[Senate Hearing 108-938]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 108-938

                    FCC OVERSIGHT: MEDIA OWNERSHIP 
                        AND FCC REAUTHORIZATION

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 4, 2003

                               __________

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


















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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South 
CONRAD BURNS, Montana                    Carolina, Ranking
TRENT LOTT, Mississippi              DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas          JOHN D. ROCKEFELLER IV, West 
OLYMPIA J. SNOWE, Maine                  Virginia
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois        BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  RON WYDEN, Oregon
GEORGE ALLEN, Virginia               BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
                                     MARIA CANTWELL, Washington
                                     FRANK R. LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel












                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 4, 2003.....................................     1
Statement of Senator Allen.......................................    31
    Article, dated June 3, 2003, from the Wall Street Journal 
      entitled ``Small-Market TV Stations Make Static Over New 
      FCC Rules''................................................    32
Statement of Senator Boxer.......................................    33
Statement of Senator Breaux......................................    30
Statememt of Senator Burns.......................................    26
    Prepared statement...........................................    26
Statement of Senator Dorgan......................................    28
Statement of Senator Ensign......................................    93
Statement of Senator Fitzgerald..................................    98
Statement of Senator Hollings....................................     2
    Prepared statement...........................................    24
    Letter, dated April 9, 2003, from the U.S. Small Business 
      Administration to Hon. Michael K. Powell, Chairman, Federal 
      Communications Commission..................................    21
Statement of Senator Hutchison...................................    27
Statement of Senator Inouye......................................    68
    Prepared statement...........................................    68
Statement of Senator Lautenberg..................................    29
Statement of Senator McCain......................................     1
Statement of Senator Smith.......................................    34
Statement of Senator Snowe.......................................    29
Statement of Senator Stevens.....................................    67
Statement of Senator Sununu......................................    28
Statement of Senator Wyden.......................................    27

                               Witnesses

Abernathy, Hon. Kathleen Q., Commissioner, Federal Communications 
  Commission.....................................................    46
    Prepared statement...........................................    47
Adelstein, Hon. Jonathan S., Commissioner, Federal Communications 
  Commission.....................................................    40
    Prepared statement...........................................    43
Copps, Hon. Michael J., Commissioner, Federal Communications 
  Commission.....................................................    50
    Prepared statement...........................................    53
Martin, Hon. Kevin J., Commissioner, Federal Communications 
  Commission.....................................................    58
    Prepared statement...........................................    60
Powell, Hon. Michael K., Chairman, Federal Communications 
  Commission.....................................................    34
    Prepared statement...........................................    37

 
                    FCC OVERSIGHT: MEDIA OWNERSHIP 
                        AND FCC REAUTHORIZATION

                              ----------                              


                        WEDNESDAY, JUNE 4, 2003,

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:30 a.m. in room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman of the Committee, presiding.

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

    The Chairman. Good morning. We'll start the hearing on time 
here. This morning, today, the Committee will hear from the 
Commissioners of the Federal Communications Commission.
    Two days ago, the Federal Communications Commission issued 
rules for setting new limits on media ownership. These rules 
were promulgated after 18 months of accumulating data and 
comments from the public in commissioning and reviewing 12 
research studies setting forth empirical evidence about the 
media industry.
    It's difficult to overstate the importance of these rules. 
The media has a tremendous impact on the everyday lives of all 
Americans. By selecting and framing issues and ideas and 
promoting public discourse, the media facilitates a critical 
function in our democracy, and, as a result, the biennial 
review has been the source of much passionate public debate.
    It appears that each of the Commissioners has approached 
these complex issues seriously. Whether one agrees with the 
outcome or not, they are to be commended for their devotion to 
public service. I look forward to hearing from each of them 
today.
    Congress placed the Commissioners in this position by 
mandating, in section 202(h) of the Telecommunications Act of 
1996, that, ``the Commission review its media ownership rules 
every 2 years to ensure the rules remain necessary in the 
public interest as a result of competition.''
    The courts have repeatedly struck down the FCC's previous 
attempts at meeting this mandate. Chairman Powell has stated 
that the courts placed, ``a high hurdle before the Commission 
for maintaining a given regulation and made clear that failure 
to surmount that hurdle, based on a thorough record, must 
result in the rule's modification or elimination.''
    The rules the FCC adopted appear to preserve important 
restrictions on media ownership, but I'm not sure that even an 
expert agency can predict with precision where the lines should 
be drawn. Legislation has already been introduced to keep the 
national TV ownership cap at 35 percent, and I will put this 
item on the Committee's agenda for consideration at our next 
executive session this month. Other bills may be introduced, 
and other efforts undertaken by Congress, to undo what the FCC 
has just done.
    I might say, I was a little disturbed that Members of this 
Committee, who immediately decided that maybe we should resort 
to putting a rider on an appropriations bill, of course, in 
complete contradiction to what Members of this authorizing 
Committee should be all about.
    Regardless of what is accomplished legislatively, however, 
the FCC continues to be subject to the requirement that it 
review its media ownership rules biennially. This continuing 
review can play an important role as a check on unforeseen 
consequences of relaxing the ownership rules. But it can only 
serve this role if the Commission is permitted to tighten its 
ownership restrictions, if necessary.
    I believe the law already allows the Commission to take 
such action, but it's not clear that the courts would agree. 
The D.C. Circuit has stated that section 202(h) of the Act, 
``carries with it a presumption in favor of repealing or 
modifying ownership rules,'' and that Congress set in place, 
``a process of deregulation'' by enacting section 202(h) in the 
Telecommunications Act of 1996. The court likened this process 
to, ``Farragut's order at the Battle of Mobile Bay, 'Damn the 
torpedoes--full speed ahead,''' toward deregulation. I think we 
have to clarify this provision of the bill, because I believe 
that the FCC should be allowed to both deregulate and re-
regulate, as it deems necessary.
    Because of the uncertainty created by the courts regarding 
the FCC's ability to strengthen as well as relax media 
ownership rules, I intend to include specific language in the 
forthcoming FCC reauthorization bill to clarify that the 
Commission may and should reimpose ownership restrictions as 
part of its biennial review, where it finds such action would 
be in the public interest. And this way, the biennial review by 
the Commission will serve as an opportunity to ensure that our 
media ownership restrictions are effective in preserving the 
goals of competition, diversity, and localism.
    I thank the Commissioners for coming before the Committee 
today. I look forward to your comments and responses to the 
Committee's questions. Senator Hollings?

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

    Senator Hollings. Thank you, Mr. Chairman, for the hearing 
and on the comment about going to an appropriations rider. As 
the Chairman of that Subcommittee for years, we've withheld any 
legislation with respect to appropriations on the Federal 
Communications Commission. Last year, Chairman Gregg and I 
withstood some 17 suggestions.
    I, yes, made the suggestion that we might be forced to that 
and that the Chairman of this Committee had said he didn't 
think that we could get the bill up, or at least get it 
approved for the statutory 35 percent. And I wonder whether we 
can pass the particular resolution of disapproval. If those two 
fail, yes, I would still attempt to do it, because I think it's 
that serious a problem that we have here.
    I'd ask consent that my prepared statement be included, and 
let me highlight just two things. One is that Chairman Powell 
has engaged in so much spin and fraud that I've got to clarify 
two things immediately. One, with respect to the graying of the 
rules in the old black-and-white era--of course, we've got a 
Constitution that's over 200-and-some years old, graying and in 
the black-and-white era, and it's still a living document. 
Otherwise, our friend, Commissioner Martin, joined in harkening 
the days when he was a boy when they only had three particular 
networks. Well, I can go back when we didn't have any networks. 
We barely had radio. No satellite. No cable. Nothing.
    [Laughter.]
    Senator Hollings. But you had a little machine you wound up 
and called Central and asked her to please connect you.
    [Laughter.]
    Senator Hollings. However, in those particular days when 
they had three networks, Commissioner Martin, they could only 
own seven stations. And the seven stations that they owned had 
to submit regularly to the license renewal. Every 3 years. I 
was the author to extend it to 3 to 5 years. Years back. We've 
been moving along with the times, this Committee has. And they 
had to have the license renewal and justify local and community 
service. Otherwise, we had the financial syndication rule where 
they couldn't own any programming.
    Now, according to the morning news, they own 98 percent of 
it, and the writers and the authors and the producers are 
complaining because My Big Fat Greek Wedding is about to be 
ruled out totally with this particular rule. So much for the 
Greeks.
    Otherwise, they had no vertical integration, because they 
couldn't integrate. Now, instead of integrating, let's find out 
what they have to integrate.
    I'd ask consent that we include in the record the five 
conglomerate ownership----
    The Chairman. Without objection. Without objection.
    Senator Hollings. We'll include that.
    [The information referred to follows:]
    

    
    Senator Hollings. And one company owns a network, some 37 
stations, cable, satellites. Five media conglomerates control 
75 percent of prime-time viewers, and it's projected that 
they'll soon reach 85 percent. Ninety percent of the top 50 
channels on cable are owned either by the major television 
networks or by cable operators. And the top 20 Internet news 
sites are owned by the existing television or newspaper 
companies. So if we've got one ill in communications, it's 
over-consolidation.
    And let's not go along with the idea--I think Commissioner 
Adelstein pointed it out--you could have all the outlets you 
wanted in your room here for electricity, but you only had one 
electrical company giving you service. I use the Rockefeller 
example which brought about antitrust. When I grew up, all they 
had was Standard Oil stations in my home town. And if you read 
J.D. Carr's book on Rockefeller, you'll find out it wasn't oil; 
it was the delivery system, the tank cars, that he controlled.
    Then Chairman Powell says, and I've got the exact quote 
here, ``If yesterday's rules had not been adopted, there would 
effectively be no national cap.'' Absolutely, absolutely false. 
And he knows it. He knows it. He's a good lawyer. And the 
Chairman knows that. The FOX versus FCC--and I've got the 
thing, and I'll ask consent that we include its decision in the 
record at this time----
    The Chairman. Without objection.
    [The information referred to follows:]

                     United States Court of Appeals

                  FOR THE DISTRICT OF COLUMBIA CIRCUIT

        Argued September 7, 2001      Decided February 19, 2002

                              No. 00-1222

                    Fox Television Stations, Inc., 
                               Petitioner

                                   v.

                 Federal Communications Commission and

                       United States of America,

                              Respondents

             National Association of Broadcasters, et al.,

                              Intervenors

                           Consolidated with 
              00-1263, 00-1326, 00-1359, 00-1381, 01-1136

               On Petitions for Review of an Order of the

                   Federal Communications Commission

    Edward W. Warren and Paul T. Cappuccio argued the cause for 
petitioners. With them on the joint briefs were Bruce D. Sokler, 
Richard A. Cordray, Ashley C. Parrish, Ellen S. Agress, Diane Zipursky, 
Michael D. Fricklas, Mark C. Morril, John G. Roberts, Jr., Stuart W. 
Gold, Laurence H. Tribe, Jonathan S. Massey, Arthur H. Harding, R. 
Bruce Beckner and Henk Brands. Jay Lefkowitz entered an appearance.
    C. Grey Pash, Jr., Counsel, Federal Communications Commission, 
argued the cause for respondents. With him on the brief were Jane E. 
Mago, General Counsel, Daniel M. Armstrong, Associate General Counsel, 
James M. Carr, Lisa S. Gelb and Roger D. Citron, Counsel, Mark B. Stern 
and Jacob M. Lewis, Attorneys, U.S. Department of Justice. Christopher 
J. Wright, General Counsel, Federal Communications Commission, Robert 
B. Nicholson and Robert J. Wiggers, Attorneys, U.S. Department of 
Justice, entered appearances.
    Robert A. Long, Jr. argued the cause for intervenors National 
Association of Broadcasters and the Network Affiliated Stations 
Alliance. With him on the brief was Jack N. Goodman.
    Harold J. Feld, Andrew J. Schwartzman and Cheryl A. Leanza were on 
the brief for intervenors/amici curiae Consumer Federation of America 
and United Church of Christ, Office of Communication, Inc. Wade H. 
Hargrove, Jr. entered an appearance.
    Before: Ginsburg, Chief Judge, Edwards and Sentelle, Circuit 
Judges.
    Opinion for the Court filed by Chief Judge Ginsburg.
                           Table of Contents
Introduction
I. Background
    A. The National Television Station Ownership (NTSO) Rule
    B. The Cable/Broadcasting Cross-Ownership (CBCO) Rule
    C. Applying  202(h)
        1. The NTSO Rule
        2. The CBCO Rule
II. Threshold Issues
    A. Finality
    B. Reviewability
    C. Ripeness
    D. Exhaustion and Standing
III. The NTSO Rule
    A. Section 202(h) and the APA
        1. Is the Rule irrational?
        2. Failure to comply with  202(h)
        3. Failure to address the 1984 Report
    B. The First Amendment
    C. Remedy
IV. The CBCO Rule
    A. Section 202(h) and the APA
        1. Competition
        2. Diversity
    B. Remedy
V. Conclusion
    Ginsburg, Chief Judge: Before the court are five consolidated 
petitions to review the Federal Communications Commission's 1998 
decision not to repeal or to modify the national television station 
ownership rule, 47 C.F.R.  73.3555(e), and the cable/broadcast cross-
ownership rule, 47 C.F.R.  76.501(a). Petitioners challenge the 
decision as a violation of both the Administrative Procedure Act (APA), 
5 U.S.C.  551 et seq., and  202(h) of the Telecommunications Act of 
1996, Pub. L. No. 104-104, 110 Stat. 56. They also contend that both 
rules violate the First Amendment to the Constitution of the United 
States. The network petitioners--Fox Television Stations, Inc., 
National Broadcasting Company, Inc., Viacom Inc., and CBS Broadcasting 
Inc.--address the national television ownership rule, while petitioner 
Time Warner Entertainment Company, L.P. addresses the cable/broadcast 
cross-ownership rule. The National Association of Broadcasters (NAB), 
the Network Affiliated Stations Alliance (NASA), the Consumer 
Federation of America (CFA), and the United Church of Christ, Office of 
Communications, Inc. (UCC) have intervened and filed briefs in support 
of the Commission's decision to retain the national television station 
ownership rule.
    We conclude that the Commission's decision to retain the rules was 
arbitrary and capricious and contrary to law. We remand the national 
television station ownership rule to the Commission for further 
consideration, and we vacate the cable/broadcast cross-ownership rule 
because we think it unlikely the Commission will be able on remand to 
justify retaining it.
I. Background
    In the Telecommunications Act of 1996 the Congress set in motion a 
process to deregulate the structure of the broadcast and cable 
television industries. The Act itself repealed the statutes prohibiting 
telephone/cable and cable/broadcast cross-ownership, 1996 Act  
302(b)(1), 202(I), and overrode the few remaining regulatory limits 
upon cable/network cross-ownership, id.  202(f)(1). In radio it 
eliminated the national and relaxed the local restrictions upon 
ownership, id.  202(a), (b), and eased the ``dual network'' rule, id. 
 202(e). In addition, the Act directed the Commission to eliminate the 
cap upon the number of television stations any one entity may own, id. 
 202(c)(1)(A), and to increase to 35 from 25 the maximum percentage of 
American households a single broadcaster may reach, id.  202(c)(1)(B).
    Finally, and most important to this case, in 202(h) of the Act, 
the Congress instructed the Commission, in order to continue the 
process of deregulation, to review each of the Commission's ownership 
rules every 2 years:

        The Commission shall review its rules adopted pursuant to this 
        section and all of its ownership rules biennially as part of 
        its regulatory reform review under section 11 of the 
        Communications Act of 1934 and shall determine whether any of 
        such rules are necessary in the public interest as the result 
        of competition. The Commission shall repeal or modify any 
        regulation it determines to be no longer in the public 
        interest.
    The Commission first undertook a review of its ownership rules 
pursuant to this mandate in 1998. This case arises out of the resulting 
decision not to repeal or to modify two Commission rules: the national 
television station ownership rule and the cable/broadcast cross-
ownership rule.
A. The National Television Station Ownership (NTSO) Rule
    The NTSO Rule prohibits any entity from controlling television 
stations the combined potential audience reach of which exceeds 35 
percent of the television households in the United States.\1\ As 
originally promulgated in the early 1940s, the Rule prohibited common 
ownership of more than three television stations; that number was later 
increased to seven. Amendment of Multiple Ownership Rules, Report & 
Order, 100 F.C.C.2d 17, pp. 14, 16 (1984) (1984 Report). The stated 
purpose of the seven-station rule was ``to promote diversification of 
ownership in order to maximize diversification of program and service 
viewpoints'' and ``to prevent any undue concentration of economic 
power.'' Id. p. 17.
---------------------------------------------------------------------------
    \1\ ``No license for a commercial TV broadcast station shall be 
granted, transferred or assigned to any party (including all parties 
under common control) if the grant, transfer or assignment of such 
license would result in such party or any of its stockholders, 
partners, members, officers or directors, directly or indirectly, 
owning, operating or controlling, or having a cognizable interest in TV 
stations which have an aggregate national audience reach exceeding 
thirty-five (35) percent.'' 47 C.F.R.  73.3555(e).
---------------------------------------------------------------------------
    In 1984 the Commission considered the effects of technological 
changes in the mass media, id. p. 4, and repealed the NTSO Rule subject 
to a six-year transition period during which the ownership limit was 
raised to 12 stations. Id. pp. 108-112. The Commission determined that 
repeal of the NTSO Rule would not adversely affect either the diversity 
of viewpoints available on the airwaves or competition among 
broadcasters. It concluded that diversity should be a concern only at 
the local level, as to which the NTSO Rule was irrelevant, id. pp. 31-
32, and that ``[l]ooking at the national level [the Rule was 
unnecessary because] the U.S. enjoys an abundance of independently 
owned mass media outlets,'' id. p. 43. The Commission also concluded 
that group owners were not likely to impose upon their stations a 
``monolithic'' point of view. Id. pp. 52-54, 61. With respect to 
economic competition, the Commission considered the markets for 
national and for local spot advertising and concluded that neither 
would be made less competitive by repeal of the NTSO Rule. Id. pp. 66-
71.
    Implementation of the 1984 Report was subsequently blocked by the 
Congress. See Second Supplemental Appropriations Act, Pub. L. No. 98-
396,  304, 98 Stat. 1369, 1423 (1984). The Commission thereupon 
reconsidered the matter and prohibited common ownership: (1) of 
stations that in the aggregate reached more than 25 percent of the 
national television audience, and (2) of more than 12 stations 
regardless of their combined audience reach. Amendment of Multiple 
Ownership Rules, Mem. Op. & Order, 100 F.C.C.2d 74, pp. 36-40 (1984). 
These limitations remained in place until 1996, when the Congress (in  
202(c)(1) of the Act) directed the Commission to eliminate the 12-
station rule and to raise to 35 percent the cap upon audience reach, 
both of which actions the Commission promptly took. Implementation of 
Sections 202(c)(1) and 202(e) of the Telecommunications Act of 1996 
(National Broadcast Television Ownership and Dual Network Operations), 
61 Fed. Reg. 10,691 (Mar. 15, 1996).
B. The Cable/Broadcast Cross-Ownership (CBCO) Rule
    The CBCO Rule prohibits a cable television system from carrying the 
signal of any television broadcast station if the system owns a 
broadcast station in the same local market.\2\ In conjunction with 
certain ``must-carry'' requirements, 47 U.S.C.  534-535; 47 C.F.R.  
76.55 et seq., to which cable operators are subject, see Turner Broad. 
Sys., Inc. v. FCC, 512 U.S. 622, 630-32 (1994) (Turner I), the Rule has 
the effect of prohibiting common ownership of a broadcast station and a 
cable television system in the same local market.
---------------------------------------------------------------------------
    \2\ ``No cable television system (including all parties under 
common control) shall carry the signal of any television broadcast 
station if such system directly or indirectly owns, operates, controls, 
or has an interest in a TV broadcast station whose predicted Grade B 
contour, computed in accordance with  73.684 of part 73 of this 
chapter, overlaps in whole or in part the service area of such system 
(i.e., the area within which the system is serving subscribers).'' 47 
C.F.R.  76.501(a).
---------------------------------------------------------------------------
    The Commission first promulgated the CBCO Rule in 1970 along with a 
rule banning network ownership of cable systems. Amendment of Part 74, 
Subpart K, of the Commission's Rules and Regulations Relative to 
Community Antenna Television Systems, Second Report & Order, 23 
F.C.C.2d 816, pp. 11, 15 (1970). In 1984 the Congress codified the CBCO 
Rule but not the network ownership ban. Cable Communications Policy Act 
of 1984, Pub. L. No. 98-549,  2, 98 Stat. 2779.
    In 1992 the Commission repealed the rule prohibiting net-work 
ownership of cable systems. Amendment of Part 76, Subpart J, Section 
76.501 of the Commission's Rules and Regulations, Report & Order, 7 
F.C.C.R. 6156, p. 10 (1992) (1992 Report). The Commission also 
revisited the CBCO Rule and concluded that ``the rationale for an 
absolute prohibition on broadcast-cable cross-ownership is no longer 
valid in light of the ongoing changes in the video marketplace.'' Id. 
p. 17. Because the Congress had imposed a similar prohibition by 
statute, however, the Commission did not repeal the Rule; instead, the 
Commission recommended that the Congress repeal the statutory 
prohibition. Id. In the 1996 Act the Congress did just that without, 
however, requiring the Commission to repeal the CBCO Rule. 1996 Act  
202(i).
C. Applying  202(h)
    As mentioned above, the 1996 Act, in addition to raising the 
national ownership cap to 35 percent and repealing the statutory ban 
upon cable/broadcast cross-ownership, required the Commission 
biennially to review all its ownership rules in order to determine 
whether they remain ``necessary in the public interest.'' To begin the 
first review thus called for in  202(h), the Commission, on March 13, 
1998, issued a Notice of Inquiry seeking comments on all ownership 
rules, including specifically both the NTSO and the CBCO Rules. 1998 
Biennial Regulatory Review, Notice of Inquiry, 13 F.C.C.R. 11276, pp. 
14, 43 (1998). The Commission described as follows the approach it 
intended to take:

        We solicit comment on our broadcast ownership rules to 
        determine whether these rules are no longer in the public 
        interest as we have traditionally defined it in terms of our 
        competition and diversity goals. Once this phase is completed, 
        we will review the comments and issue a report. In the event we 
        conclude there is good reason to believe that any of the rules 
        within the scope of the review, or portions thereof, should be 
        repealed or modified, we will issue the appropriate Notice(s) 
        of Proposed Rule Making.

Id. p. 3.
    Reply comments were filed in June, 1998 but as of the fall of 1999 
the Commission had not yet completed its review. Therefore, in 
November, 1999 the Congress directed that: ``Within 180 days . . . 
[the] Commission shall complete the first biennial review required by 
section 202(h) of the Telecommunications Act of 1996.'' Consolidated 
Appropriations Act, 2000, Pub. L. No. 106-113,  5003, 113 Stat. 1501, 
1501A-593 (1999). The accompanying Conference Report instructed: ``[I]f 
the Commission concludes that it should retain any of these rules under 
the review unchanged the Commission shall issue a report that includes 
a full justification of the basis for so finding.'' H.R. Conf. Rep. No. 
106-464, at 148 (1999).
    On May 26, 2000 the Commission announced its decision (by a 3-2 
vote) to retain the NTSO and CBCO Rules, among others, and to repeal or 
to modify certain other of its ownership rules. A few weeks later the 
Commission issued a written report in which it explained its actions. 
1998 Biennial Regulatory Review, Biennial Review Report, 15 F.C.C.R. 
11058 (2000) (1998 Report).
1. The NTSO Rule
    The Commission gave three primary reasons for retaining the NTSO 
Rule: (1) to observe the effects of recent changes to the rules 
governing local ownership of television stations; (2) to observe the 
effects of the increase in the national ownership cap to 35 percent; 
and (3) to preserve the power of affiliates in bargaining with their 
networks and thereby allow the affiliates to serve their local 
communities better. Id. pp. 25-30. The Commission also stated that it 
believed repealing the rule would ``increase concentration in the 
national advertising market''--presumably to the detriment of 
competition--and ``enlarge the potential for monopsony power in the 
program production market''--presumably to the detriment of both 
competition and diversity. Id. p. 26 n.78. Commissioners Furchtgott-
Roth and Powell dissented. Id. at 74; id. at 94.
    The effect upon petitioners Fox and Viacom of the Commission's 
decision to retain the NTSO Rule was direct and immediate. Viacom's 
acquisition of CBS brought its audience reach to 41 percent; only a 
stay issued by this court has enabled Viacom to avoid divesting itself 
of enough stations to come within the 35 percent cap. Fox Television 
Stations, Inc. v. FCC, No. 00-1222 at 2 (April 6, 2001). Similarly, the 
Rule is preventing Fox from going forward with its purchase of Chris-
Craft Industries, which purchase would enable Fox to reach more than 40 
percent of the national audience.
2. The CBCO Rule
    In the 1998 Report the Commission decided that retaining the CBCO 
Rule was necessary to prevent cable operators from favoring their own 
stations and from discriminating against stations owned by others. 1998 
Report p. 104 (``current carriage and channel position rules prevent 
some of the discrimination problems, but not all of them''). The 
Commission also determined that the CBCO Rule was ``necessary to 
further [the] goal of diversity at the local level.'' Id. p. 106. The 
Rule, according to the Commission, contributes to the diversity of 
viewpoints in local markets by preserving the voices of independent 
broadcast stations, which provide local news and public affairs 
programming. Id. pp. 106-108. Commissioners Furchtgott-Roth and Powell 
dissented from the retention of this Rule as well. Id. at 74; id. at 
100.
    The effect upon Time Warner of the Commission's decision to retain 
the CBCO Rule was significant. Although Time Warner has not identified 
any specific transaction it would have consummated but for the CBCO 
Rule, the Rule is preventing it from acquiring television stations in 
markets, such as New York City, where it owns a cable system. Time 
Warner asserts that ``obvious procompetitive efficiencies'' would 
result from ``combining'' a television station in that area with its 
all-local-news cable programming service, NY1. Time Warner also argues 
that the CBCO Rule hinders its ``WB'' network from competing with 
networks that own stations in major television markets.
II. Threshold Issues
    Before turning to the merits of the petitions we must consider 
several threshold issues. The Commission, supported by the intervenors, 
contends that its decision not to repeal or to modify the Rules is not 
final agency action, was not meant by the Congress to be subject to 
review, and in any event is not ripe for review. Intervenors NAB and 
NASA also argue that the petitioners failed to exhaust their 
administrative remedies and lack standing.
A. Finality
    This court has jurisdiction to review ``final orders'' of the 
Commission and ``final agency action for which there is no other 
adequate remedy in a court.'' 28 U.S.C.  2342(1); 5 U.S.C.  704. 
Consequently, the court must determine whether the Commission's 
determination was ``final.'' Agency action is final if: (1) it is ``the 
consummation of the agency's decisionmaking process,'' and (2) ``rights 
or obligations have been determined'' by the action or ``legal 
consequences will flow'' from it. Bennett v. Spear, 520 U.S. 154, 178 
(1997). The Commission argues that its retention decision does not meet 
this test; the networks and Time Warner argue persuasively to the 
contrary.
    There is no question a Commission determination not to repeal or to 
modify a rule, after giving notice of and receiving comment upon a 
proposal to do so, is a final agency action subject to judicial review. 
Montana v. Clark, 749 F.2d 740, 744 (D.C. Cir. 1985). Equally clear, an 
agency's denial of a petition to initiate a rulemaking for the repeal 
or modification of a rule is a final agency action subject to judicial 
review. Capital Network Sys., Inc. v. FCC, 3 F.3d 1526, 1530 (D.C. Cir. 
1993). The question presented here is whether the Commission's 
determination not to repeal the NTSO and CBCO Rules, made pursuant to  
202(h) after issuing a ``Notice of Inquiry'' and receiving comment, is 
likewise a final agency action subject to judicial review.
    The Commission first appears to contend that only a decision made 
pursuant to an adjudicative or rulemaking proceeding is final. The 
Commission fails, however, either to offer support for this argument or 
to acknowledge that we have held other types of agency actions to be 
final and reviewable. See, e.g., Ciba-Geigy Corp. v. EPA, 801 F.2d 430, 
435-37 (1986) (holding letter expressing EPA's position on procedural 
question was final agency action because it was definitive and had 
direct and immediate effect upon petitioners); Nat'l Automatic Laundry 
and Cleaning Council v. Schultz, 443 F.2d 689, 702 (1971) (holding 
letter from Administrator of Wage and Hour Division of Department of 
Labor interpreting provision of Fair Labor Standards Act was final 
agency action).
    Second, the Commission argues that the 1998 Report is not final 
because the agency intends to continue considering the ownership rules. 
That, however, does not mean the determination is not ``final'' as a 
matter of law. The 1998 Report is the Commission's last word on 
whether, as of 1998, the Rules were still ``necessary in the public 
interest as the result of competition.''
    Finally, the Commission says the 1998 Report does not impose an 
obligation or deny a right because the petitioners would receive no 
immediate relief if they were to prevail in their present challenge; 
all they could get would be an order requiring the Commission to 
initiate a rulemaking. We shall have more to say below about the relief 
to which the petitioners are entitled. For now it is sufficient to 
observe that by the Commission's own account its decision is, in 
effect, at the least a decision not to initiate a rulemaking, and it is 
established that ``an agency's refusal to institute [rulemaking] 
proceedings has sufficient legal consequence to meet the second 
criterion of the finality doctrine.'' Capital Network Sys., 3 F.3d at 
1530. Therefore we conclude, as we must, that the decision under 
review--holding that the NTSO and CBCO Rules were necessary in the 
public interest--is a final agency action.
B. Reviewability
    Separate from the question whether the 1998 decision is a final 
agency action, the Commission argues that the ``Congress did not intend 
for the Commission's biennial reviews . . . to create reviewable 
action.'' In support of this proposition, the Commission notes that  
202(c)(2) of the 1996 Act calls for the Commission to conduct a 
rulemaking to determine whether to retain, to modify, or to eliminate 
local television ownership limitations; in contrast,  202(h) requires 
only that the Commission ``review'' rules to determine whether to 
repeal or to modify them. The Commission next argues that under the 
1996 Act a ``determination,'' unlike a rulemaking decision, is not a 
reviewable event. It contends that if the Congress had wanted to 
subject to judicial scrutiny determinations made pursuant to the 
biennial reviews required by  202(h), then it would have said so, as 
it said in  252(e)(6) of the Act that a state commission's 
``determination'' approving or disapproving an interconnection 
agreement shall be reviewable in Federal court. Additionally, the 
Commission observes that  202(h) does not require it to submit a 
written report to the Congress. All this, according to the agency, 
indicates the Congress did not intend that the courts review agency 
determinations made pursuant to  202(h). In any event, the Commission 
argues, under Chevron, U.S.A., Inc. v. Natural Resources Defense 
Council, Inc., 467 U.S. 837 (1984), the court must defer to the 
Commission's statutory interpretation to that effect. Finally, the 
Commission contends that if its every decision to retain a rule under  
202(h) were subject to judicial review, then the agency and the courts 
alike would face tasks so overwhelming as not to be a result sensibly 
ascribed to the Congress.
    In light of the presumption that final agency action is reviewable, 
see Abbott Labs. v. Gardner, 387 U.S. 136, 140-41 (1967), we must 
reject the Commission's argument that the text and structure of the 
1996 Act preclude judicial review. The contrasts the Commission draws 
between  202(c) and  202(h), and between  252 and  202(h), fall 
short of the ``clear and convincing evidence'' of congressional intent 
needed to foreclose review under Abbott Labs., 387 U.S. at 141. Nor is 
an agency's interpretation of a statutory provision defining the 
jurisdiction of the court entitled to our deference under Chevron. 
Adams Fruit Co. v. Barrett, 494 U.S. 638, 650 (1990). We appreciate 
that  202(h) requires the Commission to undertake a significant task 
in a relatively short time, but we do not see how subjecting the result 
to judicial review makes the Commission's responsibility significantly 
more burdensome, let alone so formidable as to be improbable. In sum, 
having held that the 1998 decision is a final agency action, we see 
nothing in the 1996 Act that forecloses judicial review thereof.
C. Ripeness
    Next the Commission contends that its decision not to repeal or to 
modify the ownership rules in question is not ripe for review because 
the issues are not ``fit'' for judicial review, and delay would not 
cause the petitioners any hardship. See Abbott Labs., 387 U.S. at 149. 
First, the Commission points out that it is in a better position than 
the court to determine whether the challenged rules are necessary in 
the public interest. Second, the Commission argues that the petitioners 
will not be harmed if the 1998 Report is not subject to review because 
they can seek relief from the operation of the rules in other ways--a 
petition for a rulemaking or a request for a waiver; and again, the 
relief available to the petitioners would be, in any event, only an 
order directing the Commission to conduct a rulemaking to consider 
modification or repeal of the challenged rules. In addition, 
intervenors CFA and UCC contend that the decision is not ripe for 
judicial review because they ``and other interested parties have not 
yet had an opportunity to present responsive arguments relating [to 
the] rules here at issue.''
    We find these arguments unpersuasive. First, the issues in this 
case are fit for judicial review because the questions presented are 
purely legal ones: whether the Commission's determination was arbitrary 
and capricious or contrary to law, and whether the challenged rules 
violate the First Amendment. Because the court will not review de novo 
the Commission's decision to retain the Rules, the Commission's 
argument that it is in the better position to make that determination 
is, while doubtless true, quite beside the point.
    Second, the petitioners will indeed be harmed if we do not review 
the Commission's decision now. Although they could challenge the Rules 
by other means, retention of the Rules in the interim significantly 
harms both the networks and Time Warner. As we have said, the NTSO Rule 
constrains Fox and Viacom from entering into or completing certain 
specific transactions, and the CBCO Rule prevents Time Warner from 
acquiring television stations in certain markets where it would like to 
do so. Moreover, the Commission is mistaken in asserting that the only 
remedy available to the petitioners is a remand for rulemaking. For the 
reasons we provide below (in Part III.C), we think that under  202(h) 
a reviewing court may vacate the underlying rule if it determines not 
only that the Commission failed to justify retention of the rule but 
that it is unlikely the Commission will be able to do so on remand.
    Finally, CFA, UCC, and all other interested parties were invited in 
the Notice of Inquiry to comment specifically upon whether the 
broadcast ownership rules should be retained. 1998 Biennial Regulatory 
Review, Notice of Inquiry, 13 F.C.C.R. 11276, p. 3 (1998). Perhaps CFA 
and UCC, unlike the other intervenors and many members of the public, 
chose not to comment in anticipation of doing so if the Commission were 
later to propose repealing the Rules. Be that as it may, we do not see 
how that can make unripe an otherwise ripe issue or deprive those 
harmed of their right to timely review of a final agency action. Hence, 
we conclude the Commission's decision is ripe for review.
D. Exhaustion and Standing
    Intervenors NAB and NASA argue that the petitioners failed to 
exhaust their administrative remedies because they neither petitioned 
for a rulemaking to amend or repeal the Rules nor asked the Commission 
for a waiver of the Rules. They argue that in Tribune Co. v. FCC, 133 
F.3d 61, 69 (1998), this court ``made clear that the exhaustion 
requirement applies to challenges launched against the ownership rules 
that are subject to the Commission's biennial review process.'' The 
intervenors' reliance upon the Tribune case is misplaced, however. When 
that case was decided the Commission had not yet completed a review 
pursuant to  202(h). In this case, where the Commission had just 
determined that the rules in question were still necessary in the 
public interest, it obviously would have been futile for the 
petitioners to have petitioned the agency for a rulemaking to repeal 
them. And the intervenors cite no authority suggesting the petitioners 
were required to request a waiver from the agency even though a waiver 
is not the relief they seek from the court; nor do the intervenors 
proffer any reason to believe the petitioners would have been entitled 
to a waiver had they sought one.
    The intervenors also argue that the petitioners lack standing 
because a favorable decision in this case would not redress their 
injuries. Their point is that the Commission would still have to 
consider in a rulemaking whether to repeal the Rules, but as we have 
just seen in connection with the Commission's objection that this case 
is not ripe for review, that is not so. We therefore conclude that the 
petitioners have standing to bring their claims before the court.
III. The NTSO Rule
    Having found no obstacle to our adjudication of this dispute, we 
turn at last to the merits. The networks assert that the Commission's 
decision to retain the NTSO Rule was contrary to 202(h) and arbitrary 
and capricious in violation of the APA; alternatively they contend the 
Rule violates the First Amendment.
A. Section 202(h) and the APA
    The networks argue that the Commission's decision not to repeal the 
NTSO Rule was arbitrary and capricious and contrary to  202(h) for 
three reasons: (1) the Rule is fundamentally irrational, and the 
Commission's justifications for retaining it are correlatively flawed; 
(2) the Commission failed meaningfully to consider whether the Rule was 
``necessary'' in the public interest; and (3) the Commission failed to 
explain why it departed from its previous position that the Rule should 
be repealed.
1. Is the Rule irrational?
    The networks advance three reasons for thinking that retention of 
the NTSO Rule was irrational: The 35 percent cap is if anything less 
justified than the aggregate limitation upon cable system ownership we 
held a violation of the First Amendment in Time Warner Entertainment 
Co., L.P. v. FCC, 240 F.3d 1126 (2001) (Time Warner II); the Commission 
has provided no persuasive reason to believe retention of the Rule is 
necessary in the public interest; and retention of the Rule is 
inconsistent with some of the Commission's other recent decisions.
    Time Warner II. According to the networks, ``[t]he logic of Time 
Warner II applies with even greater force here.'' They contend that the 
television station ownership cap of 35 percent is more severe than the 
cable system ownership cap of 30 percent struck down in Time Warner II, 
because unlike cable systems ``broadcasters face intense competition 
from numerous stations in each local market'' and the 35 percent cap is 
measured in terms of homes potentially rather than actually served. In 
response, the Commission, supported by intervenors NAB and NASA, notes 
two distinctions between Time Warner II and this case: The 30 percent 
cap in Time Warner II was set by the Commission whereas the 35 percent 
cap at issue here was set by the Congress; and the provision of the 
Cable Act at issue in the prior case limited the extent to which the 
Commission could regulate in furtherance of diversity, whereas  202(h) 
mandates that a rule necessary ``in the public interest''--including 
the public interest in diversity--be retained.
    The networks are right, of course, that a broadcaster faces more 
local competition than does a cable system. We must also acknowledge 
that under the cap expressed in terms of a ``potential audience reach'' 
of 35 percent, an owner of television stations cannot in practice 
achieve an audience share that approaches 35 percent of the national 
audience. Nonetheless, we find the networks' reliance upon Time Warner 
II less than convincing for two reasons, one advanced by the Commission 
and one not. As the Commission points out, we concluded in Time Warner 
II that the 1992 Cable Act limited the agency's authority to impose 
regulations solely in order to further diversity in programming, Time 
Warner II, 240 F.3d at 1135-36, whereas no such limitation is at work 
in this case. See page 18 below. Additionally, in Time Warner II we 
reviewed the challenged regulations under first amendment 
``intermediate scrutiny,'' which is more demanding than the arbitrary 
and capricious standard of the APA. See Time Warner II, 240 F.3d at 
1130 (``a government regulation subject to intermediate scrutiny will 
be upheld if it `advances important government interests unrelated to 
the suppression of free speech and does not burden substantially more 
speech than necessary to further those interests' '') (quoting Turner 
Broad. Sys., Inc. v. FCC, 520 U.S. 180, 189 (1997)). In sum, although 
Time Warner II does give the court a point of reference, it is not 
controlling here.
    The Commission's reasons: competition, diversity, et al., The 
networks next argue that neither safeguarding competition nor promoting 
diversity generally can support the Commission's decision to retain the 
NTSO Rule. They then take on the specific reasons given by the 
Commission in support of its 1998 decision.
    As to competition, the networks note that there is no evidence 
``that broadcasters have undue market power,'' such as to dampen 
competition, in any relevant market. The Commission attempts to rebut 
the point, but to no avail. In its brief the agency cites a single, 
barely relevant study by Phillip A. Beutel et al., entitled Broadcast 
Television Networks and Affiliates: Economic Conditions and 
Relationship--1980 and Today (1995). Insofar as there is any point of 
tangency between that study and the matter at hand, it is in the 
authors' conclusion that ``the available evidence tends to refute the 
proposition that affiliates have gained negotiating power since . . . 
1980.'' Id. at 12. The study plainly does not, however, suggest that 
broadcasters have undue market power. The only other evidence to which 
the Commission points is a table said to show that ``many group owners 
have acquired additional stations and increased their audience reach 
since the Telecom Act's passage.'' 1998 Report p. 27. As the networks 
point out, however, ``such figures alone, without some tangible 
evidence of an adverse effect on the market, are insufficient to 
support retention of the Cap.'' Finally, the Commission's reference in 
the 1998 Report to the national advertising and the program production 
markets is wholly unsupported and undeveloped. 1998 Report p. 26 n.78. 
Consequently, we must conclude, as the networks maintain, that the 
Commission has no valid reason to think the NTSO Rule is necessary to 
safeguard competition.
    As to diversity, the networks contend there is no evidence that 
``the national ownership cap is needed to protect diversity'' and that 
in any event  202(h) does not allow the Commission to regulate 
broadcast ownership ``in the name of diversity alone.'' The Commission, 
again supported by intervenors NAB and NASA, persuasively counters the 
statutory point: In the context of the regulation of broadcasting, 
``the public interest'' has historically embraced diversity (as well as 
localism), see FCC v. Nat. Citizens Comm. for Broad., 436 U.S. 775, 795 
(1978) (NCCB), and nothing in  202(h) signals a departure from that 
historic scope. The question, therefore, is whether the Commission 
adequately justified its retention decision as necessary to further 
diversity or localism. In the 1998 Report the Commission mentioned 
national diversity as a justification for retaining the NTSO Rule but 
never elaborated upon the point. 1998 Report p. 26 n.78. This 
justification fails for two reasons. First, the Commission failed to 
explain why it was no longer adhering to the view it expressed in the 
1984 Report that national diversity is irrelevant. 1984 Report pp. 31-
32. Second, the Commission's passing reference to national diversity 
does nothing to explain why the Rule is necessary to further that end. 
The Commission did, however, discuss at some length fostering local 
diversity by strengthening the bargaining position of affiliates vis-a-
vis their networks, 1998 Report p. 30, a justification to which we 
shall come shortly.
    As to the Commission's three more specific reasons for retaining 
the NTSO Rule, the networks contend that each is inadequate. The 
Commission stated that retaining the cap was necessary so it could: (1) 
observe the effects of recent changes in the rules governing local 
ownership of television stations; (2) observe the effects of the 
national ownership cap having been raised to 35 percent; and (3) 
preserve the power of local affiliates to bargain with their networks 
in order to promote diversity of programming. 1998 Report pp. 25-30. We 
agree with the networks that these reasons cannot justify the 
Commission's decision.
    The first reason is insufficient because there is no obvious 
relationship between relaxation of the local ownership rule--which now 
permits a single entity to own two broadcast stations in the same 
market in some situations, see Review of the Commission's Regulations 
Governing Television Broadcasting, Report & Order, 14 F.C.C.R. 12903, 
p. 64 (1999)--and retention of the national ownership cap, and the 
Commission does nothing to suggest there is any non-obvious 
relationship. Furthermore, as the networks point out, neither the first 
nor the second reason is responsive to  202(h): The Commission's wait-
and-see approach cannot be squared with its statutory mandate 
promptly--that is, by revisiting the matter biennially--to ``repeal or 
modify'' any rule that is not ``necessary in the public interest.''
    The Commission, with the support of intervenors NAB and NASA, 
argues that it was required to defer to the decision of the Congress to 
set the initial ownership cap in the 1996 Act at 35 percent. For this 
the Commission relies upon both the House and the Senate having 
rejected a proposal to raise the cap to 50 percent, and upon the 
statement of Congressman Markey, ranking minority Member of the 
relevant subcommittee of the House, that the Congress's choice of the 
35 percent cap ``should settle the issue for many years to come.'' 142 
Cong. Rec. H1145-06, H1170 (daily ed. Feb. 1, 1996). This legislative 
history is no basis whatever for the Commission's decision. First, the 
choice of 35 percent rather than any other number determined only the 
starting point from which the Commission was to assess the need for 
further change. Section 202(h) itself requires the Commission to 
determine whether its ownership rules--specifically including ``rules 
adopted pursuant to this section,'' such as the present NTSO Rule--are 
necessary in the public interest. Thus, the statute imposed upon the 
Commission a duty to examine critically the new 35 percent NTSO Rule 
and to retain it only if it continued to be necessary; for the 
Commission to defer to the Congress's choice of 35 percent as of 1996 
is to default upon this ongoing duty. Second, ``the remarks of a single 
legislator, even the sponsor,'' cannot be allowed to alter the plain 
meaning of the legislation upon which he comments. Chrysler Corp. v. 
Brown, 441 U.S. 281, 311 (1979). In this instance, moreover, the 
Congressman did not even purport to interpret the statute; he merely 
offered his own prediction that competitive conditions would not 
warrant a change in the Rule anytime soon. Maybe yes, maybe no. The 
statute says that is for the Commission to decide. Consequently, the 
first two reasons given by the Commission do nothing to support its 
decision.
    Nor does the Commission's third reason--that the Rule is necessary 
to strengthen the bargaining power of network affiliates and thereby to 
promote diversity of programming--have sufficient support in the 
present record. Although we do not agree with the networks that this 
reason is unresponsive to  202(h)--as we have said, that section 
allows the Commission to retain a rule necessary to safeguard the 
public interest in diversity--we must agree that the Commission's 
failure to address itself to the contrary views it expressed in the 
1984 Report effectively undermines its present rationale. In the 1998 
Report (p. 30) the Commission asserted that independently-owned 
affiliates play a valuable role by ``counterbalancing'' the networks' 
strong economic incentive in clearing all network programming ``because 
they have the right . . . to air instead'' programming more responsive 
to local concerns. In the 1984 Report, however, the Commission said it 
had ``no evidence indicating that stations which are not group-owned 
better respond to community needs, or expend proportionately more of 
their revenues on local programming.'' 1984 Report p. 53. The later 
decision does not indicate the Commission has since received such 
evidence or otherwise found reason to repudiate its prior conclusion.
    In sum, we agree with the networks that the Commission has adduced 
not a single valid reason to believe the NTSO Rule is necessary in the 
public interest, either to safeguard competition or to enhance 
diversity. Although we agree with the Commission that protecting 
diversity is a permissible policy, the Commission did not provide an 
adequate basis for believing the Rule would in fact further that cause. 
We conclude, therefore, that the 1998 decision to retain the NTSO Rule 
was arbitrary and capricious in violation of the APA.
    Other Commission actions. The networks argue that the Commission's 
decision is also arbitrary and capricious because it is inconsistent 
with recent Commission decisions relaxing the local television station 
ownership and the radio/televison cross-ownership rules, as well as its 
decisions repealing the prime time access and the financial and 
syndication rules. The Commission answers that it has properly followed 
the lead of the Congress in taking an ``incremental'' approach to the 
deregulation of broadcast ownership. Although we are not convinced the 
Congress required such an approach--the mandate of  202(h) might 
better be likened to Farragut's order at the battle of Mobile Bay 
(``Damn the torpedoes! Full speed ahead.'') than to the wait-and-see 
attitude of the Commission--because the decisions to which the networks 
point deal with regulations that are not closely related, analytically, 
to the NTSO Rule, they are not inconsistent with the Commission's 
decision to retain the national ownership cap.
2. Failure to comply with 202(h)
    The networks argue that the Commission's decision to retain the 
NTSO Rule was not only arbitrary and capricious but also contrary to  
202(h). As just discussed, we agree with the networks that two of the 
reasons the Commission gave for retaining the Rule did not even purport 
to show the Rule was necessary in the public interest, as required by 
the statute. Furthermore, we agree that the Commission ``provided no 
analysis of the state of competition in the television industry to 
justify its decision to retain the national ownership cap.'' The 
Commission's brief description of the broadcasting market, a single 
paragraph of the 1998 Report under the heading ``Status of Media 
Marketplace,'' is woefully inadequate: The Commission merely listed the 
number of television households, the number of television stations, the 
percentage of those stations that are affiliated with networks, and the 
number of stations an average viewer can receive, without defining the 
relevant markets, let alone assessing the state of competition therein. 
See 1998 Report p. 9. Nor did the Commission attempt to link the listed 
facts to its decision to retain the national ownership cap. That, 
however, is precisely what  202(h) requires. Consequently, we agree 
with the networks that the Commission ``failed even to address 
meaningfully the question that Congress required it to answer.''
3. Failure to address the 1984 Report
    The Commission's failure to address its 1984 Report in the course 
of its contrary 1998 Report is yet another way in which the decision to 
retain the NTSO Rule was arbitrary and capricious. Recall that in the 
1984 Report the Commission concluded the NTSO Rule should be repealed 
because it focuses upon national rather than local markets and because 
even then any need for the Rule had been undermined by competition. 
1984 Report p. 108. Indeed, even when the Commission subsequently 
reconsidered its decision to eliminate the national ownership cap--as 
necessitated by the moratorium the Congress imposed upon implementing 
the 1984 Report--it expressly re-affirmed the conclusions reached in 
the Report. Amendment of Multiple Ownership Rules, Mem. Op. & Order, 
100 F.C.C.2d 74, p. 3 (1984). To retain the cap in 1998 without 
explanation of the change in the Commission's view is, therefore, to 
all appearances, simply arbitrary. The Commission may, of course, 
change its mind, but it must explain why it is reasonable to do so. See 
Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 
29, 57 (1983) (``An agency's view of what is in the public interest may 
change, either with or without a change in circumstances. But an agency 
changing its course must supply a reasoned analysis.''); Telecomm. 
Research and Action Ctr. v. FCC, 801 F.2d 501, 518 (D.C. Cir. 1986).
    The Commission now argues that the refusal of the Congress to allow 
the agency to implement the 1984 Report and its decision in the 1996 
Act to retain an ownership cap rendered irrelevant the views the 
Commission expressed in the 1984 Report. When the Congress in 1996 
directed the Commission periodically to review the ownership cap, 
however, it did nothing to preclude the Commission from considering 
certain arguments in favor of repealing the cap--including the 
arguments the Commission had embraced in 1984. So long as the reasoning 
of the 1984 Report stands unrebutted, the Commission has not fulfilled 
its obligation, upon changing its mind, to give a reasoned account of 
its decision.
    In sum, we hold that the decision to retain the NTSO Rule was both 
arbitrary and capricious and contrary to  202(h) of the 1996 Act. The 
networks argue that this requires us to vacate the Rule rather than 
merely to remand the case to the agency for further consideration. As 
will be discussed below, we disagree, and for this reason we must go on 
to consider the networks' first amendment challenge to the NTSO Rule 
which, if successful, without question would require that the Rule be 
vacated.
B. The First Amendment
    The networks contend that the NTSO Rule violates the First 
Amendment because it prevents them from speaking directly--that is, 
through stations they own and operate--to 65 percent of the potential 
television audience in the United States. They would have the court 
subject the Rule to ``intermediate scrutiny,'' rather than to 
rationality review, on the grounds that: (a) in today's populous media 
marketplace the ``scarcity'' rationale associated with Red Lion 
Broadcasting Co. v. FCC, 395 U.S. 367 (1969)--but in fact, we note, 
first set forth in National Broadcasting Co. V. United States, 319 U.S. 
190, 226-27 (1943) (NBC)--``makes no sense'' as a reason for regulating 
ownership; (b) even if scarcity is still a valid concern, the NTSO 
Rule, which does not prevent an entity from owning more than one 
station in the same local market, does nothing to mitigate the effect 
of scarcity; and (c) FCC v. League of Women Voters, 468 U.S. 364 
(1984), which postdates Red Lion, mandates heightened scrutiny for all 
restrictions on broadcast speech. In the alternative, the networks 
argue that even if the NTSO Rule is subject only to review for mere 
rationality--the least demanding type of first amendment scrutiny--then 
it is still unconstitutional because it ``severely restricts [their] 
free speech rights and fails to advance any countervailing public 
interest.''
    The Commission urges the court to accord the NTSO Rule more 
deference than is accorded under intermediate scrutiny on the ground 
that the Supreme Court upheld similar ownership rules in NCCB and NBC 
upon determining they were merely reasonable. Just so.
    In NCCB the court upheld the newspaper/broadcast cross-ownership 
rule stating: ``The regulations are a reasonable means of promoting the 
public interest in diversified mass communications; thus they do not 
violate the First Amendment rights of those who will be denied 
broadcast licenses pursuant to them.'' 436 U.S. at 802. In NBC the 
court upheld a regulation that prohibited a network from owning more 
than one radio station in a market and from owning any station in a 
market with few stations. 319 U.S. at 206-08. As in NCCB, the Court in 
NBC held the regulation to be consistent with the First Amendment 
because it was based upon network practices deemed contrary to the 
public interest and not upon the applicants' ``political, economic or 
social views, or upon any other capricious basis.'' Id. at 226-27.
    The networks offer no convincing reason those cases should not 
control. First, contrary to the implication of the networks' argument, 
this court is not in a position to reject the scarcity rationale even 
if we agree that it no longer makes sense. The Supreme Court has 
already heard the empirical case against that rationale and still 
``declined to question its continuing validity.'' Turner I, 512 U.S. 
622, 638 (1994). In any event, it is not the province of this court to 
determine when a prior decision of the Supreme Court has outlived its 
usefulness. Agostini v. Felton, 521 U.S. 203, 237 (1997).
    Second, contrary to the networks' express protestations, the 
scarcity rationale is implicated in this case. The scarcity rationale 
is based upon the limited physical capacity of the broadcast spectrum, 
which limited capacity means that ``there are more would-be 
broadcasters than frequencies available.'' Turner I, 512 U.S. at 637. 
In the face of this limitation, the national ownership cap increases 
the number of different voices heard in the Nation (albeit not the 
number heard in any one market). But for the scarcity rationale, that 
increase would be of no moment.
    Third, we do not think League of Women Voters mandates heightened 
scrutiny in this case. That case involved a prohibition upon 
editorializing by noncommercial broadcasters that received government 
money under the Public Broadcasting Act, which prohibition the Court 
concluded was a content-based restriction upon speech. 468 U.S. at 383-
84. The Court applied heightened scrutiny, noting that restrictions 
placed upon broadcasters in order to ``secure the public's First 
Amendment interest in receiving a balanced presentation of views on 
diverse matters of public concern,'' such as the fairness doctrine at 
issue in Red Lion, 395 U.S. at 386, ``have been upheld only when we 
were satisfied that the restriction is narrowly tailored to further a 
substantial government interest.'' 468 U.S. at 380. The Court did not 
question, however, the continued propriety of deferential scrutiny of 
structural regulations. Id. The NTSO Rule, unlike the ban upon 
editorializing at issue in League of Women Voters, is not a content-
based regulation; it is a regulation of industry structure, like the 
newspaper/broadcast cross-ownership rule the Court concluded was 
content-neutral in NCCB, and like the network ownership restriction 
upheld in NBC. See NCCB, 436 U.S. at 801; NBC, 319 U.S. at 226-27. For 
these reasons, the deferential review undertaken by the Supreme Court 
in NCCB and NBC is also appropriate here.
    The networks, drawing directly upon the Commission's 1984 Report, 
argue that the Rule fails even rationality review because 
``[p]ermitting one entity to own many stations can foster . . . more 
programming preferred by consumers.'' They also suggest that but for 
the Rule ``buyers with superior skills [could] purchase stations where 
they may be able to do a better job'' of meeting local needs even as 
they realize economies of scale.
    This paean to the undoubted virtues of a free market in television 
stations is not, however, responsive to the question whether the 
Congress could reasonably determine that a more diversified ownership 
of television stations would likely lead to the presentation of more 
diverse points of view. By limiting the number of stations each network 
(or other entity) may own, the NTSO Rule ensures that there are more 
owners than there would otherwise be. An industry with a larger number 
of owners may well be less efficient than a more concentrated industry. 
Both consumer satisfaction and potential operating cost savings may be 
sacrificed as a result of the Rule. But that is not to say the Rule is 
unreasonable because the Congress may, in the regulation of 
broadcasting, constitutionally pursue values other than efficiency--
including in particular diversity in programming, for which diversity 
of ownership is perhaps an aspirational but surely not an irrational 
proxy. Simply put, it is not unreasonable--and therefore not 
unconstitutional--for the Congress to prefer having in the aggregate 
more voices heard, each in roughly one-third of the nation, even if the 
number of voices heard in any given market remains the same.
C. Remedy
    We have concluded that, although the NTSO Rule is not 
unconstitutional, the Commission's decision to retain it was arbitrary 
and capricious and contrary to law because the Commission failed to 
give an adequate reason for its decision, failed to comply with  
202(h), and failed to explain its departure from its previously 
expressed views. Now we must determine the appropriate remedy.
    The networks ask us to vacate the Rule, relying upon this court's 
opinion in Radio-Television News Directors Ass'n v. FCC, 229 F.3d 269 
(2000) (RTDNA II). See also RTNDA I, 184 F.3d 872, 888 n.21 (D.C. Cir. 
1999) (holding open possibility court could vacate political editorial 
and personal attack rules after deciding Commission, which had proposed 
to repeal them, had inadequately justified decision not to do so). The 
Commission, supported by the intervenors, argue that the petitioners 
are entitled only to an order requiring the Commission to ``conduct a 
rulemaking proceeding, which might or might no[t] result in repeal of 
the rules. . . .''
    Under the APA reviewing courts generally limit themselves to 
remanding for further consideration an agency order wanting an 
explanation adequate to sustain it. Thus, when an agency arbitrarily 
and capriciously denies a petition for rulemaking the proper remedy is 
typically to remand the case for reconsideration. See, e.g., Geller v. 
FCC, 610 F.2d 973, 980 (D.C. Cir. 1979) (vacating denial of petition 
for rulemaking to repeal cable television rules and remanding for 
reconsideration). The case upon which the networks rely involved 
extraordinary circumstances--extreme delay and non-responsiveness by 
the Commission--that ultimately caused the court to issue a writ of 
mandamus. RTDNA II, 229 F.3d at 272; see also Am. Horse Prot. Ass'n, 
Inc. v. Lyng, 812 F.2d 1, 7 (D.C. Cir. 1987) (explaining that remand 
with instructions to institute rulemaking is appropriate ``only in the 
rarest and most compelling of circumstances''). In the present case, 
however, the agency appears to have been more errant than recalcitrant. 
At the same time, the Commission's argument that the court should limit 
itself to setting aside the decision found to be deficient overlooks 
the relevance of  202(h).
    Although a decision under  202(h) to retain a rule is similar to 
an agency's denial of a petition for rulemaking, the underlying 
procedures differ in at least one important respect that requires a 
different approach upon judicial review: Section 202(h) carries with it 
a presumption in favor of repealing or modifying the ownership rules. 
Under  202(h) the Commission may retain a rule only if it reasonably 
determines that the rule is ``necessary in the public interest.'' If 
the reviewing court lacked the power to require the Commission to 
vacate a rule it had improperly retained and could require the 
Commission only to reconsider its decision, then the presumption in  
202(h) would lose much of its bite. It is not surprising, therefore, 
that counsel for the Commission conceded at oral argument that the 
court has the power to vacate--technically, to order the Commission to 
vacate--the ownership rules. For this reason, we conclude that vacatur 
is one remedy available to redress a violation of  202(h).
    At the same time, it is clear that  202(h) should not be read to 
require the court always to vacate a rule improperly retained by the 
Commission. After all, vacatur is not necessarily indicated even if an 
agency acts arbitrarily and capriciously in promulgating a rule. United 
States Telecom Ass'n v. FBI, 2002 WL 63087, *7 (D.C. Cir. 2002); Ill. 
Pub. Telecomm. Ass'n v. FCC, 123 F.3d 693, 693 (D.C. Cir. 1997). The 
question is one of degree; as we said in Allied-Signal, Inc. v. United 
States Nuclear Regulatory Comm'n, 988 F.2d 146 (D.C. Cir. 1993): ``The 
decision whether to vacate depends on the seriousness of the order's 
deficiencies (and thus the extent of doubt whether the agency chose 
correctly) and the disruptive consequences of an interim change that 
may itself be changed.'' Id. at 150-51. Although here we are reviewing 
an order declining to institute a rulemaking rather than an order 
promulgating a rule, we think the Allied-Signal test remains 
appropriate. Indeed, the situation at hand is procedurally similar to 
that we faced in RTNDA I, where we applied the Allied-Signal test. 184 
F.3d at 887-89.
    Applying that test we conclude the NTSO Rule should not be vacated. 
Although the Commission's decision to retain the Rule was, as written, 
arbitrary and capricious and contrary to  202(h), we cannot say with 
confidence that the Rule is likely irredeemable because the Commission 
failed to set forth the reasons--either analytical or empirical--for 
which it no longer adheres to the conclusions in its 1984 Report. We do 
not infer from this silence that the agency cannot justify its change 
of position, for the Commission apparently labored under the 
misapprehension of law that the Congress, by blocking implementation of 
the 1984 Report, had relieved the Commission from further concern with 
the analysis therein. If the Commission rested its decision upon the 
erroneous premise that the Congress had made its 1984 Report 
irrelevant, then having been disabused the Commission may yet conclude 
the Rule is necessary to promote diversity at the local or the national 
level. To reach these conclusions, of course, the Commission would have 
to state the reason(s) for which it believes its contrary views set out 
in the 1984 Report were incorrect or are inapplicable in the light of 
changed circumstances, but that is by no means inconceivable; the 
Report is, after all, now almost 20 years old. For this reason alone, a 
remand rather than vacatur is indicated. Moreover, we note that 
although the Commission, in its 1998 Report, failed to develop any 
affirmative justification for the Rule based upon competitive concerns, 
it did, albeit somewhat cryptically, advert to possible competitive 
problems in the national markets for advertising and program 
production, 1998 Report p. 26 n.78; and intervenors NAB and NASA make a 
plausible argument that the NTSO Rule indeed furthers competition in 
the national television advertising market. The Commission needs either 
to develop or to jettison these points on remand. In sum, we cannot say 
it is unlikely the Commission will be able to justify a future decision 
to retain the Rule.
    In these circumstances, the other factor to be considered under 
Allied Signal--the disruption that might be caused if the court were 
now to vacate the Rule and the agency were later to re-promulgate it 
with an adequate explanation--is only barely relevant. It does not 
appear to us that there would be a significant disruption of the 
agency's regulatory program--contrast Allied-Signal, 988 F.2d at 151, 
where the agency would have had to pay refunds and could not have 
regulated retroactively--because the Commission presumably could 
require an entity to divest any station it acquired, at peril of being 
in violation of a newly promulgated ownership cap. Cf. NCCB, 436 U.S. 
at 802 (upholding Commission's decision, upon promulgation of 
newspaper/broadcast cross-ownership rule, to require divestiture in 
some markets where ownership concentration was particularly high). At 
the same time, if the Commission is right about the NTSO Rule, vacating 
it would for a time deprive some viewers of some diversity in the 
points of view available on the airwaves. See Davis County Solid Waste 
Mgm't v. EPA, 108 F.3d 1454, 1458-59 (D.C. Cir. 1997) (considering harm 
to environment that vacatur of emissions standards would impose). In 
the end, it appears that vacatur could cause some but not a great loss 
to the viewing public.
    Upon consideration of both the Allied-Signal factors, we conclude 
that, though the disruptive consequences of vacatur might not be great, 
the probability that the Commission will be able to justify retaining 
the NTSO Rule is sufficiently high that vacatur of the Rule is not 
appropriate. See United States Telecom Ass'n, 2002 WL 63087 at *7 
(focusing upon first factor of Allied-Signal test). We therefore remand 
this case to the Commission for further consideration whether to repeal 
or to modify the NTSO Rule.
IV. The CBCO Rule
    Time Warner's principal contention is that the CBCO Rule is an 
unconstitutional abridgment of its first amendment right to speak. Time 
Warner also argues that the Commission's decision to retain the Rule 
was arbitrary and capricious and contrary to  202(h). Because we agree 
that the retention decision was arbitrary and capricious as well as 
contrary to 202(h), and that this requires us to vacate the Rule, we 
do not reach Time Warner's first amendment claim.
A. Section 202(h) and the APA
    Time Warner raises a host of objections to the Commission's 
decision to retain the CBCO Rule. The Commission is largely 
unresponsive to these arguments; to the extent it is responsive, it is 
unpersuasive.
    First, Time Warner argues that the Commission impermissibly 
justified retaining the Rule on a ground, namely that cable/broadcast 
combines might ``discriminate against unaffiliated broadcasters in 
making cable-carriage decisions,'' different from the one it gave when 
it promulgated the Rule, namely, that ``cable should be protected'' 
from acquisition by networks bent upon pre-empting new competition. The 
Commission does not respond but even so we think the argument is 
clearly without merit. Nothing in  202(h) suggests the grounds upon 
which the Commission may conclude that a rule is necessary in the 
public interest are limited to the grounds upon which it adopted the 
rule in the first place.
    Next, Time Warner argues that the Commission applied too lenient a 
standard when it concluded only that the CBCO Rule ``continues to serve 
the public interest,'' 1998 Report p. 102, and not that it was 
``necessary'' in the public interest. Again the Commission is silent, 
but this time we agree with Time Warner; the Commission appears to have 
applied too low a standard. The statute is clear that a regulation 
should be retained only insofar as it is necessary in, not merely 
consonant with, the public interest.
    Finally, Time Warner attacks the specific reasons the Commission 
gave for retaining the Rule. All three reasons relate either to 
competition or to diversity, and we have grouped them below 
accordingly.
1. Competition
    The Commission expressed concern that a cable operator that owns a 
broadcast station: (1) can ``discriminate'' against other broadcasters 
by offering cable/broadcast joint advertising sales and promotions; and 
(2) has an incentive not to carry, or to carry on undesirable channels, 
the broadcast signals--including the forthcoming digital signals--of 
competing stations. 1998 Report pp. 103-105. Addressing the first 
concern, Time Warner argues that the Commission failed both to explain 
why joint advertising rates constitute ``discrimination--which is 
simply a pejorative way of referring to economies of scale and 
scope''--and to ``point to substantial evidence that such 
`discrimination' is a non-conjectural problem.'' Addressing the second 
concern (in part), Time Warner contends that refusals by cable 
operators to carry digital signals must not be a significant problem 
because the Commission has declined to impose must-carry rules for 
duplicate digital signals. See Carriage of Digital Television Broadcast 
Signals, First Report & Order and Further Notice of Proposed 
Rulemaking, 16 F.C.C.R. 2598 (2001). Both of Time Warner's points are 
plausible--indeed the first is quite persuasive--and we have no basis 
upon which to reject either inasmuch as the Commission does not respond 
to them.
    Next, Time Warner gives four reasons for which the Commission's 
concern about discriminatory carriage of broadcast signals is 
unwarranted. First, must-carry provisions, see 47 U.S.C.  534-535; 47 
C.F.R.  76.55 et seq., already ensure that broadcast stations have 
access to cable systems; indeed, the Commission pointed to only one 
instance in which a cable operator denied carriage to a broadcast 
station (Univision). See 1998 Report p. 104. Second, competition from 
direct broadcast satellite (DBS) providers makes discrimination against 
competing stations unprofitable. Third, the Commission failed to 
explain why it departed from the position it took in the 1992 Report, 
where it said that the CBCO Rule was not necessary to prevent carriage 
discrimination. Fourth, because a cable operator may lawfully be co-
owned with a cable programmer or a network, the Rule does little to 
cure the alleged problem of cable operators having an incentive to 
discriminate against stations that air competing programming.
    In response the Commission concedes it did not address Time 
Warner's second and third points--competition from DBS services and the 
contradiction of the 1992 Report: ``Since the Commission did not 
address any of these issues in the 1998 Report, counsel for the 
Commission are not in a position to respond to Time Warner's claims 
concerning these issues.'' The same might have been said of Time 
Warner's fourth point. These failings alone require that we reverse as 
arbitrary and capricious the Commission's decision to retain the CBCO 
Rule. See Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 
463 U.S. 29, 43 (1983) (a decision is arbitrary and capricious if the 
agency fails ``to consider an important aspect of the problem'').
    The only argument to which the Commission does respond is that the 
Univision incident alone cannot justify retention of the Rule: The 
Commission first points to its predictive judgment that there would be 
more discrimination without the CBCO Rule and then, citing Time Warner 
I, 211 F.3d at 1322-23, points out that the availability of behavioral 
remedies does not necessarily preclude it from imposing a structural 
remedy. We acknowledge that the court should ordinarily defer to the 
Commission's predictive judgments, and we take the Commission's point 
about remedies. In this case, however, the Commission has not shown a 
substantial enough probability of discrimination to deem reasonable a 
prophylactic rule as broad as the cross-ownership ban, especially in 
light of the already extant conduct rules. A single incident since the 
must-carry rules were promulgated--and one that seems to have been 
dealt with adequately under those rules--is just not enough to suggest 
an otherwise significant problem held in check only by the CBCO Rule.
    We conclude that the Commission has failed to justify its retention 
of the CBCO Rule as necessary to safeguard competition. The Commission 
failed to consider competition from DBS, to justify its change in 
position from the 1992 Report, and to put forward any adequate reason 
for believing the Rule remains ``necessary in the public interest.''
2. Diversity
    As for retaining the Rule in the interest of diversity, the 
Commission had this to say: ``Cable/TV combinations . . . would 
represent the consolidation of the only participants in the video 
market for local news and public affairs programming, and would 
therefore compromise diversity.'' 1998 Report p. 107. Time Warner 
argues that this rationale is contrary to  202(h), as well as 
arbitrary and capricious, for essentially three reasons.
    First, Time Warner contends that  202(h), by virtue of its 
exclusive concern with competition, plainly precludes consideration of 
diversity and that, in any event, it should be so interpreted in order 
to avoid the constitutional question raised by the burden the CBCO Rule 
places upon the company's right to speak. Second, Time Warner argues 
that the increase in the number of broadcast stations in each local 
market since the promulgation of the CBCO Rule in 1970 renders any 
marginal increase in diversity owing to the operation of the Rule too 
slight to justify retaining it. Finally, Time Warner asserts that the 
decision to retain the Rule cannot be reconciled with the TV Ownership 
Order, in which the Commission concluded that a single entity may own 
two local television stations as long as there are eight other stations 
in the market and one of the two stations coming under common ownership 
is not among the four most watched stations. See Review of the 
Commission's Regulations Governing Television Broadcasting, Report & 
Order, 14 F.C.C.R. 12903, p. 64 (1999).
    The Commission responds feebly. First, it does not address Time 
Warner's argument that diversity may not be considered under  202(h), 
but that is of little moment because it adequately addressed 
essentially the same argument when it was presented by the networks in 
connection with the NTSO Rule: A rule may be retained if it is 
necessary ``in the public interest''; it need not be necessary 
specifically to safeguard competition. Second, the Commission concedes 
that it decided to retain the Rule without considering the increase in 
the number of competing television stations since it had promulgated 
the Rule in 1970. The Commission gives no explanation for this 
omission, yet it is hard to imagine anything more relevant to the 
question whether the Rule is still necessary to further diversity.
    Finally, the Commission makes no response to Time Warner's argument 
that the concern with diversity cannot support an across-the-board 
prohibition of cross-ownership in light of the Commission's conclusion 
in the TV Ownership Order that common ownership of two broadcast 
stations in the same local market need not unduly compromise diversity. 
The Commission does object that Time Warner failed to raise this 
argument before the agency, but it appears that Time Warner did what it 
could to bring the argument to the Commission's attention. The TV 
Ownership Order was issued in August, 1999, after the close of the 
comment period, but almost a year before the 1998 Report was issued (in 
June, 2000). A few months thereafter Time Warner proffered supplemental 
comments raising this point but the Commission declined to consider 
them. 1998 Report p. 100 n.257. For this reason, we find the 
Commission's forfeiture argument unpersuasive. Even if it was proper 
for the agency to refuse to accept the comments, however, it does not 
follow that the agency was free to ignore its own recently issued TV 
Ownership Order. Yet the Commission made no attempt in the 1998 Report 
and makes no attempt in its brief to harmonize its seemingly 
inconsistent decisions.
    In sum, the Commission concedes it failed to consider the increased 
number of television stations now in operation, and it is clear that 
the Commission failed to reconcile the decision under review with the 
TV Ownership Order it had issued only shortly before. We conclude, 
therefore, that the Commission's diversity rationale for retaining the 
CBCO Rule is woefully inadequate.
B. Remedy
    The only question left is whether, as Time Warner requests, we 
should order the Commission to vacate the CBCO Rule itself--as opposed 
merely to reversing the Commission's decision not to initiate a 
proceeding to repeal the Rule and remanding the matter for further 
consideration by the agency. Again, this type of decision is governed 
by the test laid out in Allied-Signal. As discussed above, the 
Commission put forward justifications for retaining the NTSO Rule--
furthering local diversity by strengthening the bargaining position of 
network affiliates and furthering national diversity--that we rejected 
principally because the Commission failed to address the contrary 
position it took in its 1984 Report. We noted, however, that the 
Commission's failure to explain why it departed from the views it 
expressed in 1984 appears to have stemmed from an error of law and not 
necessarily from an inability to do so. In addition, the intervenors 
presented plausible reasons for thinking the NTSO Rule may be necessary 
to further competition. The same cannot be said with respect to the 
CBCO Rule. The Commission gave no reason to think it could adequately 
address its conclusions in the 1992 Report or in the TV Ownership 
Order. Rather, the Commission simply failed to respond to the 
objections put before it. Furthermore, neither the Commission nor the 
intervenors gave any plausible reason for believing the CBCO Rule is 
necessary to further competition. Although the Commission presumably 
made its best effort, the reasons it gave in the 1998 Report for 
retaining the CBCO Rule were at best flimsy, and its half-hearted 
attempt to defend its decision in this court is but another indication 
that the CBCO Rule is a hopeless cause.
    Nor does it appear that vacating the CBCO Rule will be disruptive 
of the agency's regulatory program. If the agency wants to re-
promulgate the Rule and is able to justify doing so, it presumably can 
require any entity then in violation of the Rule to divest either its 
broadcast station or its cable system in any market where it owns both. 
Cf. NCCB, 436 U.S. at 802. Although viewers may, in the interim, 
experience some diminution of diversity, the loss would seemingly be no 
greater than the diminution attendant upon the combination of two 
broadcast stations in the same market, which combination the Commission 
recently sanctioned in the TV Ownership Order. In sum, vacating the 
Rule might cause some disruption, but we hardly think it could be 
substantial.
    Because the probability that the Commission would be able to 
justify retaining the CBCO Rule is low and the disruption that vacatur 
will create is relatively insubstantial, we shall vacate the CBCO Rule.
V. Conclusion
    The decision of the Commission not to repeal or to modify the NTSO 
Rule is vacated and the question whether to retain the Rule is remanded 
to the Commission for further proceedings consistent with this opinion. 
This court's stay order of April 6, 2001, is vacated without prejudice 
to the petitioners' ability to seek a further stay from the Commission 
during the pendency of such proceedings. The decision of the Commission 
not to repeal or to modify the CBCO Rule is also vacated, and the 
Commission is directed to repeal the CBCO Rule forthwith.
    So ordered.

    Senator Hollings. Without reading it all, they, yes, 
vacated the cable rule, but remanded, sent back to the 
Commission to make for a record, take the testimony and give 
authorization and substantiation to the 35-percent rule. So we 
find that there was nothing wrong with enforcing a 35-percent 
rule. The Commission has been lax, but that's--the rule is 
there. And it's not that we don't have any particular rule.
    And this decision came out in February. The notice of 
rulemaking was not given until September. And I'm concerned 
that we have not complied with the Administrative Procedures 
Act, which was cited in that FOX decision. I can't find the 
support for a 45-percent ruling. It was a general rule. In 
fact, I'd ask consent that the general counsel of SBA said, 
``Now, don't call that a rule of--a particular rule of rule-
making, but actually make it a notice of inquiry.''
    I'd ask consent to include that letter in the record----
    The Chairman. Without objection.
    Senator Hollings.--to save time.
    [The information referred to follows:]

     Office of Advocacy--U.S. Small Business Administration
                                      Washington, DC, April 9, 2003
Hon. Michael K. Powell,
Chairman,
Federal Communications Commission,
Washington, DC.

Re: Ex Parte Presentation in a Non-Restricted Proceeding Initial 
    Regulatory Flexibility Analysis for 2002 Biennial Review--Review of 
    the Commission's Broadcast Ownership Rules (MB Dkt. No. 02-277)

Dear Mr. Chairman:

    As part of its statutory duty to monitor and report on an agency's 
compliance with the Regulatory Flexibility Act of 1980 (RFA), as 
amended by the Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA),\1\ the Office of Advocacy of the U.S. Small Business 
Administration (``Advocacy''), has reviewed the Federal Communications 
Commission's (``FCC'' or ``Commission'') compliance with the RFA's 
requirements for the Notice of Proposed Rulemaking (NPRM) in the above-
captioned proceeding.\2\ The Office of Advocacy is an independent 
entity within the U.S. Small Business Administration (SBA), so the 
views expressed by the Office of Advocacy do not necessarily reflect 
the views of the SBA or the Administration.
---------------------------------------------------------------------------
    \1\ Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified at 5 U.S.C. 
 601 et seq.) amended by Subtitle II of the Contract with America 
Advancement Act, Pub. L. No. 104-121, 110 Stat. 857 (1996). 5 U.S.C.  
612(a).
    \2\ In the Matter of 2002 Biennial Regulatory Review--Review of the 
Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant 
to Section 202 of the Telecommunications Act of 1996, Notice of 
Proposed Rulemaking, MB Dkt. No. 02-227, MM Dkt. No. 01-235, MM Dkt. 
No. 01-317, MM Dkt. No. 00-244, FCC 02-249 (rel. Sept. 23, 2002).
---------------------------------------------------------------------------
    In the NPRM, the Commission seeks to review its broadcast ownership 
rules as required by Section 202 of the Telecommunications Act of 
1996.\3\ The Commission conducted an Initial Regulatory Flexibility 
Analysis (IRFA), which stated that there was no impact on small 
businesses from the proposed rulemaking. Advocacy disagrees with the 
Commission's assessment that the rule will have no impact on small 
businesses.
---------------------------------------------------------------------------
    \3\ NPRM, paras. 1-8.
---------------------------------------------------------------------------
    Advocacy recommends that the Commission treat this NPRM as a Notice 
of Inquiry (NOI) and issue a further notice of proposed rulemaking 
(FNRPM). The Commission's NPRM seeks extensive comment on issue areas 
rather than specific proposals or tentative conclusions. These sorts of 
requests to the public are better suited for an NOI than a proposed 
rule. Furthermore, when the Commission proposes specific rules in an 
FNPRM, it should complete a supplemental initial regulatory flexibility 
analysis (IRFA) to comply with the RFA.\4\
---------------------------------------------------------------------------
    \4\ Pub. L. No. 96-354, 94 Stat. 1164 (1980)(codified at 5 U.S.C.  
601 et seq.).
---------------------------------------------------------------------------
1. Advocacy Background
    Congress established the Office of Advocacy in 1976 by Pub. L. No. 
94-305 \5\ to represent the views and interests of small business 
within the Federal Government. Advocacy's statutory duties include 
serving as a focal point for the receipt of complaints concerning the 
government's policies as they affect small business, developing 
proposals for changes in Federal agencies' policies, and communicating 
these proposals to the agencies.\6\ Advocacy also has a statutory duty 
to monitor and report to Congress on the Commission's compliance with 
the RFA.
---------------------------------------------------------------------------
    \5\ Pub. L. No. 94-305 (codified as amended at 15 U.S.C.  634 a-
g, 637).
    \6\ 15 U.S.C.  634(c)(1)-(4).
---------------------------------------------------------------------------
    Congress designed the RFA to ensure that, while accomplishing their 
intended purposes, regulations did not unduly inhibit the ability of 
small entities to compete, innovate, or to comply with the 
regulation.\7\ The major objectives of the RFA are: (1) to increase 
agency awareness and understanding of the potential disproportionate 
impact of regulations on small business; (2) to require that agencies 
communicate and explain their findings to the public and make these 
explanations transparent; and (3) to encourage agencies to use 
flexibility and provide regulatory relief to small entities where 
feasible and appropriate to its public policy objectives.\8\ The RFA 
does not seek preferential treatment for small businesses. Rather, it 
establishes an analytical requirement for determining how public issues 
can best be resolved without erecting barriers to competition. To this 
end, the RFA requires the agencies to analyze the economic impact of 
proposed regulations on different-sized entities, estimate each rule's 
effectiveness in addressing the agency's purpose for the rule, and 
consider alternatives that will achieve the rule's objectives while 
minimizing any disproportionate burden on small entities.\9\
---------------------------------------------------------------------------
    \7\ 5 U.S.C.  601(4)-(5).
    \8\ See generally, Office of Advocacy, U.S. Small Business 
Administration, The Regulatory Flexibility Act: An Implementation Guide 
for Federal Agencies, 1998 (``Advocacy 1998 RFA Implementation 
Guide'').
    \9\ 5 U.S.C.  604.
---------------------------------------------------------------------------
    On August 14, 2002, President George W. Bush signed Executive Order 
13272 that requires Federal agencies to implement policies protecting 
small businesses when writing new rules and regulations.\10\ This 
Executive Order authorizes Advocacy to provide comment on draft rules 
to the agency that has proposed or intends to propose the rules and to 
the Office of Information and Regulatory Affairs of the Office of 
Management and Budget.\11\ It also requires agencies to give every 
appropriate consideration to any comments provided by Advocacy 
regarding a draft rule. The agency shall include, in any explanation or 
discussion accompanying publication in the Federal Register of a final 
rule, the agency's response to any written comments submitted by 
Advocacy on the proposed rule, unless the agency certifies that the 
public interest is not served by doing so.\12\
---------------------------------------------------------------------------
    \10\ Exec. Order. No. 13272  1, 67 Fed. Reg. 53,461 (2002).
    \11\ Id. at  2(c).
    \12\ Id. at  3(c).
---------------------------------------------------------------------------
2. The NPRM Does Not Propose Any Concrete Rules and Is Better Suited as 
        a Notice of Inquiry
    In the NPRM the Commission does not propose the actual terms or 
drafts of any proposed rules. Instead, the Commission sought general 
comment on dozens, if not hundreds, of issues that addressed the value 
of diversity, competition, and localism. This is valuable information, 
and the Commission did an excellent job asking thorough and provocative 
questions. While the questions are certainly worthwhile, it does not 
counter the fact that the Commission is not proposing anything concrete 
in its proposed rulemaking.
    This manner of soliciting information from commenters is more 
consistent with an NOI than an NPRM. The purpose of an NOI is to gather 
information and intelligence about the scope of a problem, factors that 
contribute to a problem, the benefits, or limitations of different 
regulatory alternatives and the different impacts of each alternative. 
The FCC should use an NOI whenever the Commission lacks information 
about the industry to be regulated or the exact nature of the problem 
to be addressed.
    This style of rulemaking is very costly to the telecommunications 
industry. By issuing an NPRM that lacks specific proposals, the FCC 
creates uncertainty in the industry, resulting in thousands of comments 
that, at best, can only speculate as to what action the FCC may take 
and the potential impacts. Commenters spend resources answering 
hundreds of questions, and do so repeatedly over the comment period, 
the reply comment period, and the ex-parte period. Consequently, the 
lack of specificity is costly and potentially harmful to the industry 
and its customers. Small businesses, in particular, are often 
overwhelmed by the scope of a vague NPRM and cannot contribute 
meaningfully to the rulemaking process. If the FCC instead issues an 
NOI, interested parties would have answered the questions raised with 
the added comfort of knowing that they would later have the opportunity 
to comment on a more detailed and specific proposed rule, reducing 
anxiety and the need to address all possible iterations of regulatory 
approaches the FCC could conceivably adopt.
    This is the not the first time the Commission has issued an NPRM 
when an NOI is more appropriate. Advocacy has sent letters to the 
Commission in other proceedings, commenting that the Commission is 
using the NPRM process to gather basic information from industry and 
without providing specific information on the terms of the regulatory 
proposal.\13\ Consistent with our earlier statements, Advocacy 
encourages the Commission to utilize NOIs and reserve NPRMs for when 
the Commission is prepared to propose rules as opposed to soliciting 
information.
---------------------------------------------------------------------------
    \13\ Comments of the Office of Advocacy, U.S. Small Business 
Administration, to the Notice of Proposed Rulemaking in MM Dkt. Nos 01-
317, 00-244 (March 27, 2002); Letter from Thomas M. Sullivan, Chief 
Counsel, Office of Advocacy to Michael K. Powell, Chairman, Federal 
Communications Commission, in CC Dkt. No. 01-338; CC Dkt. No. 96-98; CC 
Dkt No. 98-147 (February 5, 2003); Letter from Mary K. Ryan, Deputy 
Chief Counsel, Office of Advocacy to Michael K. Powell, Chairman, 
Federal Communications Commission, in MM Dkt. No. 00-167 (February 6, 
2001); Comments of the Office of Advocacy, U.S. Small Business 
Administration, to the Notice of Proposed Rulemaking in CC Dkt. No. 01-
92 (November 6, 2001).
---------------------------------------------------------------------------
3. The IRFA Does Not Address the Impact on Small Businesses
    In its IRFA, the Commission described the need for and the 
objectives of the proposed rules, as well as identified the affected 
classes of small businesses.\14\ However, the FCC did not analyze the 
impact that the proposed rule would have on small businesses.\15\ 
Instead, the Commission limits its review of the impact to reporting 
and recording keeping requirements of which its says there are 
none.\16\
---------------------------------------------------------------------------
    \14\ NPRM, Appendix A, p. 56.
    \15\ Advocacy has identified several issues that would have an 
impact on small businesses in paragraphs. 39, 50, 55, 59, 70, 97, 107, 
144, and 151 of the NPRM. Advocacy does not intend this list to be 
exhaustive.
    \16\ NPRM, Appendix A, p. 62.
---------------------------------------------------------------------------
    The requirements of an IRFA are more than reporting and record 
keeping requirements. The RFA requires the Commission to describe all 
impacts, not just reporting and record keeping.\17\ Therefore, the 
Commission must analyze effects such as the impact on small broadcast 
affiliates, the impact on small advertisers, or the impact on small 
program providers, if there is further consolidation.
---------------------------------------------------------------------------
    \17\ 5 U.S.C.  603(a).
---------------------------------------------------------------------------
    The Commission's failure to conduct a complete analysis of the 
impact on small businesses is a direct result of the Commission not 
proposing specific rules in the NPRM. Because there are no concrete 
rules, it is difficult for the Commission, Advocacy, or small 
businesses to accurately predict and analyze what the impacts of the 
rules will be. As a consequence, any substantive analysis of the 
proposed rule is nearly impossible. We believe that by not proposing 
specific rules, the Commission is limiting the ability of small 
businesses to provide the agency with needed information on the impacts 
of the rule and possible alternatives that will lessen any impacts.
4. Commission Should Issue an FNPRM and Conduct a Supplemental IRFA 
        After Specific Rules Are Proposed
    Unless the Commission issues a supplemental rulemaking, the next 
step in the Commission process would be a final rule adopting specific 
language on which the public would not have had a chance to comment. 
This lack of specificity is not consistent with the Administrative 
Procedure Act and frustrates the spirit of the RFA, as it is difficult 
for small businesses to comment meaningfully.
    Rather than immediately publish a final rule, Advocacy recommends 
that the Commission issue an FNPRM. This will allow the Commission to 
utilize the comments gathered in this NPRM while providing small 
businesses the opportunity to comment on specific rules before the 
Commission adopts them.
    Even if the Commission does not issue a FNPRM, the Commission 
should issue a supplemental IRFA to examine any rules that the 
Commission decides to adopt in a final rule. The Commission stated that 
the proposed rule had no impacts on small businesses in the current 
IRFA, and consequently the Commission has done no analysis of impacts 
on small businesses. If the FCC releases a final rule that does contain 
small business impacts, it will be adopting rules on which small 
businesses have not been had the opportunity to comment. This is a 
violation of the RFA and could result in the courts remanding the 
entire rule.\18\ The Commission must inform small businesses of the 
regulatory impacts that will result from the rulemaking and give them a 
chance to respond. The proper avenue for this is a supplemental IRFA.
---------------------------------------------------------------------------
    \18\ Northwest Mining Assoc. v. Babbitt, 5 F. Supp. 2d 9 (D.D.C. 
1998) (recognizing the public interest in preserving the right of 
parties which are affected by government regulation to be adequately 
informed when their interests are at stake and participate in the 
regulatory process as directed by Congress).
---------------------------------------------------------------------------
Conclusion
    The Commission's NPRM seeks comment on issue areas rather than 
specific proposals or tentative conclusions. Because of a lack of 
specific regulatory proposals in the proposed rulemaking, Advocacy 
recommends that the Commission treat this NPRM as an NOI and issue an 
FNRPM when the FCC is in a position to consider concrete rules. When 
the Commission proposes specific rules in an FNPRM, it should complete 
a supplemental IRFA to comply with the RFA.
    Thank you for your consideration of these matters, and please do 
not hesitate to contact me or Eric Menge of my staff if you have 
questions, comments, or concerns.
            Sincerely,
                                        Thomas M. Sullivan,
                                        Chief Counsel for Advocacy.
                                             Eric E. Menge,
                    Assistant Chief Counsel for Telecommunications.
                                       Radwan Saade, Ph.D.,
                                              Regulatory Economist.

cc: Commissioner Kathleen Q. Abernathy
Commissioner Michael J. Copps
Commissioner Kevin J. Martin
Commissioner Jonathan S. Adelstein
W. Kenneth Ferree, Chief, Media Bureau
Carolyn Fleming Williams, Director, Office of Communications Business 
Opportunities
John D. Graham, Administrator, Office of Information and Regulatory 
Affairs, Office of Management and Budget.

    Senator Hollings. But that inquiry didn't actually propose 
the rule and get comments. In fact, we didn't get the rule 
until 3 weeks, the exact hour and so forth, in the dark of 
night, the exact 3-week measurement, like a lawyer that was 
trying his case would measure it. And the actual text of the 
rule was not given by the Chairman to the Commissioners until 
last Friday night. And so Commissioners were working all Sunday 
night preparing their statements for the Monday ruling.
    So when they asked for 30-days extension, which was a time-
honored tradition, according to former Commissioner Scott, they 
said, ``No way, that we had to get this ruling out, because 
without a rule, there would be no cap at all.'' That's 
absolutely false.
    Then the unmitigated gall to say that they--``I'm 
saving''--put on the white hats, they take on the good guys--
``I'm saving free over-the-network broadcasts, because if I 
don't do this, they're not making money.'' Barry Diller says, 
``If you can't make money in broadcasting, then they're 
stealing from you. You'd better look quick and find out, 
because that's the only way you can lose money in 
broadcasting.'' But what has really happened is that they've 
got 9.2 billion, I think, in advanced advertising for this 
fall, so the networks, the broadcasters, are not in any trouble 
whatsoever.
    But what we have done, Mr. Chairman, is, the Commission, 
with this order, has turned the people's public-interest 
commission into an instrument of corporate greed. Blair Levin, 
the particular former member of--former top official for the 
Commission, who is now an instrument and an analyst in the 
investment bank of Legg Mason, said, quote, ``Everyone in the 
business has to wake up tomorrow and ask, Do I want to be a 
buyer or a seller?''
    I'll elaborate on my comments. Let me stop there.
    [The prepared statement of Senator Hollings follows:]

            Prepared Statement of Hon. Ernest F. Hollings, 
                    U.S. Senator from South Carolina
    Thank you, Mr. Chairman. As the Supreme Court recognized over 50 
years ago, the first amendment--one of the founding principles of our 
democracy--``rests on the assumption that the widest possible 
dissemination of information from diverse and antagonistic sources is 
essential to the welfare of the people.'' Regrettably, however, the 
recent actions taken by the Federal Communications Commission are fixed 
on turning this fundamental tenet into a historical footnote.
    The spin coming out of the FCC is dizzying. Amazingly, yesterday's 
Washington Post  quotes Chairman Powell as saying that ``if yesterday's 
rules had not been adopted, there would effectively be no national 
cap.'' Luckily for us, the case law tells us otherwise.
    The truth of the matter is that the 35 percent national television 
ownership cap is in effect today. While the D.C. Circuit in Fox v. FCC, 
eliminated the cable ownership rules, it specifically declined to 
vacate the national television ownership cap. Instead, it gave the FCC 
a job to do--a job that they have been avoiding ever since. The court 
was explicit, stating that:

        [A]lthough the Commission, in its 1998 report, failed to 
        develop any affirmative justification for the rule based on 
        competitive concerns, it did, albeit somewhat cryptically, 
        advert to possible competitive problems in the national markets 
        for advertising and program production . . . and interveners 
        nab and NASA make a plausible argument that the NTSO rule 
        indeed furthers competition in the national television 
        advertising market. The Commission needs either to develop or 
        to jettison these points on remand. In sum, we cannot say it is 
        unlikely the Commission will be able to justify a future 
        decision to retain the rule.

    As a result, the Court specifically held that the question of 
``whether to retain the rule is remanded to the Commission for further 
proceedings. . . .'' Unfortunately, rather than seeking to make the 
case for the 35 percent cap imposed by Congress, a bare majority 
decided to pick its own number--45 percent--without any specific 
justification for this level and in the face of a mountain of evidence 
that consolidation has already gone too far.
    On television and in print, large media conglomerates already 
control the vast majority of what Americans see, read, and hear. Just 
five media companies today control 75 percent of prime time programming 
and in the near future are projected to increase their market share to 
85 percent. New outlets such as cable and the Internet, which could 
have served to check big media's power, have instead followed the old 
adage, ``if you can't beat `em, join `em.'' Thus, today these same five 
companies control 90 percent of the top 50 channels on cable. Similarly 
on the Internet, existing newspapers and tv stations dominate the 20 
most popular sites for news and information. Technology may have 
increased the number of media outlets, but it has not stopped big media 
from further extending its reach.
    While Monday's decision promising further media deregulation may 
well be celebrated in a few New York and Hollywood boardrooms, it will 
be remembered as a dark day in thousands of American communities who 
look to the FCC to ensure that use of the public airwaves serves the 
interests of all Americans, not the economic self-interest of a chosen 
few.
    But instead of encouraging a meaningful, open debate, the FCC has 
instead chosen to stack the deck. By refusing to provide the American 
people with a clear roadmap of the changes in store for the media 
marketplace, a bare, three-member majority of FCC Commissioners has 
employed a ``damn-the-torpedoes, full speed ahead'' strategy to hammer 
through one of the most far-reaching policy decisions in the history of 
media. Gone are prior rules that prevent a single corporation from 
controlling more than 35 percent of all TV households; and that 
restrict cross-media mergers in local communities. Under the FCC's new 
direction, a single entity will in many cases be free to corner the 
market on public discourse and control a community's cable system, its 
most popular television channel, its biggest radio station, and its 
only daily newspaper.
    Broadcast media is not just another appliance, it's not a toaster 
with pictures. It makes government and business directly accountable to 
the American people for their actions; and it teaches our children the 
values of deliberative democracy. The free flow of diverse and 
antagonistic views cannot be guaranteed if a few large businesses 
control all the information across every medium--television, radio, 
magazines, books, and the internet.
    While critics argue that existing limits are antiquated in light of 
the modern media marketplace, we should not mistake age with infirmity. 
The constitution has served us well for more than 200 years. And the 
principles that have long supported our regulation of the broadcast 
industry--the values of promoting competition, diversity and localism--
remain as vital today as when they were enacted in 1934. While the 
FCC's Monday decision has called into question our Government's 
commitment to these enduring values, let us hope that the Congress and 
the courts have the last word.

    The Chairman. Thank you, Senator Hollings.
    I would remind my colleagues that all five of the witnesses 
have an opening statement, and we're eager to hear from them so 
I would appreciate brevity in our opening statements. I thank 
you.
    Senator Burns?

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

    Senator Burns. Mr. Chairman, I'll honor that, and I'll put 
my statement in the record. And with my questions, I think we 
can sort of make the gist of what we're--the direction from 
which we're coming.
    I thank you for holding these hearings, though.
    [The prepared statement of Senator Burns follows:]

   Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana
    I thank the Chairman for convening this critical and timely hearing 
on media consolidation. Two days ago, the Federal Communications 
Commission decided to significantly ease limits on media ownership. I 
appreciate the difficulty of analyzing the current media marketplace in 
light of the rapid pace of technological change in recent years. 
However, for a variety of reasons, I fear that the Commission's 
sweeping and historic ruling will lead to a wave of media consolidation 
that will imperil media diversity and localism in rural America.
    While there has been much talk about the ``500-channel universe'' 
we now all supposedly live in, the simple fact of the matter is that 
Montana is not Manhattan. The reality in rural America in particular is 
that the vast majority of consumers still receive vital local news and 
public safety information through free, over-the-air television. It is 
for this reason that I simply do not believe that the significant 
relaxation of the national cap on television broadcast ownership from 
35 percent to 45 percent is in the public interest.
    While many have cast the Commission's decision in coarsely partisan 
terms, I do not believe this is the case at all. This issue is about as 
bipartisan as you can get--along these lines, I joined with Sen. 
Hollings, Sen. Dorgan, Sen. Wyden and many others on both sides of the 
aisle to sponsor Sen. Stevens' bill to maintain the national caps at 
the previous, reasonable 35 percent standard which was adopted in the 
1996 Telecommunications Act. I believe that any further movement from 
this level of ownership tips a delicate balance and grants excessive 
leverage to the networks, turning local broadcast affiliates into 
simple generic outlets for national programming.
    Clearly, the media landscape has been altered by an increase in 
video programming choices available to the consumer--direct satellite, 
cable services and on-demand video over the Internet. However, the vast 
majority of these services are produced and marketed at a national 
level. There is little room, if any, to cater to programming of local 
interest. Local broadcast television has historically filled this vital 
role.
    Those in favor of relaxing the national broadcast ownership cap yet 
again argue that nearly all consumers have access to local programming 
over cable or DBS. The situation in rural America could not be more 
different, however. While consumers in Manhattan have a wide variety of 
local programming alternatives, my state of Montana has a cable 
penetration rate of barely over 50 percent, which is among the lowest 
in the Nation. Futhermore, unfortunately the average income in Montana 
is such that a lot of Montanans simply can't afford cable even if they 
do have access to it. As for other alternatives, the majority of 
Americans in rural areas still don't have access to their local 
stations over direct broadcast satellite services. The fact remains 
that large numbers of rural Americans rely on free, over-the-air 
broadcast television to receive important local news and community 
information.
    The mission of the national broadcast networks is clear and 
certainly understandable-they strive to increase their share of the 
national viewing audience. The networks must recognize, however, both 
the need for local programming as well as the sensitivities of viewing 
audiences in different parts of the country. In my opinion, some degree 
of local ownership is the key that strikes the balance between such 
competing demands. We must ensure that affiliates continue to have 
flexibility in providing local programming without fears of undue 
retribution from the networks. Unfortunately, yesterday's decision only 
increases the networks' powerful leverage over increasingly isolated 
and vulnerable locally-owned stations.
    Again, while I disagree with yesterday's decision, I recognize the 
difficulty of the task before the Commission and I look forward to the 
hearing from the Commissioners. Thank you, Mr. Chairman.

    The Chairman. Thank you very much, Senator Burns.
    Senator Wyden?

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

    Senator Wyden. Thank you. I'll be very brief, Mr. Chairman.
    Mr. Chairman and colleagues, I believe the Federal 
Communications Commission's decision rings the dinner bell for 
the big media conglomerates who are salivating to make a meal 
out of the Nation's many small media outlets, and I think the 
question now is whether this Congress is going to stand up for 
the public interest.
    And I had town meetings around Oregon this last weekend, 
and this was the dominant topic. People kept coming back again 
and again with one person saying, ``If the Federal 
Communications Commission has stood up for the powerful, who's 
going to stand up for us?''
    And now I just hope that the Congress--we have a Dorgan 
proposal, we have a Hollings proposal, we have a variety of 
initiatives--that this Congress takes steps to make sure that 
these big media conglomerates, who just want to get bigger, 
aren't going to end up producing policies that make this 
country's news and entertainment less diverse, less locally 
oriented, and more mass produced.
    We have seen what happened with radio in the kind of fake 
localism, where DJs on one side of the country pretend to be 
thousands of miles away, in the Pacific Northwest. We will 
have, essentially, fake diversity and fake localism become the 
norm if this Federal Communications decision, as written, goes 
into effect. I hope that the Congress won't allow that. I look 
forward to working with my colleagues, and I hope we will have 
a bipartisan coalition that protects the public interest on 
this issue.
    I thank you, Mr. Chairman.
    The Chairman. Senator Hutchison?

            STATEMENT OF HON. KAY BAILEY HUTCHISON, 
                    U.S. SENATOR FROM TEXAS

    Senator Hutchison. Thank you, Mr. Chairman. I do appreciate 
your holding the hearing. Let me just say that I thought, in 
some ways, the Commission was measured by going from 35 to 45 
percent, rather than taking all of the percentages off. The 
part that is most troubling to me, though, is the allowing of 
ownership of the major newspaper or the only newspaper in a 
market--and generally, in America today, we only have one 
newspaper in the major markets; there are a few exceptions--
along with a major television station and radio stations.
    I'd just give you the example of Cox Enterprise Holdings, 
in Atlanta. They have the only newspaper in Atlanta, five radio 
stations, with a 32-percent share of Atlanta's radio market, 
and, although Atlanta is the tenth largest broadcast market, 
their Cox WSB TV is the top-performing ABC affiliate in the 
country. And so I think that is an alarming amount of 
concentration, and it's grandfathered.
    In Dallas, Texas, a major market in our country, the one 
newspaper in Dallas also owns the number-one television 
station. Sometimes it's number two, but it's always in the top 
two. That, too, is grandfathered. But I don't want to see other 
cities get into that kind of concentration. And you have 
allowed that with your proposed ruling, and it concerns me 
greatly.
    Thank you, Mr. Chairman.
    The Chairman. Senator Dorgan?

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

    Senator Dorgan. Mr. Chairman, thank you very much. I'll 
just be a minute.
    I think the FCC decision is wrongheaded and destructive, 
and I want to read a letter from an investment banking firm 
sent to one of the major newspapers in our country. I'll read 
one paragraph. ``As you know, the FCC is considering 
elimination of the ban on cross-ownership of media properties 
within a daily newspaper publisher's given markets. There are 
now strong indications these restrictions may, indeed, be 
removed by late spring or summer. In anticipation of that 
ruling, several newspaper groups are already forging alliances 
and cutting handshake agreements with both radio and television 
broadcasters in their markets. If you are considering broadcast 
acquisitions to bolster your market presence, we believe the 
time to act is now. We would like to be your broker.''
    And so it goes. My colleague calls it a ``dinner bell,'' 
but it will be an orgy of mergers, acquisitions. All of us 
understand that. In a conflict between the public interest and 
the big interest, the majority of the FCC did not have the 
strength to stand up for the public interest. It is the case 
that, with this ruling, in one of our largest cities in this 
country, you could see the same owner owning the newspaper, 
three television stations, eight radio stations, and the cable 
system. I have no idea how anyone justifies that as competitive 
or moving in any direction that represents the public interest.
    I intend to push for a congressional review act, a 
legislative veto. I will also, next week--if we mark up the 35-
percent legislation, I will offer an amendment that will 
prohibit cross-ownership. I think we ought to find several ways 
to try to undo what the FCC has now done, because I think it's 
destructive.
    The Chairman. Senator Sununu?

               STATEMENT OF HON. JOHN E. SUNUNU, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Sununu. Thank you, Mr. Chairman. Welcome to the 
Commissioners.
    It seems to me that the question shouldn't be whether or 
not we're worried about one company buying another. That 
happens in America every single day. I don't think we should be 
surprised that investment bankers are communicating with 
newspaper stations that may be given the legal right to buy a 
newspaper and saying, ``If you're thinking about making an 
acquisition, we'd like to work with you.'' That's what these 
people do for a living. That should not surprise us in the 
least. There's nothing wrong with that.
    The basic question should come back to competition, 
localism, and diversity, and whether or not these rule changes 
protect those interests. I hope and I believe that those were 
the interests and the principles that all of the Commissioners 
were working toward, whether they agree or disagree on specific 
provisions of this rulemaking. I hope we hear more from them 
today about their thinking and their approach to those 
principles.
    But, at the end of the day, I do believe that times have 
changed. That doesn't mean that we don't need more--that we 
don't need any regulations, but if times have changed, 
technology has changed, if we do have more outlets, then we 
ought to at least make sure that the process we use to regulate 
these media companies is keeping pace with those changes.
    Thank you, Mr. Chairman.
    The Chairman. Senator Lautenberg?

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Thanks, Mr. Chairman.
    Just very briefly and out of respect to your request for 
statements in the record, I would--I just want to note the fact 
that there is an awful lot of personal time spent by people 
from the Commission with those who we're trying to regulate. 
It's prohibited for the Senate. We're not even allowed to do 
it. Perhaps up to 50 bucks, but it's hard to get to Las Vegas 
and back for less than 50 bucks.
    And I note the incredible amount of travel, and socializing 
that I assume goes along with that travel, that is taken by the 
agency, that there are some 330 trips to Las Vegas during the 
period, 173 to New Orleans, 102 to New York, during a period 
from May 1995 to February 2003.
    But I want to find out what it is that permits the kind of 
attention that the companies who support these trips and 
support this free time together, how do they convey the public 
interests to the commissioners? Because I assume that the 
public does not have a chance to carry the bag or hit a few 
balls with the rest of the Commissioners.
    The Chairman. Thank you, Senator Lautenberg.
    Senator Snowe?

              STATEMENT OF HON. OLYMPIA J. SNOWE, 
                    U.S. SENATOR FROM MAINE

    Senator Snowe. Thank you, Mr. Chairman. I thank you for 
holding this hearing. I thank the Commissioners for being here.
    And I, too, share the profound disappointment and 
disagreement with the way in which the FCC has ultimately 
reached a decision that paves the way for further consolidation 
and concentration of power further in the hands of a few. I 
think, certainly, that these changes will alter news as we know 
it. And given the enormity and the magnitude of what was at 
stake here, I think it required the fullest public disclosure.
    It may well be that it wasn't required by law, in terms of 
how this process would unfold. But given what was at stake, I 
think it did require the highest level of scrutiny and the 
fullest public disclosure.
    Now, I know some have said this is a victory for free 
enterprise and free speech. And most assuredly, it's a victory 
for free enterprise. But it is not a victory for free speech.
    And so, Mr. Chairman, I hope that we will review the 
process here, because I don't happen to believe that the 1996 
statute or the courts preordained what occurred here in the 
FCC. The courts said that the FCC should establish a rationale, 
a basis, for what is necessary in the public interest. And I 
don't know how you establish what's in the public interest if 
you don't have a public process.
    And so I would hope, through this hearing today and in the 
ensuing days, that we determine how best to proceed, because 
once these rules take place, you cannot turn the clock back, 
Mr. Chairman.
    And so I would hope that the FCC would rule favorably on 
petitions for reconsideration. And, in the meantime, I do think 
that Congress will have to intervene, to review and to 
reconsider. Because to do otherwise, we will see the reality of 
these rules in place. And the reality is that acquisitions and 
further consolidation and an amalgamation of control will 
occur--may not be immediately, but it will occur in this 
environment, without question.
    Now, I know that the FCC has used the rationale, ``Well, 
you know, we have more media outlets, greater numbers.'' And 
that well may be true, but more mouthpieces doesn't guarantee 
diversity and localism and competition. Diversity of ownership 
does.
    And so, Mr. Chairman, I am greatly concerned about the 
actions that have been taken by the FCC and do believe that we 
will have to weigh in on this mighty question.
    The Chairman. Senator Breaux?

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

    Senator Breaux. Thank you very much, Mr. Chairman.
    I'll probably be the only person that congratulates the FCC 
for acting, for the simple reason that had they not acted, 
there would be no regulations. And I think that it's very 
important that we remember that the way we structured this 
operation, with the court's interpretation of striking down all 
the regulations, really had the FCC not taken any action at 
all, there would have been no ownership restrictions at all. So 
I congratulate you for acting, because, you know, we may not 
like the product, but without some action by the FCC, there 
would have been no ownership restrictions at all.
    The point I would like to make, just very briefly, is I 
think that the standard by which we restrict the ownership, the 
35-percent cap now going up to 45 percent because of the 
decision, really does not make any sense at all. It doesn't 
make any sense, because it doesn't talk and it doesn't address 
the question of the impact of a station owner in a particular 
area. I mean, some owner could own stations, a single station, 
in every single large market in the country and would have 
reached the 35-percent cap, or probably the 45-percent cap, 
even though they have 1 percent viewership.
    I mean, in the large cities you have access to hundreds of 
channels. And if no one watches your channel because you have a 
lousy product, you still would be prohibited, because you're 
too powerful, because you happen to have a station in a city 
that has a large amount of population, when the population 
standard really has nothing to do with the impact of an owner 
of a network or the owner of a group of stations. So whether 
it's 35 percent or 45 percent, we're only measuring the size of 
the city that they're located in. We're not, indeed, measuring 
the impact of that dominance of the market by a particular 
owner.
    So it seems to me there ought to be a better way of 
measuring whatever caps we come up with than merely the size of 
the city that a tower happens to be located in.
    Thank you, Mr. Chairman.
    The Chairman. Senator Allen?

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

    Senator Allen. Thank you, Mr. Chairman. And thank you to 
all the FCC Commissioners for appearing today.
    I agree with what Senator Breaux was saying, in the sense 
that, first and foremost, the FCC has finally done what the 
Congress and, indeed, the courts, have commanded them to do in 
adopting ownership rules that are based on empirical evidence, 
and you'll be presenting that empirical evidence, and I 
guarantee it'll be challenged by the Congress by re-hearings, 
and in the courts. But it is, I think, reflective of reality in 
the marketplace today.
    You've taken some steps in crafting updated rules, having 
to take into account the new media outlets that are available 
to consumers for entertainment, for news, and for information. 
And, indeed, I'd dare say that anyone would not agree with this 
statement that now consumers have more access to information 
than any other time in our history. There are more TV stations. 
There are more radio stations. There's cable. There's over the 
air, of course. There's satellite. There's the Internet. And so 
whether it's for local information, national, or international, 
consumers have more choices.
    I will be interested in hearing your justification, though, 
I will say to members of the Commission, on why small markets 
are treated differently than large markets. Running an 
operation in a small market, without the same revenue, is more 
difficult than in large markets, where you get more advertising 
revenue.
    And I would insert into the record, Mr. Chairman, a story 
in yesterday's Wall Street Journal by Emily Nelson regarding 
small-market TV stations that are not pleased with the new FCC 
rules, because they have all the cost of technology, reporters, 
and so forth, and they actually could benefit more if these 
rules were updated for small markets.
    And I look forward to hearing the testimony and rationale 
of this and other issues by the commissioners.
    Thank you, Mr. Chairman.
    [The information referred to follows:]

               Wall Street Journal Article--June 3, 2003

        Small-Market TV Stations Make Static Over New FCC Rules

                            By Emily Nelson

    No one will confuse Robert Gluck with Rupert Murdoch. Like the News 
Corp. chief, Mr. Gluck, a television station owner in Fargo, N.D., has 
been keenly watching the debate in Washington over media-ownership 
rules. But while Mr. Murdoch and other media moguls were applauding a 
sweeping overhaul of rules that could trigger additional consolidation, 
Mr. Gluck was glum.
    That is because the new rules don't hold much benefit for TV 
station owners in small towns--even though they argue they need 
regulatory relief the most.
    Yesterday, the Federal Communications Commission passed its highly 
anticipated new broadcast ownership rules, but in the section dealing 
with small towns, the FCC made it very difficult for a broadcaster to 
own two stations, known in the industry as a ``duopoly.''
    Mr. Gluck, president and chief executive of North Dakota Television 
LLC, says he could improve his local news reporting and amortize 
expenses from computers to reporters if he were allowed to own two 
stations in the same market.
    It is more expensive than ever to run a television station in a 
small town: It means buying new digital equipment and staffing a news 
operation. Combining with another station would allow an owner to 
spread its costs and realize other financial savings.
    ``I certainly think it would be in the community's best interest to 
let me run both stations,'' he says. As for owners in large cities who 
can own several stations under the new rules, he adds, ``it doesn't 
seem like everyone's on the same playing field.''
    Under the old rules, station ownership was determined by the so-
called eight-voice test, meaning that a market had to have eight 
separate voices or TV stations, each held by a different owner, for a 
duopoly to be allowed.
    The new rules permit a combination of stations in markets with five 
or more stations, leaving many stations in small towns to go it alone.
    To understand who this affects, consider that the U.S. is divided 
into 210 markets, ranging from No. 1 New York, with the most TV 
households (7.3 million), to No. 210, Glendive, Mont., (4,960 TV 
households), according to Nielsen Media Research. Victor Miller, an 
analyst with Bear Stearns, calculates that 44 of the 100 markets ranked 
from 51 through 150 won't be allowed a duopoly under the new rules.
    The FCC restrictions on duopoly in small markets were meant to 
ensure that TV stations reflect the sensibilities of their local 
communities while also offering a variety of viewpoints. When the FCC 
was designing its new rules easing ownership restrictions, it was 
easier to argue that larger markets already offer a variety of voices 
and that deregulation in big cities wasn't likely to affect that. But 
it also reflected the fact that the big media markets wielded more 
influence with regulators, small station owners say.
    ``We were looking for a much broader deregulation,'' says Paul 
Karpowitz, vice president of television for Lin TV Corp., a TV station 
owner and operator, based in Providence, R.I. ``It's just unfortunate 
that in smaller markets where they need it the most, it doesn't appear 
this ruling will give them the relief they need.''
    Reporting local news isn't the only expense confronting small TV 
stations: They also are required to upgrade their equipment to meet new 
Federal requirements that TV stations broadcast digitally for high-
definition TV. Today, few people own high-definition TV sets but in a 
few years, that number is expected to grow and the government has set 
compliance guidelines for the big networks as well as small local 
stations.
    Installing a digital antenna, necessary to transmit in high-
definition, costs a station $3 million to $5 million, Mr. Karpowitz 
says. ``It's going to be very difficult to recoup those costs, 
certainly in the short term.''
    Of course, some owners already are spotting loopholes around the 
prohibition on duopolies in smaller markets by signing marketing or 
management agreements with another station. Such agreements allow one 
station to handle some operations of another TV station and spread out 
the costs of maintaining its own operation.
    In Providence, Lin TV owns the CBS-affiliated station and has a 
marketing agreement with the Fox affiliate. Because it has two 
stations, it was able to add a 10 p.m. local news on the Fox station by 
using its CBS anchors and reporters, Mr. Karpowitz says, but he adds, 
``it would be a heck of a lot easier if we owned both stations.''
    As a result, viewers will start seeing the same news stories and 
same anchors on different stations, station owners say.
    ``It will be a little confusing for viewers. They'll see the same 
talent on opposing networks,'' says Robb Atkinson, news director at 
WWAY, the ABC-affiliated station in Wilmington, N.C., owned by Liberty 
Corp. He predicts ``the new model'' for stations in small markets will 
be a similar arrangement to get around the duopoly prohibition.
    One small-market owner angry about the new FCC rules is Jim 
Goodmon, president and chief executive of Capitol Broadcasting Co., in 
Raleigh, N.C. He testified before the FCC against the changes and, 
yesterday, said he can't find ``anyone who supports this other than the 
major media companies, their lawyers, and their investment bankers.''

    [Table]
    Left Behind?
    The biggest small-market broadcasters.
    Company/Headquarters Stations*
    Gray Television/Atlanta 22
    Raycom Media/Montgomery, Ala. 15
    Nexstar Broadcasting Group/Irving, Texas 14
    Media General/Richmond, Va. 13
    Sinclair Broadcast Group/Hunt Valley, Md. 12
    *Number of stations owned in small markets
    Source: Broadcast Investment Analysts

    The Chairman. Senator Boxer?

                STATEMENT OF HON. BARBARA BOXER, 
                  U.S. SENATOR FROM CALIFORNIA

    Senator Boxer. Mr. Chairman, I'd like to speak for about 2 
minutes.
    First of all, thank you very much for calling the 
Commissioners before the Committee. In California, this is 
perhaps the biggest issue. People are up in arms about what the 
FCC did. And I'm going to try to convey why.
    First, I don't agree with my colleagues, Senator Breaux and 
Senator Allen, when they say congratulations. The fact of the 
matter is, the court didn't ask the FCC to strike down the 35-
percent cap. They told you to justify it. You had that 
justification in the form of 700,000 communications from the 
people.
    And the people of this country have spoken out so 
eloquently on this point. And it is your job to represent the 
people, not the big special interests. I am dismayed and 
disappointed at what you have done.
    I guess the point that there are a lot of outlets is true. 
All the more damaging to have just a few people control the 
communication from those outlets. That's the point. Yes, we do. 
And, if anything, the Commission should have learned from the 
history, your own history, on the radio situation, which is a 
total disaster for free speech and ideas. Just talk to average 
people on that issue.
    And what about Enron? Think about that. You had nothing to 
do with it except for the fact that they became bigger and 
bigger and bigger, and the regulatory commissions just stood 
back and became a lapdog instead of a watchdog. And I hate to 
say it, but that's what I think is happening here.
    So I'm going to do everything I can as a Senator 
representing the largest State in the Union with a lot of 
voices out there that want to get heard. Entertainment voices, 
personalities, from the left to the right and everywhere in 
between. And it's interesting that the left and the right have 
gotten together on this, as well, in criticizing what you've 
done. And I hope to overturn what you did. I really do. And I 
know we have a lot of good leadership on that, whether it's 
Senator Hollings, Stevens, Dorgan, we have a lot of--Senator 
Lott--lots of us who feel this is wrong. Senator Snowe added 
her eloquence, I thought, this morning.
    Thank you.
    The Chairman. Senator Smith?

               STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman. And in the interest 
of hearing our witnesses, I'd like to just simply say I'm here 
to find out whether the response to your action is based on 
hype and hyperbole or if what you have done is based on what is 
reasonable and reasoned given that we live in an age of 
information. It does seem to me that, if anything, the public 
is on information overload. So I'm trying to find out if you've 
responded well to what the Congress has required, the courts 
are demanding, and I look forward to the testimony.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    I'd like to welcome all five Commissioners. It's the custom 
here to restrict opening statements to 5 minutes. But given the 
seriousness of this issue, we will allow the witnesses to speak 
as fully as possible and--of course, recognize that we do have 
a lot of questions, obviously.
    So please proceed, and we'll be begin with you, Chairman 
Powell, and then we'll just go back and forth to the other 
members of the Commission. Welcome, Chairman Powell.

    STATEMENT OF HON. MICHAEL K. POWELL, CHAIRMAN, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Chairman Powell. Thank you, Mr. Chairman. And I'd ask that 
my full statement be submitted for the record.
    The Chairman. Without objection.
    Chairman Powell. Mr. Chairman and distinguished Members of 
the Committee, it's my pleasure to come before you today to 
discuss the Commission's biennial review of our broadcast 
ownership rule. I also want to personally thank all of you who 
have provided the Commission with your respective views on the 
proceeding, along with well over 500,000 Americans. We have 
helped build the most comprehensive and complete broadcast-
ownership record in FCC history.
    Monday represented the culmination of a 20-month process 
that was required by the framework Congress crafted in the 1996 
Telecom Act. In the now-infamous Section 202(h), Congress 
ordered the Commission to review its broadcast-ownership 
regulations every 2 years and to, quote, ``determine whether 
any of such rules are necessary in the public interest as a 
result of competition.'' Further, we're required to repeal or 
modify any regulation we determine no longer serves the public 
interest in its current form.
    I think critical to understanding our actions is an 
understanding of the court's view of Congress's charge. In FOX, 
the D.C. Circuit held, and I quote, ``The Congress set in 
motion a process to deregulate the structure of the broadcast 
and cable television industries,'' end quote. It noted, in 
support of its view, that in 1996 Congress had repealed a 
myriad of rules, including repealing the statutory cable 
broadcast ban, repealing limits on cable network ownership, 
eliminating the national cap restrictions in radio and relaxing 
local radio rules. It directed the Commission to eliminate the 
national cap on the number of television stations any one 
entity may own. And it directed the Commission to increase the 
television ownership cap from 25 to 35 percent.
    As to the biennial review provision that's the subject of 
our actions today, the court stated clearly that the Commission 
was required by Congress, quote, ``to continue the process of 
deregulation,'' end quote, by reviewing each of the 
Commission's ownership rules every 2 years.
    It is this Congressional framework that guides the 
Commission's work, and it was the prior Commission's failure to 
heed the Congressional direction that led to so many of the 
broadcast rules being struck down or remanded.
    The FCC is an administrative agency, and it is 
constitutionally bound to comply, willingly or not, with 
Congress's direction, as expressed by the text of the statute. 
The Commission does not have the luxury of always doing what is 
popular. Thus, I must reject the sensationalist claims that our 
effort is nothing more than gratuitous deregulation. I believe 
we did our job, and I believe we did it well.
    Indeed, over the past 20 months we have been working 
tirelessly toward achieving three critically important goals. 
One, to reinstate legally enforceable broadcast-ownership 
limits that promote diversity, localism, and competition, 
replacing those that had been struck down by the courts. Two, 
by building modern rules that take proper account of the 
explosion of new media outlets for news, information, and 
entertainment. And, three, striking a careful balance that does 
not unduly limit transactions that promote the public interest 
while ensuring that no company can monopolize the medium. I am 
confident we achieved these goals.
    Indeed, because of the critically important nature of this 
proceeding, we set out to build a stronger foundation for our 
rule choices. It began when I created the Media Ownership 
Working Group, which commissioned 12 studies of how Americans 
use the media for different purposes and how media markets 
function. This was the first time ever the agency sought to 
survey the American people to see how it is they access news. 
We put out five notices of proposed rulemakings and public 
notices during the time and gave the public 15 months or more 
of open comment time to assist the Commission in its fact-
gathering efforts. Indeed, approximately ten public hearings 
were held on the subject. And I do commend, in large measure, 
the efforts of Commissioners Copps and Adelstein in bringing 
the benefits of those hearings to the Commission deliberation. 
As a result of this effort, we amassed the most thorough record 
ever in order to fulfil this statutory responsibility.
    Here is what we learned about the media marketplace. It is 
marked by abundance. For example, we found the number of 
outlets and the number of independent owners have risen 
dramatically over the course of the last 40 years. We learned 
that in 1960, the purported Golden Age of Television, if you 
missed the half-hour evening newscast, you were out of luck. 
But today, news and public affairs programming, the fuel of our 
democratic society, is overflowing. There used to be three 
broadcast networks, each with 30 minutes of news. Today, there 
are 24--there are three 24-hour all-day news networks, seven 
broadcast networks, and over 300 cable networks. Local networks 
are bringing the American public more local news than at any 
point in history. And there are new tools, such as the 
Internet, becoming increasingly important as a diverse source 
of news and information.
    There has been a 200-percent increase in outlets. But, more 
importantly for diversity, as so many people have mentioned, 
there has been a 139-percent increase in owners. In sum, 
citizens do have more choices and more to depend on for 
information than any time in history.
    Finally, I would emphasize the public interest does remain 
protected. While competition in the marketplace of ideas is 
robust, the Commission still believes deeply in the values of 
diversity, localism, and competition. They remain paramount 
public objectives. Thus, while we concluded many of the rules 
could not be sustained in their current form, many dating back 
to nearly 60 years, we opted to modify the regime, rather than 
eliminate it, Congress having provided only those two options.
    The package of changes, in my opinion, are modest. We kept 
in place the rule that forbids the top networks from merging. 
We have tightened the radio rules, fixing the anomaly that led 
to the now-vaunted situation in Minot, North Dakota. Given 
pending transactions, in fact, that market would be said to 
have 45 stations under the old rules. Under our new rules, it 
would only be ten, limiting the number of stations any one 
entity can own.
    We modified the remaining rules to better reflect the 
record evidence and strengthen the public-interest benefits. We 
retained a national cap, which is, as Senator Breaux notes, 
curiously defined in terms of the number of households an owner 
can potentially speak to, not the number of stations one owns 
or controls. Indeed, all networks, each own less than 3 percent 
of the television stations in the United States.
    We raised the cap from 35 percent to 45 percent in order to 
better balance the public-interest benefits of network 
ownership. Yes, the record shows they actually produce more 
local news in markets than non-network-owned stations. And we 
balanced the putative harms resulting from their bargaining 
power with a local affiliate.
    We also could not find that an absolute complete ban on 
cross-ownership between newspapers and broadcast properties, or 
radio and television properties, was defensible on the record. 
Such a complete prohibition was clearly harming the public 
interest in significant ways. Yet, again, we retained some 
meaningful limits on cross-ownership, utilizing a diversity 
index for the first time to weigh diversity consistent with the 
manner in which consumers do in drawing these limits.
    Finally, our competition caps are modified to better 
reflect the state of competition in different markets.
    Let me conclude by saying that the most important public-
interest benefit, by far, resulting from our actions is that we 
have reinstated meaningful limits that are once again 
enforceable. The existing rules haven't been taken out of 
action, suffering from their judicially delivered wounds. And I 
believe we did faithfully implement the Congressional scheme.
    I recognize, too, that by doing so we have forced an 
important debate about media regulation and the role of media 
in our society. I, personally, welcome and encourage that 
discussion, and stand ready to aid the Congress in any way to 
consider any changes in its media blueprint that it may see fit 
to make.
    Thank you, Mr. Chairman.
    [The prepared statement of Chairman Powell follows:]

        Prepared Statement of Hon. Michael K. Powell, Chairman, 
                   Federal Communications Commission
    Mr. Chairman and Members of the Committee, I appreciate the 
opportunity to appear before you today to discuss our recent decision 
to adopt new broadcast ownership limits. I am proud that this 
Commission and its staff can say that we conducted the most exhaustive 
and comprehensive review of our broadcast ownership rules ever 
undertaken. We have done so, obligated by our statutory duty to review 
the rules biennially and prove those rules are ``necessary in the 
public interest.'' The Court of Appeals has interpreted this standard 
as placing a high hurdle before the Commission for maintaining a given 
regulation, and made clear that failure to surmount that hurdle, based 
on a thorough record, must result in the rule's modification or 
elimination. This is an exceedingly difficult charge, but a critical 
one to fulfill if we hope to continue to promote the cherished values 
of diversity, competition and localism.
    Over the past twenty months we have been working tirelessly toward 
achieving three critically important goals in this proceeding: (1) 
Reinstating legally enforceable broadcast ownership limits that promote 
diversity, localism and competition (replacing those that have been 
struck down by the courts); (2) Building modern rules that take proper 
account of the explosion of new media outlets for news, information and 
entertainment, rather than perpetuate the graying rules of a bygone 
black and white era; and (3) Striking a careful balance that does not 
unduly limit transactions that promote the public interest, while 
ensuring that no company can monopolize the medium. I am confident we 
achieved these goals with the June 2, 2003 Order.
    To achieve these goals, however, the Commission needed to come face 
to face with reality. So, we faced the reality of the law and our 
responsibility to implement Congress' will, as interpreted by the 
courts. We faced the reality of having to compile and analyze a record 
unlike any other in our history. We faced the reality of the modern 
media marketplace. And by doing so, the Commission was able to craft a 
balanced package of enforceable and sustainable broadcast ownership 
limits that will best serve to achieve our public interest objectives 
of diversity, competition and localism for our Nation's citizens.
I. Statutory Mandate and Court Decisions
    In the Telecommunications Act of 1996, Congress established the 
biennial review mandate. In relevant part, Section 202(h) requires that 
the Commission review all of its broadcast ownership rules every 2 
years and determine ``whether any of such rules are necessary in the 
public interest as a result of competition.'' The Commission, as a 
consequence, is required to repeal or modify any regulation it cannot 
prove is necessary in the public interest. Congress gave the Commission 
a sacred responsibility, one that I do not take lightly. We are duty 
bound to obey the law. It is not an optional exercise or one that we 
can choose to ignore.
    Recent court decisions have established a high hurdle for the 
Commission to maintain a given broadcast ownership regulation. As 
interpreted by the U.S. Court of Appeals for the District of Columbia 
Circuit in the 2002 Fox and Sinclair cases, Section 202(h) requires the 
Commission to study and report on the current status of competition. 
Both decisions provide that the survival of any prospective broadcast 
ownership rules depends on this Commission's ability to justify those 
rules adequately with record evidence on the need for each ownership 
rule, and ensure that the rules are analytically consistent with each 
other. The implications of the court decisions were clear--fail to 
justify the necessity of each of our broadcast ownership regulations at 
the rules' and our sacred goals' peril.
    Indeed, keeping the rules exactly as they were was not a viable 
option. As the only member of this Commission here during the last 
biennial review, I watched first hand as we bent to political pressure 
and left many rules unchanged. Nearly all were rejected by the court 
because of our failure to apply the statute faithfully. I have been 
committed to not repeating that error, for I believe the stakes are 
perilously high. Leaving things unaltered, regardless of changes in the 
competitive landscape, is a course that only Congress can legitimately 
chart. This is why I set in motion the process--over 20 months ago--
that brought the Commission to the point we find ourselves at today.
II. FCC Procedural Action
    The court admonitions demonstrated the need to rebuild our decaying 
broadcast ownership regulations from the ground up. Like any 
reconstruction project, our task began with the need to lay a solid 
foundation to support our structural regulations. Our cement was not 
the blind intuitions of generations past--but facts that would lay the 
foundation for a sustainable set of broadcast ownership regulations 
built around, and for, today's media marketplace.
    Because of the critically important nature of this proceeding, we 
set out to lay this foundation by embarking on an exhaustive review, 
indeed the most comprehensive in the agency's history. It began in 
earnest 20 months ago when I created the Media Ownership Working Group. 
They commissioned studies of how Americans use the media for different 
purposes and how media markets function. The group's work formed the 
initial foundation of our review. More importantly, those studies sent 
a message that this review would not be business as usual when it comes 
to media ownership rules. For the first time, this agency took on the 
challenge of updating and reconciling years of piecemeal, decades old, 
ownership regulations in a rigorous and comprehensive way.
    We put out no less than three Notice of Proposed Rulemakings during 
that time and gave the public over fifteen months of open comment time 
to assist the Commission in its fact-gathering efforts. Approximately 
ten public hearings were held on the subject, thanks in large measure 
to the efforts of Commissioners Copps and Adelstein. I am enormously 
pleased that the public accepted our challenge. The record we received 
in this proceeding is deeper and more insightful than any I have seen 
in my 6 years of service at the Commission. I take pride in the fact 
that our decisions rest on an extraordinarily strong empirical record. 
For the agency charged with preserving the free flow of information in 
our democracy, the public should expect no less from us.
III. The Modern Marketplace
    Our fact-gathering effort demonstrated that today's media 
marketplace is marked by abundance. Since 1960 there has been an 
explosion of media outlets throughout the country. Even in small towns 
like Burlington, Vermont, the number of voices--including cable 
satellite radio, TV stations and newspapers has increased over 250 
percent during the last 40 years. Independent ownership of those 
outlets is far more diverse, with 140 percent more owners today than in 
1960.
    What does this abundance mean for the American people? It means 
more programming, more choice and more control in the hands of 
citizens. At any given moment our citizens have 4 access to scores of 
TV networks devoted to movies, dramatic series, sports, news and 
educational programming, both for adults and children. In short, niche 
programming to satisfy almost any of our citizens' diverse tastes.
    In 1960--the ``Golden Age of Television"--if you missed the \1/2\ 
hour evening newscast, you were out of luck. In 1980, it was no 
different. But today, news and public affairs programming--the fuel of 
our democratic society--is overflowing. There used to be three 
broadcast networks, each with 30 minutes of news daily. Today, there 
are three 24 hour all-news networks, seven broadcast networks, and over 
300 cable networks. Local networks are bringing the American public 
more local news than at any point in history.
    The Internet is also having a profound impact on the ever-
increasing desire of our citizenry to inform themselves and to do so 
using a wide variety of sources. Google news service brings information 
from 4,500 news sources to one's finger tips from around the world, all 
with the touch of a button. As demonstrated by this proceeding, diverse 
and antagonistic voices use the Internet daily to reach the American 
people. Whether it is the New York Times editorial page, or Joe Citizen 
using e-mail to let his views known to the Commission, or the use by 
organizations such as MoveOn.org to perform outreach to citizens, the 
Internet is putting the tools of democracy in the hands of speakers and 
listeners more and more each day.
    I have not cited cable television and the Internet by accident. 
Their contribution to the marketplace of ideas is not linear, it is 
exponential. Cable and the Internet explode the model for viewpoint 
diversity in the media. Diversity-by-appointment has vanished. Now, the 
media makes itself available on our schedule, as much or as little as 
we want, when we want. In sum, citizens have more choice and more 
control over what they see, hear or read, than at any other time in 
history. This is a powerful paradigm shift in the American media 
system, and is having a tremendous impact on our democracy.
IV. Public Interest Benefits
    The marketplace changes mentioned above were only the beginning, 
not the end of our inquiry. The balanced set of national and local 
broadcast ownership rules we adopted preserve and protect our core 
policy goals of diversity, competition and localism. Certain public 
interest benefits have clearly been documented in the record and the 
rules we adopted embrace and advance those benefits for the American 
public.
    As an initial matter, the public interest is served by having 
enforceable rules that are based on a solid, factual record. For the 
last year, several of the Commission's broadcast ownership regulations 
have been rendered unenforceable--vacated or remanded by the courts.
Protecting Viewpoint Diversity
    In addition, the Commission, recognizing that ``the widest possible 
dissemination of information from diverse and antagonistic sources is 
essential to the welfare of the public,'' introduced broadcast 
ownership limits that will protect viewpoint diversity. The Commission 
concluded that neither the newspaper-broadcast prohibition nor the TV-
radio cross-ownership prohibition could be justified in larger markets 
in light of the abundance of diverse sources available to citizens to 
rely on for their news consumption.
    By implementing our cross-media limits, however, the Commission 
will protect viewpoint diversity by ensuring that no company, or group 
of companies, can control an inordinate share of media outlets in a 
local market. We developed a Diversity Index to measure the 
availability of key media outlets in markets of various sizes. By 
breaking out markets into tiers, the Commission was able to better 
tailor our rules to reflect different levels of media availability in 
different sized markets. For the first time ever, the Commission built 
its data in implementing this rule directly from input received from 
the public on how they actually use the media to obtain news and public 
affairs information.
    Furthermore, by instituting our local television multiple ownership 
rule (especially by banning mergers among the top-four stations, which 
the record demonstrated typically produce an independent local 
newscast) and our local radio ownership limit, the Commission will 
foster multiple independently owned media outlets in both broadcast 
television and radio--advancing the goal of promoting the widest 
dissemination of viewpoints.
Enhancing Competition
    Moreover, our new broadcast ownership regulations promote 
competition in the media marketplace. The Commission determined that 
our prior local television multiple ownership limits could not be 
justified as necessary to promote competition because it failed to 
reflect the significant competition now faced by local broadcasters 
from cable and satellite TV services. Our revised local television 
limit is the first TV ownership rule to acknowledge that competition. 
This new rule will enhance competition in local markets by allowing 
broadcast television stations to compete more effectively not only 
against other broadcast stations, but also against cable and/or 
satellite channels in that local market. In addition, the record 
demonstrates that these same market combinations yield efficiencies 
that will serve the public interest through improved or expanded 
services such as local news and public affairs programming and 
facilitating the transition to digital television through economic 
efficiencies.
    The Commission found that our current limits on local radio 
ownership continue to be necessary to promote competition among local 
radio stations and we reaffirmed the caps set forth by Congress in the 
1996 Telecommunications Act. The Order tightens the radio rules in one 
important respect--we concluded that the current method for defining 
radio markets was not in the public interest and thus needed to be 
modified. We found the current market definition for radio markets 
which relies on the signal contour of the commonly owned stations, is 
unsound and produces anomalous and irrational results, undermining the 
purpose of the rule. We therefore adopted geographic based market 
definitions which are a more rational means for protecting competition 
in local markets. For example, we fixed the case of Minot, North Dakota 
which under our former rules produced a market produced a market with 
forty-five (45) radio stations. Under our reformed market definition, 
Minot would have only ten (10) radio stations included in the relevant 
geographic market.
    By promoting competition through the local television and radio 
rules, the Commission recognized that the rules may result in a number 
of situations where current ownership arrangements exceed ownership 
limits. In such cases the Commission made a limited exception to permit 
sales of grandfathered stations combinations to small businesses. In so 
doing, the Commission sought to respect the reasonable expectations of 
parties that lawfully purchased groups of local radio stations that 
today, through redefined markets, now exceed the applicable caps. We 
promote competition by permitting station owners to retain any above-
cap local radio clusters but not transfer them intact unless such a 
transfer avoids undue hardships to cluster owners that are small 
businesses or promote the entry into broadcasting by small businesses--
many of which are minority- or female-owned.
    Finally, by retaining our ban on mergers among any of the top four 
national broadcast networks, the Commission continues to promote 
competition in the national television advertising and program 
acquisition markets.
Fostering Localism
    Recognizing that localism remains a bedrock public interest 
benefit, the Commission took a series of actions designed to foster 
localism by aligning our ownership limits with the local stations' 
incentives to serve the needs and interests of their local communities. 
For instance, by retaining the dual network prohibition and increasing 
the national television ownership limit to 45 percent, the Commission 
promoted localism by preserving the balance of negotiating power 
between networks and affiliates. The National Cap will allow a body of 
network affiliates to negotiate collectively with the broadcast 
networks on network programming decisions to best serve the needs of 
their local community, while at the same time allowing the networks to 
gain critical mass to prevent the flight of quality programs, such as 
sports and movies, to cable or satellite.
    The record further demonstrated that by both raising the National 
Cap to 45 percent and allowing for cross-ownership combinations in 
certain markets the Commission would promote localism. Indeed, the 
record showed that broadcast network owned-and-operated stations served 
their local communities better with respect to local news production--
airing more local news programming than did affiliates. Furthermore, 
the record demonstrated that where newspaper-broadcast television 
combinations were allowed, those televisions stations have produced 
dramatically better news coverage in terms of quantity (over 50 percent 
more news) and quality (outpacing non-newspaper owned television 
stations in news awards).
    The Commission crafted a balanced set of broadcast ownership 
restrictions to preserve and promote the public interest goals of 
diversity, competition and localism.
V. Conclusion
    This critical review has been an exhaustive one. The Commission has 
struggled with a difficult conundrum: building an adequate record, 
satisfying the administrative burden of the Section 202(h) mandate, and 
ultimately justifying its rules before the courts that have expressed 
growing impatience with irrational and indefensible ownership rules. 
Four years ago, in the last completed biennial review, I concluded 
``[i]t is indeed time to take a sober and realistic look at our 
broadcast ownership rules in light of the current competitive 
communications environment.'' With a full record in hand, it was 
appropriate to fulfill Congress's mandate of completing our broadcast 
ownership review. The extraordinary coverage of the issue and the 
comments and evidence on the record have allowed the Commission to make 
an informed judgment, and hopefully to resist claims of being both 
``arbitrary and capricious'' before the courts.

    The Chairman. Thank you.
    Commissioner Adelstein?

STATEMENT OF HON. JONATHAN S. ADELSTEIN, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Adelstein. Thank you, Mr. Chairman, Senator Hollings, 
Members of the Committee. Thank you for this opportunity to 
testify.
    I'm just convinced that the FCC can benefit from the 
careful review that you're going to provide of our recent 
decision to allow further media concentration. We really need 
your help, because this issue goes to the heart of our 
democracy. So we desperately need to hear input from elected 
officials like yourselves.
    I'm afraid that democracy was not well-served by Monday's 
decision. Allowing fewer media outlets to control what 
Americans see, hear, and read can only give our people less 
information to make up their own minds about the issues they 
face.
    As media conglomerates go on buying sprees after this 
decision, they'll accumulate huge debts that will force them to 
chase the bottom line ahead of all else. Their growth will 
likely fuel even more sensationalism, more crassness, more 
violence, and even less serious coverage of the news and local 
events. The American people instinctively grasp this.
    Commissioner Copps and I reached out to Americans at field 
hearings across the country. We heard a loud and unanimous 
chorus that media concentration has gone too far already and 
should go no further. I've rarely seen an issue on which such 
strong opinion is so one-sided. This has hit a raw nerve. 
There's no doubt in my mind. Three-quarters of a million people 
contacted the FCC, the likes of which we'd never seen. 99.9 
percent of those people, who took their time to contact us, 
oppose further media consolidation.
    Of course, the FCC can't make these decisions according to 
popular opinion, but our statutory mandate is very simple. It's 
to do what's in the public interest. We shouldn't assume that 
the people are wrong about what's in their own interests unless 
we have overwhelming evidence to prove it. And here, there's 
plenty of evidence that the American people are right.
    Senator Snowe has noted that we can't know what's in the 
public interest about a public process. Well, I'll tell that, 
you know, Commissioner Copps and I did a public process of our 
own, and we went out, we talked to the American people. And 
I'll tell you, it had a profound influence on me, because we 
heard from people in organizations from every political 
stripe--from liberal to conservative, from Republican to 
Democrat, and virtually everyone in between--that they oppose 
the allowance of further media consolidation.
    This shouldn't be seen as a partisan issue simply because 
the Commission's vote broke down along party lines. My own dad, 
for example, is a Republican, and he's an elected State 
Representative in the State of South Dakota. He told me he's 
concerned that if media giants swallow up locally owned outlets 
in rural states like ours, citizens will see less coverage of 
local concerns, including key issues facing state governments, 
which have such a critical role under our Constitution and for 
which Republicans have so long and so hard fought to protect. 
His concerns highlight a real threat to our democracy.
    One national study found that combined TV coverage of all 
the campaigns in 2000 was about 74 seconds per night, and that 
includes local, state, and Federal elections, all elections for 
the Senate, President of the United States, state and local 
officials, Mayors, Governors, everything, 74 seconds. As you 
know all too well, people heard a lot more in the population 
from paid political ads, many of them negative, which only 
serves to depress voter turnout.
    Could the media activities help explain why half of the 
American population doesn't vote? Can anyone seriously argue 
that this will get better if we allow media giants to fortify 
their already massive market power?
    The FCC's order assumes that somehow the cost savings that 
come from mergers will always get channeled into better news 
and programming, but it requires no steps whatsoever to ensure 
that really happens. The majority made a huge leap of faith 
that the fixed rules based on oftentimes arbitrary numbers are 
the be-all and end-all of what's in the public interest.
    For example, the order assumes that every time a newspaper 
buys a TV station in the communities where 97 percent of 
Americans live, it's in their interest. Now, in some cases, 
that might be right. Those mergers may actually bring some news 
help to a struggling TV station in certain cases. But is that 
true in every case, as this order assumes?
    In many areas, such a deal eliminates an important voice 
that serves the community. It takes what was two voices and 
makes it one. But the order makes no effort to sort that out or 
to require any public-interest commitments whatsoever.
    The order also allows one TV station to swallow another in 
most communities in this country. Potentially, 95 percent of 
the population lives in a community where they can see one 
television station be swallowed up by another, again with no 
requirement that the broadcasters do anything to serve the 
public or to use any of the benefits that result from that 
merger to actually provide better news, better local 
programming, any investigative journalism, nothing, no 
requirements whatsoever, carte blanche.
    And this order assumes that networks should be able to own 
stations reaching 45 percent of the population--90 percent if 
you count the UHF discount--with no justification as to how 
this will help diversity or localism. We're about to create new 
media giants, media moguls that make Citizen Kane look like a 
piker.
    As Senator Dorgan noted, in larger markets like San 
Francisco, Senator Boxer's own San Francisco, or L.A., one 
owner can combine the cable system, three television stations, 
eight radio stations, the dominant newspaper, the leading 
Internet provider, some cable networks thrown in, magazines, 
and the studios that produce most of the programming that goes 
out over all those outlets.
    In smaller markets--say, Senator Burns' town of Great 
Falls, Montana; population of about 56,000--one entity could 
own the cable company, the dominant TV station, the dominant 
newspaper, and multiple radio stations. Is that really good for 
democracy in Montana?
    It's true that Congress and the courts forced a massive 
review, but they did not force massive deregulation. We could 
have required a market-by-market, case-by-case approach that 
ensures each new merger we allow actually serves the public 
interest. By failing to do so, the order went further than 
necessary in eliminating most of the last safeguards the FCC 
had in place to protect the public, and it went further than 
Congress or the courts required. The public-interest standard, 
if not dead, is mortally wounded. I'd be happy to answer any 
questions you have, and thank you for having me.
    [The prepared statement of Commissioner Adelstein follows:]

    Prepared Statement of Hon. Jonathan S. Adelstein, Commissioner, 
                   Federal Communications Commission
    Mr. Chairman, Senator Hollings and members of the Committee, thank 
you for the opportunity to testify before you today. It's great to be 
back here, but, unfortunately, I do not have great things to report. 
It's been a sad week for me, and I think for the country, as a dark 
storm cloud now looms over the future of the American media. I'm 
convinced the FCC can benefit from this careful review by Congress of 
our recent decision allowing further media concentration. Since this 
issue goes to the heart of our democracy, we desperately need input 
from members of the world's greatest deliberative body.
    On Monday, over my strong dissent, the FCC approved the most 
sweeping and destructive rollback of consumer protection rules in the 
history of American broadcasting.
    I'm afraid democracy was not well served by Monday's decision. 
Allowing fewer media outlets to control what Americans see, hear and 
read can only give Americans less information to use in making up their 
own minds about the key issues they face.
    The decision will diminish the diversity of voices heard over the 
public airwaves, which can only diminish the civil discourse and the 
quality of our society's intellectual, cultural and political life. It 
will diminish the coverage of local voices and local issues as media 
giants gobble up local outlets and nationalize the stories they 
broadcast.
    In the end, our new rules will simply make it easier for existing 
media giants to acquire more outlets and fortify their already massive 
market power. Monday's order capitulated to many of the longstanding 
demands of the media companies the FCC oversees.
    As media conglomerates go on buying sprees, they will accumulate 
enormous debt that will force them to chase the bottom dollar ahead of 
all else. This is likely to result in more sensationalism, more 
crassness, more violence and even less serious coverage of the news and 
local events.
    The American people instinctively grasp that media concentration is 
not healthy for our democracy. They know how it will affect coverage of 
issues of local concern.
    This is why we heard such a public outcry. Commissioner Copps and I 
reached out to Americans at field hearings across the country. People 
take their media very personally, and they are very articulate and 
substantive in what they say. We listened to thousands of people 
firsthand in city halls, schools, churches and meeting rooms. We heard 
a loud and unanimous chorus that they think media concentration has 
gone too far already and should go no further.
    And the American people have flooded the FCC with nearly unanimous 
opposition from all sides, from ultra-conservatives to ultra-liberals, 
and virtually everyone in between.
    In my years on the Hill, I worked on a lot of hot issues. But I've 
never seen an issue on which such strong opinion is so one-sided. It's 
touched a raw nerve. Three-quarters of a million people contacted the 
FCC, and 99.9 percent of them opposed further media consolidation. Of 
the thousands of e-mails I personally received, I saw only one that 
didn't oppose allowing further media concentration.
    The American people appear united in believing that media 
concentration has gone too far already and should go no further.
    I've heard it said the FCC can't make its decision by polls or by 
weighing postcards. I agree the FCC can't make these decisions 
according to popular opinion. But our statutory mandate from you is to 
do what's in the public's interest. Does that mean that we can simply 
dismiss those people who took the time to alert us to their deep-seated 
concerns with a passing reference? I don't think we should assume that 
people are wrong about what's in their own interest unless we have 
overwhelming evidence to prove it. Here, the opposite is true. There is 
plenty of evidence the people are right.
    We've heard opposition from people and organizations from every 
political stripe, from liberal to conservative, Republican to Democrat, 
and virtually everyone in between. Organizations of nearly every 
political stripe have weighed in, from the National Rifle Association 
to the National Organization for Women, from the Catholic Conference of 
Bishops to the Leadership Conference on Civil Rights. The Parents 
Television Council, Common Cause, the National Association of Black-
Owned Broadcasters, the National Association of Hispanic Journalists, 
the Writers Guild, and the Association of Christian Schools. Each of 
these organizations expressed grave doubt about the wisdom of allowing 
greater consolidation.
    We also heard from hundreds of leading musicians and performing 
artists, including Tom Petty, Billy Joel, Pearl Jam, Neil Diamond, and 
Tim McGraw. The Small Business Administration's Office of Advocacy 
worries about the effect of our changes on small businesses. Media 
moguls like Barry Diller and Ted Turner, who know the industry 
intimately, are greatly concerned.
    This should not be seen as a partisan issue simply because it broke 
down along party lines at the FCC.
    My own Dad, for example, is a Republican--and an elected state 
representative in our State of South Dakota. He fears that if media 
giants swallow up locally owned outlets in rural states like ours, 
citizens will see less coverage of local concerns, including the key 
issues facing state governments.
    He highlights a real threat to our democracy. One study found that 
the combined TV coverage of all campaigns in 2000 was about seventy-
four seconds per night--and that included local, state and Federal 
elections. As you all know best, people heard a lot more from political 
ads, many of them negative. That just depresses turnout. Could this 
media coverage help explain why half of Americans don't vote? Can 
anyone seriously argue that this will get better if we allow media 
giants to fortify their already massive market power?
    The FCC's order assumes that economic efficiencies and cost savings 
from mergers will always get channeled into better news and 
programming. But it requires no steps to actually make that happen.
    The majority made the leap of faith that fixed rules based on 
oftentimes arbitrary numbers are the be-all and end-all of what's in 
the public interest. They rejected an approach to look case-by-case, 
market-by-market in favor of bright line rules. They refused even to 
ask parties that seek to merge to say anything about how many news 
staff would be retained, the number of hours of local programming 
planned, cross-programming plans for TV duopolies or the overall impact 
on news and public affairs programming.
    For example, the order assumes that every time a newspaper buys a 
TV station in communities where 97.7 percent of Americans live, it is 
in their interest. In some cases, those mergers may actually bring some 
new heft to a struggling TV station. But is that true in every case? 
There are many circumstances in which such a deal eliminates an 
important voice that is now serving a community. The FCC order makes no 
effort to sort that out, or to require any public interest commitments 
whatsoever.
    The order essentially assumes one TV station swallowing another 
will always be of benefit in every community where 95.4 percent of the 
population lives, assuming that the community does not already have a 
television duopoly and depending on the success of any noncommercial 
station in the market.
    And it assumes that networks should be able to own stations 
reaching 45 percent of the population--90 percent if you count fully 
the UHF stations that are discounted by half--with no explanation as to 
how this will help diversity or localism.
    It's true that Congress and the courts forced a massive review. But 
they did not force massive deregulation. The FCC had to undertake the 
review, but it had a choice on the outcome. Certainly, the media 
markets have changed, and our rules must keep pace. But Monday's order 
goes much further than Congress or the courts required. It elects 
gratuitous deregulation.
    The biennial review called for in the Act provides a simple 
directive--to determine whether the rules ``are necessary in the public 
interest as the result of competition,'' repealing or modifying them 
only if we deem them ``no longer in the public interest.'' The linchpin 
of our statutory mandate is two words--public interest. In the context 
of media ownership, the FCC still has a special duty to protect what 
the Supreme Court referred to as an ``uninhibited marketplace of 
ideas.'' And the public interest means that the American citizenry 
should benefit from each decision.
    To protect the public, we could have required a market-by-market, 
case-by-case approach that would ensure that each merger served the 
interest of the communities affected. By failing to do so, the order 
went further than necessary in eliminating most of the last safeguards 
the FCC had in place to protect the public.
    One argument in favor of unleashing the media giants is that free 
over-the-air television is threatened. That's a worthy goal, but the 
rumors of its demise, widely spread, are greatly exaggerated. In 
reality, just last month, broadcast network advertisers spent a record 
$9.4 billion in upfront sales for next season, up 13 percent. The Wall 
Street Journal recently reported that some networks make $600-$700 
million, though others are less profitable.
    It is quite telling that the best case for consolidation is that 
the networks need to make still more. It's not the FCC's job to make 
sure every big TV network makes money--that's up to network management. 
Our first priority is ensuring the American people get a wide range of 
diverse viewpoints.
    The day we will know over-the-air TV is in real trouble is when 
broadcasters start lining up to turn back their licenses. Today, 
instead, the value of television stations continues to skyrocket 
because these licenses are so scarce. One station in Los Angeles sold 
for $800 million. Why are the networks so interested in increasing the 
nationwide cap or acquiring triopolies or duopolies in local markets if 
this business is on the way down?
    Some argue that the concern about the threat to American democracy 
is overblown since it is so strong and resilient. While our democracy 
is strong and not about to crumble, does it mean we can afford to 
weaken it? Doesn't it matter that only half our citizens vote? The same 
people argue there is plenty of diversity already, so we can afford to 
lose some. I just don't agree.
    It violates every tenet of a free democratic society to let a 
handful of powerful companies control our media. The public has a right 
to be informed by a diversity of viewpoints so they can make up their 
own minds. Without a diverse, independent media, citizen access to 
information crumbles, along with political and social participation. 
For the sake of our democracy, we should encourage the widest possible 
dissemination of free expression through the public airwaves.
    Despite the majority's assumption that technological advancements 
render broadcasters just another voice in a crowd of ever-expanding and 
fungible media channels, a simple fact remains. No technological 
advances have made it possible for every person who wants to broadcast 
in a local community to do so. Nobody yet has figured out how to 
replicate the spectrum for everyone who wants to broadcast a message. 
The exclusive right to use the broadcasting spectrum denies it to all 
others.
    While it is true that many Americans now access hundreds of 
channels on cable and satellite, the Internet and other media. But it 
turns out that the same few vertically-integrated global media firms 
own the bulk of what people see. A person can always add more 
electrical outlets throughout their home, but that doesn't mean they 
will get their electricity from new sources. The same goes for media 
outlets.
    Neither the Internet nor cable changes the fact that people still 
get the vast bulk of their local news and information from the same 
places they always have: their local newspaper and local TV stations. 
And these are the very outlets we are giving the most new flexibility 
to merge.
    We are moving to a world where in larger markets one owner can 
combine the cable system, three television stations, eight radio 
stations, the dominant newspaper, and the leading Internet provider, 
not to mention cable networks, magazine publishers and programming 
studios which could produce the vast bulk of the programming available 
to those outlets.
    In smaller markets, say the town of Great Falls, Montana with a 
population of 56,690, under our new rules one entity could own the 
cable company, the dominant television station, the dominant newspaper, 
and multiple radio stations. Is that automatically in the interest of 
the residents of Great Falls?
    To me, the public interest means more than just efficiencies and 
cost savings. Every community has local needs, local elections, local 
news, local talent, and local culture. While localism reflects a 
commitment to local news and public affairs programming, it also means 
much more. It means providing opportunities for local self-expression 
and reaching out to, developing and promoting local talent. It means 
making programming decisions to serve local needs. It means allocating 
resources to address the needs of the community. Localism's many 
virtues are hard to capture, but may get easier to ignore as companies 
consolidate.
    In this order, we face tradeoffs between efficiencies and other 
public interest goals such as localism and diversity in the media. 
Guess who wins. The social benefit of diverse, locally originated and 
oriented programming and program selection to me carries a lot of 
weight and calls for more individualized decisionmaking.
    I don't mean to suggest that bigness is always bad, or that free 
enterprise will always fail the public. There is some truth to the 
arguments that my colleagues make today. There's nothing inherently 
wrong with earning profits from using public property.
    But when it comes to gaining even greater profits at the expense of 
the cornerstones of our democracy, we must carefully question the 
effect on the public. Our new rules just don't let the big get bigger, 
they will effectively prevent smaller entities from breaking in.
    This is far from over. You may ultimately prove more responsive to 
the hundreds of thousand of citizens who have passionately pled for the 
independence and diversity of their media. To paraphrase Winston 
Churchill, this is not the end, or even the beginning of the end, but 
just the end of the beginning.

    The Chairman. Thank you.
    Commissioner Abernathy?

STATEMENT OF HON. KATHLEEN Q. ABERNATHY, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Commissioner Abernathy. Good morning, Mr. Chairman, Senator 
Hollings, and distinguished Members of the Committee. It's a 
distinct privilege to come before you to discuss the 
Commission's biennial review of its broadcast-ownership rules 
and to address your concerns.
    I cannot recall a single proceeding over the last several 
years that generated such extensive concern from citizens, 
elected officials, and consumer advocates. And the concern was 
entirely appropriate, because our relationship with the media 
helps define who we are as a country. It speaks to our love of 
the First Amendment and our respect for divergent views and 
opinions. It's a mirror into the soul of America. And that is 
why I very carefully considered all of the comments and all of 
the concerns from citizens when crafting the rules that we 
ultimately adopted.
    At the end of the day, we had to decide whether to be 
guided by facts or by fears. For literally years, the 
Commission has struggled to strike an appropriate balance in 
its media-ownership rules.
    Many have argued that this proceeding is about the core of 
our democracy. And I agree. And nothing is more fundamental to 
democracy than following the rule of law, as given to us by 
Congress and as interpreted by the courts. It is a heavy 
responsibility, and I believe we have exercised it well.
    I began my review of the FCC's media-ownership rules with 
three inescapable realities: the Telecommunications Act of 
1996, the judicial decisions interpreting it, and the United 
States Constitution.
    First, the act requires the Commission to conduct a review 
every 2 years to determine which of our broadcast-ownership 
rules remain necessary in the public interest and can be 
justified in the modern media world. The statute is written to 
prefer competition over regulation. We are already 5 months 
behind schedule for our 2002 biennial review and have, 
therefore, been unfaithful to the statute. Despite requests 
that the proceeding be delayed, I could not do that and also 
adhere to the statutory mandates.
    Second, judicial decisions in this area have struck down 
every broadcast rule the courts have reviewed since the passage 
of the 1996 act. Each time, the courts found the FCC failed to 
justify the limits it continued to place on broadcast 
ownership. To maintain all our rules in their current form 
would be to defy the Federal courts, something I was unwilling 
to do.
    Third, the First Amendment to the Constitution protects the 
free-speech rights of broadcasters. Therefore, any ownership 
restrictions imposed by the FCC must be based on concrete 
evidence, not on fear and speculation.
    Within these parameters, I was persuaded that several 
ownership limits, in their current form or with some 
modifications, remain necessary in the public interest to 
preserve competition, localism, and diversity. There is no 
doubt that the Commission must continue to improve prophylactic 
rules to ensure that the public receives a range of independent 
and competitive sources of local news and information in each 
market.
    Despite all of the alarmist cries, it is instructive to 
look at what we actually did. The reality is that, pursuant to 
the FCC's order, there will continue to be hundreds of pathways 
into the American home in the average American city or town. 
The reality is that we are continuing to impose a national 
television ownership cap in recognition of the important role 
that affiliates play in promoting localism, competition, and 
diversity. The reality is that today's order will prevent media 
companies from owning more than one of the top four stations in 
a market, and will similarly forbid consolidation to fewer than 
six voices in the market serving the vast majority of 
Americans.
    We have preserved structural limitations in revised forms, 
but modified our old rules, not only because they fail to 
promote competition, localism, and diversity, but because they 
actually may be harming these goals.
    It goes without saying that none of us want to see media 
ownership concentrated in the hands of a few. While reasonable 
minds can differ about which particular restrictions might best 
promote this goal, national ownership caps of 40 versus 45 
percent, or a minimum of six versus eight owners of local 
television stations in a market, and so forth, it's important 
to recognize that these are, in fact, issues on which 
reasonable people may disagree.
    But I believe the net result of our order is balanced. We 
preserved core values by maintaining safeguards to protect 
against undue concentration. We altered rules, as necessary, to 
respond to the dramatic changes that have occurred in the 
marketplace since the adoption of our media-ownership rules 
many years ago. And we provided a rigorous justification with 
an exhaustive study of the record.
    In all cases, our decisions were based on facts, rather 
than fears. That is what the Communications Act requires, that 
is what the courts require, and that is what the First 
Amendment requires.
    Thank you, and I'll be happy to answer any questions.
    [The prepared statement of Commissioner Abernathy follows:]

    Prepared Statement of Hon. Kathleen Q. Abernathy, Commissioner, 
                   Federal Communications Commission
    Good morning, Mr. Chairman, Senator Hollings, and distinguished 
Members of the Committee. I appreciate the opportunity to appear before 
you to discuss the Commission's biennial review of its broadcast 
ownership rules. This hearing provides us with an opportunity to 
discuss the changes that this Commission has made and why I believe our 
decision furthers our core goals of competition, localism, and 
diversity.
Overview
    On Monday, the Commission faced another historic decision affecting 
free speech where we needed to decide whether to be guided by facts or 
by fears. For literally years, this Commission has struggled to strike 
an appropriate balance in its media ownership rules. Many have argued 
that this proceeding is about the core of our democracy--and I agree. 
And nothing is more fundamental to democracy than following the rule of 
law as given to us by Congress and as interpreted by the courts. It is 
a heavy responsibility and I believe we have exercised it well.
    I began my review of the FCC's media ownership rules with three 
inescapable realities: The Telecommunications Act of 1996, the judicial 
decisions interpreting it, and the United States Constitution.
    First, the Act requires the Commission to conduct a review every 2 
years to determine which of our broadcast ownership rules can be 
justified in the modern media world. We are already 5 months behind 
schedule for our 2002 biennial review and have therefore been 
unfaithful to the statute. I understand that some Members of Congress, 
this Committee, and the public have requested that we delay this 
proceeding, but I could not do that and also adhere to the statutory 
mandates.
    Second, judicial decisions in this area have struck down every 
broadcast ownership rule the courts have reviewed since the 1996 Act. 
Each time the courts found the FCC had failed to justify the limits it 
continued to place on broadcast ownership. A decision to maintain all 
our rules in their current form would be contrary to the edict from the 
courts and would most likely be remanded, or indeed vacated, by the 
courts.
    Third, the First Amendment to the Constitution protects the free 
speech rights of broadcasters. Any rules we retain must be a reasonable 
means to accomplish our public interest goals. The Federal court 
opinions specifically tell me that any restrictions we place on 
ownership must be based on concrete evidence--not on fear and 
speculation. Based on the record, I could not conclude that most of our 
previous rules would meet this standard.
    Within these parameters, the decision we adopted on Monday tailors 
our ownership restrictions to the competitive realities of today's 
media marketplace, which includes not only more broadcast stations than 
ever before, but also cable operators, direct broadcast satellite 
providers, and other outlets. It also safeguards free over-the-air 
television by granting additional flexibility in response to the 
increased competition broadcasters are facing and the increased costs 
they are incurring to produce local news and to transition to the 
digital age. Moreover, by preserving several key ownership 
restrictions, our decision ensures that the public will continue to 
receive diverse and independent sources of local news and information. 
In contrast to previous Commission efforts, we have discharged our 
statutory obligation to provide a rigorous justification of these 
rules, thereby diminishing the prospect of our ownership restrictions 
being vacated by the court of appeals.
Statutory Duty
    I am pleased that a majority of the Commission has fulfilled its 
statutory duty to modify outdated rules where marketplace developments 
have rendered them no longer ``necessary in the public interest.'' 
Congress instructed the Commission to determine every 2 years whether 
our ownership restrictions remain ``necessary in the public interest'' 
in light of the competitive developments. Section 202(h) accordingly 
requires the Commission to determine whether each of our broadcast 
ownership rules could, in essence, be readopted on the ground that it 
serves the public interest. The courts interpreting Section 202(h), 
though, have made clear the statute carries with it a presumption in 
favor of repealing or modifying our ownership rules. Thus, if we do not 
affirmatively justify the retention of each rule, it will be 
eliminated. Furthermore, under the First Amendment, any restrictions we 
impose on the speech rights of broadcasters must be a reasonable means 
of promoting the public interest in a diverse and competitive media. In 
short, we must be able to demonstrate that our existing rules are 
reasonably necessary to promote competition, localism, and diversity or 
we must modify or eliminate those rules.
    In conducting this analysis, the Commission compiled a record of 
unprecedented breadth and depth. The record includes hundreds of 
thousands of comments, 12 independent studies, and testimony from a 
number of broadcast ownership hearings. We provided adequate notice of 
the rules under review at a level of specificity that is consistent 
with the scores of other NPRMs we have issued in other contexts in 
recent years. I am confident that we have fully complied with the 
Administrative Procedure Act. And I am satisfied that we had the 
information and the input we needed to make a sound, judicially 
sustainable decision that will benefit the public interest.
Timing
    Despite concerns that have been expressed, the path that led to 
Monday's decision was anything but a rush to judgment. The FCC 
initiated a review of the newspaper/broadcast cross-ownership rule and 
the local radio ownership rule in Fall of 2001. We were also required 
to respond to court remands of the local television ownership rule 
(adopted in 1999) and the national television cap (adopted in 2000). 
Those decisions were made 3 to 4 years ago and the NPRMs in these cases 
were issued in 1996 and 1998--five to seven years ago. The Commission 
thus has had, for the most part, between 18 months and 7 years to craft 
legally sustainable media ownership rules. While some would prefer to 
continue debating the issues in this 2002 biennial review, it is almost 
time to begin the 2004 biennial review. The issues before us are 
difficult and complex, but our task would not have become any easier a 
week from now, a month from now, or even a year from now.
Broadcast Ownership Rules
    Based on my review of the record, I am persuaded that several 
ownership limitations--in their current form or with some 
modifications--remain ``necessary in the public interest'' to preserve 
competition, localism and diversity. These rules thus met the legal 
standard demanded by Congress and the courts. Rules that did not meet 
this standard were not retained. Overall, our restrictions are grounded 
in actual evidence of harm, as required by the courts, not in merely 
hypothetical fears.
    First, in the process of retaining our current limits on ownership 
of radio stations, we have tightened our definition of radio markets to 
ensure that it more accurately reflects the level of competition in 
these markets. Second, our television ownership rules continue to 
maintain the prohibition of mergers among any of the top four networks. 
Third, for such other matters as restrictions on local television 
ownership, the national television cap, and our cross-ownership rules, 
we have preserved structural limitations in revised forms. We have 
modified these restrictions because, not only do the former rules fail 
to promote competition, localism and diversity, but they may actually 
be harming these goals. For example, the record demonstrates that 
combinations of two television stations actually produce more local 
news. The record also demonstrates that newspaper-owned television 
stations provide more news and public affairs programming and receive 
more industry awards for such programming than unaffiliated stations. 
If we kept our existing rules unchanged, we would artificially restrict 
such benefits to local communities with no countervailing advantages.
    While the public can benefit from some combinations, I strongly 
believe that the Commission must continue to impose prophylactic rules 
to ensure that the public receives a range of independent and 
competitive sources of local news and information in each market. The 
changes we made to our local television ownership rule will allow 
common ownership of no more than two television stations in markets 
with 17 or fewer television stations, and no more than three television 
stations in markets with 18 or more television stations (thereby 
ensuring a minimum of six distinct owners in many markets). Moreover, 
media companies may not own more than one of the top four stations in a 
market. The changes we are making to the newspaper/broadcast and radio/
television cross-ownership rules restrict any such combination in all 
markets with three or fewer television stations, and allow for limited 
combinations in mid-sized markets. Our new cross-media limits recognize 
that broadcast television and radio and newspapers continue to be the 
primary sources of local news and information, and the rules restrict 
ownership accordingly.
    With respect to the national television cap, the record in this 
case supported raising it to 45 percent. I believe this level will 
preserve the affiliate/network relationship and help ensure that 
television programming reflects the tastes and values of local 
communities. Allowing networks to increase their reach to 45 percent of 
the national audience, moreover, compared to 35 percent or proposals of 
40 percent, translates into an increase of their presence in only a 
handful of markets.\1\
---------------------------------------------------------------------------
    \1\ Moreover, the percentage of commercial stations that the 
networks own is very small: CBS owns 2.9 percent; Fox, 2.8 percent, 
NBC, 2.2 percent, and ABC, 0.8 percent. Even if these companies 
increased their national reach to 45 percent, these percentages will 
only increase modestly.
---------------------------------------------------------------------------
    Despite the significant degree of structural regulation that we are 
retaining, I realize that some people will oppose our decision on the 
ground that the four major networks air the programming that is chosen 
by approximately 75 percent of viewers during prime time. To me, the 
critical fact is that these providers control no more than 25 percent 
of the broadcast and cable channels in the average home, even apart 
from the Internet and other pipelines into the home. This means that 
Americans are watching these providers because they prefer their 
content, not because they lack alternatives.
New Initiatives
    The defining characteristic our biennial review decision is 
balance. We have undertaken affirmative steps to retain limits on 
ownership where they can be shown by actual evidence to promote 
competition, localism, and diversity. In the process of reaching this 
balance, we have also taken some additional steps.
    First, I was concerned that allowing an entity to own more than one 
television station in a market could decrease the amount of children's 
educational and informational programming available to families in 
those communities. I did not want to see the amount and diversity of 
such programming diminished if stations that are commonly owned in the 
same market simply re-run the same shows on each station. Accordingly, 
I was pleased that we clarified in the order that commonly owned 
stations must air distinct children's programming to comply with our 
rules.
    Second, our decision also leads the Commission down a path of 
providing more opportunities for small businesses, many of which are 
minority- and woman-owned businesses. The order restricts transfers of 
most existing combinations that fall out of compliance with our new 
rules unless the purchaser is a small broadcaster. In doing so, we are 
creating new opportunities for participation in broadcasting without 
threatening diversity or competition in these markets.
    Third, I also am pleased that, as part of this decision, we decided 
to issue a Further Notice of Proposed Rulemaking to explore 
opportunities to advance ownership by minorities and women in 
broadcasting. Furthermore, I commend Chairman Powell on his formation 
of a Federal Advisory Committee to assist the agency in creating new 
opportunities for minorities and women in the communications sector.
Conclusion
    It goes without saying that none of us wants to see media ownership 
concentrated in the hands of a few. While reasonable minds can differ 
about which particular restrictions might best promote this goal--
national ownership caps that vary by only 5 percentage points, a 
minimum of six versus eight owners of local television stations in a 
market, and so forth--we should recognize that these are in fact issues 
on which reasonable people may disagree. For me, given the rules the 
Commission adopted Monday, the breakneck pace of technological 
development, and the ever-increasing number of pipelines into 
consumers' homes, it is simply not possible to monopolize the flow of 
information in today's world.
    The net result of our Order is balance: We have preserved core 
values by maintaining safeguards to protect against undue 
concentration, we have altered rules as necessary to respond to the 
dramatic changes that have occurred in the marketplace since the 
adoption of our media ownership rules many years ago, and we have 
provided a rigorous justification with an exhaustive study based on the 
record. Sometimes the facts have led us to strengthen former 
restrictions; sometimes they have led us to relax them in part. But in 
all cases our decisions were based on facts rather than fears. That is 
what the Communications Act requires, that is what the courts require, 
and that is what the First Amendment requires.

    The Chairman. Thank you.
    Commissioner Copps?

   STATEMENT OF HON. MICHAEL J. COPPS, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Dr. Copps. Mr. Chairman, Senator Hollings, Members of the 
Committee, it's always an honor for me to return to the 
nurturing womb of the Russell Senate Office Building where I 
spent so many formative and happy years working for my valiant 
mentor and friend, Senator Hollings. Thank you for inviting us 
to be here today. Thank you, Mr. Chairman, for the concern and 
the leadership you have shown on the main issue before the 
Committee today, media concentration.
    Eight days ago, I participated in one of the most unique 
and inspiring events of all my years in Washington. 
Representatives of more than two-dozen organizations came to 
talk with Commissioner Adelstein and me, about their concerns 
regarding the media proceeding, which was then racing toward 
its culmination. Imagine seeing the National Organization for 
Women, the Parents Television Council, Common Cause, the Family 
Research Council, the Conference of Catholic Bishops, plus 
many, many more, bins and bins of postcards from the National 
Rifle Association were on tables behind us, and tens of 
thousands of other petitions were presented at that meeting. 
The people who came were from the political left and the 
political right, Republican and Democrat, rural and urban, 
young and old, North and South, creative artists, businessmen, 
women, labor organizations, educators, parents concerned about 
indecency and excessive violence on the airwaves, journalists, 
and civil-rights groups.
    My friend, Brent Bozell, of the Parents Television Council, 
looking around the room, had perhaps the best line of the day 
when he observed, ``When all of us are united on an issue, then 
one of two things has happened. Either the earth has spun off 
its access and we have all lost our minds''----
    [Laughter.]
    Dr. Copps.--``or there is universal support for a 
concept.'' He and I both understood immediately that it was the 
concept.
    On Monday, I strongly dissented to the decision that was 
taken at the FCC. I dissented on grounds of substance. I 
dissented on grounds of process. I dissented because I believe 
the Commission's actions empower too few media giants with 
unacceptable levels of influence over the ideas and information 
upon which our society and our democracy depend.
    I believe we are surrendering to them enhanced gatekeeper 
control over the civil dialogue of our country, more content 
control over our music, entertainment, and information, and 
veto power over the majority of what our families watch, hear, 
and read.
    I believe our approach was flawed. We should have begun by 
examining the law. What does the law tell us? The 
Communications Act tells us to use our rules to promote 
localism, competition, diversity. It reminds us that the 
airwaves belong to the American people, and that no broadcast 
station, no company, no single individual owns an airwave in 
the United States of America. The airwaves belong to all of the 
people.
    The law tells us that the last time Congress legislated on 
this topic--and keep in mind this was only 7 years ago now; not 
in the 1940s or the 1960s or sometime back in the medieval 
past. It was in 1996. And Congress thought then that 
restrictions on how large a single media corporation could get 
and how much power one company could amass were still important 
and still necessary.
    The Supreme Court has upheld media protections, stating 
that, quote, ``It is the purpose of the First Amendment to 
preserve an uninhibited marketplace of ideas in which truth 
will ultimately prevail rather than to countenance 
monopolization of that market, whether it be by the government 
or a private licensee,'' end quote.
    Speaking of jurisprudence, I'm often reminded of Judge 
Learned Hand's admonition when he said, ``The hand that rules 
the press, the radio, the screen, and the far-spread magazine, 
rules the country.'' Those words come down through the years 
with shining clarity and continuing relevance.
    Remember also that court decisions since then have kept 
open the way, not only for us to keep, but even to strengthen 
most of our ownership limits, provided that we justify them 
with deeper analysis and better data.
    I wanted us to look more deeply at the world of experience, 
what practical real-world lessons could we draw from the 
massive radio consolidation that followed 1996? What does it 
mean that in 2003 we have 34 percent fewer radio-station owners 
than we had in 1996? How much has diversity of programming 
suffered? Did more homogenized music and standardized 
programming get played, crowding out local and regional artists 
and performers? How widespread were local newsroom cutbacks in 
the wake of station takeovers?
    I wanted us to seek out the counsel and wisdom of the 
American people, believing, as I do, that the Commission has a 
serious public-interest obligation to reach out and inform the 
American people when it is dealing with matters like these, not 
through a Federal register notice read mostly by Washington 
insiders, but through public outreach that can be heard by all 
Americans.
    And in the end, I wanted these proposed rules published and 
circulated, with 60 or 90 days, or some period of time, at 
least, for public comment. It was not to be. Commissioners 
received the item on the last day possible if we were to vote 
on June 2, and the public received it not at all. Indeed, the 
actual text of the final rules didn't come into my office until 
late last week.
    I believe that the animating spirit of a notice-and-comment 
procedure is to make sure our citizens know as much as possible 
about the specifics of what is being proposed. It makes for 
better laws. It makes for better democracy. After all, even 
this independent agency is part of a democratic system of 
government. And when there is such an overwhelming response on 
the part of the American people and from their representatives 
in Congress assembled, we ought to have taken notice, we ought 
to have taken action. This is not a business-as-usual affair.
    I also happen to believe that putting the proposed rules 
out for comment would have enhanced their prospects for 
successful scrutiny by the courts. Wouldn't we be better able 
to defend, say, the new 45-percent cap if we subjected it to 
some analysis and comments, so we could tell the court we had 
consulted the real world? Instead, we open ourselves to the 
argument that 45 percent might just be an arbitrary Commission 
number. I, frankly, doubt the courts are going to be impressed.
    And I agree with what Senator McCain said at the outset, 
even an expert agency can't predict all the consequences of an 
action like this. I am still reading the papers and the 
comments every morning to try to ascertain the thoughts of 
groups who are taking issue with one facet or another of this 
agreement, because there's no way that we can do all of that.
    Even with incomplete information, the public reaction 
against the proposed changes has been unlike anything the FCC 
has ever experienced, as Commissioner Adelstein noted. Over 
three-quarters of a million comments we have received, 99 
percent, 99.9 percent of them saying, ``Think again.''
    I believe the Commission's majority chose radical 
deregulation 2 days ago. Perhaps not quite so radical as 
originally intended a year ago, before Americans found out what 
was going on and began to speak out, but radical, nevertheless.
    This decision allows a corporation to control three 
television stations in a single city. Why does any company need 
to control three television stations in any city?
    The decision allows the giant media companies to buy up the 
remaining local newspaper and exert massive influence over a 
community by wielding three television stations, eight radio 
stations, the cable operator, plus the already monopolistic 
newspaper.
    The decision further allows the already massive television 
networks to buy up even more local TV stations so that they 
could control up to an unbelievable 90 percent of the national 
television audience.
    This is not localism, diversity, and competition. It is 
centralization, uniformity, and oligopoly, or worse.
    The vaunted 500-channel universe of cable TV is not going 
to save us. Ninety percent of the top cable channels are owned 
by the same giants that own the TV networks and the cable 
goliaths. Nor is the Internet going to be our salvation, given 
the track that it's presently on. The 20 top Internet news 
sources are controlled by the very same media giants who 
control radio, TV, newspapers, and cable.
    Some would have us believe that this was merely an ordinary 
examination of our rules that we conduct every 2 years. Let's 
not----
    The Chairman. Commissioner Copps, you are exceeding my 
generous offer.
    Dr. Copps. OK. Can I have a minute and a half to finish up?
    The Chairman. That would be fine.
    Dr. Copps. OK. This was, I think, the granddaddy of all 
reviews. It sets the direction for how the next review is going 
to go.
    I did not carry the Commission vote on Monday. Was I 
disappointed? Of course I was. Am I discouraged? No, I am not. 
I am encouraged. I am encouraged that this Committee is 
following up so quickly with urgent oversight of Monday's vote. 
I am encouraged by the increased attention that this issue is 
receiving throughout the Congress. I'm encouraged that judicial 
avenues of redress remain open, even administrative redress 
through reconsideration petitions at the Commission, although 
I'm not betting my house on this latter one. But I do hope my 
colleagues will listen anew in the weeks and months ahead.
    Finally, the people understand this issue, because it goes 
to the values and virtues of democracy. It goes beyond 
statistics about the boundaries of radio markets or the 
formulas of diversity indexes or the precise mix of properties. 
It goes to protecting freedom and openness of our media, 
diversity of entertainment and information and ownership and 
viewpoint, and it goes to keeping as much of this local as we 
possibly can.
    What animates the people's concern is clear. These citizens 
want us to settle this issue of who will control our media and 
for what purposes, now. And they want to resolve it in favor of 
airwaves of, by, and for the people.
    Mr. Chairman, Senator Hollings, Members of the Committee, I 
look forward to working with you to make that happen.
    [The prepared statement of Commissioner Copps follows:]

      Prepared Statement of Hon. Michael J. Copps, Commissioner, 
                   Federal Communications Commission
    Mr. Chairman, Senator Hollings, Members of the Committee, I am 
honored to appear before you today and to participate in this 
discussion of the most important issue before the Commission this 
year--media concentration. So much rides on the outcome of this issue 
and, in light of the Commission's action Monday, dealing with it as 
soon as possible becomes critical. I look forward to our discussion and 
to receiving the guidance of the Committee. In these opening remarks, I 
will limit myself to discussing Monday's decision to dismantle most of 
our media concentration protections.
    I strongly dissented to this decision. I dissented on grounds of 
substance. I dissented on grounds of process. I dissented because I 
believe the Commission's actions empower America's new Media Elite with 
unacceptable levels of influence over the ideas and information upon 
which our society and our democracy so heavily depend.
    We are at a crossroads--for television, radio and newspapers and 
for the American people. The decision the FCC made on Monday will 
recast our entire media landscape for years to come. At issue is 
whether a few corporations will be ceded enhanced gatekeeper control 
over the civil dialogue of our country; more content control over our 
music, entertainment and information; and veto power over the majority 
of what our families watch, hear and read.
    Two very divergent paths beckoned us.
    Down one road is a reaffirmation of America's commitment to local 
control of our media, diversity in news and editorial viewpoint, and 
the importance of competition. This path implores us not to abandon 
core values going to the heart of what the media mean in our country. 
On this path we reaffirm that FCC licensees have been given very 
special privileges and that they have very special responsibilities to 
serve the public interest.
    Down the other road is more media control by ever fewer corporate 
giants. This path surrenders to a handful of corporations awesome 
powers over our news, information and entertainment. On this path we 
endanger time-honored safeguards and time-proven values that have 
strengthened the country as well as the media.
    So the stakes are high--higher than they have been for any decision 
the five people sitting before you today have ever made at this 
Commission. How should we have decided which path to choose?
    We should have begun by examining the law. What does the law tell 
us? The Communications Act tells us to use our rules to promote 
localism, diversity and competition. It reminds us that the airwaves 
belong to the American people, and that no broadcast station, no 
company, no single individual owns an airwave in America. The airwaves 
belong to all the people. The law tells us that the last time Congress 
legislated on this topic--and keep in mind this was only 7 years ago, 
not in the 1940s or the 1960s, but in 1996--it thought that 
restrictions on how large a single media corporation could get and how 
much power one company could amass were important and necessary. And 
the Supreme Court has upheld media protections, stating that ``it is 
the purpose of the First Amendment to preserve an uninhibited 
marketplace of ideas in which truth will ultimately prevail, rather 
than to countenance monopolization of that market, whether it be by the 
Government itself or a private licensee.'' Speaking of jurisprudence, I 
am often reminded of Judge Learned Hand's admonition that ``The hand 
that rules the press, the radio, the screen, and the far-spread 
magazine, rules the country.'' Those words come down through the years 
with shining clarity and continuing relevance.
    We should then have looked deeply at the world of experience. What 
practical, real world experience do we have to guide us? Radio 
deregulation gives us powerful and relevant lessons. When Congress and 
the Commission removed radio concentration protections, we experienced 
massive, and largely unforeseen, consolidation. We saw a 34 percent 
reduction in the number of radio station owners. Diversity of 
programming suffered. Homogenized music and standardized programming 
crowded out local and regional talent. Creative local artists found it 
evermore difficult to obtain play time. Editorial opinion polarized. 
Competition in many towns became non-existent as a few companies bought 
up virtually every station in the market. This experience should 
terrify us as we consider visiting upon television and newspapers what 
we have inflicted upon radio. ``Clear Channelization'' of the rest of 
the American media will harm our country.
    We should, finally, have sought out the counsel and wisdom of the 
American people. Commissioner Adelstein and I have attended public 
hearings across the country with conservatives and liberals, 
broadcasters and creative artists, concerned parents and civil rights 
activists, church leaders and educators. Our Commission has seen close 
to three quarters of a million people register their views--more than 
for any proceeding in Commission history. And in a nation that can be 
deeply divided on important issues, these citizens are uniquely 
unanimous on the question of whether this Commission should allow 
further media concentration. They are screaming that we should protect 
local broadcasting, diversity of programming and opinion, and the 
ability to compete with the huge companies. We should heed their 
conservatism--their urgent call to refrain from abandoning time-honored 
protections when so much is at stake and so much is unknown about the 
consequences of what we are doing here today.
    The majority instead chose radical deregulation--perhaps not quite 
so radical as originally intended a year ago before Americans found out 
what was going on and began to speak out--but radical nevertheless. 
This decision allows a corporation to control three television stations 
in a single city. Why does any company need to control three television 
stations anywhere? The decision allows the giant media companies to buy 
up the remaining local newspaper and exert massive influence over a 
community by wielding three TV stations, eight radio stations, the 
cable operator, plus the already monopolistic newspaper. The decision 
further allows the already massive television networks to buy up even 
more local TV stations, so that they could control up to an 
unbelievable 90 percent of the national television audience. Where are 
the blessings of localism, diversity and competition here? I see 
centralization, not localism; I see uniformity, not diversity; I see 
monopoly and oligopoly, not competition.
    Will the vaunted 500-channel universe of cable TV save us? Well, 90 
percent of the top cable channels are owned by the same giants that own 
the TV networks and the cable systems. More channels are great. But 
when they're all owned by the same people, cable doesn't advance 
localism, editorial diversity or competition. And those who believe the 
Internet alone will save us from this fate should realize that the 
dominating Internet news sources are controlled by the same media 
giants who control radio, TV, newspapers and cable.
    Some would have us believe that this was merely an ordinary 
examination of our rules that we conduct every 2 years. Let's not kid 
ourselves. This was the granddaddy of all reviews. It sets the 
direction for how the next review will get done and for how the media 
will look for many years to come. I have seen the concern, the deep 
feeling and outright alarm on the faces of people who have come out to 
talk to Commissioner Adelstein and me all across this country. Are they 
emotional? You bet. And I think they are going to stay that way until 
we get this right.
    Why did the Commission get this so wrong? Good, sustainable rules 
are the result of an open administrative process and a serious attempt 
to gather all the relevant facts. Bad rules and legal vulnerability 
result from an opaque regulatory process and inadequate data. 
Unfortunately, today's rules fall into the latter camp. This proceeding 
has been run as a classic inside-the-Beltway process with too little 
outreach from the Commission and too little attention paid to the 
public. This is the way the Commission usually does business, we are 
told. Well, I submit this is too important to be treated on a business-
as-usual basis. So Commissioner Adelstein and I traveled across the 
country to attend as many hearings and forums as we could.
    I am also troubled that the Commission refused to publicly disclose 
the rules before voting on them. What possible harm can come from 
transparency? How can telling Congress and the public what we plan to 
do possibly be bad? Isn't the animating spirit of our ``notice and 
comment'' procedure to make sure our people know as much as possible 
about the specifics of what is being proposed?
    Even with incomplete information, the public reaction against the 
proposed changes has been unlike anything the FCC has ever experienced. 
Of the nearly three quarters of a million comments we have received, 
nearly all oppose increased media consolidation--over 99.9 percent.
    We've heard bipartisan concern from more than 150 Members of 
Congress, including a majority of this Committee, as well as the 
Congressional Black Caucus, the Congressional Hispanic Caucus and the 
Congressional Asian Pacific American Caucus, asking us to slow down and 
put these proposals out for public comment before we vote.
    Dozens of organizations have weighed in with their concerns about 
media concentration. Among others, we have heard from Children Now, the 
Writers Guild of America, the Parents Television Council, the 
Communications Workers of America, AFTRA. the National Association of 
Hispanic Journalists, the National Association of Black Journalists, 
the Conference of Catholic Bishops, the Center for the Creative 
Community, Common Cause, the American Civil Liberties Union, the 
National Rifle Association, the American Civil Liberties Union, the 
National Organization for Women, the Family Research Council, the 
National Association of Black Owned Broadcasters, Rainbow Push, the 
Media Access Project, Consumers Union, the Consumer Federation of 
America, Move On, the Center for Digital Democracy, United Church of 
Christ, the Minority and Media Telecommunications Council, the 
Leadership Conference on Civil Rights, and many, many more across a 
broad political and geographic spectrum. City councils across this 
country in such places as Chicago, Seattle, Philadelphia, San 
Francisco, Atlanta, and Buffalo, as well as a whole state--Vermont--
have gone on record against media concentration. Note, please, that 
several of these are cities where Big Media would have us believe that 
all is well with the consolidation they have introduced.
    As Brent Bozell of the Parents Television Council so aptly put it, 
``When all of us are united on an issue, then one of two things has 
happened. Either the Earth has spun off its axis and we have all lost 
our minds or there is universal support for a concept.'' Well, it's the 
concept--a transcending, nationwide concept.
    The FCC is not, of course, a public opinion survey agency. Nor 
should we make our decisions by weighing the letters, cards and e-mails 
``for'' and the letters, cards and e-mails ``against'' and awarding the 
victory to the side that tips the scale. But even this independent 
agency is part of our democratic system of government. And when there 
is such an overwhelming response on the part of the American people and 
their representatives in Congress assembled, we ought to take notice. 
Here the right call is to take these proposals, put them out for 
comment and then--only then--call the vote. The spirit underlying the 
``notice and comment'' procedure of independent agencies is that 
important proposed changes need to be seen and vetted before they are 
voted. We haven't been true to that spirit.
    And what did we vote on? The majority allows TV networks to control 
up to 45 percent of the national audience--up to 90 percent once the 
strange decision to keep the UHF discount is considered. This decision 
is made without an adequate explanation for why 45 percent is not just 
an arbitrary number pulled out of a hat, and despite exhaustive and 
largely uncontested evidence supporting the existing cap by local 
broadcasters. I frankly doubt the courts will be impressed.
    Merrill Lynch predicts this decision will result in a ``Gold Rush'' 
where the national networks buy up the remaining local broadcasters. 
The newspapers, on the morning after Monday's vote, were filled with 
speculation of what kinds of deals, mergers and swaps would now take 
place.
    Some have argued that free over-the-air television is doomed unless 
we allow more concentration. The facts tell a different story. The 
networks not only reach consumers over the air through their own highly 
profitable stations and through affiliates, but they are also 
guaranteed carriage to cable subscribers. Indeed, they own much of 
cable. The networks command an enormous advertising premium, recently 
receiving a record $9.4 billion in up-front prime-time advertising for 
the next season. They have ownership in most of their profitable 
programs, and these are subsequently put into syndication or 
``repurposed''--the fancy new term for a re-run. This argument that the 
only way for the poor among us to continue receiving free, over-the-air 
television is to allow already powerful networks to grow more powerful 
would have been better left unsaid.
    The majority inexplicably, maintains the UHF Discount. Under the 
UHF Discount, UHF TV stations are considered to reach only 50 percent 
of the households that VHF TV stations reach for purposes of 
determining whether a company has exceeded the national cap. Once upon 
a time, that was warranted. The Commission found that over-the-air UHF 
stations reached fewer viewers than VHF stations because their signals 
were different. But UHF and VHF stations reach an identical number of 
viewers when delivered over cable TV facilities. Today, over 85 percent 
of consumers receive their signal from cable and DBS. Program carriage 
requirements ensure that cable consumers receive the UHF signal, and 
DBS operators are required to carry all UHF stations in any market 
where they carry any local channel.
    With 85 percent of Americans experiencing no difference between UHF 
and VHF stations, the discount no longer makes sense. Eliminating the 
entire discount may be warranted, but at a minimum it requires 
replacement with a number that reflects the reality of today's 
technology and marketplace.
    The more you dig into this Order, the worse things get. The Order 
finds:

   That further concentration in already highly-concentrated 
        markets is acceptable.

   That in a town with only four TV stations, it is acceptable 
        for the top-rated television station to buy the only daily 
        newspaper.

   That consolidation going forward will enhance news 
        programming, despite considerable record evidence showing that 
        increased concentration more often than not reduces quality 
        news.

    There are other things this order could have done. Commenters 
addressed the need to require more independent programming on our 
airwaves so that a few conglomerates do not act anti-competitively to 
control all of the creative entertainment that we see. These proposals 
should have received the serious attention they deserve in this 
decision. Over the past decade, we have witnessed a substantial 
increase in the amount of programming owned by the networks. In 
addition to the obvious loss of diversity, this has also entailed the 
loss of thousands of jobs, including creative artists, technicians and 
many, many others. Years ago, we had protections against this kind of 
program ownership. Now that the majority is loosening outlet ownership 
rules, we ought to be looking at the consequences of having no limits 
on who owns the programming.
    The Order could have addressed having a legitimate license renewal 
process to partially protect against the risks of further 
consolidation. The system has degenerated into one of basically post-
card license renewal. Unless there is a major complaint pending against 
a station, its license is almost automatically renewed. A real, honest-
to-goodness license renewal process, predicated on advancing the public 
interest, might do more for broadcasting than all these our other rules 
put together.
    The Order could have considered the impact of media concentration 
on local broadcasters. As I have traveled across the country, I have 
spoken to local broadcasters. We should recognize and reaffirm the 
proud heritage of local broadcasters, most of who are strongly 
committed to serving the public interest. Unfortunately, consolidation 
has already meant that broadcasters are less and less captains of their 
own fate and more and more captives to Wall Street and Madison Avenue 
expectations. Increasing consolidation threatens their very survival. 
Media analysts expect that the only option for local broadcasters will 
now be to sell. They conclude that those that want to remain will face 
an extremely tough road. During our hearings, we heard from small 
broadcasters that had already been squeezed out of the market. These 
rule changes can only accelerate this trend. Yet, we have failed even 
to consider the impact on these independent broadcasters.
    The Order could have analyzed the impact of media concentration on 
indecent and excessively violent programming. Some have suggested that 
there may be a link between increasing consolidation and increasing 
indecency on our airwaves. The Commission fails to address this issue 
in its analysis. It seems plausible that there is such a connection. I 
don't know the answer to this question. I do know this: we have no 
business voting until we take a serious look at the matter and amass at 
least a credible body of evidence.
    The Order could have addressed the impact of media concentration on 
women and minority groups. We know that there are substantially fewer 
radio station owners today than there were before the rules were 
changed in 1996. People of color now make up less than 4 percent of 
radio and television owners. The National Association of Black Owned 
Broadcasters tells us that the number of minority owners of broadcast 
facilities has dropped by 14 percent since 1997.
    We have not even attempted to understand what further consolidation 
means in terms of providing Hispanic Americans and African Americans 
and Asian-Pacific Americans and Native Americans and women and other 
groups the kinds of programs and access and viewpoint diversity and 
career opportunities and even advertising information about products 
and services that they need. America's strength is, after all, its 
diversity. And our media need to reflect this diversity and to nourish 
it.
    Today's Order puts most such questions off into the future, with 
the exception of a curious plan to allow a small business, perhaps a 
minority firm, to buy a consolidated block of outlets from an incumbent 
who exceeds the limits. That would require deeper pockets than most 
such firms could afford. I would prefer to look for real opportunities 
for small entrepreneurs instead of encouraging them to buy large 
consolidated properties.
    All this means that I am deeply saddened by the Commission's 
actions. Some have characterized the fight against this seemingly pre-
ordained decision as Quixotic and destined to defeat. But I think, 
instead, that we'll look back at this 3-2 vote as a Pyrrhic victory.
    This Commission's drive to loosen the rules and its reluctance to 
share its proposals with the people before we voted awoke a sleeping 
giant. American citizens are standing up in never-before-seen numbers 
to reclaim their airwaves and to call on those who are entrusted to use 
them to serve the public interest. In these times when many issues 
divide us, groups from right to left, Republicans and Democrats, 
concerned parents and creative artists, religious leaders, civil rights 
activists, and labor organizations have united to fight together on 
this issue. Senators and Congressmen from both parties and from all 
parts of the Country have called on the Commission to reconsider. The 
media concentration debate will never be the same. The obscurity of 
this issue that many have relied upon in the past, where only a few 
dozen inside-the-Beltway lobbyists understood the issue, is gone 
forever.
    I didn't carry that Commission vote on Monday. Was I disappointed? 
Sure, of course. Am I discouraged? Not a bit. I am encouraged. Let me 
tell you why. I am encouraged that this Committee is following up so 
quickly with urgent oversight of Monday's vote. I am encouraged by the 
increased attention this issue is receiving throughout the Congress. I 
am encouraged that judicial avenues of redress remain open to our 
people, and even administrative redress through reconsideration 
petitions at the Commission. I'm not putting all my bets on this latter 
one, but I do urge my colleagues to listen anew in the weeks and months 
ahead.
    But far more than any of this, I am encouraged by my fellow 
citizens. After traveling almost the length and breadth of this land 
and talking with thousands of people of every size, stripe and 
persuasion, I am convinced that the vast majority of them want, 
deserve, and are increasingly demanding a renewed discussion of how 
their airwaves are being used and how to ensure that their public 
property is serving the public interest. I congratulate the hundreds of 
thousands of people who have attended hearings, filed comments, written 
letters to the editor, and contacted the Commission. They have made a 
difference. And I believe they will stay the course, looking to you, 
their representatives, to tackle what I am convinced is a great 
emerging grassroots issue. The people understand the issue, because it 
goes to values and virtues that are part of democracy's soul. It goes 
so far beyond statistics about the boundaries of radio markets, or the 
formulas behind diversity indexes, or the precise mix of properties one 
company can own in various sized media markets. It goes to protecting 
the freedom and openness of their media; encouraging diversity of 
entertainment, diversity of information, diversity of ownership and 
diversity of viewpoint; and keeping a large chunk of the media local, 
making it available to new entrants, preserving its competitiveness. 
Taking only a little license, I think the concern underlying all those 
cards, letters and e-mails that have come into the Commission can be 
summed up this way:

        Dear Commissioner: I understand you're messing around with the 
        people's airwaves. I don't think I like what you're doing. I 
        know I don't like the way you're doing it. I'm a citizen and I 
        expect to be told what your plans are before you do it. Get a 
        grip. Straighten out your priorities. Thank you.

                                                       Yours truly,

    What animates this concern is clear: these good citizens want us to 
settle this issue of who will control our media and for what purposes 
now, and they want to resolve it in favor of airwaves of, by and for 
the people. Mr. Chairman, Senator Hollings, Members of the Committee, I 
look forward to working with you to make it happen.

    The Chairman. Thank you, Commissioner Copps.
    Commissioner Martin?

   STATEMENT OF HON. KEVIN J. MARTIN, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Commissioner Martin. Thank you, Mr. Chairman, Senator 
Hollings.
    The Chairman. Could I just mention to the audience, we 
don't want any displays of approval or disapproval during the 
Committee hearings. We'd appreciate that. Thank you.
    Commissioner Martin?
    Commissioner Martin. Thank you, Mr. Chairman, Senator 
Hollings, for the invitation to be with you this morning. I 
look forward to listening to your comments and to answering any 
questions you may have. And I would like to reiterate at the 
start what I have said to this Committee before, that I 
recognize the Federal Communications Commission is a creature 
of Congress. As a member of the Commission, my job is to 
implement the laws you pass, and I appreciate the opportunity 
to hear directly from you about the concerns that you may have.
    We've been asked this morning to focus our statements on 
our review of the broadcast-ownership rules. But before I 
begin, I think it's important to commend Chairman Powell for 
his leadership on these issues. The Chairman has long advocated 
his vision for a new media-ownership framework. Through his 
hard work and dedication, we were able to conclude the most 
comprehensive review of our broadcast-ownership rules since the 
biennial review provision was enacted in 1996.
    I also want to commend my Democratic colleagues, 
Commissioner Copps and Adelstein, for their tireless efforts to 
reach out to the public and encourage participation in this 
process. While I ultimately disagreed with them on the course 
of action the Commission should take, I appreciate and respect 
the contribution they have made to this debate.
    This proceeding required each of us to make decisions that 
were as difficult as they were critical. The media touches 
almost every aspect of our lives. We are dependent on it for 
our news, our information, and our entertainment. Indeed, the 
opportunity to express diverse viewpoints lies at the heart of 
our democracy. In fact, I agree with many of the concerns about 
consolidation and diversity that were expressed by my 
colleagues and by Members of this Committee.
    I am also aware, however, that the FCC must respond to 
Congressional and judicial calls to update our rules for the 
21st century. As you know, the 1996 act significantly changed 
the rules governing broadcast ownership. As a part of that 
process, the act created a continuing obligation to review and 
modify the Commission's media regulations.
    In Section 202(h), the Congress instructed the Commission 
to review each of the Commission's media-ownership rules every 
2 years. The Commission is under a legal mandate to review our 
broadcast-ownership rules and determine whether they are still 
necessary. If they are not necessary, we must repeal or modify 
the rules.
    The courts have interpreted this provision as placing a 
substantial burden on the Commission. In fact, since 1996 the 
courts have repeatedly found the Commission's reasoning 
insufficient to justify retaining these media-ownership 
regulations. In these decisions, the D.C. Circuit concluded 
that the act placed an exceedingly demanding burden on the 
Commission.
    Particularly after these court admonitions, I believe our 
statutory obligation requires that we review our rules in light 
of the current media landscape. The media marketplace is not 
stagnant. Factors such as rapidly improving technology and 
innovation have contributed to a media environment that is 
continually evolving, and this environment is considerably 
different from the one that existed when most of the broadcast-
ownership rules were first adopted.
    Indeed, we have seen a significant change from a world in 
which consumers received their news and their entertainment 
from a few television stations, a handful of radio stations, 
and a local newspaper. The number of broadcast networks has 
doubled. We now have cable networks that regularly rival the 
broadcast networks in audience share. Over 85 percent of 
households now receive their video programming via satellite or 
cable. Consumers today can choose from hundreds of television 
channels for their news and entertainment, often including a 
channel devoted entirely to local news. There are more radio 
stations and more weekly newspapers.
    In addition, the growth of the Internet has dramatically 
changed how people receive and distribute information. The 
Internet represents a significant outlet for diverse views, as 
well as an important source of news and information. As a 
result, people today have access to more information than at 
any other time in history.
    The existing media-ownership rules were adopted to promote 
three principles: competition, localism, and diversity. Since 
that time, the media marketplace has changed significantly. Yet 
what has not changed is the importance of these core values. 
Fundamentally, our rules must still promote competition, 
localism, and diversity to nourish a vibrant media marketplace.
    The order we adopted on Monday was our best attempt to 
respond to the court's admonitions and our Congressional 
mandate. In so doing, we recognize the availability of new 
media outlets, evaluated their impact on our core goals, and 
modified our rules as appropriate.
    Again, thank you for inviting me to be here with you this 
morning. I look forward to answering your questions.
    [The prepared statement of Commissioner Martin follows:]

       Prepared Statement of Hon. Kevin J. Martin, Commissioner, 
                   Federal Communications Commission
    Thank you for this invitation to be here with you this morning. I 
look forward to listening to your comments and to answering any 
questions you may have. And I reiterate what I have said in testimony 
to this Committee before: I recognize that the Federal Communications 
Commission is a creature of Congress. As a member of the Commission, my 
job is to implement the laws you pass, and I appreciate the opportunity 
to hear directly from you about your concerns.
    While I understand this hearing is one of general oversight, we 
have been asked to focus our testimony on our recent Order concluding 
the 2002 biennial review of our broadcast ownership rules. First, I 
think it is important to commend Chairman Powell for his leadership on 
these issues. Chairman Powell has long advocated his vision for a new 
media ownership framework. Through his hard work and dedication, we 
were able to conclude on Monday the most comprehensive review of our 
broadcast ownership rules since the biennial review provision was 
enacted in 1996.
    I also want to commend my Democratic colleagues, Commissioners 
Copps and Adelstein, for their tireless efforts in reaching out to the 
public, informing people of the issues, and encouraging participation 
in this process. While I ultimately disagreed with them on the course 
of action the Commission must take, I appreciate and deeply respect the 
contribution they made to this debate.
    This proceeding required each of us to make decisions that were as 
difficult as they were critical. The media touches almost every aspect 
of our lives. We are dependent on it for our news, our information, and 
our entertainment. Indeed, the opportunity to express diverse 
viewpoints lies at the heart of our democracy. In fact, I agreed with 
many of the concerns about consolidation and preservation of diversity 
that were expressed by my colleagues on the Commission and by Members 
of this Committee.
    I am also aware, however, that the FCC must respond to 
congressional and judicial calls to update our rules for the 21st 
century. As you know, the Telecommunications Act of 1996 significantly 
changed the rules governing broadcast ownership. As part of that 
process, the 1996 Act created a continuing obligation to review and 
modify the Commission's media regulations. In section 202(h) of the 
Act, Congress instructed the Commission to review each of the 
Commission's media ownership rules every 2 years. Specifically, the 
statute states:

         202(h) Further Commission Review.--The Commission shall 
        review its rules adopted pursuant to this section and all of 
        its ownership rules biennially as part of its regulatory reform 
        review under section 11 of the Communications Act of 1934 and 
        shall determine whether any of such rules are necessary in the 
        public interest as the result of competition. The Commission 
        shall repeal or modify any regulation it determines to be no 
        longer in the public interest.

In sum, the Commission is under a legal mandate to review our broadcast 
ownership rules and determine whether they are still necessary in 
today's marketplace. If they are not, we must repeal or modify the 
rules.
    The courts have interpreted this provision as placing a substantial 
burden on the Commission. In fact, since 1996, the courts repeatedly 
have found the Commission's reasoning insufficient to justify retaining 
its media ownership regulations. In these decisions, the D.C. Circuit 
concluded that section 202(h) places an exceedingly demanding burden on 
the Commission: ``Section 202(h) carries with it a presumption in favor 
of repealing or modifying the ownership rules. . . . [T]he Commission 
may retain a rule only if it reasonably determines that the rule is 
`necessary in the public interest.' '' \1\
---------------------------------------------------------------------------
    \1\ Fox Television Stations, Inc. v. FCC, 280 F.3d 1027, 1048 (D.C. 
Cir. 2002).
---------------------------------------------------------------------------
    Particularly after the courts' specific admonitions, I believe our 
statutory obligation requires that we review our rules in light of the 
current media landscape. The media marketplace is not stagnant. Factors 
such as rapidly improving technology and innovation have contributed to 
a media environment that is continually evolving--and considerably 
different from the one when most of the broadcast ownership rules in 
which first adopted.
    For instance, I recall having extremely limited choices on our 
family television set when I was growing up. There was no cable. There 
was no satellite. Even with our roof antenna, we received just five 
channels--the three major networks, one independent, and one public 
television station. Our national news was delivered to us by the three 
networks for one-half hour, straight from New York City, at the same 
time every evening. No CNN, FOX, MSNBC, or CNBC. Local news was 
broadcast by the local stations just once at 6 and once at 11. And at 
that time, news from 24 hour local cable channels was far off on the 
horizon. While my parents still live in the same house, they now have 
access to seven broadcast networks, hundreds of digital cable channels 
(including a local cable news channel), many more radio stations, and 
thousands of sites on the Internet.
    Indeed, we have progressed far from a world in which consumers 
received their news and entertainment from 3 or 4 television stations, 
a handful of radio stations, and a local newspaper. The number of 
broadcast networks has doubled, and we now have cable networks that 
regularly rival the broadcast networks in audience share. Indeed, over 
85 percent of households receive their video programming via satellite 
or cable. Consumers today can choose from hundreds of televisions 
stations for their news and entertainment, often including a channel 
devoted entirely to local news. There also are more radio stations and 
more local weekly newspapers. In addition, the growth and 
popularization of the Internet has dramatically changed how people 
receive and distribute information. The Internet represents a 
significant outlet for diverse views, as well as an important source of 
news and information to consumers. As a result, people today have 
access to more information than at any time in our history.
    It is important to appreciate, however, that while the media 
landscape has changed significantly, the three principles our original 
rules were intended to promote--competition, localism, and diversity--
remain critical. Fundamentally, I believe our rules must continue to 
promote competition, localism, and diversity to nourish a vibrant media 
marketplace that functions in the public interest.
    The Order we adopted on Monday was our best attempt to respond to 
the courts' admonitions and our Congressional mandate by recognizing 
the availability of new media outlets, evaluating their impact on these 
core goals, and modifying our rules as appropriate.

    The Chairman. Thank you very much.
    Could I say to my colleagues, we appreciate, obviously, the 
very large participation of Members of the Committee. If it's 
agreeable, we will have a 6-minute period for questioning, and 
then we will have as many rounds as the Members desire to have. 
I will also hope that we could try to observe that 6 minutes. I 
know it's difficult, when you have questions for each member of 
the Commission, but so that everyone would have an opportunity 
to pose their questions, I hope we would observe that, and we 
will have additional rounds. I thank my colleagues.
    I thank the Commissioners for being here today, and I 
appreciate not only the importance of your decision, but the 
enormous amount of interest and concern this issue has raised, 
because I think, in the view of all of us, some of the 
fundamental aspects of our democracy are at stake here.
    Let me say that, from my standpoint--and I think I reflect 
the view of some of my colleagues--it's very difficult for us 
to know what the right standard is--25 percent, 35 percent, 45 
percent? It's very difficult. And what's a large market and 
what's a small market, what's a medium-sized market?
    We all are in agreement that too much concentration is 
unhealthy. At the same time, what is that level of 
concentration? And it is complicated by the fact that there's 
not only an issue of horizontal integration, but vertical 
integration. And vertical integration sometimes can be as 
dangerous as horizontal integration.
    The miner's canary for this Committee was the hearing we 
had on Clear Channel that I had at the request of several of my 
colleagues, when we had a case, as occurred in Minot, North 
Dakota, where all six stations were owned--or six of the seven 
stations, whatever it is--were owned by one entity, and there 
was an emergency and there was nobody there--raised alarm. And 
then as we got into it, we found out that this same entity 
owned promotions, ticket sales, what was alleged to be a form 
of payola, which they have now abandoned, and various artists 
were arguing that they were being excluded from having their 
products on that network because of the fact that they weren't 
doing business with it. Those allegations were not 
substantiated, but they were raised by credible witnesses 
before this Committee.
    So my question is, to the members of the Commission, one, 
do you believe that the Telecommunications Act allows you to 
re-regulate, as well as deregulate the media? And does that--
and if you don't, does that law need to be changed?
    My second question is, a couple of the Commissioners have 
said that these should be judged on a case-by-case basis. I 
don't think it's right--it's been raised several times--when 
one major entity owns three TV stations, eight radio stations, 
the cable station, the major newspaper, and the major Internet 
provider. Most people would say, ``Hey, that's too much'' in a 
small market, Great Falls, Montana, the cable station, TV 
station, the major newspaper, and many radio stations. But, 
again, it's very simple--very complicated. You don't know how 
much of the market it is, what--and so we're talking about 
everybody's in agreement, localization, competition, and 
diversification is our goal. The questions is how we get there.
    So my questions to the Commissioners are, one, Does the law 
allow you to re-regulate, if you feel it is necessary to do so, 
as part of the mandated, by the Telecommunications Act, 
biennial review? And, two, would a case-by-case scrutiny of 
these various aspects of media consolidation, including the 
aspect of vertical integration as well as horizontal 
integration, be an effective way to--I have read that, but 
there seems to be some difference of opinion amongst the--
Senator Stevens just pointed out the statute to me, but I--
there seems to be some disagreement amongst the Commissioners, 
I am told, on that issue. Thank you.
    We'll begin with you, Mr. Powell. And, if it's OK, we'll 
got Mr. Adelstein, Ms. Abernathy, Mr. Copps, and you last, 
since you're the youngest, Mr. Martin.
    [Laughter.]
    Chairman Powell. Thank you, Mr. Chairman.
    I think, from the text of the statute, it doesn't look like 
there is a limitation for regulating or deregulating. But I 
think that what we have come to be concerned about is the way 
that the court has interpreted the provision as having a 
deregulatory bias as a continuation of a deregulatory 
Congressional process. We have concerns that the court would 
interpret it as a floor from which you can--a ceiling from 
which you can come down, but not a floor to which you can come 
up. So I think that, as you stated at the outset, that's really 
the central question. We can wait and find out or the Congress 
can act to make that clear.
    I would note, we did, arguably, strengthen the radio rule 
on maintaining the Congressional cap, so that question may be 
presented with respect to at least that provision. But I think 
the text doesn't speak to it one way or the other, but the 
court cases are where the worry lies.
    As to case-by-case, I am normally a huge fan of case-by-
case. I'm an antitrust attorney and often have argued 
vigorously that we ought to do things in a case-specific way. 
More and more mergers and transactions at the FCC, we have 
revitalized as a case-specific method. In spectrum, when we 
removed the spectrum cap, we set up a regime to review case by 
case.
    The problem is, you still have to have standards. You still 
have to know what it is you're reviewing and what are you going 
to use to review it. And that's not as easy as it might seem.
    And then, finally, the administrative burden must be 
considered. You could have many, many transactions taking much, 
much, much time to complete as a consequence of that process.
    The Chairman. Mr. Adelstein?
    Mr. Adelstein. Mr. Chairman, in terms of whether or not we 
have the authority to re-regulate, the Sinclair Court did say 
that we could tighten the rules if it were in the public 
interest. But, as the Chairman noted, there is some lack of 
clarity in the court decisions about whether there is a 
deregulatory bias. And, therefore, I think it would be helpful 
if the Congress could provide some clarification here, as you 
indicated you maybe interested in doing, in your opening 
statement.
    With regard to case-by-case, I think that it's very 
difficult, as you noted, to draw those lines and to say, ``Is 
it 45 percent, 35 percent? Should 95 percent of the country let 
duopolies occur?'' That's why I think case-by-case is such a 
useful approach. I think that--I was hoping to get my chairman 
on that, since he has such an antitrust background and such an 
interest in that approach. But the beauty of it is that you can 
set standards and then go case by case. You can look at 
individual markets. You can look at Great Falls and see what--
or you can look at cities and see what kind of concentration 
already exists there, and based on the determination, according 
to broad rules of what the level of concentration is in a 
particular market, you could then apply that to an individual 
merger. This is something that could be done very easily.
    You can have--administrative burden on the agency is 
something that the Chairman noted that's of concern. I would 
note that our statutory obligation is to the public interest, 
convenience, and necessity, and not the convenience of the 
Federal Communications Commission. If we are to pursue our 
statutory obligation and do what's in the public interest and 
convenience, then we need to go through the effort necessary to 
evaluate these mergers on an individual basis to ensure that 
they are, in fact, in the public interest, and not shirk our 
statutory mandate because it is more convenient for the agency.
    The Chairman. Ms. Abernathy?
    Commissioner Abernathy. Thank you, Mr. Chairman.
    Can we re-regulate? Probably, assuming we that we can 
surmount the statutory hurdle that shows a preference for 
deregulation. As the statute's been interpreted today, we're 
supposed to be looking at the minimum number of voices needed 
to promote diversity and competition and localism, not the 
most, or not what's nice, or not what we might like to see. 
That's the direction the statute takes us. We can probably re-
regulate, however, if we pass that burden and show that we 
guessed wrong, that what we did actually hurt the public 
interest, and, therefore, we're going to head in the opposite 
direction.
    With regard to case-by-case, fundamentally I think we're 
still there, in the sense that every merger that comes before 
us is inherently fact-specific and is put out in front of us 
for a review. There can still be petitions to deny filed. 
Parties can still come in with waiver applications to deal with 
some of the smaller market issues that arise where you may have 
only three stations in a market, and normally we will not allow 
consolidation; but if one of them is going under and does no 
news, and we think it might be in the public interest for an 
acquisition, we can consider that.
    So it's fine-tuning, you know, whether you call it ``case-
by-case'' or whether you call it the ``review process'' that 
takes place today anyway, by virtue of the fact that every 
single merger has to pass muster in front of the FCC, as far as 
serving the public interest.
    The Chairman. Commissioner Copps?
    Dr. Copps. Yes, I believe we have both the legislative 
authorization and the judicial approval to re-regulate. Would I 
like to see additional clarity added? Sure, so we could avoid 
some of these debates and spend less time on this particular 
matter.
    One of the reasons I object to what we did on Monday is 
that I think we have too much emphasis here on bright-light--
bright-line rules and too little on the case-by-case. We are 
talking about diversity and encouraging diversity. There are 
examples where stations may have gone dark and communities be 
deprived of service, save for the fact that somebody took the 
station over. So consolidation has its benefits as well as its 
detriments. We have to balance that off.
    And a final comment on what you said about vertical 
integration. That shouldn't have been part and parcel of this 
deliberation. We're loosening the horizontal controls here, or 
limitations that we had. Long ago, the financial syndication 
rules of vertical integration was gone, so there's precious 
little left. And we're putting an awfully big load on just 
these bright-line structural rules to serve the public interest 
and deliver the kind of media that the American people need to 
have.
    Commissioner Martin. Senator, I think that Section 202(h) 
does provide us the ability to modify our rules, which would 
include making them more restrictive or, in that sense, re-
regulating it. But I think that it would be, obviously, helpful 
to clarify that, as others have talked about.
    I'm not sure that it would provide us independent 
authority, without some other authority in the act, to adopt 
completely new rules or regulations. For example, limiting some 
of the other vertical-integration concerns that you've 
expressed or some of the other rules or regulations that some 
people would like us to impose. I think we might have to have 
other independent authority within the act to do that.
    On the subject of case-by-case, every license or 
transaction still must be approved by the Commission and found 
to be in the public interest. I think that what we've attempted 
to do is try to provide some standards for those 
considerations.
    Thank you.
    The Chairman. Senator Hollings?
    Senator Hollings. Thank you very much, Mr. Chairman.
    Commenting on the question about ``too much,'' that's why 
we put in the record the holdings of the five giants. It's 
already too much, obviously. If you look at ten pages of 
holdings here of Viacom, and going right on down the list from 
not only the stations, but the publishing and the production of 
the programs, the radio, the TV, the cable, everything; 
similarly, ten pages more of news corporations--that's why we 
made that record.
    With respect to the statute itself, the answer is yes, you 
can deregulate or you can re-regulate. We provided, in 1996--
I'm not a telecommunications expert, but I'm intimate to the 
development of it over the last 36, going on 37, years now that 
I've been here--and you can ask Chairman Bliley and myself, we 
tried to maintain the 25-percent cap. The majority of the 
conference committee was for 25 percent. We knew it was 
working. But they already were in violation. And there was a 
small minority holding us up, and we wanted an overwhelming 
acceptance to this updating and deregulation of 
telecommunications. Otherwise--that's why we gave in to go to 
the 35 percent. Yes, we maintained a lot of--as Commissioner 
Abernathy says that all kind of--well, the amount of concerns--
I've got a quote here--but, otherwise, I can tell you, we 
maintained a lot of deregulation, but we maintained the 35 
percent.
    And there is no question--I take exception one more time, 
and I'll show the record, and that's why I put it in, the FOX 
decision--that there is, until day before yesterday, a 35-
percent cap. The FOX decision did not remove the cap. They 
removed the cap with respect to cable television, but not with 
respect to this ownership proposition.
    Now, Commissioner Abernathy said that that was so much 
concern that--said ``no issue has raised such concern,'' and 
then the ``divergent views.'' I don't find a divergence. 
Honestly. I mean, I've been trying to find--I've been following 
the result of the Commission's ruling, and you can see, going 
down the list of media giants, hint that they might be 
expanding. Then a chance for big media to get even bigger. Then 
Merrill Lynch putting out, The Gold Rush Begins. ``That's 
Merrill Lynch in the stock market. The creators of shows--
shows' creators say television will suffer. And another 
headline--I could keep on going--'' FCC pulverizing the public 
interest and feeding it to media barons. I looked for some 
affirmative comment, and I found one letter, I think it was, 
from my friend, Secretary Don Evans, of Commerce, who knows oil 
and contributions.
    [Laughter.]
    Senator Hollings. I found out that he, sadly, went along 
with the public. And the Congressional interest--the 
Congressional interest was 150 of us. We've been trying to get 
hearings.
    Chairman Powell, where in the world do you find the grounds 
for a 45-percent cap? Where was the record built? I know you 
can get study--I've been a chairman, and I can tell the staff, 
``Find this for me and give me a report,'' and you can get 
consultants to find anything. But where did you find the public 
comment? You resisted public comment on the thing. You'd only 
agree--you come now and talk about all the hearings we had. Oh, 
no, you opposed there--you went to one in Richmond and you 
wouldn't give them the money, the minority there, to even hold 
the hearings. They had to go all over the country on a 
shoestring. You wouldn't even give them the 30-day extension. 
It's been a rather arbitrary thing from the get-go, since the 
first of the year when you said you'd made up your mind. Where 
did you get the support for 45 percent? Why wasn't it 40? Why 
wasn't it 50?
    Chairman Powell. Well, Senator, first of all, I never said 
that, at the beginning of the year, I had made up my mind. We 
used the record to make up our mind, and I continue to believe 
that there has been an extraordinary amount of public comment 
on this specific rule. But we will have to disagree on that.
    The proposition starts with the fact that the record 
wouldn't defend 35 or 40. The record wouldn't defend 35 percent 
or 40, because our theory about whether that rule promoted 
localism was found deficient in the court, because it said 
there wasn't evidence on the record that supported the 
proposition that the cap was necessary to allow local 
affiliates to reject programming.
    We set out to find if that record were able to be 
developed. One of the things we found is that, on the record, 
we couldn't demonstrate that the 35 percent, in fact, had that 
effect. Why? First of all, because the majority of the networks 
are nowhere near the 35 percent in the first place. Only two 
are, and they're over it. They're actually close to 40 percent. 
But when we looked at the relationship between networks and 
affiliates, what we found is even networks that were at 40 
percent, those affiliated stations still had excess amounts of 
preemption available to them at the end of each year, which 
means that each year, even though they were allowed to preempt 
and use that authority to promote local programming, they, in 
fact, had not done that to the extent that they were permitted 
by their contracts.
    So our belief was, we had a rule that we did not have a 
record for that would support 35. We believed the record 
wouldn't support 40, because there's already 40 existing in the 
market. But we did believe there was harm to protect against, 
that there was a network-affiliate relation, balance-of-power 
problem. So we believed that we wanted to provide a national 
cap limit. So we provided a modification, one of the only two 
choices Congress gives us, to modify or eliminate, and we 
modified it modestly, five more percent, from that that existed 
in the market and tried to argue that we believed that was a 
fair balance in order to maintain the balance of power.
    Finally, we're going to use a lot of court cases these 
days, and I'm glad--you concede that I'm a decent lawyer. The 
court, in Sinclair, stated something very specific: Where 
issues involve elusive and not easily defined areas, such as 
broadcasting diversity in broadcasting, review is considerably 
more deferential than usual, according to broad leeway to the 
line-drawing determinations of the Federal Communications 
Commission.
    Our believe was if we could strengthen the rationale and 
demonstrate, on the record, the benefits of the rule, that we 
could modify it and get deference on the line that we drew.
    My time is up.
    The Chairman. Senator Stevens has to leave. He'd like to 
make a brief comment.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Mr. Chairman, I thank you, and Members. I 
wish to make a short statement myself.
    I think we've got a strange situation caused by the Act, 
itself. It's my understanding that the Commission used 20 
months to review, as required on a biennial basis. If the 
Commission and the staff is spending the majority of its time 
for 20 months out of every 24, it just doesn't make sense. I 
think that mandated review should be done less frequently.
    But, beyond that, I think we should increase your 
flexibility in order to make exceptions, and spend some of this 
time you're currently spending reviewing every 20 months what 
you're mandated to do, to deal with the exceptions that are 
really the things that are brought to this table, as those 
people who are denied exceptions are--or their exceptions are 
not acted on within a reasonable period of time, they come to 
us for relief.
    I think we should look at this Act, Mr. Chairman, and 
stretch out the time for this review and increase the 
flexibility of the Commission to deal with exceptions, and try 
to see if they can do the governance, instead of having all 
these things brought to us.
    I appreciate your courtesy, and I congratulate you for this 
review, but I do think that we have to take a look at the 35 
percent. Both Senators are right. The difficulty was we didn't 
put the 35 percent in the Act. We should have put it there, and 
we wouldn't have this problem today. I'm sure you've been 
getting the same e-mails as all of us have.
    The difference, by the way, in terms of the number of 
contacts we've had, has the increased viability of technology. 
We're all getting more messages now.
    So I'm not affected by the fact that we're overwhelmed with 
messages. I'm affected by the fact that we're overwhelmed with 
reviews instead of action within the regulations and the law, 
as we contemplate it.
    Thank you very much.
    The Chairman. Thank you.
    In our adherence to fairness and balance, Senator Inouye 
entered before all Members had finished their opening comments. 
Senator Inouye, do you have any opening--any comment?

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

    Senator Inouye. I thank you very much, Mr. Chairman. I now 
request that my statement be made part of the record.
    The Chairman. Without objection.
    [The prepared statement of Senator Inouye follows:]

 Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
    I want to thank Chairman McCain for holding today's hearing on 
media ownership. While I am pleased that the FCC Commissioners are 
before us this morning, I want to express my deep regret that this 
Committee did not have the opportunity to hear from the FCC before the 
final vote was taken on this monumental decision. I look forward to a 
candid discussion as you explain and defend Monday's decision, which I 
fear will do much to line the pockets of media conglomerates, but 
nothing to advance the public interest.
    The FCC's decision to raise the national ownership cap is 
particularly troubling. Only after long debate and much consideration 
did Congress raise the cap from 25 percent to 35 percent in the 1996 
Act. The national cap is essential to maintaining a balance of power 
between the national networks and the local affiliates, which underpins 
our unique system of broadcasting. We are the only nation with a local 
system of broadcasters charged with serving their diverse local 
communities. The FCC's own data show that affiliates provide higher 
quality news to their markets than network owned stations, and yet the 
new rule would allow networks to buy more stations across the country 
and effectively freeze out the entities that have served their local 
communities so well. Ted Turner recently stated that ``[t]he climate 
after Monday's decision will encourage even more consolidation and be 
even more inhospitable to smaller businesses.'' Small local 
broadcasters and the citizens they serve are likely to fare the worst 
under this decision as they face the choice between selling their 
stations to large conglomerates or losing their affiliation and with it 
their livelihood.
    The potential harm in raising the national ownership cap to 45 
percent is exacerbated by the UHF discount, which discounts a company's 
actual ownership reach by 50 percent for its UHF stations compared with 
VHF stations. In reality, the FCC has created a national rule that 
allows the largest station owners to reach 90 percent of the country. 
The FCC's failure to address the UHF discount is inconsistent with the 
FCC's stated rationale for these rule changes. The FCC has stated that 
the media rules must be updated to reflect the modern media 
marketplace. Yet, the decision to retain the cap fails to account for 
the increase in cable and satellite penetration, which has all but 
eliminated the need for special treatment of UHF stations. The UHF 
discount needs to be addressed now, not after television broadcast 
stations transition from analog to digital service. The 35 percent 
national television cap preserves a delicate balance in the network/
affiliate relationship, which is not contingent on whether the 
broadcast is done in digital or analog.
    Broadcasters were made trustees of the public spectrum, which was 
given to them for free. With this privilege came the responsibility to 
fulfill the public interest and to serve their local communities. The 
FCC also was given a responsibility to implement and enforce rules that 
further the public interest. Instead, this Commission has granted 
waivers allowing networks to exceed the national ownership cap and then 
altered the rule validating this behavior. I am a proud co-sponsor of 
legislation introduced by Senator Hollings and Stevens among others on 
this Committee that would permanently set the national cap at 35 
percent. The bipartisan support for this legislation demonstrates that 
this is not a partisan issue but an issue concerning all Americans.
    Hundreds of thousands of Americans from diverse backgrounds opposed 
further relaxation of the rules. I and many of my colleagues asked the 
FCC to delay its decision so that there would be an opportunity for 
meaningful public comment on any proposed rule changes. Without a 
moment's delay, the FCC has now initiated the ``gold rush'' expectantly 
predicted by Merrill Lynch for wealthy media companies at the expense 
of the American public.
    I urge the Committee to take up this legislation to re-implement 
the 35 percent cap at the earliest possible time. Thank you Mr. 
Chairman.

    Senator Inouye. Mr. Chairman, the State of Hawaii has a 
very unique situation, with two newspapers of any consequence, 
and one person can buy that paper, one of them. We have five 
stations, TV stations, that control about half of the air time, 
one cable station that handles about half of the other air 
time. And, as a result, one person can come in, buy one paper, 
buy the cable station, buy another top-four station, and he 
controls Hawaii. Now, that's the way I look at it.
    Don't you think this is a bit too much concentration for 
one state? I'm not speaking of a city. I'm speaking of a state.
    Chairman Powell. It could be. As a market of five, if you 
add the possibility of purchasing some of the properties you 
listed, like the cable company, that transaction would have to 
come to the Commission for a special public-interest review and 
would only be approved if it was found affirmatively in the 
public interest.
    So I'd like to emphasize there are still case-specific 
reviews made possible. In some ways, the rules take certain of 
those--that discretion off the table, but some of the 
combinations in your hypothetical would, in fact, have to 
require a specific public-interest review. And so if I saw the 
actual transaction, I might agree with you, or I might not. But 
I would need to review the specifics in a case-specific format.
    Senator Inouye. So your rules permit that, won't it?
    Chairman Powell. The rules don't automatically permit, for 
example, a cable company to own another company. There's not a 
rule that says you never can, but they don't have a rule that 
guarantees them safe harbor, either. So any transaction of that 
sort would require a public-interest review by the Commission.
    Senator Inouye. Isn't it safe to assume that--reading the 
transcript of your hearings and the way it was carried out, 
that it would be approved?
    Chairman Powell. I wouldn't say that at all. I happen to 
have led a Commission that has been the first Commission in 60 
years to block a major public-interest transfer, in the case of 
Echostar. I happen to believe very strongly if you're going to 
do case-by-case, it only works if you have the courage to 
shoot. I think at least this Commission has demonstrated that 
courage, not only in that merger, but as being the only 
Commission that has blocked radio mergers in 50 years.
    Senator Inouye. So you feel that Hawaii can have two 
voices, instead of just one.
    Thank you very much.
    The Chairman. Senator Burns?
    Senator Burns. Thank you, Mr. Chairman.
    I guess my only concern in this thing is--I think I want to 
make a point that hasn't been made around this Committee this 
morning, as far as the increasing of this cap.
    Manhattan, New York, is a little bit different than 
Manhattan, Montana. Now, the way I see--Commissioner Adelstein, 
the way this thing's run, I think Great Falls is not a good 
example of what we're concerned about.
    I would say this. I was in the broadcast business. I was 
also in the network business. And I have a fairly good feel of 
what happens when a rule like this is changed or we see an 
avenue of more concentration, and that concerns me.
    We can talk about the First Amendment and democracy all you 
want to. This is market muscle. This is a small operator trying 
to operate in a rural state, trying to expand and grow his 
business and cannot do it to amass or in capital formation to 
even take care of the mandatory rules and regulations that's 
being put on the broadcast business now through the 
introduction of new technologies. That concerns me a lot. We 
said we've seen a growth in voices and a growth in outlets. We 
have seen that under present rules. So my first inclination 
would say, ``Why change?''
    But there's also another growing factor that's in the 
background of this. We've seen an alarming reduction in the 
number of independent production companies, which is down 85 
percent, over the last 10 years, to somewhere between 15 and 20 
percent today. This trend occurred over the same period that we 
permitted an increase in ownership cap from 25 to 35 percent, 
and that being done under the Telco Act.
    So I'm concerned about programming and production companies 
in that concern, and I'm afraid if we go to more concentration, 
that this number, too, will continue to decrease.
    We brought it out in the Chairman's hearing on radio 
ownership. We found one owner that not only owned a lot of 
radio stations, but also in the marketing division of 
entertainment, ticket sales, arenas, but he also owned one 
other thing that was very important. They also owned the only 
outdoor advertising outlet that they had in some of those 
markets. And I think we tend to forget about that.
    I'd like some comment under this, that if the present 
rules--if we've increased the voices and increased the outlets, 
when we see a decrease in programming and production work, why 
that shouldn't concern us. And I will tell you, everybody's 
missed the market around here. I've gone down the road and sold 
advertising. I've sold air time, as much as probably anybody in 
this room. And I will tell you, market muscle, when you're 
trying to survive in a small market, is darn tough, because 
they influence agencies and agency buyers to the point where 
they can freeze you out, and you cannot amass capital for the 
transition to new technologies.
    I'd just like a comment on that, especially on the 
programming side, because programming is the voice. If I can 
get a comment on that.
    Other than that, I've got 17 other questions.
    [Laughter.]
    Mr. Adelstein. I'd like to respond on the Great Falls 
issue, because I come from a city almost exactly the same size, 
of Rapid City, South Dakota, about 55,000, ourselves. And our 
experience has been, for example, that we have one of the great 
broadcasters, one of the old-line broadcasters named Bill 
Duhamel, and he is a classic. He's a good citizen, he's a good 
member of the community. He cares about it. He lives there. I 
went to school with his kids. And we grew up together. And he 
really is committed, just as the broadcasters always have been, 
to trying to cover what happens in the local community.
    And in rural areas like that, I'm afraid if we lift this 
35-percent cap, he's going to come under enormous pressure to 
sell out. He's already having difficulty, for a lot of the 
reasons you said. And the massive muscle that you indicated 
that will be brought to bear upon him and on other small 
broadcasters, community-based broadcasters, people who live in 
the community, people who care about their community, they're 
going to get squeezed out. Those local voices are going to get 
squeezed out, and they're going to be replaced by national 
media conglomerates that are going to pump in the programming 
through the same type of homogenized, lowest-common-denominator 
programming to the stations all over the country, and we're 
going to lose that old-line broadcaster. We're going to lose 
that sense of commitment to the community that has so long 
characterized everything that we hold sacred about 
broadcasting.
    Senator Burns. Chairman Powell?
    Chairman Powell. Senator, one of the things I think will be 
important to do today is to try to deal with some of the facts 
that the record reveals that we had to rely on. For example, 
the evidence submitted in the record shows, with respect to 
your point about programming, that 26 different independent 
producers were responsible, in whole or in part, for two 
thirds, 59 out of 90 of the shows aired, during the prime time 
of the top-four broadcast networks during 2002/2003 season. 
Recent data indicates that there is a comparable number of 
separate producers for prime time in the 2003/2004 season. So 
I'm not entirely clear that I could concede that independent 
producers do not continue to provide a substantial amount of 
the programming available to citizens in prime time.
    Second, with your question about local television markets 
and the cap, the 35-percent ownership cap, which is only a cap 
that says the potential audience you can speak to, not the 
number of stations--in fact, the number of stations that any of 
these networks owns, consistent with the rule, is less than 3 
percent of the total stations in the United States. So I'm not 
sure what the ``swallowing up'' language is coming from. I 
think that's a far cry from swallowing up local stations in the 
United States.
    But, more importantly, under your judgment of 25 percent or 
35 percent, it didn't say where those networks might buy those 
stations. They're free to buy them in any market in the United 
States, no matter what the limit is. And, indeed, what we've 
seen among the networks, consistently, for decades now, is an 
interest in owning stations mostly in very large markets. 
Indeed, even under the existing 35-percent rule, most of the 
networks haven't even approached the limit, by any means, and 
they've been permitted to. So it's clear that in their self 
interest or in their strategies, ``swallowing up'' local 
stations all over the country just doesn't seem to be borne out 
by the record and the evidence.
    Dr. Copps. Senator Burns, can I make a quick comment? Among 
the many victims of this wrecking ball of media concentration--
and there are many, many victims--are the small broadcasters. I 
could not agree with you more. I have talked to a lot of them 
over the course of the last year. I went out and talked to the 
Montana broadcasters. Their concern was loud and clear, that 
they cannot survive with rule changes like this.
    A lot of these people are really still strongly motivated 
by a desire to do a good job and to serve the public interest 
and to do news when they can, and to do all these other 
wonderful things. But less and less, in the direction we are 
headed, are they captains of their own fate. And more and more 
are they driven by this big, you know, consolidated bottom-line 
expectations of the analysts and all. And that's where we've 
got to get a hand on all of this. And I think these media 
consolidation rules are one way to do it, but I don't think we 
can put all of the burden on them.
    We've got to get back to looking at what companies are 
going to get in return for--or what the public is going to get 
in return for allowing this consolidation. Where are the 
public-interest expectations? Why don't we have a license-
renewal process? Why don't we go back to being explicit about 
what companies are expected to do in return for using the 
people's spectrum?
    This is just an enormous problem, and I'm delighted we're 
having this hearing today. I hope it's first of many, because 
we need to get in and wrap our hands around this once and for 
all.
    Chairman Powell. Senator, do you want me to yield to the 
next----
    The Chairman. Go ahead.
    Chairman Powell. I think there's an extremely important 
point that I want to bring to the attention of the Committee, 
because I think it does present an important question for the 
country and the public that needs to be understood.
    The public-interest obligations of the use of the free 
airwaves or the public's property is a legal model, a policy 
model, that only applies to over-the-air broadcast television 
and radio. Eighty-seven percent of our citizens now watch 
television over medium that is not subject to that model or 
those legal restrictions. There are no public airwaves being 
used on cable channels or cable properties. There are no First 
Amendment special circumstances under Red Lion for cable 
ownership.
    What makes most of the companies big that we're all talking 
about that are causing the greatest public anxiety and concern, 
their bigness doesn't come from them as broadcasters. Their 
bigness comes from them as content providers who own channels 
on large multi-media paid platforms. That is not a public-
interest model platform.
    So I think the question for the country, which is going to 
be with or without deregulation, I think, is going to be a 
problem, because that's where technology and our citizens are 
going, is going to be, What is the notion of the public 
interest in an increasingly paid-platform model that isn't 
subject to the historical public-interest perspective?
    The Chairman. We will be reviewing that issue, with your 
help.
    Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    Chairman Powell, I was struck by your characterization that 
the changes, in your view, were modest, and you said they 
reflect caution. And I'd like to ask you specifically about a 
couple of examples on that point.
    On the newspaper/broadcast cross-ownership rule, before 
your decision, as a general proposition, you couldn't have a 
merger between a TV station and a newspaper in the same town. 
Now, after this rule change, the merger would be allowed in 
about 200 markets, where about 98 percent of the American 
people live. My question to you is, How does that become a 
modest rule change?
    Chairman Powell. I'd be the first to concede that I think 
the most significant rule change is the cross-ownership 
limitation. But I'd also say that it's important to note that 
we start from the proposition of the statute having to 
demonstrate that a complete ban or prohibition is necessary.
    What we've found is that because there have been a 
substantial number of grandfathered transactions, we had a lot 
of evidence before us that we had to deal with. Some of that 
evidence demonstrated enormous public-interest benefit in 
newspaper cross-ownership for consumers. One thing, for 
example, we found that newspaper-owned television stations 
produced 50 percent more local news than non-newspaper-owned 
stations. We also found, when we looked at quality awards for 
excellence in the news industry--RTNDA, the Project for 
Journalistic Excellence--that newspaper-owned stations often 
produced the highest-quality news product of a local market. So 
we felt we couldn't defend an outright prohibition. And then it 
became a balancing act of how much ownership you might allow.
    One of the things that people urged consistently is some of 
the greatest value of these combinations were in smaller and 
more medium-sized markets where you find a larger number of 
television stations that don't do news at all, or do shopping 
network, or QVC affiliates, who have an increasingly difficult 
time funding the extraordinarily high cost of modern news.
    And so we believed we attempted to try to weight the degree 
to which consumers rely on these sources, and draw reasonable 
limits. I'll accept they can be disagreed with, but that's the 
way we did it.
    Senator Wyden. All right. On the caution concept, 15 
Members of the U.S. Senate, many Members of this Committee, 
asked you to give the public a chance to comment on specific 
rule changes, not just on the general concepts. You declined to 
give the public the opportunity to comment on specific changes. 
Wouldn't it have been the cautious thing to do to let the 
United States people, the people of this country, comment on 
specific rule changes?
    Chairman Powell. First of all, in my view, I think there's 
an amazing tension here between talking about the extraordinary 
amount of comment received and news coverage and input, and 
then simultaneously say the public hasn't had an opportunity to 
comment on it.
    I think that our process has been extremely open. I think 
it's provided enormous opportunity for comment. And I think 
that's demonstrated by the breadth of the record and the amount 
of comment that we've received.
    Second, I would say that I have read, for 45 to 50 days, 
the specifics of what we were going to do, and I think we've 
received extraordinary amount of public comment from those news 
and television-production coverage of our likely actions.
    Candidly, with respect to actually putting out the rules, I 
don't say this as a defense, only to say that the Commission 
has never done that, as far as I know. In the 6-years I've been 
in the Commission, I've never seen it put out the very specific 
rules.
    One of the reasons is, it takes the same effort to put them 
out as it does to adopt them. Notices of proposed rule-making, 
in order to have comment that I could rely on on the record, 
would require a vote of the full Commission. We would have 
fought over what the specific rules we were putting out in 
order to get them out. Indeed, we didn't know the final 
specifics of this rule til the eve of our vote.
    My concern was, if we put a notice of proposed rule-making, 
we would go through the same effort to get the rules adopted, 
we would release them, and I wouldn't be able to complete the 
biennial til close to the end of the year, backing up into the 
next one.
    Senator Wyden. Chairman Powell----
    Chairman Powell. So, in my judgment, I thought that was the 
best course.
    Senator Wyden. Chairman Powell, there's obviously bitter 
disagreement in the FCC on the decision. Are you comfortable 
with the fact that a decision of this magnitude was made on a 
three-to-two vote? And what kind of effort did you make, 
particularly with the two dissenters, to try to come up with a 
compromise position?
    Chairman Powell. I am always regretful that you can't 
command the full Commission, but I also know, on the most 
difficult and controversial items, it often splits, because 
people have genuinely held and sharp and distinct differences, 
and that was the case in many of the issues involved in this 
particular decision.
    I think we opened this process up among commissions to the 
greatest degree ever seen. One of the things I did at the end 
of the triennial, which was also, I would note, a three-to-two 
decision, with me in the dissent. I cleared the decks between 
that proceeding and this proceeding. We had other major 
proceedings scheduled in order that we could focus on nothing 
but this proceeding. I instructed my bureau to be prepared to 
brief every Commissioner once or twice or three times a week, 
if necessary, to keep them abreast of what the developing 
options were. I had meetings with most Commissioners on a 
weekly or biweekly basis.
    And then, finally, I would say I think there are parts of 
the final order that, candidly, I'm surprised aren't unanimous. 
We decided, for example, to continue the prohibition against 
networks merging with each other, yet I have two dissenting 
colleagues, and I'm not entirely sure why. The radio rule 
actually is further restricting than the old rule, but we still 
have a dissent. So I think those things, in my mind, were 
intended to seek unanimity, but, for some reason, they failed 
to do so.
    Senator Wyden. Commissioner Copps and Adelstein, what 
efforts were made in the Commission to try to find some common 
ground? And I'd like the two of you to tell us about those 
efforts.
    Dr. Copps. Well, I think we had--from the day one, I think 
the first conversation Chairman Powell and I ever had when I 
joined the Commission was on the broad parameters of media 
ownership, and I think we knew of one another's interests and 
generally where we were coming from.
    The problem here is that it was not until 3 weeks before 
that we actually saw the reasoning, saw the conclusions and 
some of the proposals we were headed toward. Within a week we 
had digested that as best we could, and I had gone back with 
some specific suggestions regarding the context I would like to 
see, some of the proposals, some of the things I would like to 
see included, like financial syndication, vertical integration, 
some of those things we talked about, maybe even looking at 
what you can use as a supplement to not put the whole burden on 
these structural rules, but how do you service the cause of 
localism, competition, and diversity through some other 
approaches which I think were relevant here. And those were not 
acceptable to the majority of the colleagues.
    So I think there was that kind of a conversation, but I 
think the process was less than an ideal one. But not so much 
for the Commissioners, but mostly for the people of the United 
States.
    Senator Wyden. Commissioner Adelstein?
    Mr. Adelstein. There were regular conversations that the 
Chairman and I and the other Commissioners had, and we--I tried 
my best to try to find common ground. And the reason we 
couldn't, I don't think dealt so much with the process as it 
was that we just simply couldn't agree on the substance of the 
issues. We had some good discussions.
    But I'd like to respond to just a couple of the questions 
of the Chairman about claiming that I had dissented on things 
that I would support, and take issue with that. I made very 
clear in my dissent why I dissented from those provisions, 
including the dual-network rule. I dissented on that--I've made 
very clear--because it made no effort to judge whether or not 
Spanish language is a separate market, in terms of media. 
There's a huge rise of Spanish-language media in this country. 
We supposedly, under this order, are trying to determine what 
changes in the marketplace have been taking place, and try to 
update our rules to take those into account. The fastest-
growing minority, it has the fastest-growing minority media 
infrastructure, and yet now we could allow two Hispanic 
networks to merge, with no consideration whatsoever. I can't 
vote for that.
    He said that radio rules were tightened up, and there were 
some beneficial provisions within the radio rules. But, in 
fact, there was a big weakening, a giant hole, in the middle of 
the radio rules that allowed--that got rid of the current 
procedure, where FCC flags applications where one owner would 
end up with 50 percent of the radio advertising-revenue share, 
where the top two owners are 70 percent. This is a very 
important protection to make sure that competition remains in 
radio markets. And yet in an order that supposedly is designed 
to protect competition in the radio markets, we completely 
gutted that. Now, how can I vote for that? I mean, these are 
good reasons not to.
    And on the question of whether or not this is a moderate or 
an extreme proposal, just to comment on the fact that you made, 
I think it's hard to characterize it as moderate when you take 
newspaper broadcasting and allow it to apply to 95 percent of 
the population. That's extreme, in my view. It's dramatic.
    And, yes, there may be circumstances where that is 
warranted, where a newspaper could actually help raise the 
caliber of a local TV station. But in other cases, in every 
case, it eliminates a voice in a community. And those need to 
be balanced against each other. And the nature of that local 
market needs to be evaluated on a case-by-case basis to 
determine whether or not there are sufficient voices in that 
community left over after you eliminate that voice.
    The Chairman. Thank you, Commissioner Adelstein, for that 
wide-ranging response to Senator Wyden's comment, and we'll let 
Commissioner Powell respond with the next round, if necessary.
    Thank you, Senator Wyden. Thank you all.
    Senator Sununu?
    Senator Sununu. Thank you.
    Commissioner Copps, you said that the process was--well, 
first, in your opening statement, you said that you ``object'' 
to the process. Then, in a more recent statement, you said it 
was ``less than ideal.'' And I'm certainly willing to concede a 
process as complex as this, it almost certainly be less than 
ideal. I don't know if you can have an ideal process. But 
according to all the information we've seen, it was a 20-month 
process. We've heard a discussion that maybe we should spread 
this out further because of the scope of the 20 months, the 
time, the 20 months. Tens of thousands of comments, five 
periods, notice periods, and publications of proposed 
rulemakings, and what was described as the most thorough record 
ever--may or may not be the most thorough record. But it seems 
like a pretty comprehensive process to me. Like anyone else, 
I've been reading about the substance and the specifics of the 
rules for a couple of months now.
    I guess my question is, What about the process did you deem 
to be unfair? Not less than ideal. I mean, I would like to be 
specific, because if the rules for this process were violated, 
I certainly want to know about it, as a policymaker. What about 
it was unfair? Or what about it violated the norms and 
standards of the FCC proceedings?
    Dr. Copps. I'll be specific. In my reference to ``less than 
ideal,'' I think, was trying to talk about the internal 
dialogue, which was the specific question that was asked among 
Commissioners. I think the overall process was grossly 
violative of the spirit and intent of how an agency should 
proceed on notice and comment when issues of large public 
moment are being considered. And I don't know of any issues of 
larger public moment are being considered.
    This was not the most comprehensive record that's ever been 
compiled. We did not put out for comment what would be the 
projected effects of changing the number from 35 to 45 percent. 
We did not ask any questions about what's the effect on small 
business, what's the effect on advertisers, especially mom and 
pop advertisers, on a consolidated media environment. We did 
not ask the effect of minorities. We did not raise the question 
about the relationship between media consolidation and the 
increasing wave of indecency and violence on television.
    Is there a connection? I don't know if there's a 
connection. I think a good argument can be made that there is. 
I don't think we have any business voting on this until we at 
least try to put that question out and compile a halfway 
credible body of evidence so the people know we had looked at 
it. These things are germane to ownership matters. Ownership 
affects all of these things.
    I think, you know, we have studies down there, a dozen 
studies, and that got the dialogue going. But to rely on those 
for all of the conclusions when groups came in and said, ``You 
haven't asked this question, this question, this question''----
    Senator Sununu. It seems to me that every one of those 
issues you just mentioned, as important as they may be, are 
issues of substance. My question was a question regarding 
process--the public notice, the public hearings, ten public 
hearings, the rulemaking process and informing members, and 
obviously soliciting comments. So I just want to make sure----
    Dr. Copps. All right. OK.
    Senator Sununu.--that the Chairman didn't violate the 
outlines and the requirements of putting forward this rule.
    Dr. Copps. I have not charged a specific violation. I do 
think it is process if you don't ask the questions that should 
be asked. I do think there are problems with the process when a 
couple of Commissioners want to go out and hold hearings and 
they are prohibited or strongly precluded from doing so. I do 
think there were process questions when the spirit of notice 
and comment in a democratic society is to try to tell the 
people as much as you can before you make a decision and you 
don't do that.
    Now, yes, you can wiggle through and look at the text of 
the Administrative Procedures Act. That's why I don't charge a 
specific violation. But I think we have a responsibility as an 
independent agency to go beyond the letter and go to the 
spirit.
    Senator Sununu. Mr. Chairman?
    Chairman Powell. Well, Senator, let me just say a few 
things. I would be more than happy to provide a detailed 
chronology of the kind of briefings made available to 
Commissioners and the extraordinary lengths we went to make 
sure the internal process was effective. I reject, with every 
fiber of my being, that anybody was foreclosed from an 
opportunity to inform themselves about the proceeding, or that 
anything internally about it was decisional.
    I don't think ``wiggling through the Administrative 
Procedure Act,'' disparaging as that sounds, is a trivial 
point. The Administrative Procedures Act is the law of this 
Congress that guides our processes. And as is conceded, nothing 
about that is being argued as deficient.
    I also--the suggestion that we prohibited or precluded 
people from conducting public-interest hearings--I apparently 
failed. There were ten of them held by these two individuals, 
and apparently I didn't succeed in prohibiting or precluding. 
If the idea is give money, well, I'd be happy if the Congress 
wanted to give us money to fund something like that. The one 
hearing we conducted in Richmond cost $20,000. And, as I 
explained to the Commissioner and others who asked me about 
that, I just don't see the resources or the funds to have the 
10 to 15 to 20 hearings outside of the Washington area that 
would involve the Commission, but that I welcomed that any 
individual commissioner could expend their personal travel 
budget to attend such hearings. And each Commissioner was 
forced to make a judgment about how to use their limited 
allotted set of resources under the appropriations statute.
    Senator Sununu. With regard to substance, Chairman Powell, 
you talked about the prevalence of independently produced 
programming that--I don't know what the exact percentage was 
that you gave, a significant percentage last year and this 
year, of the top-rated programs produced independently. What 
did the record show about localism on network-owned TV 
stations, those network-owned TV stations that you looked at--
to what degree are they producing local news? We heard about a 
small local broadcaster and--I mean, sometimes you have big, 
sometimes you have small, but I think where the Commission is 
concerned, it's that local news, that localism, that really 
should drive your decisionmaking. What did the record show 
about that issue?
    Chairman Powell. I know it would seem, to some, 
counterintuitive, but what the record showed is that network-
owned stations in local markets actually produced more local 
ownership, on average, than non-network-owned stations and 
affiliated stations, not by a huge order or magnitude, but 
certainly not less than. So that's what the record reflected 
with respect to local news and ownership.
    Senator Sununu. Thank you.
    The Chairman. Senator Dorgan?
    Senator Dorgan. Thank you very much.
    Chairman Powell, I regret to be so hard on the Commission 
on this decision, because I like you, personally. But you know, 
from what I have said, I just think this is a decision by a 
regulatory agency that appears toothless to me. In the shadow 
of the largest corporate scandals in the history of this 
country, the last thing we need is to have regulators with no 
teeth. I want regulators to be tigers on behalf of the public 
interest, and it looks, for all the world, to me, and I think 
it looks, for all the world, to the rest of the American 
people, like the majority of the FCC could not or would not 
stand up against the interests of the big business here.
    Now, let me describe a couple of things that I see in this 
process where I really believe you're wrong. You say this was 
an open process. One hearing in Richmond, Virginia. Sure, you 
got a lot of comments, but there's no substitute for going 
around the country and holding open hearings.
    You say they're modest changes. Clearly, they're not modest 
changes when, in nearly 200 cities, newspapers will be able to 
buy the television station.
    You say that it'll promote more competition. Nonsense. The 
evidence suggests that is simply not the case.
    You say that there will be few mergers and acquisitions. Of 
course, that stands logic on its head.
    And you say, ``The court made us do it.'' The court didn't 
make you do it.
    I mean, this is the old joke in the movie, ``Who are you 
going to believe, me or your own eyes?''
    [Laughter.]
    Senator Dorgan. Look, the evidence is in on all of these 
issues, Mr. Chairman. And, I guess, let me ask this question 
this way, because I believe it appears to me so evident that 
the big interests were served here, at the expense of the 
public interest. Would you not agree with me that today those 
who most aggressively celebrate your decision are the biggest 
economic interests in broadcasting in this country? Are they 
not the ones that are celebrating your decision?
    Chairman Powell. I have no idea who's celebrating our 
decision.
    Senator Dorgan. You really don't? Are you kidding me?
    Chairman Powell. Senator, I also know that there's a----
    Senator Dorgan. Wait, let me state--but are you kidding me? 
You really don't know who's celebrating that decision?
    Chairman Powell. I'll tell you what, me and the staff are 
celebrating being completed with the decision.
    Senator Dorgan. All right, fair enough, but----
    [Laughter.]
    Senator Dorgan. Well, let me just refer you then to the 
major newspapers in the country and refer you to the stories 
following your decision. It's quite clear, Mr. Chairman, that 
the big public interests were served here--the big economic 
interests, I should say, were served, and the public interest, 
in my judgment, was disserved.
    But let me also ask what's the basis, especially given what 
we now know about concentration and mergers in radio and 
television--what's the basis for suggesting this substantial 
change in the rules will not lead to greater concentration? 
I've heard you suggest, ``Well, this may not lead to greater 
concentration at all.'' What's the basis for your belief in 
that?
    Chairman Powell. Well, Senator, if you don't mind, I--with 
respect to which market, or which sets----
    Senator Dorgan. Radio, television. Do you believe that, as 
a result of what you have done, there will be greater 
concentration in television broadcasting companies?
    Chairman Powell. I think there will be an increase in 
mergers. I think there will be not an extensive increase in 
concentration to the levels which would cause great public-
policy concern, because we did draw significant and meaningful 
limits. In the context of radio, which you mentioned at first, 
we still essentially retain the limits that Congress imposed in 
1996, and have not altered them one bit. We have, indeed--you 
know, when I first talked to you, 2 years ago, as chairman, we 
had a good conversation about Minot. I didn't know how much 
more I'd hear about it for the next two-and-a-half years. But 
we endeavored mightily to try to fix that problem, that 
anomaly, and I think we have. So I think that rule is tighter. 
And so in the area of radio, we've improved it.
    Again, facts again, there are 3,400 owners of radio; 3,300 
of them own ten or fewer stations in the United States. I 
think, under the rules, that kind of robustness will continue.
    With respect to the national ownership cap, I think it's 
important to point out, again, that while 35 and 45 percent 
sound like big numbers when you look at them in terms of 
station ownerships, it's less than 3 percent of the stations in 
the United States. When you also consider that of the seven 
networks--there are only two of them under the old rule 
completely free to rise up to 35 percent--are nowhere near the 
cap and haven't chosen that strategy. There are only a limited 
number of networks who could be a class of buyers, and I think 
there are very few of them actually interested in an 
extraordinary amount of national ownership of local television 
properties. So I think that rule is reasonable.
    I think, in the local context, finally, one of the most 
important things we did is, we continued to prohibit the 
ownership of the mergers of the top four stations in any 
market. By the way, those top four stations are usually the 
network-owned or affiliated stations. So that means they don't 
have nearly as much opportunity as would be suggested for 
buying in local markets, because they could never combine the 
top four stations, under the rule, in that market.
    Senator Dorgan. Mr. Chairman--let me ask Commissioner 
Abernathy. You said that the Congress--took a swipe at those of 
us in Congress saying that we were acting out of irrational 
fear instead of hard facts with respect to the issue of 
consolidation. Is there any evidence that you see with respect 
to consolidation, particularly with respect to radio in recent 
years, and also television, that would suggest that we have an 
irrational fear of consolidation?
    Commissioner Abernathy. I would never call Congress 
irrational. I think that what you have to balance here is, you 
have to balance the First Amendment rights of the licensees 
against the rights of all the public to have diversity, 
localism, and competition. And when we're looking at a statue 
that drives us to say, ``What's the minimum number of voices 
needed to promote competition,'' it's not a statute that says 
``maximize the number of choices.'' That's just not how it's 
been interpreted by the courts. And so when I look at that 
statute and I look at what our choices are, I think that we are 
creating an environment where there's going to be choice in all 
of the markets. The top four can't combine. We're going to have 
a multiplicity of voices. Whereas, in the radio business, we 
saw, in some markets, excessive concentration, which we 
addressed in this order. That was--there are different rules in 
that market than we have in the television market, where, for 
example, the top four can't combine; where, for example, in 
certain markets, the newspapers cannot be acquired. We put 
solid protections in place to ensure that there are multiple 
voices out there for consumers.
    Senator Dorgan. Now, just as an observer, in my final 
moments, I think diversity, localism, and competition are fast 
expiring here. I mean, I think it's time to press our black 
suits for a funeral for those issues. I think the decision that 
was made by the FCC is one that really goes against the grain 
of localism and diversity, and I would just ask--I guess I'm 
out of time. I was going to--let me just make a comment.
    Mr. Chairman, you mentioned that, ``Well, the 35 percent is 
not so relevant.'' You've got a couple of station groups that 
are now over that, but some of them are not up to it. If it's 
not relevant because some have not reached it, as you've 
suggested a couple of times, why increase it?
    Chairman Powell. Well, that's actually an argument for 
eliminating it, which was one of our greatest----
    Senator Dorgan. Well--I'm sorry. I didn't mean to interrupt 
you.
    Chairman Powell. It is an argument for eliminating it if 
you can't demonstrate its need. What we tried to do is find 
evidence that it was--a national cap of some sort was still 
extremely important. We do believe that the balance of power 
between networks and affiliates is something to balance. But if 
we couldn't prove the existing number did what we claimed it 
did, as couldn't the Commission that preceded me and had the 
rule remanded, then we thought by modifying it into a range 
that the court would give us deference on would help save the 
preservation of a national cap.
    Senator Dorgan. But there's no evidence the public interest 
would ever be served by eliminating this standard, and I'm 
surprised a regulator would say that. But that----
    Chairman Powell. It might not, Senator, but I think it's 
absolutely important to continue to point out that the way the 
court has interpreted this statute is--what you have to prove 
is that you need the rule, not prove that it'll serve the 
public interest for eliminating it, which is one of the 
problems with the standard of this biennial review.
    Senator Dorgan. And our disagreement is that we believe you 
could have approved the need for the existing rules, and, 
instead, you chose to go with more generalized liberalized 
rules that would result in more concentration.
    Chairman Powell. That might be fair, yes.
    Senator Dorgan. Mr. Chairman, thank you.
    The Chairman. Senator Snowe?
    Senator Snowe. Thank you, Mr. Chairman. Thank you.
    Chairman Powell and other members of the Commission, 
there's no question that, obviously, you've invested a 
considerable time and effort in this type of decision, and a 
decision of great importance and significance to the 
underpinnings of democracy and the objectivity of reporting. 
And, obviously, you're reached very divergent views.
    I happen to believe that abiding public concern is a matter 
of public interest, and incorporating public feedback and 
developing rules or modifying or repealing, or whatever, with 
respect to withstanding judicial scrutiny, are not mutually 
exclusive goals.
    And so it concerns me, Commissioner Abernathy, when you're 
saying we have to separate fear from facts. I mean, I think the 
fact is that if there is broad public concern that could 
ultimately undermine the confidence in the decision that's 
reached by the FCC, that is a matter of high public interest.
    And I'm concerned also about the divergent views, in terms 
of whether or not the statute had a regulatory bias, 
deregulatory bias, whether this was all driven by congressional 
biennial review requirements, as well as the court remands, and 
all of that, I think, could have been addressed. If those were 
legitimate concerns on your part and you're concerned about the 
direction, then clearly it should have gotten the attention of 
the Congress.
    But the Congress nor the courts ultimately forced the 
ultimate decision that you made. The court essentially asked 
the Commission to justify, with a solid, factual data base, how 
you reached a decision with respect to these rules and whether 
or not they were necessary in the public interest. And in the 
court opinion, it indicated, in sum, ``We cannot say it's 
unlikely the Commission will be able to justify a future 
decision to retain the rule.''
    So I'm interested in hearing from each of you with respect 
to this rationale, because I think--first of all, I think it's 
clear that, you know, you could have gotten our attention on 
the biennial review. That was a timetable--it wasn't a 
mandate--for reaching the conclusions you did today. Now, you 
could say that the statute had a regulatory bias, a 
deregulatory bias. Irrespective, obviously, there's a 
difference of opinion. But, again, that could have come back to 
Congress.
    The court asked the Commission to justify the existence of 
these rules. You could have justified the existence of the 
existing rules. And so, you know, maybe I'm viewing it very 
differently, but I'd be interested in knowing, especially from 
you, Chairman Powell, because you were here in the last 
biennial review, what occurred now that's so different than in 
the past where you're saying that you were unable to accept the 
current rules, that was not a viable option? I mean, what did 
you do now that you didn't do in the past? And couldn't you 
have justified the existing rules?
    Chairman Powell. Let me be clear about what courts do and 
don't. They don't write the rules for you. They tell you what's 
wrong with the rules you've written. To the extent that the 
court doesn't tell you, you couldn't possibly--by the way, they 
really said that you couldn't--``We don't concede that you 
couldn't justify a national ownership rule.'' Well, we have 
tried to justify a national ownership rule.
    But one of the things you have to take from the court case 
is, number one, their interpretation of the law. With due 
respect to my prior colleagues and Commissioners and Chairman 
Kennard, he didn't have the benefit of the court interpretation 
of the statute. He attempted to interpret it in a manner that 
allowed sustainment of the rules based on the record evidence 
that we had at the time.
    When the case got to court, the court gave us two sets of 
guidance. They gave us guidance about how to properly interpret 
the statute. And if it's not as Congress or this body wishes, I 
would urge you, for me and for future Commissions, it's going 
to need to be changed. There's no question that the court 
insisted that there is a presumption of deregulation. It 
discussed the history of the Congress's deregulation. But, more 
importantly, what it did is, it told us what was factually 
deficient about justifying the 35-percent rule. It told us 
about the kind of record it would expect to see to justify any 
kind of rule, and that was a really rigorous and extensive kind 
of record that didn't even come close in the last biennial.
    What did we do different? We started a Media Ownership 
Working Group 20 months in advance. We've commissioned 12 
empirical studies to go out and survey the market at a depth 
never before done in broadcast ownership review, so that we had 
that tangible data and record evidence the court said ``you'd 
better have when you walk back into this place.'' We surveyed 
consumers for the first time and say, ``What is your principal 
reliance on the media? How do you use it?'' And then we tried 
to weight those in the context of our decision.
    It was a massive proceeding in which we did all the rules 
comprehensively. One of the criticisms of the court were that 
the rules were not coherent. You'd count something in one and 
not the other. Well, my decision to put the rules together in 
one massive proceeding, which drew all this attention--perhaps 
I shouldn't have done that--what it did is allow more coherency 
across the rules.
    It's our hope that that, all put together, is something 
much more palatable in the mind of the court. But the notion 
that the court didn't tell you you couldn't keep the 35-percent 
rule, I would agree with, but they also told you what you'd 
better have to do it. And when we got the record, we believed 
that we didn't have the evidence to support the rule at 35 
percent, and we had some doubts about supporting the rule at 
all. But we believed that we had an opportunity, if we 
modified, as the statute required, to save a national cap. And 
so, you know, that's what we did. We'll see if we're 
successful. This is a rule I'm quite concerned about in the 
court, and I think there's serious reason to believe it'll be 
reviewed quite critically.
    Senator Snowe. Mr. Copps?
    Dr. Copps. Can I make just two comments?
    There was never any question in my mind, from the day I go 
in the Commission, about the direction that this proceeding was 
going. It was obviously in the direction of further 
deregulation, and it was not undertaken with the idea, ``Let's 
really do a super job to see if we can strengthen the 
regulations that exist or justify the ones that we have.''
    Which leads us to my second point about the legislative 
context in which we operate. I don't have any problem with 
saying that the Telecommunications Act of 1996 is a broadly 
deregulatory act. In the context of telecommunications, that 
means to me that you deregulate incrementally once you have 
provided the basis of competition.
    With regard to the context for proceeding on media, it 
means, yes, you can deregulate once you have made sure that you 
are protecting localism, competition, and diversity, and 
protected the public interest. I don't think there's any 
question about that.
    Senator Snowe. Uh-huh.
    Mr. Adelstein?
    Mr. Adelstein. The public-interest standard is one of the 
broadest, if not the broadest, that we operate under at the 
Commission, with the least, I think, guidance from Congress as 
to what it is. The public interest ultimately becomes what 
three of the five of us think it is, which is a real problem 
and a real reason that I would seek further guidance from 
Congress on this.
    But I'd go back to the legislative history of this. The 
great Senator Clarence Dill, who was on this Committee in the 
1920s and was one of the creators of the act, said that the 
charm of the public-interest standard was its vagueness and its 
breadth. He said, quote, ``It covers just about everything.''
    I'm afraid what we've done here is make it so it covers 
just about nothing. We've had this broad authority granted to 
us to try to do what's right for the American people, and 
perhaps you can justify what the Chairman did. He makes very 
eloquent arguments for it. You can justify it there. You can 
justify it at 35, at 45, at 65. You can make a case for 
anything. Whatever we say it is, if you get it upheld in the 
court, that's OK.
    The question, for me, is, Did we do the best we could to 
promote the public interest? Is it OK to say that in 95 percent 
of the country you can have a duopoly without asking anything 
of the broadcaster that's able to merge to make sure they 
provide better service to the consumer? You can allow a 
newspaper to buy a television station in virtually anywhere in 
the country but a few small towns. Sometimes that's in the 
public interest, sometimes it's not.
    We should make a determination whether it is or whether it 
isn't. We have that authority. But, instead, we just made the 
broad assumption that it's always in the public interest, no 
matter what, for these things to happen. For those voices to be 
lost in those communities is always in the public interest. 
That's the assumption underlying this order. I don't think it 
was a vigorous interpretation of the broad authority that 
Senator Dill expected us to utilize.
    Chairman Powell. Senator Snowe, because this Committee is 
so interested in possible legislation, I do have to continue to 
emphasize how dangerous the court case is. We just heard the 
talk about, ``We should take a slower, more incremental 
approach.'' And here's the quote from the quote, on page 1043. 
``The Commission answers that it's properly followed the lead 
of Congress in taking an incremental approach to the 
deregulation of broadcast ownership. We are not convinced 
Congress required such an approach. The mandate of 202(h) may 
be better likened to Farragut's order at the Battle of Mobile 
Bay, `Damn the torpedoes--full speed ahead.' '' This is what 
we're operating under.
    Senator Snowe. So if we codified these ownership rules in 
statute, would the court look at it very differently?
    Chairman Powell. Oh, substantially differently. The only 
limits on this institution are the Constitution of the United 
States. The problem is, I'm not a legislator; I'm a regulator. 
I'm obligated to follow the delegated authority that you 
provide. I'm restricted by that, and I'm under the strict 
oversight of the courts.
    Senator Snowe. Just one followup. But if you were troubled 
by that direction--and obviously you're not--but if you were 
troubled by that direction, couldn't the Commission come to the 
Congress and say, ``You know, this is the situation and the 
circumstances, and it really will require, you know, input and 
changes by Congress with respect to the 1996 statute?''
    Chairman Powell. Yes, ma'am. I mean, I think I have had 
many conversations with legislators about the challenge 
associated. The FOX case was quite a long time ago. We've been 
working for 18 to 20 months to implement it. I think that I've, 
personally, had many discussions. You and I had the benefit of 
a long 3-hour session not too long ago in which we tried to 
work out some of the understandings about the statutory 
limitations. But we felt our first duty, in the limited time we 
were given, was to try to craft rules that were consistent with 
it. I do think the rules that we did were.
    Senator Snowe. Uh-huh. Well, you know, I just hope, in the 
future, that we can work in sync on some of the issues where we 
feel that there is a profound public obligation because of the 
magnitude and the enormity of the impact. And somehow, I think, 
obviously, that has, you know, affected these proceedings, and 
obviously we're going to have to correct that.
    The Chairman. Senator Lautenberg?
    Senator Lautenberg. Thank you, Mr. Chairman.
    Mr. Chairman--and I address Chairman Powell--the question 
persists as to what the data were that were used to come to the 
conclusion that you did. And there is a challenge--you hear it 
throughout, I think, this Committee--as to whether or not there 
was sufficient recognition of the access to communicate with 
the public or to have the public communicate with the 
Commission. And it seems to me that there are several areas of 
challenge.
    One was, was it a coincidence that there were so many 
reliable forecasts as to the outcome of what this decision 
would make? Was it leaked somehow or other from the Commission? 
Was it a public statement that perhaps I missed along the way 
that said this is the way this is going to come out? Because I 
didn't hear anybody say that it was going to be any different 
than expanding the caps.
    Chairman Powell. You know, I don't--you know, it's a 
mystery to me how all these things get out. The Commission has 
this, sort of, long and ignoble history of having almost 
anything it does get out. I've rarely worked on a proceeding in 
which, at some point early in the process, it's fairly well 
known out in the public and among the newspapers what we're 
doing.
    I can tell you I didn't undertake a conscious effort to 
leak the specifics that I saw in the newspapers. I also made a 
conscious effort not to try to refute them when I was on talk 
shows, television shows, and newspaper interviews.
    Senator Lautenberg. OK, then that raises the question. 
Because how could they have been so accurate in their 
prediction, unless somebody had a sense it was pretty darn 
good? And I would like to look at, kind of, three areas to 
raise the question about access by all the commissioners to the 
same opportunity to hear public communications. So I want to 
look at hearings. I want to look at the ``outings,'' if I can 
call them that, these numerous trips that took place. And I'd 
like to ask a couple of questions about the volume of comment 
that came in.
    Now, there's a debate whether it's 500,000 or 750,000 
comments that came in from the public. And what was the 
evaluation of that data? Was the data a factor in making a 
decision, or was it not? I heard the response that you earlier 
made, but that kind of volume of commentary is pretty 
overwhelming, in terms of the need to consider it.
    Chairman Powell. Yes, sir. There was an effort to take into 
account the volume of content. Indeed, in my statement on the 
day that we announced the decision, I talked very specifically 
about the fact that I think that that strong public response 
introduced a sense of caution in the choices we make. You've 
heard some suggest this was going to be a lot worse until this 
happened. Well, if that's true, then it had an impact.
    Senator Lautenberg. Could these be considered also in the 
nature of the public's vote? I mean, I'm sure most of them 
said, ``Hey, you ought to do this, you ought to do that, but I 
favor this way, I favored not expanding the caps, or I do.'' 
And did anybody go through those and say, well, there was 
500,000 who said that we ought not to expand the caps or 
anything of that nature?
    Chairman Powell. There was no one official who did that, 
although they were all gone through. There have been a lot of 
claimed surveys of what the percentage is of for and against. 
But one of the things I'd like to emphasize--for example, of 
the 500,000, 300,000 of them are postcards from the NRA. Every 
single postcard largely says the same thing. It's pretty easy 
to quickly get through a generalized commentary.
    And one of the problems I had with some of the--not 
problems I had, but the little assistance it provided--is a lot 
of them would say, ``I'm against more big media 
consolidation.'' Well, Mike Powell is against unfettered 
consolidation, too. But our specific task in determining 
percentages of ownership, duopoly relief, diversity index, the 
myriad of expert judgments we're expected to make, those kinds 
of comments introduce caution and care, but they don't 
necessarily provide the kind of record evidence that leads to 
very specific decisions. That's one of the problems with them.
    Senator Lautenberg. Then I'd like to take the liberty of 
asking your colleagues who had a dissenting view on the 
outcome.
    Mr. Copps, did you have a chance to look at these comments 
that came in?
    Dr. Copps. We've had a chance to look at a lot of them, not 
to go through all of them. Other organizations have. I think 
they're running about 99.9 percent, as I said earlier, against 
the direction the committee is going.
    But Commissioner Adelstein and I had the opportunity to get 
a little bit more granular evidence in going out in these 
hearings and talking to the American people. And you get away 
from the idea that these are just bland postcards or something 
like that. What I saw out there, and we couldn't afford to 
advance these hearings and do all that, four, five, six-hundred 
people would come out, and they were not only concerned; there 
was alarm on their faces. There is serious disenchantment in 
this country with the results, already, of media consolidation. 
Put aside the question of whether we're going to have more. 
It's a grassroots issue. There's serious disenchantment. I 
think radio listenership is on the rapid decline.
    Senator Lautenberg. I hate to be the timekeeper, but the 
big timekeeper--is gone?
    [Laughter.]
    Senator Lautenberg. Well, let's talk fast, before he gets 
back.
    [Laughter.]
    Senator Lautenberg. Mr. Adelstein, what do you have to say 
about that?
    Mr. Adelstein. I saw the same thing at these hearings 
across the country, a virtual unanimous chorus against this. 
And we had all these hundreds of thousands of people that wrote 
in, and they weren't just postcards. They weren't just ``stop 
consolidation.'' There was a lot more depth.
    This probably the best expert witness in the world, the 
American people, because the 750,000 people that contacted us 
watch billions of hours of television and radio and read the 
newspapers, and they had something to say.
    I mean, here's an example of a letter from one of your 
constituents, Senator Boxer, from California, just to give you 
an example of whether these are just postcards. I mean, this 
person said, from Cupertino, that, ``It's been demonstrated in 
California, where consolidation media has resulted in local 
content being cut, low-quality news and journalism, and 
ethnicity not being representative. The radio waves are now 
programmed with mainstream commercial-laden content from some 
corporate headquarters of the other side of the country.'' And 
then they go on to make a bunch of specific recommendations as 
to what we should do about it, ``Achieving diversity will 
require explicit restrictions on a number of items. Ownership 
of media by a single company in a region, maybe it should be 
limited to 25 percent or less. Ownership of different types of 
media, a single company should not be allowed to control 
multiple media outlets''----
    Senator Lautenberg. Let me cut you short because the hot 
breath of time use is, I feel coming, and I want to anticipate 
that.
    [Laughter.]
    Senator Lautenberg. So can I ask you this? And I heard the 
distinguished Chairman, and he is a distinguished Chairman and 
very articulate--just happens to be wrong----
    [Laughter.]
    Senator Lautenberg.--but in terms of the hearings, Chairman 
Powell said that because of the costs, there were limitations. 
I would ask you this. I wonder if those hearings would have 
cost more than $2.8 million. Why do I pick that figure? Because 
that's what was spent on the 2500 trips that took people to Las 
Vegas and other interesting historic places.
    [Laughter.]
    Senator Lautenberg. And so were either of you satisfied? 
Because, obviously, there is--if not an implicit direction to 
the Chairman's comments, that the Commissioners who weren't 
satisfied--I understand there was only one--correct me if I'm 
wrong, Chairman Powell--there was only one hearing at which all 
five Commissioners attended. Is that correct?
    Mr. Adelstein. That's right.
    Senator Lautenberg. OK. Were there attempts by your part to 
hold more hearings?
    Dr. Copps. Yes, we did hold more hearings. We held a 
couple----
    Senator Lautenberg. Who attended those?
    Dr. Copps. We tried to have a balanced representation. We 
invited business. We invited the broadcasters----
    Senator Lautenberg. I'm talking about among the 
Commissioners.
    Dr. Copps.--a cross-section. And we did--you know, he said 
there was--that one hearing cost $20,000--we didn't have that 
kind money, and I think the 12 or 14 that we attended, and some 
of these were sponsored by other people, a grand total of that 
was less than $20,000. They were on a shoestring. They weren't 
the kind of things I would like to do. But as between no 
hearings at all and a hearing on a shoestring, I'll take the 
hearing on a shoestring every time.
    Senator Lautenberg. How many of your colleagues were at 
those hearings that----
    Dr. Copps. Commissioner Adelstein and I were at the 
hearings.
    Senator Lautenberg. Did you give notice that you wanted to 
do this and that it was going to be held at a specific date?
    Dr. Copps. We invited all of our colleagues.
    Senator Lautenberg. Forgive me, Mr. Chairman, but--and I 
will stop with this, I promise--and that is that there is a 
lopsided process of interview and data accumulation that, 
frankly, is--I'll speak for myself, but I sense it coming from 
my colleagues on both sides of the aisle. Why wasn't the public 
paid more attention to? What was it? We know who the sponsors 
were of the outings, the trips. So many of them. It's hard to 
imagine being able to get away that often. But the fact of the 
matter is that it has a kind of a taint, Chairman Powell. And I 
think it was Senator Hollings who talked about ``Why the 
rush?'' And I think that's a good question. Maybe you ought 
to--I don't know whether it can be considered now, but I think 
it was a hasty decision, and it looks, based on the advanced 
notice and the dismissal of data that came in, that it was a 
hasty--and I know you were required by rule, by law, to get 
something done, but I assume that postponements were not 
unusual.
    And I thank you very much. Thanks, Mr. Chairman.
    The Chairman. Thank you, Senator Lautenberg.
    Senator Breaux?
    Senator Breaux. Thank you very much, Mr. Chairman. Thank 
all the Commission members.
    After hearing all of your testimony, I cannot imagine how 
much fun it must be to be on the FCC.
    [Laughter.]
    Senator Breaux. I'm talking about lack of diversity in the 
media. We certainly don't have lack of diversity in the FCC.
    [Laughter.]
    Senator Breaux. I think that it's an incorrect argument for 
us to be debating whether a 35-percent national TV ownership 
cap is correct, or whether a 45-percent national TV ownership 
cap is appropriate. I happen to personally believe that we 
shouldn't have media concentration. There should be some 
measurement of media concentration. But I would argue that the 
current rule that you follow because of the act, Mr. Chairman, 
is the incorrect standard by which to judge whether an owner 
has media concentration in a given market.
    For example, it seems to me that you could have a single 
owner of a TV station in each one of our largest cities in the 
country that would exceed the 35- or 45-percent cap, even 
though no one watches those stations in each one of those large 
cities, because the cap is based not on the media dominance, 
but rather where the station is located in the population of 
the city.
    You, for instance, could also, on the opposite extreme, say 
to an owner who is the only station, for instance, in 200 small 
towns around the country, that that person, who is the only TV 
outlet in those 200 cities, in fact, would not come anywhere 
close to reaching the 35- or 45-percent cap because of the size 
of the cities.
    If you look at the studies that have been undertaken on the 
media networks, as far as the percentage of the population that 
watches these outlets during prime time, NBC has 13 stations, 
and their prime-time audience share is 1.6 percent; ABC, ten 
stations, 1.2 percent of the population watching it during 
prime time; FOX, 34 stations, but 2.7 percent of the population 
watching the station during prime time.
    The question I ask for you, and others can comment on it--
I'm for some type of a national cap. I just think that the 
standard we use is totally irrelevant when it comes to media 
dominance in a particular area. And I'd like to have your 
comment on that, Mr. Chairman.
    Chairman Powell. Well, Senator, I think you're actually 
quite correct. It's a big problem with the way that the 
national cap has worked historically and what it purports to 
defend. My statistics are similar to yours, that the actual 
audience reach of the four networks is only 3 to 4 percent of 
the country because of this household measurement model.
    One of the reasons that we were not able to conclude that 
the rule is necessary on competition grounds is for the reasons 
that you just cited. And the court was very skeptical of 
whether you would defend it on competition grounds.
    What we have attempted to do is defend a cap purely on 
diversity grounds, and specifically localism grounds. The idea 
of a national owner having a certain amount of power in the 
owner-affiliated relationship might coerce or prohibit or limit 
a local station owner's ability to preempt national 
programming, the vertical-integration issue Senator McCain's 
concerned about. This helps prevent that local station from 
feeling limited or coerced in its ability to preempt national 
programming.
    So what we've done is defend the rule, only on diversity 
grounds, not competition grounds, and on localism grounds 
specifically. And, just to repeat, the problem we've found is 
there are a lot of inconvenient facts about how well it works, 
because I think while the affiliates, for example, are, by the 
way, a monied interest that are not particularly happy about me 
raising this rule, one of the things, you know, that is 
difficult to explain is that they have preemptions that they 
are permitted to use to provide local programming. But yet, at 
the end of the programming year, they haven't exercised them, 
and we thought that that was going to be a very unfortunate----
    Senator Breaux. Let me ask a question. Is there not a 
better standard that could be drafted in order to measure media 
dominance by individual owners around the country than what we 
have? I mean, what we have now is based on the size of the 
city, not the number of people that watch and get their 
information just from that outlet. I mean, does anybody have 
ideas about perhaps a better way?
    Mr. Adelstein?
    Mr. Adelstein. Yes, sir. One idea for that is using what's 
called the HHI, which is a measure used by the Justice 
Department to determine the level of competition in a 
particular market. We use the HHI in this order in order to 
determine a diversity index, but we don't apply it to 
individual markets. The problem is, we could have used that 
kind of a determination to judge the level of concentration in 
a particular market, like New Orleans, and say, ``What's it 
like there? How many owners are there in this particular area? 
How concentrated is this market?''
    Can we permit an additional merger in that city, permit a 
newspaper to buy a TV, or a TV to buy another TV in that city 
given the level of concentration that exists there, based on 
that market analysis done under an HHI? That would be a very 
creative way to do it. It's one that was contemplated by the 
Commission, but unfortunately one that was not adopted.
    Senator Breaux. Mr. Chairman?
    Chairman Powell. Senator, as an antitrust lawyer, you have 
to let me come back in on this. If we use HHI, station groups 
that own 3 to 4 percent of the country are going to be so 
dramatically below any level of concentration you can defend. 
These stations could own hundreds more stations.
    If you're saying that the only relevant market is the local 
market, then the only rules of relevance are our local caps and 
restraints, the ones that prevent--only allow duopoly or 
triopoly in certain markets, and the ones that prevent the top 
four stations from merging, that's a very compelling argument 
for no national cap whatsoever.
    Senator Breaux. Well, what would be your recommendation on 
the way to measure media and market dominance? I mean, I just 
happen to think--I guess the 35-percent national population 
relation is because Congress said that's what should be used. 
So what would, in your opinion, be a better measurement of 
market dominance in order to regulate media ownership?
    Chairman Powell. Well, this would require a lot more 
considered opinion, but sometimes I think we should not be 
trying to regulate that kind of problems through, sort of, 
three cushion shots through ownership structure. If what we're 
saying is we want nondiscriminatory principles in the provision 
of content, if what we're saying is a certain amount of 
capacity should be reserved for localism, I would much prefer 
we more clearly and honestly have a rule like that than attempt 
to get it added through a secondary effect of ownership. In 
fact, in some ways that's kind of the wisdom Congress expressed 
with respect to cable, which this very Commission reaffirmed, 
the notion of. Well, if a cable company owns this much 
capacity, a percentage of it, program access, requires other 
programmers to be on it.
    You can debate whether you like that kind of regulation, 
but at least it's cleaner, clearer, and more obvious. And this 
very Commission has reaffirmed regulations like that and 
they've been upheld in court.
    Senator Breaux. Well, I think--I'm out of time, as well--
but I just think that we need to look at--number one, I think 
that a concentration of media ownership can get to a point 
where it is not in the public interest, and it should be 
regulated by the Commission. The question I have is that the 
standards we use, and you use because Congress said that was 
the standard, is an inappropriate measurement of market 
dominance. It only says that station owners are operating in 
large cities. It doesn't have anything to do with whether 
anyone's watching them in those cities.
    Dr. Copps. Can I make a 10-second comment? I think one of 
the things you could be looking at, in terms of radio, for 
example, is audience share. I think you were driving at that. 
We used to look--until we did this proceeding the other day, we 
would flag radio concentration if one company had over 50 
percent of the advertising revenues or two had over 70 percent. 
That's gone.
    Senator Breaux. Thank you.
    The Chairman. Thank you.
    Senator Boxer?
    Senator Boxer. Thank you very much, Mr. Chairman.
    First, let me say I served on a board once with five 
people. It was a board of supervisors. And I know it's hard to 
be split like this. It's really hard. But I just want to say to 
each and every one of you, the important thing here is the 
public interest, not the personal relationships. They'll live 
through it. And I just appreciate the fact that if you really 
believe what you're doing, fine.
    I, however, am very frosted by something that Commissioner 
Abernathy has sort of hung her hat on in making this decision, 
and that's the fact-versus-fear theory, which I have now read 
throughout your statement that you put out to the press, and a 
whole section is called ``Fact versus Fear,'' and so on and so 
on. And today you used the word ``alarmist cries.''
    Now, I've learned something. I've been in elected life for 
a very long time. It's a very humbling experience, I can assure 
you. And just because you sit behind a microphone does not make 
you smarter than other people. And to dismiss their points of 
view by saying they're fearful is an insult to them, and it is 
an insult to the people of my state.
    Now, I'm going to give you an example of some of the 
letters you got which you dismissed as being fearful, they're 
acting on fear. Here's a lady from Massachusetts. I don't know 
her. Here's what she wrote. ``I'm opposed to further media 
consolidation in this country. I no longer feel able to listen 
to AM radio because of its poor content. Musicians no longer 
are given ample air exposure if they're not a proven product or 
backed by some corporate sponsor. We, the people on this 
country, deserve unbiased news coverage.''
    Fear? I don't think so, Commissioner. I think it's fact. 
You can't tell her that she is wrong to believe that she's not 
getting good music anymore. You can't tell her that she has no 
right to expect diversity and unbiased news. You have no right 
to do that. As a matter of fact, it goes against what you're 
supposed to do.
    Here's another one. Here's one from Roanoke, Virginia. ``I 
urge you not to relax cross-ownership rules. Yet if you do, I 
urge you to put safeguards in place to prevent corporations, or 
any other conceivable entity, from having whole control over 
information in the free airwaves. Of course, people will be 
able to continue getting alternative sources via the Internet, 
but it will not help those who cannot afford the Internet.''
    Fear or fact? Is it a fact that some people can't afford 
the Internet? Yes, it's a fact. And it goes on.
    How about this one? This is really based on fear. This is a 
comment from Bridgehampton, New York. ``Delay your June 2 
proposed decision. This important decision needs more public 
input.''
    So you have dismissed the people. And it is very irritating 
to me, because, in my opinion, and this is--you have every 
right to disagree with the people and say, ``I don't agree with 
their conclusion. I don't agree with those woman. We don't need 
more time.'' But you don't do that. You use this, ``Oh''--and 
your comment here today, ``Oh, I would never find Congress 
irrational.'' It's the same tone about it. And it bothers me, 
because there are only five of you looking out for this 
diversity and this competition.
    And I'm going to bring up another point here, which goes 
along the same line. There's an article----
    The Chairman. Senator Boxer, would you like to have 
Commissioner----
    Senator Boxer. Yes, but I want to----
    The Chairman.--Abernathy respond to that one?
    Senator Boxer. Yes, once I do the second----
    The Chairman. All right.
    Senator Boxer.--because this builds on it.
    And this is the second point that feeds into the same 
thing, with who has really been given attention and who has 
really been given the respect in this debate. And I want to 
make sure it's right, because we know we've got problems with 
accuracy in the media. So I want to make sure this article in 
the New York Times is right.
    [Laughter.]
    Senator Boxer. It says that ``media lobbyist, Dick Wiley, 
whose clients''--I don't know the man. He's probably out 
there.--``whose clients include numerous large media companies 
and partners at his firm, held at least 34 meetings with FCC 
officials, according to the record, the open record at the 
FCC.'' So we have 34 meetings with a lobbyist and his partners, 
and you all went to, all five of you, one meeting.
    So the point I'm making is, do you understand why the 
people out there are upset? They're upset because they do not 
feel that this decision was made with their best interests in 
mind, because they hear comments that dismiss what they say as 
fear, and they see these things, 34 meetings with one lobbyist, 
and they had one meeting.
    So if Ms. Abernathy could--if each of you could react to 
this, I'd appreciate it. And that's what I have to say.
    Commissioner Abernathy. Thank you, Senator. And if the 
impression has been given that we didn't, or I didn't, taken 
into account all of the concerns of the citizens, that's 
absolutely wrong.
    Senator Boxer. I didn't say that. I said you dismissed it 
as being fear. I didn't say you didn't take it into account. I 
said you categorized their comments as being fearful.
    Commissioner Abernathy. And it was based on fear. It was 
based on, ``What if the FCC gets rid of all its rules? What if 
the FCC allows the top four stations in all the markets to 
merge? What if the FCC doesn't maintain a cap on affiliate 
ownership? What if we are willing to sanction two or three 
media moguls providing all the information to consumers?'' I 
would never do that. I would hope that none of my colleagues 
would ever do that.
    What we tried to do, what I felt was critically important 
in this instance, was not to adopt rules that I might 
personally like to see, not to adopt rules that I thought would 
make me feel more comfortable, personally, about what we would 
do, but to look at the facts in the record that demonstrated 
all the choices that consumers have, to look at the number of 
options we would be protecting consumers by virtue of having 
restrictions, as far as newspaper ownership, maintaining 
restrictions, and, in fact, improving the radio and----
    Senator Boxer. Well, you're not answering the question I 
asked you. I asked you, can you see why people might be upset 
looking at your comment dismissing what they say as being based 
on fear, having 34 meetings with a top lobbyist--I'm assuming 
it's accurate, because it was gotten from your records at the 
Commission.
    Commissioner Abernathy. Uh-huh.
    Senator Boxer. And the other point is only two 
commissioners went out across the country. You know, you--I'm 
out of time, but it's--your answer is very nice to listen to, 
but it's not getting to the heart of my point. And I hope that 
you'll listen to what I'm saying to you, because I'm just 
trying to say to you, in the future you ought to consider more 
what the people feel. I don't think you did.
    Commissioner Abernathy. Thank you, Senator, and I'll be 
happy to talk with you further and understand your concerns and 
the concerns of the citizens. But certainly that was not my 
intent, nor was it the intent of the Commission.
    The Chairman. Our dear and beloved Morris Udall said, ``The 
politician's prayer is, `May the words we utter today be tender 
and sweet, because tomorrow I may have to eat them.' ''
    [Laughter.]
    Senator Boxer. Would you pass a little sugar over here?
    [Laughter.]
    The Chairman. May I ask my friends, Senator Fitzgerald and 
Ensign, who prefers to go first? Senator Ensign was here first. 
Senator Fitzgerald has been here for awhile.
    Senator Ensign?

                STATEMENT OF HON. JOHN ENSIGN, 
                    U.S. SENATOR FROM NEVADA

    Senator Ensign. With that lead-in about possibly having to 
eat words, I will attempt to go forward.
    Mr. Chairman, I think it's very appropriate that you had 
this hearing so quickly after the decision was made. I think it 
an incredibly difficult decision that you all have undertaken, 
simply because of the complexities. Anybody that sits on this 
Committee understands that the issues that we deal with here, 
we have no idea sometimes what the consequences are going to be 
of the decisions that we make.
    The 1996 telecom law, I think, is a perfect example of 
that. The biggest laws that were passed that year were the law 
of intended and unintended consequences of that law. And 
depending on who looks at it, depending on the court, depending 
on the regulator, it can vary widely in how it is implemented. 
And I think that we're seeing, in so many different areas of 
that law, we're seeing perhaps things that the originators of 
the law didn't intend and other things that maybe went farther 
or not as far as the originators of the law had intended.
    The part that still amazes me in this whole debate, though, 
is the rules looking back, compared to technology. It doesn't 
seem that those same rules could possibly apply to today as 
what applied in the past because the landscape has changed so 
dramatically. I think--and I appreciate the comments by all the 
Commissioners about not wanting anybody in America to control 
so much thought because of so much information coming into a 
home that they can dominate thought. I mean, we know how 
dangerous that can be.
    But the evidence that I've looked at through the hearings 
that we've had, through a lot of the reading that I've done, 
through media reports, through looking at both sides of this 
issue as much as I can, it doesn't seem to me possible to 
control, based on this minor tinkering of the law that you all 
have done, to control thought in America. It just doesn't seem 
possible. And it seems like that there are safeguards built in, 
as you all have mentioned today, about some of the case-by-
cases that can be done that still are protected in law.
    If there are exceptional circumstances, they can go either 
way, as Ms. Abernathy talked about, if it would be beneficial 
that more consolidation happen because one news station in a 
small market may go off the air, that may be beneficial to the 
public interest to allow consolidation in that case. In other 
cases, it may be detrimental, and you still have the rights, 
from what I understand, to block some of those things from 
happening.
    And I'd be curious to hear from Mr. Adelstein or Mr. Copps. 
I've read your testimonies and--but it doesn't seem--let me try 
to pose the question this way. When we're looking at market 
share--because that's one of the arguments, is that popularity 
in market share--it seems to me that we shouldn't be regulating 
popularity. In other words, if there are 200 stations or 
whatever out there, and a certain percentage of the companies 
are controlling based on their market share because they've 
been able to attract people to their stations, that doesn't 
seem to me to be what we want to control. We want to be able to 
control the ability for people to have diversity. But if they 
can attract people to their stations because they have better 
content, we shouldn't be in the business of saying, ``No, you 
have too much market share. You have too much ownership of what 
goes into the households,'' simply because they're better, 
whether that's radio, television, or whatever it is.
    Mr. Adelstein. When these media giants get as large as they 
have, they control vertically integrated programming and 
distribution. Their size becomes so large that it becomes very 
difficult for new entrants to enter or to compete to get the 
number of eyeballs that those companies have with their vast 
access to capital and their ability to control what goes out 
over such a large number of the stations.
    I think the best argument for the Chairman's position is 
that there has been a real change in the marketplace. And, in 
fact, there has. And we need to take that into account in these 
rules and update them to take that into account.
    I'd just like to say there are three major things that 
haven't changed. You know, one thing is that five companies 
control about 75 percent of what people see, hear, and read 
over the media. Five big media conglomerates.
    Senator Ensign. That's what the choose to see, not what it 
available to see.
    Mr. Adelstein. That's right, but that's partially because 
of the vertical integration that these companies enjoy.
    The other thing that hasn't changed is that people still 
get their local news and local information from local 
television stations and their local newspaper, and those are 
exactly the entities that we are allowing the most leverage to 
merge and to eliminate local voices under this rule that the 
Commission adopted.
    The third thing that hasn't changed is that TV and radio 
licenses are still as scarce as ever. In fact, their value is 
going up. There's not a great array of them that are being 
created. We're not giving out a lot of new licenses, if any.
    And so those are--as the market dictates their value goes 
up, that indicates the incredible value that is in those 
licenses, and those are the ones that we're allowing one person 
to own two or three or four licenses, depending if it's radio 
or TV. But we're not giving out new ones to other people. And 
so it's going to be horded by this small group that are going 
to control where people get their local news and their local 
information, and that's one of the core values that the 
Commission has always striven to uphold. And I'm afraid that 
we've dramatically weakened it in this order.
    Senator Ensign. Well, just coming from somebody who's been 
involved--I have been involved now in--before this last year, 
in four straight election cycles. You know, my one comment on 
local news, providing that localism, that localism angle, as 
far as politics are concerned, because that's--you know, 
general feedback--they're really no difference, anyway. It 
seems like they almost cover less politics than the national 
news does anymore because they're so concerned about 
sensationalism that the news content anymore, based on--you 
know, that was part of the public good, supposed to be, of 
localism, was that they were going to cover, you know, local 
races and things like that and try to get something--there are 
a few responsible stations out there in our area, but certainly 
my experience has not been that fantastic, and I've been a 
vocal critic to our local broadcasters. And things have 
improved a little bit.
    But, I mean, I know that that's our laudatory goal, that--
you know, for the localism, but I also see some of that just 
does not happen. I mean, it just doesn't.
    Mr. Adelstein. That's right. The study showed that 74 
seconds is all that is allotted every night to Federal, state, 
and local elections. People are getting their information from 
paid political advertising, and then they don't show up to the 
polls, because they're so turned off.
    That's why I'm so concerned about media concentration. I 
think----
    Senator Ensign. But what I'm saying is I don't think that 
what the Commission has done is going to change any of that. I 
mean, I just don't. I guess I haven't been convinced of the 
arguments. I don't know. Chairman Powell, if you want to, you 
know, comment on that participation thing or the question that 
I had about attracting people and, therefore, controlling 
because of the people you can attract to your--on the 
percentages.
    Chairman Powell. Yes, Senator. I do think it's an important 
point, because I think what's so complicated about this debate, 
it's easy to, sort of, murk up and muddle a number of different 
concerns. You know, these big media companies, the big moguls, 
the big, huge companies we keep talking about, the famous five, 
most of them are big-content companies, and a lot of them own 
very little distribution. I mean, Disney-ABC owns .8 percent of 
television stations in the United States and doesn't own a 
cable network anywhere. The vast majority of them don't own any 
cable systems anywhere. Their big news is coming from there.
    The issue about localism, well, if local stations that are 
not owned by large networks are still not providing localism, 
the argument that ownership is a proxy for localism is just 
demonstrated as much weaker than we profess it to be. I mean, I 
think there are a lot of--you know, this question--I would just 
end with this--the question about popularity, I think, is awful 
important to get straight. And let me just repeat for you again 
the actual statistics. Five large companies in the United 
States own 25 percent of the channel capacity of the United 
States. Five percent each. They happen to be 80 percent to 90 
percent popular. That is, they are the channels that are chosen 
by our citizens out of the choices they have available to them. 
I'm very concerned when I hear that that's a basis to restrict 
their flexibility.
    Similarly, ``Oh, well, the Internet is owned by five 
guys.'' Well, you know, when I sit down at the Internet, I can 
go anywhere I choose. And if I go to Googlenews, right now, 
today, Googlenews.com, if nobody knows about it, you will have 
4,000 sources of news aggregated for you from every corner of 
the country and the Nation. Now, that's available to me. But 
does that mean--80 percent go to msnbc.com because they prefer 
to.
    And so we have to make some rigorous distinction between 
preferences and words like ``owned, controlled, swallowed,'' 
which I think are loaded to intend that there is no flexible 
choice permitted to consumers.
    Dr. Copps. Can I give you a little granular evidence?
    Senator Ensign. It's up to the Chairman. I don't want to 
cutoff Commissioner Copps, but it's up to the Chairman. My 
time's expired. So----
    Dr. Copps. Just give me--I'll give you a little granular 
evidence on the difference of coverage between consolidated 
news and local news, and we'll use our hearings as an example. 
I can't tell you, you know, how many cities we went where there 
was a consolidated newspaper. We'd have--or a consolidated-
owned television--and we'd have four, five, six-hundred people, 
maybe a Congressman, a lot of important people from the city. 
You never read about it in the consolidated newspaper or the 
big--the network television. But that locally owned independent 
television station would, more often than not, be there.
    I'll give you one other example. There was a former mayor 
out west who testified before us, and he said, ``You know, when 
we used to have two newspapers in this city, people used to 
just fall through the door, the reporters, trying to hear what 
was going on on the City Council. Now we've got one. There is 
no local coverage, there is no local interest.'' And I've seen 
that time and again.
    The Chairman. Senator Rockefeller?
    Senator Rockefeller. Thank you, Mr. Chairman.
    I think all this talk about rules is interesting and 
important. And I was late in getting here but--I don't know if 
this has been discussed, but, to me, the most important aspect 
of all of this is to what degree is the quality of news and 
information that is going to be available to Americans going to 
be affected by the decision which has been made? You know, and 
this is all about democracy.
    The polls show that the American people are not 
particularly concerned about the problem--the discovery or lack 
of discovery of weapons of mass destruction in Iraq. The policy 
consequences of that are fascinating. If one is living under 
something called a ``doctrine of preemption''--and that means 
that if a country is deemed to be imminently dangerous to the 
United States, that the United States then should go ahead and 
do something forceful about that--that means, therefore, that 
the intelligence which is available is incredibly important. 
The intelligence has to be really good.
    Now, that's not the kind of thing that appears in 
newspapers particularly much--it does these days, and it will, 
I think, for some time to come--or on television, but it makes 
the point I'm trying to make, that the level of knowledge in a 
world which has grown so complex, where I think I read a number 
of years ago and, therefore, am probably out of date, that the 
average American read something like 11 inches of news a day, 
and that may be wrong or it may be right, but we don't read a 
lot of news. We don't watch a lot of news. We tend to go to the 
popular programs, which are the contests or the soaps or this 
or that or the other thing. And I don't pass any judgment on 
that. But there is a profound importance in a new era, not just 
post-9/11, but in a new, highly complex era in this world where 
we've become not 191 Nations, but one world in the sense that 
we're all of help or of danger to each other, or neutral, that 
people know that the level of information that is available to 
people and the way in which they use it or decide not to use it 
is an important consideration. To me, it's the most important 
consideration from this judgment that you all have made.
    Ms. Abernathy, I wasn't here to hear it, but my 
understanding is that you indicated in a press release that you 
felt that that kind of comment was elitist. And, Commissioner 
Copps, my understanding is that you have had concerns that this 
matter of quality, of the quality of the product--forget the 
rules, but the quality of the product and how that is affected 
by what the FCC has done, that you have a rather different view 
about it.
    And I would like to ask any of you who wish to comment on 
this what your thoughts are about the effect of your decision 
on this FCC--not on the rules, but on the effect of what it is 
that the American people are likely to be learning--hopefully, 
more about what is going on in this world, in their country, in 
their communities.
    Dr. Copps. I think the effect, with regard to the news, is 
just about disastrous. And I know Chairman Powell has studies 
and we have the FCC study concluding one thing, the Project for 
Excellence in Journalism, a little different conclusion. We 
don't really have a conclusive answer. We need do more research 
on this.
    But I can tell you, from going around this country and 
talking to people--not just in local news, but I've talked to a 
lot of people who work in the networks, too--there is an 
enormous dissatisfaction with the constraints that are put upon 
news people in the United States about what stories they can 
cover and what stories they can't cover. And, you know, I've 
heard from people who say, you know, ``We've got license to do 
a lot of things, but we don't have license to talk about media 
concentration.'' I think that's a serious, serious problem.
    And, yes, finally, the networks, who have done such an 
abysmally poor job of teeing up this issue for the American 
people in the last week or so, got more active. But I don't 
think that that gives them a passing grade for how they have 
dealt with this issue.
    If we're going to give a green light to consolidation and 
let a company control all this stuff, why don't we just say, 
``Well, we're going to really monitor this, and we're going to 
look if you provide more localism and more local news. And 
don't expect to get your license renewed if you don't. Give us 
the commitments what you're going to do in the public interest, 
then maybe we'll look at this, see how you do, study it on a 
case-by-case analysis, and see if you're serving the public.'' 
That's the approach I'd like to see.
    Commissioner Abernathy. Senator, I guess what I'd say about 
local news, it's probably the best of times and the worst of 
time all at the same time, partly because we have tremendous 
choices today that we've never had in the past, both for 
children, for adults, education, 24-hour news channels, the 
ability to learn almost anything we want to learn about certain 
subjects if we can tap into it. The worst of times in the sense 
that the economics of having so many channels brought into your 
home means that all of the providers are competing for 
eyeballs. And when you compete for eyeballs, and when you're so 
susceptible to the economy when you're a broadcaster that has 
to go out and get advertising to support you, that means that 
you need to ensure that people will turn to you instead of the 
150 other choices that they have. And so sometimes that leads 
to the kind of programming that I don't particularly enjoy and 
that I'm sure you don't enjoy.
    Senator Rockefeller. Well, does that, therefore, abrogate 
you of a responsibility toward that? In other words, I've heard 
this argument so many times, that you have 500 channels to 
choose from, but, on the other hand, sometimes you can turn to 
those channels, and five of them will be giving you the same 
news broadcast from five different cities given by the same 
person. And so it's not local.
    And so regardless of the argument that people have choice--
and in America, choice is a good thing--but in American also, 
in order to support and buttress a democracy in a particularly 
difficult era, which I think is going to last for quite a long 
time, and I'm not just talking about terrorism, but the 
complexity of life, people have to--it strikes me that there's 
not an absence of relationship between the FCC's interests and 
the interests of a media entity which is helping to inform the 
American people and increase their knowledge of what is of 
importance to them. Is that something that you are all detached 
from?
    Commissioner Abernathy. No, I agree that that's part of our 
obligation, which why, again--and I think when you look at the 
broadcasters, one of our obligations is to review and to make 
sure that they are serving the public interest. And one of the 
reason why we worked so hard to try and come up with the right 
numbers so that they would continue to be responsive to local 
needs and the local community and local elections and politics 
and the school board, is how we came up with the protections 
around the numbers of consolidation that we're going to allow. 
I hope we chose right, because I do think it's very, very 
important.
    Most local news comes from television--not from cable, but 
television and newspapers--and that's one of the ways, when we 
looked at all the data, we tried to figure out what amount of 
consolidation is appropriate and which amount would be harmful.
    Senator Rockefeller. My time is up.
    The Chairman. Senator Fitzgerald?

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

    Senator Fitzgerald. Thank you, Mr. Chairman.
    Members of the Commission, I want to congratulate you, at 
least those on the majority side. I thought you did a pretty 
good job of modernizing our rules. I think, in particular, that 
ending the--or modifying the cross-ownership ban just brings us 
up to date. I think that, as has been pointed out with the 
numerous cable channels available in practically every market, 
the ability of someone, Joe Schmoe, to just form essentially an 
Internet newspaper with very little capital and compete with 
established newsprint organizations has made it very difficult 
to monopolize the news in any market.
    And I think of my city, Chicago, in particular. The Chicago 
Tribune has been exempt from the cross-ownership ban, or 
grandfathered, because back in the 1940s they formed WGN 
Television. WGN stands for World's Greatest Newspaper, which 
used to be the motto of the Chicago Tribune. And, certainly, 
they have not had a monopoly on points of view in Chicago, even 
though the Tribune owns both the main newspaper and a 
significant television station. I think, a good example. 
Tribune has historically been a Republican paper with ties 
dating back to Abraham Lincoln. They endorsed President Bush in 
the last election. But, nonetheless, Chicago almost always 
votes about 80 percent Democratic. And I think that, right 
there, is just an example of there not being any harm in your 
relaxing the cross-ownership ban.
    And I'm just wondering, Chairman Powell, could you explain 
to us how the Commission decided upon the specific combinations 
that you would permit under the new rule? You're very specific 
on what is allowed and what isn't allowed. How did you go about 
deciding on exactly what you would allow, with respect to the 
cross-ownership rule?
    Chairman Powell. Indeed, it was difficult, but this is the 
area where the creation of the diversity-index tool that you've 
heard about comes into play. What we did was start with trying 
to survey and come to an understanding of the way our citizens 
use the media. So we used Nielsen survey data that told us that 
consumers use newspapers as their primary source X-percentage 
of the time, television X-percentage of the time.
    Then we basically did something relatively simple in terms 
of assigning weights to different medium based on those 
consumer preferences. So a newspaper in a community would have 
a given weight, a television station in a community would have 
a given weight, and those weights would reflect what the 
citizenry told us about how much important that particular 
source is as a viewpoint.
    And then we ran many, many combinations, both real ones and 
hypothetical ones, all over the country to see what the data 
would show us by various kinds of combinations. If the only 
newspaper, or the only this and the only that, what would be 
the resulting index number taken from the antitrust methods of 
HHI?
    And then we tried to look for patterns of where we saw the 
greatest harm. And what we saw was three really clear bands no 
matter how many times we ran this, that with markets with less 
than four stations, there really were serious dangers on the 
diversity measure. So we walled those markets off as at-risk, 
because we believed that the impact on diversity would be too 
great to even consider.
    Senator Fitzgerald. How big would cities be, typically, 
that have four or less stations? Would you have an idea?
    Chairman Powell. I wouldn't know in terms of population, 
but they certainly are the smallest percentage of the 200 
television-station markets. I could get you a sense of them.
    The middle bands were, sort of, four to nine stations, and 
we looked at those and we saw that that was another clear band 
in the data, and so we permitted some cross-ownership 
purchases, but not as many as we would permit in the larger 
markets, where we believed diversity was preserved.
    So in some ways, we came up with this method of quantifying 
consumer preferences, ran it out, and saw what the data told 
us, and we saw that that gave us a pretty consistent and fair 
indication of where we thought the greatest harms would lie.
    Senator Fitzgerald. Well, it sounds like you were very 
scientific and disciplined in your approach. And I think that 
the dangers of your ruling that they could lead to are somewhat 
overstated. I think you can always go back and change. And you 
had significant court pressure to make the modernizations that 
you did, too. And so I think, on balance, you've done a pretty 
good job, and I'd want to commend you and thank you all for 
being here today.
    Chairman Powell. Thank you, Senator.
    The Chairman. Do the Commissioners agree or disagree that 
there has been, at least in some markets, too much 
consolidation and, therefore, a reduction in localism, 
competition, and diversity in radio? We'll begin with you, Mr. 
Copps.
    Dr. Copps. I think in many markets there has been too much 
reduction. I've heard too many stories about cutbacks in the 
local newsroom or emerging news or bringing news in from 
outside. So I think the danger is here and now, and we need to 
do a better job of understanding just how concentrated we 
already are before we flash the green lights to further 
concentration.
    The Chairman. Mr. Adelstein?
    Mr. Adelstein. Yes, I do think there's too much 
concentration in some markets. We heard from people across the 
country that one of their number-one concerns was radio.
    The Chairman. Chairman Powell?
    Chairman Powell. Yes, sir, I do. I think some markets, but 
not necessarily most markets. That's why we kept--we restricted 
the radio rules further.
    Commissioner Abernathy. Yes, Mr. Chairman, I agree there 
was too much concentration in some of the radio markets, and 
that information informed us as we looked at what rules we 
needed to incorporate into our television ownership rules.
    Commissioner Martin. Yes, Senator, that's the reason why we 
modified our market definitions to try to take into account 
that some small markets were being treated like larger markets.
    The Chairman. Of course, the question is, Are those rule 
changes going to be sufficient? The reason why I asked that 
question is that I am--as I mentioned in my opening remarks, is 
that radio can be this--at least in the view of some, the 
miner's canary of what might happen in television. So one of 
the things I've gotten out of this--and I appreciate your 
patience; you've been here for over 3 hours now--is that no 
matter how the Commission came down, you're not really 
satisfied with the process, and that is, in large part, due to 
perhaps some anomalies in the 1996 act or other regulations or 
court decisions that have been laid down. So I'd like to ask, 
starting with you, Commissioner Powell, what changes or what 
actions should the Congress take legislatively, would you 
recommend, in order to enable to do your job of ensuring 
localism, competition, and diversity and satisfying the Supreme 
Court's admonition in promoting the widespread dissemination of 
information from a multiplicity of sources?
    Chairman Powell. Yes, sir. I think the first thing I would 
potentially recommend and possibly endorse is to look at 
whether having rules reviewed every 2 years, as intensely as 
that process is, is merited, in hindsight, that it's very 
destabilizing to the market, it creates an extraordinary amount 
of pressure on resources in the Commission, and I think that it 
destabilizes the choices, making it sort of very difficult to 
ever get an understanding of whether what we've done proves, 
for better or worse, before you have to do it again.
    I do think that some review period probably is still 
warranted, thought. I would probably recommend something like 5 
years, instead of two.
    I also think that the standard is the most critical 
question here. If the Congress is displeased with the kind of 
results that they've seen, then they need to take a very hard 
look at the kind of standard the court has insisted Congress 
laid out in the statute. If that standard prevails, I would 
submit to you future Commissions and future Chairmen will have 
to do similar things or they're likely to be overturned if they 
don't. That's another thing that I'd considered seriously.
    Finally, my recommendation would be that, you know, this is 
the people's institution, much more dramatically than the 
Federal Communications Commission is. It's very difficult to 
aggregate the diverse points of view of 250 million Americans. 
But this institution is much more capable of doing so, with its 
535 members. If there are rules that should be inviolate that 
are so important to our sense of democracy, then my strong 
belief is they should be statutory rules. They should not be 
rules conferred to a regulatory body with three to five 
unelected officials making those determinations, if they are so 
integral to democracy, as many of us believe, with respect to 
some of them. So that would be my recommendation.
    The Chairman. What should the standard be?
    Chairman Powell. Well, I think it's a very different 
question, and I don't if I'm prepared to answer, because I 
think the standard is going to have to take into account major 
changes in the way consumers are getting media. Because if we 
look at this as a broadcast problem, we're going to miss the 
train. This is really a move to media in a paid-platform model 
that doesn't apply most of the historical beliefs that we have 
about the public interest.
    So, yes, the standard should always be the public interest. 
But what that means and how it's applied as media transforms 
itself from just free over-the-air TV to the other things, I 
don't know the answer to today, but I think that's probably the 
most important set of questions to debate.
    The Chairman. Commissioner Adelstein?
    Mr. Adelstein. I would agree with the Chairman on a number 
of his recommendations, particularly the one that is the 
broadest, which is that I think that this entire proceeding 
would be better handled by Congress than by the FCC, not 
because of any lack of quality among our membership, but 
because this issue goes to the heart of our democracy, and this 
issue is so important to the American people that it really 
defies the ability of five unelected officials, or three to 
five, to make determinations that are so profound to the future 
of the American media marketplace. And so I think it would be 
more helpful if Congress were to dictate each one of these 
things: how the duopoly rule is structured, how the newspaper/
broadcast is done, network ownership cap, everything down the 
line.
    Now, that's not very realistic, I don't think, having 
worked in the Senate for 15 years, in my humble opinion, but I 
wish they would.
    But short of that, some more realistic ideas are what the 
Chairman suggested about the biennial review. I think it is 
somewhat destabilizing to have it every 2 years. I think that 
the Congress could consider codifying the national cap at 35 
percent, as it contemplated during the Telecommunications Act. 
And maybe a standard that could be used by Congress if they 
wanted to leave wide discretion to the agency would be to 
require a case-by-case, market-by-market analysis to ensure 
that individual mergers that are approved are in the public 
interest in terms of promoting localism, diversity, and 
competition.
    The Chairman. Commissioner Abernathy?
    Commissioner Abernathy. Thank you, Mr. Chairman. I agree 
with the Chairman, that the 2-year review cycle, particularly 
when the 2-year review requires us to re-justify every single 
rule, we don't have the ability to simply say there's no change 
to circumstances in certain instances and some of the rules can 
continue. We have to affirmatively conclude that they are 
necessary, and that standard's been interpreted to be a pretty 
high hurdle by the courts.
    I believe that in many instances, we're forced to look at 
what's the minimum number needed to promote viewpoint 
diversity, as opposed to looking at a preference, maybe, toward 
multiple voices.
    And, second, again with regard to what the Chairman 
mentioned, the way that we receive media now, so many people 
receive it over satellite and cable, and the public-interest 
obligations are run with whether or not you have spectrum, not 
with whether or not you're delivering content to consumers. So, 
for example, children's television obligations and many of 
those other obligations, we may need to look more broadly 
across overall media obligations, as opposed to distinguishing 
between those that use the public airwaves and those that 
deliver by other technology.
    The Chairman. Commissioner Copps?
    Dr. Copps. I think I agree with many of the recommendations 
that have been made. I agree with the Chairman on the biennial 
review, although since we were on the losing end of this vote, 
I might be happy to have another biennial review----
    [Laughter.]
    Dr. Copps.--and startup immediately. But I think it does 
impose an undue burden on the Commission. Codifying the cap 
would be good.
    But a couple of other things. I think the Congress needs to 
look seriously at the convergence of cable and broadcast and 
what questions that provides, and how do you protect the public 
interest in the larger context of that, do we have a good 
regulatory balance there? I think the Commission could do 
something on its own with re-instituting a serious honest-to-
God license-renewal process, but it would be nice to have some 
direction on that from Congress and perhaps even replete with 
some public-interest obligations on what companies do in return 
for the new rights that they have been granted.
    Finally, although it is not part of the Communications Act, 
per se, I wish Congress would reveal the Government in the 
Sunshine Act and facilitate better communications within the 
Commission, itself.
    The Chairman. Commissioner Martin?
    Commissioner Martin. I would agree with both the concerns 
that have been raised about trying to clarify what--the ability 
of the Commission, when they're talking about modifying our 
rules, to be able to re-regulate when necessary. I think that 
the courts could end up having some questions about our intent 
to do that, and I think that would be helpful for 
clarification.
    And I also think it would be important to amend the open-
meetings laws, to allow for the Commissioners, particularly on 
important decisions where they're going to be ultimately making 
them in public at a public meeting, have some opportunity to 
interact with each other as a group and meet and discuss some 
of the issues, and I think that would have helped the process 
in this case.
    The Chairman. Well, I want to thank all of you. It's been a 
long morning for you, but a very important one to us. And I 
thank you for being here.
    Senator Wyden. Mr. Chairman?
    The Chairman. Yes, I was going to----
    Senator Wyden. Oh.
    The Chairman. I guess--yes, go head. Senator Wyden, and 
then Senator Sununu had a follow up question.
    Senator Wyden. Thank you, Mr. Chairman. I have just two 
follow up questions that I wanted to get into.
    Chairman Powell, when I asked you earlier about the cross-
ownership rules, the rules with respect to newspaper and 
broadcast, because those rules are going to allow mergers in 98 
percent of the areas where the American people, you said that's 
the most significant part of the decision. My question to you 
is, If the FCC is going to allow all of these mergers, mergers 
that will cover a big chunk of the country, do you think the 
Federal Communications Commission has an obligation to let the 
public know in these markets who owns what so that they can 
evaluate the independence and credibility of the communications 
in their area?
    Chairman Powell. Just in terms of an information function?
    Senator Wyden. Yes. I mean, would you put on your website, 
for example, these cross-ownership ties so that the public--
given the fact that in the area that you've said is the most 
significant, people would like to know about the independence 
and credibility of what they're getting, would you put that, 
for example, on your website so people know who owns what?
    Chairman Powell. We might, in fact, substantially already 
do that. I'd like to look at what we do. Because all licensed 
broadcasters have certain public disclosure obligations about 
their ownership. Most of that is on public file with the 
Commission. And I'm not exactly sure what we have available, 
Web-based, at the moment, as opposed to file-based. But let me 
come back to you on that. I think that we do a great deal about 
that. Perhaps we can strengthen and improve that to deal with 
your concern.
    Senator Wyden. Because I know people tell me they can't 
figure out who owns what in American communications. And this 
is the area you said was the most significant. It certainly 
doesn't fit my definition of a modest change, which is why I 
asked about it earlier. And I think, at a minimum, you ought to 
lay out for the American people what these cross-ownership ties 
are.
    One last area I wanted to discuss with all of you. It looks 
to me like all of the arguments that the Federal Communications 
Commission has used against the 35-percent cap could be used 
against a 45-percent rule, as well. I think you could take 
virtually all of them and just say this would apply to 35, 45, 
48, whatever. And, in fact, I was struck, Commissioner Martin, 
where you said this was the area that you found particularly 
difficult.
    Wouldn't it be safer, I ask you men and women of the 
Commission, to just have Congress step in and set the cap now? 
I mean, we're not talking about trying to do everything. But 
wouldn't it make sense for the Congress so that we can be 
accountable to the people and not deal with the fact that--the 
arguments that I've heard today are pretty much the same for 
35, 45 or 48--why not have Congress step in, as a number of us 
here have said ought to be done, and set those limits now?
    Chairman Powell?
    Chairman Powell. I couldn't disagree at all. I think that 
actually bears merit, because the huge difference which we've 
tried to illustrate for you today is that we're bound by the 
provision of the biennial and the statute and standards and the 
court's review of it. You would be bound by none of that and 
only accountable to the Constitution. So to the extent that 
that's the will of the people, I think would--it's always more 
defensible if it's statutory, as opposed to regulatory.
    Senator Wyden. Do any of you disagree with that? We can 
save some time.
    Mr. Adelstein. I think it would be ideal if Congress would 
do it, but I would also say that--you know, agree with you that 
all of the arguments we used for 45 could be used for 35 or for 
40. And we didn't even take into account the UHF discount, 
which means that really 45 percent could spill up to 90 
percent. So by not dealing with the UHF discount before we did 
this, we let the cat out of the bag before we dealt with the 
whole situation, and it's really dangerous in the future. Now 
if we want to adjust the UHF discount, it's going to become 
that much more difficult to do it in a meaningful way.
    Senator Wyden. Any of the others want to add to it?
    Dr. Copps. I just hope when Congress does get involved, 
that it will cast even a little bit wider net than that and go 
beyond the national rules and look at the local rules but, more 
specifically, to look at some of these other suggestions that 
I've made today for how do you protect the public interest in 
these transactions?
    Senator Wyden. Well, I want to let Senator Sununu ask his 
questions, and it's in my interest because he and I are going 
to lunch.
    [Laughter.]
    Senator Wyden. But I will tell you, the one thing that you 
have done through your work is you have really mobilized the 
American people. I think they get it, and I think they 
understand what's at stake. I mean, the reason I said that the 
dinner bell has rung for these big media conglomerates is 
that's what I heard all weekend. All weekend, when I was having 
town meetings, people said, where in the world is the Congress 
when we need somebody to stand up for them? So I have disagreed 
profoundly with a number of these changes you all have made, 
and that's why I asked those questions with respect to the 
question of modesty and caution.
    I can tell you, Chairman Powell, the people of my home 
State do not see anything--they don't see a shard of modesty 
and caution in this. I mean, they think this is the floodgates 
opening up. And you have mobilized the American people, and 
hopefully we can get bipartisan support for Congress making 
some changes in these policies that really reflect the public 
interest rather than the private concerns.
    My time is up, and I'm going to wait around for my lunch 
partner.
    Senator Sununu. Thank you very much, Senator Wyden.
    Let me pick up on something that hadn't been mentioned 
until just now. Commissioner Adelstein, you mentioned the UHF 
discount, and you mentioned that a lot, or I heard about that a 
lot in some of the written comments that I've seen, and I think 
I saw a telecast of the Richmond hearing. It seems to me that 
this really isn't that big of a deal. And I say that because if 
it were a big deal, we would have a lot of broadcasters out 
there right now with 70 percent coverage taking advantage of 
that enormous discount that exists today under the 35 percent 
rule. But, in point of fact, we really don't have anyone ever 
close to 70 percent, nobody that's even taken advantage of the 
UHF discount to get up to that level, do we?
    Mr. Adelstein. We do, in fact, have one. Paxson 
Communications would be at 67 percent if the UHF discount were 
eliminated.
    Senator Sununu. But they're not one of these big five that 
you've been talking about. You've talked about five companies 
controlling 75 percent of what we see here, and read. I mean, 
Paxson is not one of those big five that you keep referring to.
    Mr. Adelstein. That's correct, but Paxson has made a 
business strategy of going after UHF, and this UHF discount has 
enabled them to pursue that.
    Senator Sununu. But they're the closest, and they're the--I 
guess, not maybe the one, but certainly one of the only 
companies that has taken advantage. But I harken back to this 
issue of the big five because we keep talking about them, but 
the big five have not made aggressive use of this loophole. 
Isn't that the case?
    Mr. Adelstein. They have made some use of this loophole. 
There are a number of UHF stations that are owned by the major 
national networks, and it has enabled them to get closer to the 
cap, and they could utilize it more now to maximize the 
additional 10 percent flexibility that was granted to them by 
this order.
    Senator Sununu. Mr. Chairman, any disagreement on that 
point?
    Chairman Powell. I would only note that the major networks 
are 45 percent or less, if that's the way you're going to 
perceive it. I would also note that if the argument is that 
Congress spoke clearly in 1996 when they raised it to 35, they 
raised it with the UHF discount in place. That means the rule 
has been 70 percent since 1996. And so if you're going to fault 
us for raising it to 90, we better accept that it currently is 
70.
    The other thing I would say is, we still found very 
substantial items on the record why it mattered. A UHF station 
reaches 44 percent, has a signal that's 44 percent less than 
that of a VHF signal. UHF stations, on average, are 50 percent 
less popular than VHF standard, and they require 150 to 300 
percent more power than a VHF station.
    So we believed, honestly, that they continue to matter 
until the digital transition comes along.
    Dr. Copps. Can I make a quick comment on that?
    Senator Sununu. Let me ask my question, and then you can 
answer both----
    Dr. Copps. All right.
    Senator Sununu.--my next question and this point, because 
my next question is directed at you, Commissioner Copps.
    Senator Fitzgerald described the Chicago experience with 
cross-ownership, certainly more than a few decades of cross-
ownership in the Chicago market without a degradation in the 
value of the voices, certainly without negative effects and the 
influence that the station and TV had. That would lead me to 
conclude one of two things. Either you think that he 
mischaracterized the Chicago experience, or you think we should 
ignore the Chicago experience when evaluating the cross-
ownership rules. Which one of those two would hold?
    Dr. Copps. OK, let me make a quick comment on the UHF thing 
first. I think it's interesting that we counted this as 50 
percent for purposes of talking about national reach, which, if 
anything, I think we would all agree probably would encourage 
concentration, but when we talk about enabling duopolies and 
allowing companies to own duopolies, we count that station as 
one full station. It's 100 percent then, and you'd need X 
number of stations to get a duopoly, so now you've got it--I 
think the courts might wonder why we have that discrepancy.
    The Chicago experience? I think we can handle cases on a 
case-by-case basis. I think it's interesting that the city 
council of Chicago passed a resolution almost unanimously 
warning against the evils of further consolidation, so I don't 
know that there's great unanimity in that city about the 
unfettered blessings of consolidation.
    And if you look at this issue on the whole, I'm just 
worried if--75 years ago, we had 500 cities in the United 
States of America that had more than two newspapers. We had 
over a hundred that had more than three. Now we've got about 30 
or 40 or something like that. So nobody's going to contest that 
that's a monopoly.
    Go to the broadcast side, if you haven't got a monopoly, 
you've got a duopoly or an oligopoly, and I searched like the 
dickens through this item to see where are the blessings for 
localism, diversity, and competition in encouraging the 
monopoly and the oligopoly to get together, and I couldn't find 
it.
    But I think we have, in the current cross-ownership laws, 
the ability to look, on a case-by-case basis; and if, in 
reality, everybody is happy in Chicago and it is serving the 
purposes of localism, competition, and diversity, fine, let's 
deal with it rather than just giving a green light to all these 
dozens or hundreds of other markets to go ahead and march down 
this same trail.
    Senator Sununu. Commissioner Adelstein, I think perhaps you 
misspoke. A little bit ago, you said five firms control 75 
percent of what the American public sees, hears, and reads. 
Now, I think the five biggest newspapers in the country are USA 
Today, Wall Street Journal, Washington Post, New Times, and the 
L.A. Times. They're obviously not controlled by any of those 
five companies. I think what you meant to say is that five 
companies control 75 percent of what is seen, what viewers 
choose to watch on broadcast or cable TV. Is that correct?
    Mr. Adelstein. It really is what they choose to watch. 
There are certainly more channels available.
    Senator Sununu. Right, but it's what they watch, not what 
they hear, see, and read in America. I think there's an 
important distinction there. You know, 75 percent market share 
of what is seen, heard, and read is different than 75 percent 
of what's seen on broadcast or cable TV.
    Mr. Adelstein. Right, I would say that's probably correct.
    Senator Sununu. Let's stay there just for a moment, on the 
broadcast/cable TV markets. In 1970, I think roughly three 
companies controlled three channels that were watched by 90 
percent of Americans. Today, we've got five companies, the big 
five that you're concerned about, controlling 12 channels that 
are watched by 75 percent of the public. It would seem to me 
that, at least on the score of competition and diversity, we've 
seen gains since 1970. Would each of the Commissioners care to 
comment on that?
    Mr. Adelstein. Well, I'd refer to the book by Ben 
Bagdikian, who is the former dean of the School of Journalism 
at University of California at Berkeley and the former 
assistant editor of the Washington Post. He wrote a book called 
The Media Monopoly in 1983. In that book, he said there were 
about 50 companies that he felt controlled the bulk or the 
majority of what goes out over the airwaves. And each 
successive addition reduced the number. In 1997, it was down to 
much lower. And by the 2000 edition, he had it down to these 
five.
    So his analysis showed that there was increasing 
competition, at least since 1983, and I think that the American 
public seems to feel that there has been increasing 
consolidation, but they are not satisfied with that. They would 
to see no further consolidation, at least from what I heard 
from people around the country.
    Dr. Copps. I see at least six differences in that situation 
you're talking about, when the three reign supreme. They didn't 
own all of the owned and operated stations they presently have. 
They operated under vertical protections of financial 
syndication rules. They have very explicit and affirmative 
public interest obligations. The industry operated under a 
voluntary code of broadcaster conduct--self discipline, self 
policing. We had a whole different mentality across this 
economy about what was expected of corporations. And we had a 
license approval process that had a little teeth in it. And I 
submit that makes a substantial difference in how companies can 
operate now compared to how they operated back then.
    Senator Sununu. I understand that there are differences 
today. There are different rules, different regulations, 
different Federal statutes. But you go from three companies, 
three channels, 90-percent viewership, to five companies, 12 
channels, 75-percent viewership. It would seem to me that in 
what people are watching on television, there is greater 
diversity, greater competition.
    Any other Commissioners care to add?
    Commissioner Martin. Just that I think it's self-evident 
that there seems like that there is more. And in your example, 
there is more competition, and that's what I think that the 
Commission was trying to take into account by modernizing and 
modifying its rules.
    Chairman Powell. Senator, I'd just say one thing, since 
this debate will continue. We have to distinguish between 
bigness and concentration. They're not the same thing. I think 
a lot of what I have come to believe is the average citizen's 
perception of concern is the increase in, sort of, very large, 
big media institutions. I think that concern might be there if 
there were a hundred of them if they felt there was a certain, 
sort of, size dimension, corporate dimension to who they were.
    And I think that's why this gets a little difficult and a 
little slippery. Sometimes I think we're talking about bigness, 
as opposed to the term of art and the technical view of what 
actually is concentration, which is a very, very different 
concept than just a company as big or large or successful. And 
I think as the debate goes forward, keeping that distinction in 
mind is useful.
    Senator Sununu. I appreciate that.
    Commissioner, did you want to add something?
    Commissioner Abernathy. Just a quick follow-up, that what's 
always been important to me is not the five stations, 75 or 80 
percent of the people are watching what they put on, but that 
they have 75 percent other choices. They may continue to watch 
what some of these five companies are putting on because they 
like what they're putting on. But as long as I know there are 
all these other pipes into their home to give consumers 
alternative choice, that's what's always of most concern to me.
    Senator Sununu. I think that's a very important 
distinction, because there was some discussion about whether 
you use viewership as a proxy for power or whether you use the 
number of homes that you can broadcast into as a proxy for 
power for concentration. And while I appreciate that, a station 
that 90 percent of the people is watching is much more powerful 
than one that only 5 percent of the people are watching, if we 
start to try to regulate on the basis of what viewers are 
choosing to watch, I think we're on a very slippery slope to 
regulating what people can and can't choose to see through 
television.
    So what seems to me to be most important is that we do the 
best we can to ensure diversity and competition among channels 
that compete fairly and equitably and have an equal opportunity 
of gaining, winning a viewer in the marketplace.
    Let me just say thank you to all of the Commissioners. 
These are some pretty sharp disagreements, but I think they 
have been, you have been, very thoughtful and substantive and 
extremely professional in the way you presented it. I find that 
very, very helpful, because these are very complex issues.
    It was pointed out that, you know, the 1996 act is driving 
a lot of this, and I know Chairman McCain and I are maybe two 
of the only members of the committee than can disavow 
responsibility for the 1996 act.
    [Laughter.]
    Senator Sununu. But it is clear that these are a set of 
issues that we're going to have to continue to deal with. And 
your professionalism has been very helpful. And in that regard, 
I don't think that Congress should be legislating all of these 
rules and regulations, because we don't have the expertise and 
the capability that you all have. If there are things that we 
can do to modify the restraints that you operate under to make 
you--to enable you to share information and work more 
effectively together, I'd be very interested in pursuing that.
    Thank you very much. The hearing is adjourned.
    [Whereupon, at 1:10 p.m., the hearing was adjourned.]

                                  
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