever Happened to Competition,''  
American Journalism Review (June 2001).
---------------------------------------------------------------------------
    It is difficult to imagine the Thomas Paine pamphleteer tradition 
of print journalism--considered so valuable to our core beliefs that 
the Supreme Court granted it the most far reaching First Amendment 
protections \13\ will be able to survive in a world where newspapers 
become marketing devices for broadcasters. Print journalists often 
assert an allegiance to their almost century-old creed:
---------------------------------------------------------------------------
    \13\ New York Times Co. v. Sullivan, 376 U.S. 254 (1964).
---------------------------------------------------------------------------
    I believe in the profession of journalism. I believe that the 
public journal is a public trust; that all connected with it are, to 
the full measure of their responsibility, trustees for the public; that 
acceptance of lesser service than the public service is a betrayal of 
this trust.\14\
---------------------------------------------------------------------------
    \14\ Kunkel, Thomas and Roberts, Gene, ``The Age of Corporate 
Newspapering; Leaving Readers Behind,''  American Journalism Review 
(2001) citing Walter Williams, The Journalist's Creed (1914).
---------------------------------------------------------------------------
    Compare these journalistic values with the image presented by 
Tribune Company executives, describing how the Chicago Tribune and 
Chicago television station WGN, among other media properties, view 
their business: ``Tribune had a story to tell--and it was just the 
story Wall Street wanted to hear. In charts and appendices, they showed 
a company that owns four newspapers--and 16 TV stations (with shared 
ownership of two others); four radio stations; three local cable news 
channels; a lucrative educational book division; a producer and 
syndicator of TV programming, including Geraldo Rivera's daytime talk 
show; a partnership in the new WB television network; the Chicago Cubs; 
and new-media investments worth more than $600 million, including a $10 
million investment in Baring Communications Equity Fund, with dozens of 
Asian offices hunting out media investments.
    ``There was an internal logic and consistent language to their 
talk: Tribune, said the four men, was a ``content company'' with a 
powerful ``brand.'' Among and between its divisions, there was a 
``synergy.''
    ``It was a well-scripted, well-rehearsed performance, thorough and 
thoroughly upbeat. And the word ``journalism'' was never uttered, once.
    ``Even apart from TV and new media--at the Tribune papers 
themselves--the editor in chief rarely presides at the daily page one 
meeting. The editor's gaze is fixed on the future, on new zoned 
sections, multimedia desks, meetings with the business side, focus 
group research on extending the brand, or opening new beachheads in 
affluent suburbs. ``I am not the editor of a newspaper,'' says Howard 
Tyner, 54, whose official resume identifies him as vice president and 
editor of the Chicago Tribune. ``I am the manager of a content company. 
That's what I do. I don't do newspapers alone. We gather content.'' 
\15\
---------------------------------------------------------------------------
    \15\ Auletta, Ken, ``The State of the American Newspaper.'' 
American Journalism Review (June 1998).
---------------------------------------------------------------------------
    In highlighting the Tribune Co., we do not mean to suggest that 
there is anything wrong with the company's behavior. On the contrary, 
economic ``synergies'' may certainly help Tribune improve the quality 
of its media products. And we do not mean to suggest that other 
factors, like newspaper consolidation and newspaper ties with other 
corporate entities, do not also challenge print journalist's ability to 
follow their creed. However, when the two largest sources of news and 
information--television and newspaper \16\ come under the same 
ownership roof, there is special cause for concern about business 
pressures that could undermine the free marketplace of ideas.
---------------------------------------------------------------------------
    \16\ Media Studies Center Survey, University of Connecticut, Jan. 
18, 1999.
---------------------------------------------------------------------------
    Consumers Union believes that, particularly where there is only one 
local newspaper, the public interest is best served by prohibiting that 
newspaper from owning a local television broadcast outlet. Dangers 
ranging from favorable newspaper reviews of a broadcaster's 
programming, to positive editorials/opinion articles about business 
interests of a broadcaster or politicians who favor such business 
interests would be difficult to prevent if cross-ownership is broadly 
permitted:
    Down in Tampa, Media General has gone so far as to put its 
newspaper, the Tampa Tribune, in the same building with its local 
television station and online operation, the better to exchange stories 
and, ostensibly, resources. (It's still unclear what the newspapers get 
out of the bargain other than garish weather maps sponsored by the 
local TV meteorologist.) Tampa's has become the most sophisticated 
model of this kind of thing, and as such is drawing enormous interest 
from other newspaper companies.
    Under the Tampa model, and presumably in most major city rooms of 
the future, news decisions for all these outlets are made in a 
coordinated way, sometimes in the same meeting. In effect the same 
group of minds decides what ``news'' is, in every conceivable way that 
people can get their local news. This isn't sinister; it's just not 
competition.\17\
---------------------------------------------------------------------------
    \17\ Kunkel, Thomas and Roberts, Gene, ``The Age of Corporate 
Newspapering; Leaving Readers Behind.''  American Journalism Review 
(May 2001).
---------------------------------------------------------------------------
    Except where there is meaningful competition between local 
newspapers, we believe that lifting the newspaper/broadcast cross-
ownership ban would significantly undercut the watchdog role that 
newspapers play over broadcasters and thereby undermine--particularly 
in the realm of political speech--Congress' goal of ensuring an open 
marketplace of ideas.
    It is time for the FCC to engage in a careful analysis of media and 
communication markets, before it considers altering current ownership 
rules. Consumers Union believes that such a analysis will demonstrate 
the need to preserve the national broadcast network ownership cap and 
newspaper/broadcast cross-ownership rule in order to promote the 
publics interest in more media and communications competition, 
diversity of ownership, and protecting the First Amendment rights of 
citizens whose tastes do not correspond to those of the majority 
nationwide or in a particular community.

    The Chairman. Very good.
    Dr. Noam.

    STATEMENT OF DR. ELI M. NOAM, PROFESSOR OF FINANCE AND 
           ECONOMICS, COLUMBIA UNIVERSITY; DIRECTOR, 
COLUMBIA INSTITUTE OF TELE-INFORMATION; FORMER COMMISSIONER OF 
                PUBLIC SERVICES, NEW YORK STATE

    Dr. Noam. Thank you very much, Senator. Thank you for 
dealing with this important issue. Yes, there has been a lot of 
mergers. Some are troubling and some are not, but going beyond 
the specific deal, the more important question is whether, in 
the aggregate, American media have become more concentrated. 
Because if we deal with that question, maybe we can relax a 
little bit about the issues before us.
    Despite the conventional wisdom about media concentration, 
the answer is not an obvious yes. Because while the fish in the 
pond have grown in size, the pond grew even faster.
    Second, there have been a lot of new fish. Some of the 
giant companies such as AOL or Microsoft or Viacom or Qwest 
hardly existed 20 years ago or did not exist at all. And at the 
same time, some of the old media empire giants have imploded, 
companies such as RCA, the original CBS, Hearst, or AT&T. I 
wouldn't be surprised if in the future we will say the same 
thing about Fox, Disney, Time Warner, or Viacom. Companies are 
growing more than they can manage, around some kind of 
charismatic leader who puts it all together, but when he steps 
off the scene, companies often cannot manage the way they did 
before.
    When it comes to concentration, there are strong opinions, 
but the numbers are scarce. Therefore, we have conducted a 
study at Columbia, and collected market share numbers industry-
by-industry, company-by-company, for 52 media and information 
subindustries--from book publishing to film production to 
Internet service providers and consumer electronics--in order 
to trace the concentration trends since the early 1980s after 
the AT&T divestiture. It is probably the most detailed study of 
media concentration in America, and is generally confirmed by 
another empirical study at Penn State.
    Unfortunately, I was invited here only 3 days ago, so my 
data is not quite up to date. But what we did find was that the 
overall concentration of the entire information sector, which 
includes mass media, telecommunication, and the IT sector, did 
not increase, but declined somewhat over the past two decades. 
At first, it went down, and then it rose again, but by 1998 not 
quite to the level that existed in 1984 right after the AT&T 
divestiture.
    Now, if this surprises you, just remember that 20 years 
ago, in that supposedly Golden Age of unconcentrated media we 
seem to have lost, there were three major television companies, 
one computer company, and one telecom company. While today, 
nobody would argue that the communications industry is greatly 
fragmented, there certainly are more participants than used to 
be, although a bit less than 2 or 3 years ago. For the classic 
mass media, such as broadcasting, cable television and print 
media, concentration has increased, but not in every segment.
    Radio is the classic example everybody gives for an 
explosion of ownership. Its concentration more than doubled in 
the last 5 or 6 years. But at the same time, the largest of the 
companies owns only 11 percent of all stations and it accounts 
for 15 percent of all revenue according to a DeutscheBank-Alex 
Brown study. Furthermore, there are other audio delivery 
technologies.
    I, for example, listen to radio more on the Internet than 
over-the-air, and the reason is partly because I like country 
music and in New York City, despite 35 stations, you usually 
cannot get country music over public radio. A few stations have 
tried, but dropped out. But if Mr. Karmazin doesn't give this 
music to me, Yahoo does. Obviously, I can't do this in the car 
yet, although this too, will come and there are alternatives 
such as satellites. So the real issue of radio ownership is 
actually not so much the national ownership issue, but it is 
local concentration. It is whether one company should have 8 
stations in the same market.
    Now, does that mean that there is concentration problems? 
No. As I said it is probably more local concentration in 
newspapers, in telecommunications, and in cable television. 
That is why a cap on national cable ownership can be more 
justified than for broadcasting, where no local market power 
exists in the aggregate that could exclude channels in the way 
that the largest of the cable companies could.
    When it comes to the broadcast industry, a national 
ownership cap will not do very much. Today, the four major 
networks have barely 50 percent of the prime-time audience. 
Their share keeps shrinking, and they are only a shadow of 
their former domineering self. Most of the audience is watching 
their programs over cable, not over-the-air, and if one 
additional Supreme Court Justice changes his view and votes 
against broadcast TV's must-carry rights, the broadcast 
industry would be going into a tailspin.
    Cable operators will then do separate deals with the major 
networks and syndicators for direct program feeds, bypassing 
local broadcasters, and will create or contract with local 
providers such as newspapers for the news programs. Broadcast 
station's spectrum rights will be their most important asset, 
not their broadcast operations.
    If you truly want very badly to achieve local content, a 
direct approach is better than working through ownership. You 
could, hypothetically, require a certain amount of local 
program production as a prerequisite for license renewal. You 
could set an open broadcast time slot for local access to 
television. You could license low-power television. Now, those 
might not be things that we want to do, but the fact that most 
industry proponents of localism do not advocate such direct 
policies toward localism tells me that this fight isn't really 
about localism. And if that is the case, then government 
officials should not be the arbiter between several media 
industries on how to split the pie between them, tempting at it 
might be. Similarly, media industries that cherish their 
independence should not call for the government to regulate 
them. It is really asking for trouble.
    Therefore, I would not perpetuate the old rules of national 
broadcasting ownership caps in an environment of new media.
    I thank you, Senators, for your kind attention.
    [The prepared statement of Dr. Noam follows:]
    Prepared Statement of Dr. Eli M. Noam, Professor of Finance and 
 Economics, Columbia University; Director, Columbia Institute for Tele-
  Information; Former Commissioner of Public Services, New York State
    Chairman Hollings, Senator McCain, members of the Commerce 
Committee, I am grateful to join you in discussing the important topic 
of media concentration and ownership rules. Let's start by agreeing 
that we all share an intense desire not to let the diversity of media 
voices be strangled by a few big companies. But the question is how to 
go about it.
    There are many elements of ownership rules. Caps, cross-ownerships, 
foreign-domestic, minority. Each raises different issues. I will focus 
here on the national cap for TV broadcasters, though I'll be happy to 
address other issues as well later.
    It would probably help us all if we first looked at the extent of 
media concentration, because that would take the edge of alarm off.
    Yes, there have been lots of mergers. Some are troubling, some are 
not. Going beyond the specific deal, the more important question is, in 
the aggregate, have American media become more concentrated?
    Despite the conventional wisdom, or books based on anecdotes rather 
than data, the answer is not an obvious ``yes.'' First, while the fish 
in the pond have grown in size, the pond did grow, too, and faster. The 
growth of the information industry has been 8 percent faster than 
inflation since 1987. Second, there have been a lot of new fish. Giant 
Companies such as AOL, Microsoft, Viacom, Qwest, hardly existed a few 
years ago. Foreign companies such as Bertelsmann and Vivendi are 
contesting the American market. Third, there are new and rapidly 
growing ponds, like the internet; and fourth, all these separate ponds 
are becoming more of a large lake, as the technological and regulatory 
dikes between them fall.
    When it comes to concentration, views are strong, but numbers are 
scarce. Therefore, at one study at Columbia we collected market share 
numbers, industry by industry, company by company, for 60 media and 
information sub-industries from book publishing to film production to 
internet service provision and consumer electronics, in order to trace 
the concentration trends since the early 1980s, after the ATT 
divestiture. This is probably the most detailed study ever of media 
concentration in America. It is confirmed by another study, by Ben 
Compaine, formerly of Harvard. Unfortunately, we did the study 3 years 
ago. I am updating it, but I had only 3 days since your invitation, 
including the weekend. But I will provide you with them when we have 
updated the work.
    What did we find? Surprisingly, the overall concentration of the 
entire information sector, defined to including also telecommunications 
and the IT sector, did not increase, but declined somewhat in the past 
two decades. Or rather, first it went down, then it rose, but not to 
the level that existed before. If this surprises you, just remember 
that 20 years ago, there were 3 major TV companies, 1 computer company, 
and 1 telecom company. The combined share of the top 10 companies in 
the U.S. information industry declined from 59 percent in 1987 to 39 
percent in 1998, even as the total size of most companies increased.
    If one looks at the classic mass media industries alone, they did 
indeed increase in concentration but remained unconcentrated by Justice 
Department standards. (I should add that I do believe that for media, 
antitrust standards should be interpreted more stringently than for 
other industries because of their special importance, and because of 
the undesirablility and unconstitutionality of direct regulatory 
interventions). The weighted average of 4 firm market share for the 
mass media industries was 33 percent in 1986. It then fell to 27.5 and 
rose to 40 percent again.
    For the 3 networks, it declined from 70 to 53 percent. For local TV 
stations, the top 4 firms share rose nationally from 15 to 26 percent. 
For cable TV distribution, it rose from 37 to 60 percent.
    The main factors increasing the rise in the mass media 
concentration figures were cable television systems (accounting for 
half) and home video (accounting for 20 percent). Concentration also 
increased in TV station ownership and retail bookstores, and more than 
doubled in radio station ownership and book publishing. There is one 
very large owner of radio stations. But even it owns only 11 percent of 
all stations and accounts for 15 percent of revenues. And the number of 
radio stations grew by 800 in the past 3 years. The number of TV 
stations increased since 1984 by 37 percent, or about 400 stations. The 
top four firms still have only about quarter of these markets, as 
measured by revenue. In other industries, concentration held relatively 
steady. Film production remained fairly concentrated but steady, with 
the top four firms controlling 60 percent. The national movie theater, 
newspaper and magazine markets remained relatively unconcentrated, with 
the top four firms accounting for a quarter of sales.
    Therefore, it cannot be said that U.S. media have become, in 
general, more concentrated. Some segments have, others have become less 
concentrated. Still, the next question then must be raised: even if a 
firm does not dominate any specific market, could it not be 
overpowering by being a medium sized firm in every market? The fear is 
that vertically integrated firms will dominate by having their 
tentacles in each pie. But in economic terms, this can only happen if a 
firm has real market power in at least one market, which it then 
extends and leverages into other.
    But where markets are competitive, vertical integration makes 
little sense. Disney should not earmark its best programs for ABC if 
other networks offer more money. Conversely, for Disney to force its 
lemons on the ABC television network would only hurt the company.
    Does this mean there is no concentration problem? No. But the real 
problems in media concentration are not national, but local, 98.5 
percent of American cities--though less of a share of people--have only 
one newspaper. (But you rarely will find editorials castigating this 
concentration). Most American homes have no choice in their cable 
provider, though DBS is changing that. This is why a cap on cable 
ownership can be more easily justified than for broadcasting, where no 
local power exists that in the aggregate could exclude channels the way 
that the largest of cable companies could. Alternative local 
residential phone service may be coming, but is not here yet. That's 
why local interconnection is regulated. And the absence of competition 
in local telecommunications might justify a higher cap on cable where 
it becomes an active rival to telecom, as in ATT's original strategy. 
Local radio concentration has increased considerably since the 
Telecommunications Act of 1996 relaxed local ownership ceilings, and 
may become more of a problem than national radio concentration. On the 
other hand, the ownership of multiple radio outlets in a community has 
also increased program diversity, because a firm that buys an 
additional station in a market will target new audiences rather than 
cannibalize its existing ones.
    In broadcasting, we've had a set of rules established when two-and-
a-half TV networks, all headquartered in Manhattan within a few blocks, 
supplied the TV programming for most Americans. But the ownership rules 
didn't really change that. What did create the change was the entry of 
cable television that now provides almost 70 percent of households with 
a menu of about 55 channels, on average. Satellite TV reaches another 
15 percent or so of households. Both of these media can program scores 
of channels, and can also charge subscription and per view fees, which 
gives them a much stronger base than advertising revenues. Today, the 
top 4 networks have barely 50 percent of the audience and keep 
shrinking inexorably. There are over 200 cable channels being offered. 
Thus, broadcasting is a pale shadow of its former self. Only a small 
audience slice watches the classic over-the-air VHF TV. If one 
additional Supreme Court justice changes his view and votes against 
broadcast TV's must-carry rights, the industry will be going into a 
tailspin. Cable operators will do separate deals with the major network 
and syndicators for direct program feeds, bypassing local broadcasters, 
and will gradually create or contract with local providers such as 
newspapers for the news programs. And as that happens, broadcast 
stations' spectrum rights will be its most important asset, not its 
broadcast operations.
    And that's just today's challenge. In the near future, with high 
speed internet rising in penetration; it will become an additional 
medium for the distribution of mostly national and even global 
programs, often of new and interactive kinds, which are not possible 
for broadcasters.
    Broadcasting has now been given a second chance, through digital TV 
with its multicasting potential. So far, this has been a total failure. 
But the concept of broadcast TV as a multi-channel medium with each 
station broadcasting half a dozen of programs may become the lifeline 
for that industry as it competes against cable. It is also a high cost 
proposition that will challenge the smaller firms.
    The increasing fragmentation of audiences through narrow casting 
also leads to a decline of localism. Local programming, outside the 
news, was always more asserted than practiced, with some noteworthy 
exceptions. The economics here are basic. Any professional TV program 
is expensive to produce but cheap to reproduce. Therefore, national 
networking is the economically logical way to go. It's been that way 
since early radio. And if audiences get fragmented locally, they have 
to be aggregated nationally. So there are fundamental and increasing 
incentives toward national electronic media. Conversely, whatever local 
production or preemption or syndication that draws audiences will be 
practiced by stations based on local conditions, whatever the ownership 
is, since they have to contest nightly for audiences.
    So this is an industry in intense transition, much more in trouble 
than it often recognizes itself, and this then leads to fundamental 
restructuring as a response. You can constrain it, but then you might 
end up with the electronic equivalent of the railroads and other 
rustbelt industries.
    I am more concerned with the question of impact on minority 
ownership. But here, even under the old system, minority ownership has 
been miniscule, and if one wants to achieve it one should find other 
ways.
    There are also costs to this cap restriction. It prevents larger 
companies from seeking new licenses, or acquiring weak UHF stations, 
because they count as part of aggregate ownership. Just as cross-
ownership restrictions can reduce the number of stations, as well as 
sometimes of second-tier newspapers. And this deprives communities of 
additional stations and voices.
    Much of what this fight over ownership caps is about the relative 
bargaining strength between station groups and networks. That's vital 
to the participants, but does not obviously an issue of issue of 
protection of local content. It's ultimately an empirical matter for 
study, whether local programming in a competitive local market is 
affected by ownership or cross-ownership at all. Since we have various 
exceptions for every rule around the country, this can be determined.
    To conclude, it seems to me that if you want to achieve local 
content, there are approaches that are more direct than working through 
ownership, such as a certain amount of local program production as a 
requirement of licensing, or an open a time slot for local access to 
TV, or the licensing of additional broadcasters such as LPTV, or the 
right to reply. The fact that most proponents of localism do not 
advocate such direct policies toward localism tells me that this fight 
isn't really about localism.
    And if that's the case, you should not become the arbiter between 
several industries, TV networks, station groups, and Hollywood 
syndicators. Media industries cherishing their independence should not 
call for the government to regulate them. It's asking for trouble. But 
if one can show clear and convincing public harm, that's one thing. If 
one can show local media power that permits its vertical extension, 
then some protective rules may be in order. But in the absence of such 
showing, I would not perpetuate old rules of national broadcasting 
ownership caps in an environment of new media.
    Thank you very much for your kind attention

    The Chairman. Thank you very much.
    Senator Breaux.
    Senator Breaux. Thank you very much. Mr. Chairman. I did 
want to hear both of these gentlemen because neither one of 
them have an economic stake in this. I mean, everybody else at 
the previous table represented millions of dollars and 
legitimate interests. What we do here--and both of you can sort 
of stand back and give us a perspective that is not influenced 
by the bottom line of what happens with regard to the ownership 
issue.
    Dr. Noam, if I pronounced it correctly, you have in your 
statement something that I had said and I did not notice it 
before. I said that local ownership really is a fight, not so 
much of local content, but really on the bargaining power 
between the affiliates and the networks. What do you mean by 
that? I mean, I agree with it. It is what I said. It is in your 
testimony. Can you explain and elaborate what do you mean by 
that statement?
    Dr. Noam. There are several industries involved. The 
providers of syndicated programs would like to deal with a 
large number of local stations rather than with a smaller 
number of buyers who would have a greater bargaining power.
    The medium-sized station groups do not want to compete for 
station acquisitions with the large. And the network affiliates 
more generally want to have station groups, more bargaining 
power relative to the networks. From their perspective, it is a 
perfectly logical behavior.
    But I do not think that there is a great deal of public 
interest in terms of diverse content that is attached to that. 
I can agree with the point that you made earlier, namely, that 
if a station, regardless of the ownership, should more or less 
follow some very similar principles of what the audience wants 
to see because they are competing nightly and daily for 
audiences. There shouldn't be any difference on content. If the 
networks do not serve local markets well, they aren't doing a 
good business and eventually they will lose audiences. There 
are self-correcting market forces here.
    Senator Breaux. I used a station, whether a station in 
Louisiana is owned by CBS in New York or owned by Hearst Argyle 
in New York. It seems to me that it is a New York-owned station 
and what they are going to do is try and serve the needs and 
local market in Louisiana in the most profitable manner that 
they can and obviously, that means having a lot of local 
content. Do you have any problems with that as a principle? It 
seems to me it doesn't matter whether Hearst Argyle or CBS owns 
it. They have to do what's best to be successful in running 
that station.
    Mr. Kimmelman. I think that is a good point. There is an 
economic factor missing from the equation. That is a national 
broadcast network that has lost 50 percent market share, but 
remain the biggest player in prime time, the big bucks, the big 
advertising dollars. They need to get their programming on, 
period. Their programming is preeminent. Even a New York-owned 
set of stations trying to meet local needs has slightly 
different economic incentives. They want maximum eyeballs, 
maximum viewership in that particular community or 5 or 6 or 8, 
but not nationwide and that can have a very significant impact 
on the programming you select during prime time when most 
people are watching.
    The Chairman. Would the Senator yield on this important 
point? Isn't it a fact, Senator Breaux and panel, on whether or 
not you own content. You have mentioned CBS. They have got 
content. The Fin-Syn rules have been abolished. So they are 
pushing content. Whereas Hearst, you said, they are both in New 
York, but these group ownerships, they do not have content so 
they are not pushing it. I find from the local folks, and 
everything else of that kind, if they can get and adhere to the 
localism, which we both agree is of tremendous value, that has 
been put in. You used to have to come up and justify your 
relicense and ensure how many public interest shows you had and 
everything else. But where they have got just affiliates, and 
the affiliate is being harassed by the network owner because 
they have got content, it is just like the morning programs and 
the evening.
    They are advertising movies all over the place. I couldn't 
go on ``Who Wants To Be a Millionaire.'' I think I could do 
pretty good on the answers, but not with the movies. They are 
getting rid of me about the third or fourth question: ``who 
played the leading part in such-and-such a movie.'' They are 
promoting them regularly. More people are going to them, and it 
is a money-making promotional proposition of content which is 
taken away.
    It is not that both of them come from New York, and it is 
an affiliate link. But John, isn't it an affiliate fight 
because they do have content where Hearst doesn't, and they 
just want to see the station succeed and as you and I both 
agree, localism counts.
    Senator Breaux. The Senator makes a good point. The fact is 
if you do not like what the network has programmed, you have 
got 125 channels you can go to on your cable and look at 
something else. In New Orleans, for instance, I think I am 
correct, but I think WWL Channel 4 is a Hearst Argyle station.
    Does anybody out there in the audience know? Anyway, it is 
a CBS affiliate. They do not like the CBS ``Morning Show,'' so 
they just do not carry it. And they carry their local news for 
the whole entire 2-hour block in the morning because they think 
that that is a local--and the network cannot make them do it. 
So they have to appeal to a local audience and if the local 
audience doesn't like the national programming, it is not going 
to carry it. I mean, no one wants to do that.
    The final point is 35 percent limitation. It seems to me 
that it was spelled out at a time when you just looked at the 
potential market, but now with 125 stations on the cable, the 
actual numbers of people watching the networks probably average 
out from the Nielsen ratings about 3 percent. You can have a 
station in Los Angeles which has huge potential market, maybe 
20 percent of the whole country where nobody watches your 
station, your penetration may be almost zero or 3 percent, 
which is average. So the question is, is there a better way of 
gauging the media dominance in an area other than just 
selecting the total number of people that live in the area. 
Shouldn't it be based on the number of people that watch a 
particular network affiliate?
    Mr. Kimmelman. Senator Breaux, I think it is a very good 
point. The difficulty is, it changes all the time. Every one of 
these stations has different ratings for different days, 
different months. We do measure differently in different areas. 
I think this is something that is absolutely critical to look 
at. I think you should make the Federal Communications 
Commission look at it. It is easy to challenge a number. Why 
not 36 or 40. The issue is how does some other number provide 
for promotion of localism, competition and ownership. That is 
what we have not seen from the FCC.
    They can raise concerns about a number, it is easy to 
nitpick, but no one has come up with a better alternative. It 
is a very hard point. It is hard to measure. Mr. Karmazin has 
talked about his low numbers. Some programming gets a 25 
percent market share and that is the big advertising dollars, 
but it won't necessarily get it every day or every week.
    Senator Breaux. Dr. Noam, do you have any comments on that 
thought?
    Dr. Noam. I'd like to comment on the question of national 
content or local content. As we have 200-plus cable television 
channels offered, localism is really in trouble. As one 
fragments audiences, one must aggregate them nationally, and it 
is very expensive to produce programs. It is expensive to 
produce programs, but cheap to reproduce, and therefore a 
national distribution takes place. That has been the way from 
the beginning of radio.
    To use an analogy: In New York, zoning laws restrict large 
supermarkets. The background is the desire to protection 
smaller stores on social policy reasons. But the result is to 
have many inefficient small stores that still sell virtually 
the same mass products like Campbell's soup, Coke, and Haagen-
Daz. People pay more but do not have more choice. The economic 
forces for media work similarly. So we should worry about local 
programming. But ownership rules are an ineffective way to deal 
with the issue.
    The Chairman. Thank you very much. The roll call is about 
to go on, so the Committee is indebted to both of you, Mr. 
Kimmelman, Dr. Noam. We appreciate your appearance. The record 
will stay open for questions. The hearing will be in recess 
subject to the call of the chair.
    [Whereupon, at 12:03 p.m., the hearing adjourned.]

                            A P P E N D I X

    Prepared Statement of Lowell ``Bud'' Paxson, Chairman of Paxson 
                       Communications Corporation

    Paxson Communications Corporation is the largest television station 
owner in the country and the creator of the newest over-the-air 
television network. We would request that the following statement be 
submitted for the record of the July 17, 2001 Senate Commerce, Science 
& Transportation Committee hearing on broadcast ownership.
    This statement sets forth our position on the current national 
television ownership cap. Our position is simply stated and, we 
believe, legally compelling. The FCC's current 35 percent television 
cap should be completely eliminated and the issue of television 
concentration on a national level should be left to Federal antitrust 
authorities.
    The 35 percent television cap is a totally arbitrary number bearing 
no relation to any antitrust or even public policy concern, it was 
adopted without record support and it fails to accurately measure the 
viewership reach of any television group owner. For these reasons, it 
cannot and will not survive review by the Court of Appeals in 
Washington, DC. But, neither this Congress nor the FCC should wait for 
such an adverse decision. The time is now for the repeal of this 
antiquated rule.
    First, a brief history of the 35 percent rule. During the 
deliberations leading to the 1996 Telecommunications Act, a group of 
television broadcasters, including Paxon, formed the Local Station 
Ownership Coalition which lobbied for televison duopoly and local 
marketing agreements, i.e. LMAs. The Coalition supported H.R. 1555 
(entitled ``The Communications Act of 1995'') which was voted out of 
the House Commerce Committee by a 38-5; vote. This bill raised the 
television audience cap to 35 percent for one year and then to 50 
percent thereafter.
    However, when the Bill went to the House floor, the Coalition 
became aware of efforts to amend the bill to set the television 
ownership cap at 35 percent. The Coalition members convened by 
telephone conference and agreed to accept the reduction in the 
television cap in return for keeping the support of the House members 
for H.R. 1555. The Coalition's views were then communicated to key 
Representatives on the House Commerce Committee who were sponsoring the 
local television ownership changes. The Coalition's position on this 
issue was dictated by the intense desire for local television and LMA 
rule relaxation and not by any analysis of the consequences of a 35 
percent vs. a 50 percent audience cap. In short, the 35 percent number 
was ``plucked out of thin air'' as the Court of Appeals noted recently 
in striking down the cable ownership rule.
    The second point worth noting is that the 35 percent audience cap 
does not actually provide a meaningful measurement of anything. As 
NBC's President, Bob Wright, has explained in testimony before 
Congress, although NBC's 13 owned television stations reach about 25 
percent of the country's television households (as measured by the 
current FCC rule), only 2-3 percent of those homes are actually 
watching NBC on average, so that NBC's owned stations garner about 6 
percent of television viewers nationwide.
    The 35 percent rule is simply arbitrary and capricious and it 
fundamentally restricts the right of television owners to speak to 
their viewers. Local television markets are very competitive nowadays 
and we face competition from many sources including other television 
stations, cable, cable networks, Microsoft's Web TV, TIVO, Ultimate TV, 
radio, newspapers, DBS, magazines, billboards, the Internet, direct 
mailings, etc. Notwithstanding this intense competition, a television 
owner at the 35 percent cap cannot buy a television station in a new 
market simply because of its ownership somewhere else. There is no 
logic to this and it is violative of that owner's First Amendment free 
speech rights. And let's be honest, the issue is not local ownership 
vs. out-of-market ownership. First there is no legally justifiable 
reason for favoring local ownership of broadcast stations and most 
stations are owned by group owners, not individual local owners. The 
issue is how the station is operated and how responsive it is to its 
obligations as a licensee. Second, most viewers do not know, or care, 
whether a television station is owned by a local group, a national 
network or a newspaper group from another state. It is simply 
irrelevant.
    In summary, Paxson Communications urges Congress not to wait until 
further Court rulings striking down the 35 percent cap and other 
ownership restrictions but to take the lead and eliminate these 
antiquated, useless, and constitutionally infirm rules now so that our 
television industry can meet the new competitive challenges. All 
existing antitrust laws are fully capable of protecting the consumer 
and preventing anti-competitive conduct.

                               __________
 Prepared Statement of James A. Wades, Radio and Television Broadcast 
                            Industry Veteran

    As a nearly 20 year veteran of the Radio and Television broadcast 
industries, I feel it is my duty to offer input to the Committee on the 
issue of Media Concentration, a trend that has, over the past decade, 
resulted in a significantly reduced level of quality broadcast service 
to communities throughout these United States.
    Historically, the regulatory approach affecting the electronic 
media has been based in the public interest. This approach began during 
the 1920s under then-Secretary of Commerce Hoover and has been 
consistently reaffirmed under countless administrations as well as 
through three distinct government agencies charged with the 
responsibility of regulating broadcasting activities (e.g. Department 
of Commerce, Federal Radio Commission, Federal Communications 
Commission). Unfortunately, it appears that recent regulatory decisions 
have resulted in a climate that de-emphasizes the requirement for 
licensees to act in the public interest.

Impact on Local Service

    Over the past decade, the vast majority of local radio stations 
have eliminated any meaningful commitment to local community affairs. 
While serving as a consultant to a large number of AM and FM broadcast 
stations throughout the Great Lakes Region, I have watched as local 
stations have been consistently absorbed by large media conglomerates. 
The result has been, almost without exception, the elimination of local 
news directors and community affairs positions within these stations.
    Whereas stations formerly owned by local community investors often 
maintained ties with numerous organizations and local government 
entities, stations managed from outside the area often fail to identify 
the potential value of coordination with the local community. The 
results are often subtle, but nonetheless important. For example, I 
have seen many stations de-emphasize the importance of Emergency Alert 
System bulletins, such as Tornado Warnings, Flash Flood Warnings, and 
similar local emergency information simply because it does not fit into 
a prefabricated format developed thousands of miles away at a corporate 
headquarters.
    Media Concentration encourages the development of generic radio 
programming transmitted to local affiliates via satellite. While this 
offers significant profitability advantages for large corporate owners, 
such formats discourage the dissemination of local community 
information and programming.

Media Concentration Discourages Cultural Diversity

    Media concentration has resulted in the creation of generic radio 
formats, which are unable to offer a range of choices to the local 
consumer. With programming standards concentrated in the hands of a few 
large corporate entities, the natural business tendency toward 
decreasing operating overhead results in the elimination of local 
positions formerly held by qualified programming experts. Instead of 
local broadcasters developing formats, which respond accurately and 
rapidly to the desires of a local community, the local listener must 
choose from a limited variety of programming designed to appeal to the 
``lowest common denominator.'' In many cases, one can hear identical 
programming at multiple locations on the dial. This programming often 
originates from a single location and is then rebroadcast through 
multiple transmitter sites with overlapping coverage areas.
    Those local investors that do attempt to compete with concentrated 
media entities often meet with minimal financial success. Not only does 
an erstwhile attempt to develop programming tailored to local needs 
result in higher overhead in the form of employment expenses, but it 
also becomes difficult to capture scarce advertising revenue. In simple 
terms, larger advertisers and agencies find it easier to deal with a 
few large corporate entities rather than to work with numerous 
independent broadcast stations. This situation has become even more 
serious as local businesses are destroyed or marginalized by the 
invasion of large corporate chain stores, most of which purchase 
advertising only through large agency representations.
    I have spoken with many individual station owners who have ``sold-
out'' to media conglomerates simply because they were no longer able to 
generate sufficient revenues in competition with concentrated media 
power. The result has been a consistent lack of local programming and 
community involvement.

Media Concentration Limits the Voice of Minority Interests

    Ethnic and minority owned broadcast stations are consistently 
marginalized by media concentration. Many of these broadcast stations 
are often operated by individuals who have a sincere desire to serve a 
unique community, which lacks a voice or cultural perspective in 
traditional mass media. Such stations find it difficult to compete with 
duopolies and media consolidations within their communities.
    I have watched as minority-owned stations struggle to generate 
advertising revenue when faced by competition from one or two 
companies, which often own all remaining viable stations in a broadcast 
market.
    Such stations are likely to be further marginalized by the ill-
advised decision of the Commission to create low-power FM broadcast 
stations to serve unique communities. Such stations offer little in the 
way of coverage area and they often lack the necessary capitalization 
and revenue stream necessary to adequately serve their community with a 
quality product. However, they do serve to drain valuable advertising 
revenue away from viable minority-owned stations. As a result viable 
ethnic or minority-owned stations often find themselves caught between 
the excessive revenue flow to local duopolies and competition from 
ineffective low power UHF TV and FM stations that offer only 
``lipservice'' to broadcast diversity.

Media Concentration Lowers Technical Standards

    My experience indicates that many stations owned by large corporate 
entities pay little attention to those FCC regulations designed to 
insure that the interference between stations is limited and the 
average listener receives a consistent, quality, broadcast signal.
    I have observed AM Directional Antenna systems operating out of 
tolerance for weeks, if not months on end, resulting in interference to 
co-channel stations in other parts of the country. I have observed 
over-modulation, off-frequency operation, and over-power operation at 
both AM and FM stations throughout the Great Lakes Region. Many of 
these stations are operated under a management structure that views FCC 
technical standards as a cost-center and threat to the shareholder.
    In some cases, stations consistently fail to meet technical 
standards simply because they have employed one under-qualified 
technician to maintain multiple studio and transmitter sites within the 
same market. Whereas each station formerly employed a competent 
broadcast engineer or maintained a viable service contract with an 
outside consulting engineer, consolidation often results in a single 
salaried technician burdened under an impossible workload.
    Contract and Consulting Engineers are often harmed by the same 
economic forces resulting from media concentration. Prior to the most 
recent wave of media consolidations, there were significant benefits to 
contracting one's engineering services through a local engineering 
company. This allowed stations to maintain their facilities on an as-
needed basis. Today, large media groups often find it is in their best 
interest to avoid engineering contracts. It is simply cheaper to hire a 
single, minimally competent technician on salary and then insist that 
he work an almost unlimited number of hours. If compliance with 
Commission Rules is impossible, it matters little. Congress 
consistently fails to authorize adequate funding to the Commission for 
reasonable inspections of broadcast stations and other licensed 
services. Therefore, there is little risk of being caught.

Media Concentration Encourages Unhealthy Speculation

    Unlike most businesses, the unique nature of broadcasting, combined 
with the current regulatory environment, has resulted in many broadcast 
properties having two unique and distinct values. The first value is 
that of an operating business, offering investors a net profit or loss 
based on available revenue and expenses. Unfortunately, broadcast 
stations also have a ``speculative value,'' much like real estate.
    The analogy to real estate is instructive. Like real property, an 
FCC broadcast license serves as a ``deed'' to a property. It defines 
and protects a unique coverage area as well as a location within the 
radio frequency spectrum. Therefore, like real estate, the license has 
value simply as an investment property, even if the business occupying 
that property is not viable.
    It is my opinion that much of the media concentration is not 
motivated by a desire or need to compete with technological or 
marketplace innovations, but rather through a desire to speculate, and 
perhaps profit, on the future value of ``real estate.'' As more 
broadcast properties are concentrated in the hands of a single group of 
investors or a publicly held company, the aggregate value of the real 
estate increases. Investment in the media consolidation occurs simply 
because the value of this finite resource is likely to increase over 
time.
    As in the case of real estate, it is often desirable to limit any 
costs associated with the property while it is accruing in value. Such 
costs are usually associated with the production of a quality broadcast 
product and the maintenance of reasonable technical standards.
    In the past, Congress and the Commission recognized that this 
factor resulted in the degradation of broadcast products and community 
service. Limits had been placed on the frequency with which an investor 
could transfer a broadcast property. In recent years, these limitations 
have been removed resulting in ``trafficking'' in broadcast station 
licenses. Further deregulation has allowed consolidation of properties 
and even greater speculation.

Media Consolidation is a Threat to Balanced Political Coverage

    During the 1930s, Powell Crosley, Jr. was licensed to operate a 
super-power station capable of dominating the broadcast marketplace, as 
it then existed. Evidence soon emerged that Mr. Crosley was dictating 
policy to news personnel in an effort to insure that his personal 
viewpoints were favored. The Commission soon ended its experiments with 
such authorizations in order to insure that no single person or 
business entity could control public access to news and information.
    While it is true that the electronic media is more technologically 
diverse today than at any time in the past, the fact remains that 
broadcast media maintains considerable power to shape ideas and values 
within our society. Even the Internet, with its unprecedented growth, 
lacks the ability of broadcast media to encourage consensus and the 
convergence of ideas.
    Media concentration places unprecedented power in the hands of the 
few. These individuals will not only have the ability to influence 
political debate, but also to shape the individual values of our 
children through the control of popular culture and entertainment. 
While the extent of the ability of popular culture and entertainment to 
shape individual values is debatable, few would argue with the 
suggestion that its influence is significant. The current lack of 
stewardship and social responsibility on the part of mass media should 
be obvious to the thinking person. Does the existing track record 
justify increased trust and confidence?

We Are at a Crossroads

    If Congress allows the Commission to authorize greater media 
concentration, we will be taking one more step away from the tradition 
of viewing radio frequency spectrum as an asset to be managed in the 
public interest on behalf of the American people. We have already set a 
dangerous precedent by auctioning spectrum to the highest bidder, an 
action which, by the way, is a significant departure from a nearly 75 
year history of spectrum management.
    Unlike manufacturing or service industries, most of which can be 
largely regulated by the market place, broadcast media investors are 
given the privilege to serve the community while engaged in a useful 
business enterprise. Congress must insure that public resources are 
utilized in a manner that benefits the Nation as a whole, while 
allowing shareholders to maintain a reasonable margin of profit. Any 
attempt to compare broadcast media with other business activity is, by 
definition, incorrect. No other business has similar access to a 
resource traditionally viewed as public property.
    Further media concentration will result in additional inequalities 
in the market place and will serve only to silence the few local voices 
left within the electronic media. The pressures on locally owned 
broadcast stations and those employed by them will ultimately result in 
business failure and the need for local investors to sell-out at 
whatever price they can obtain.
    There is not substitute for an effective free press in the form of 
diverse, locally owned broadcast media. Media concentration will only 
result in cultural narrow-mindedness, a lack of economic diversity, and 
a dangerous consolidation of political and cultural power in the hands 
of a few. It is my sincere hope that Congress will take whatever steps 
are necessary to encourage true diversity in the broadcast marketplace.
  

                                  
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