[Senate Hearing 110-1117]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1117

                          THE FUTURE OF RADIO

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 24, 2007

                               __________

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











                  U.S. GOVERNMENT PRINTING OFFICE
73-787 PDF                WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001






       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota        KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington           JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey      JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas                 JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
   Christine D. Kurth, Republican Staff Director and General Counsel
                  Paul Nagle, Republican Chief Counsel
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 24, 2007.................................     1
Statement of Senator Cantwell....................................     1
    Prepared statement...........................................     1
Statement of Senator Dorgan......................................     2
Statement of Senator Inouye......................................    15
Statement of Senator McCaskill...................................     3
Statement of Senator Snowe.......................................    16
    Prepared statement...........................................    16
Statement of Senator Sununu......................................    52

                               Witnesses

McCaughan, Mac, Co-Founder, Merge Records........................     3
    Prepared statement...........................................     6
Pierson, Carol, President and CEO, National Federation of 
  Community Broadcasters.........................................    38
    Prepared statement...........................................    39
Rehm, Dana Davis, Senior Vice President, Strategy and 
  Partnerships, National Public Radio............................    42
    Prepared statement...........................................    44
Turner, S. Derek, Research Director, Free Press; on Behalf of 
  Consumers Union, Consumer Federation of America................    22
    Prepared statement...........................................    24
Westergren, Tim, Founder and Chief Strategy Officer, Pandora 
  Media on Behalf of the Digital Media Association...............    17
    Prepared statement...........................................    18
Withers, Jr., W. Russell, Founder and Owner, Withers Broadcasting 
  Companies, on Behalf of the National Association of 
  Broadcasters...................................................     8
    Prepared statement...........................................     9

                                Appendix

Letter, dated November 15, 2007 from the Future of Music 
  Coalition to the Senate Committee on Commerce, Science, and 
  Transportation.................................................    59
Response to written questions submitted by Hon. Maria Cantwell 
  to:
    Mac McCaughan................................................    65
    Carol Pierson................................................    73
    Dana Davis Rehm..............................................    75
    S. Derek Turner..............................................    71
    W. Russell Withers, Jr.......................................    67
Response to written questions submitted by Hon. Daniel K. Inouye 
  to:
    Mac McCaughan................................................    65
    Carol Pierson................................................    73
    Dana Davis Rehm..............................................    75
    S. Derek Turner..............................................    70
    Tim Westergren...............................................    70
    W. Russell Withers, Jr.......................................    66
Smith, Hon. Gordon H., U.S. Senator from Oregon, prepared 
  statement......................................................    59

 
                          THE FUTURE OF RADIO

                              ----------                              


                      WEDNESDAY, OCTOBER 24, 2007

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:02 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Maria 
Cantwell, presiding.

           OPENING STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Good morning, the Senate Committee on 
Commerce, Science, and Transportation will come to order, and 
we're having a full Committee meeting this morning on the 
future of radio.
    We are joined by Carol Pierson, President and CEO of 
National Federation of Community Broadcasters, welcome. Ms. 
Dana Davis Rehm, Senior Vice President for Strategy and 
Partnerships from NPR, thank you for being here. Mr. S. Derek 
Turner, Research Director for the Free Press, thank you very 
much. Mr. Tim Westergren, Chief Strategy Officer and Co-Founder 
of Pandora Media, I'm sure we're going to hear more about what 
that is, thank you. And, Mr. Mac McCaughan, Founder of Merge 
Records, and member of Superchunk, and Mr. Russell Withers, 
Founder and Owner of Withers Broadcasting, on behalf of the 
National Association of Broadcasters.
    Welcome, all. This morning we are scheduled to have a vote 
at 11:00 which may be followed by a couple of votes, so I'm 
going to forego my opening statement and submit it to the 
record so that we might hear from you, and maybe even get to a 
question and answer period before that.
    But I'll see if any of my colleagues wish to do the same, 
or to make an opening statement.
    [The prepared statement of Senator Cantwell follows:]

Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
    I want to welcome everyone to the hearing on the future of radio. I 
want to thank Chairman Inouye and Vice Chairman Stevens for calling 
this important hearing.
    Radio remains a vital means to inform and educate listeners 
throughout the country as well as serving to entertain them. Today, 
consumers have an overwhelming number of choices on how to spend their 
leisure time.
    Radio is but one among many choices consumers have and over-the-air 
radio broadcast is but only one means for distributing audio 
programming to listeners. There is also satellite radio, Internet 
radio, podcasts on iPods and MP3 players, as well as downloads on 
wireless phones. Consumers also can receive audio channels with 
subscriptions to cable or satellite television service. And they can 
always listen to CDs or old cassettes and albums.
    As the lines of traditional radio get blurred and the digital 
delivery of audio programming occurs over an increasing number of 
platforms, consumers will have more choices than they know what to do 
with as to what they listen to, how they listen to it, when they listen 
to it, and where they listen to it.
    But it is not going to all happen overnight. Unlike the transition 
to digital television, the transition to digital radio is voluntary. 
And there are still critical details that need to be worked through.
    For that reason alone, terrestrial radio will continue to play an 
essential role for a considerable time to come. Ultimately, I see these 
different audio platforms as complementing each other rather than 
competing with one another.
    The value of terrestrial radio in fulfilling the Commission's 
mission in promoting ``competition, diversity, and localism'' can't be 
understated.
    But unfortunately, the 1996 Telecom Act brought about massive radio 
industry consolidation, a loss of localism, and a lack of programming 
diversity.
    A recent bright spot, though, has been Low Power FM radio. These 
community-based, non-commercial radio stations create hours of original 
local programming, can tailor their services to niche populations, and 
are an inexpensive means of adding another voice to a consolidated 
radio market.
    After the FCC did its due diligence on potential interference, it 
launched the new Low Power FM service in 2000. A rider to an 
appropriations bill later that year, made a technical change to the FCC 
rule and required additional testing, effectively limiting the service 
from being licensed in more populated areas.
    Those additional tests by an outside lab cost the taxpayer millions 
of dollars and came up with the same conclusion as the FCC. Senator 
McCain and I have introduced legislation in the last three Congresses 
to try and set things right.
    And as we look ahead, we must also take stock of where we have 
been.
    The Telecommunications Act of 1996 lifted all nationwide ownership 
limits for radio station broadcasters, and permitted a single entity to 
own and operate as many as eight stations in the Nation's largest 
markets.
    Three years later, the FCC relaxed its television-radio cross-
ownership rule. This was followed in 2003, by the FCC replacing its 
rules prohibiting newspaper-broadcast cross ownership as well as its 
1999 local television-radio cross ownership rule, with a single rule on 
cross media limits.
    As we all know these specific rules were remanded by the Third 
Circuit Court in Philadelphia, and never went into effect.
    Last year, the Commission began the process for reviewing all of 
the remanded rules as well as conducting its required periodic review 
of media ownership rules.
    A number of my colleagues from both sides of the aisle have 
expressed concerns how the Commission has conducted the review to date. 
At times, I have the impression that the Chairman has his answer, 
particularly with respect to eliminating the existing media cross 
ownership rules, and this whole process is all about checking off the 
necessary boxes rather than getting at the facts. I hope that is not 
the case.
    Based on statements made by Chairman Martin, it appears that he 
wants to wrap the proceeding up and issue rules by this December 18th. 
I think this would be a major miscalculation on his part.
    I want to assure Chairman Martin that people really care about 
media ownership. I know people back home in Washington State do. And 
they take every opportunity to tell me so. I hope that Chairman Martin 
will not short circuit the process.
    I look forward to hearing from the panel.

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

    Senator Dorgan. Madam Chair, let me take just a minute and 
a half. Because of the time problem, I will be very brief. But, 
I want to say that I think this is a very important hearing. 
I'm a cosponsor of the Local Community Radio Act which deals 
with Low Power FM, I'm a cosponsor of the Internet Radio 
Equality Act. I've opposed the merger of satellite radio 
companies XM and Sirius. There's a lot to talk about with 
respect to the future of radio.
    But I want to talk just for 1 minute, especially about the 
proposed FCC proceedings, with respect to the concentration of 
ownership, that is, relaxing the ownership limits on 
broadcasters--radio and television--and also allowing cross-
ownership of newspapers. Senator Trent Lott and I, we're having 
a press conference at noon today on that subject.
    But, I think those listening and those paying attention to 
the FCC should understand they're going to be in for a huge 
battle, if they think they're going to go now and begin, 
between now and the middle of December, relax the ownership 
limits on television and radio that has already had dramatic 
concentration--far more than is healthy for this country--and 
then at the same time, allow cross-ownership with newspapers.
    I just want people to understand, the FCC is going to be in 
for a big fight if it caves in to the interests that are 
pushing them to relax ownership rules, that is not in the 
interests of this country.
    So, I wanted to make that point. But, I know this is about 
radio, and I appreciate having the hearing.
    Senator Cantwell. Senator McCaskill, do you wish to make an 
opening statement?

              STATEMENT OF HON. CLAIRE McCASKILL, 
                   U.S. SENATOR FROM MISSOURI

    Senator McCaskill. Briefly, Madam Chair, I agree with many 
of the things that Senator Dorgan has indicated. I, 
particularly, have heart palpitations about the idea that one 
company--having more spectrum than the entire FM band--I mean, 
just think about that. One company, having more spectrum than 
the entire FM band. And one national company with more channels 
than its local competition combined, in every market in 
America.
    I think those things are something that we need to be very 
focused on, I think it is our job to speak for those people out 
there that we don't hear, and there are a lot of people out 
there whose voices we don't hear in the halls of Congress. And, 
I think it's important that we do that, and I think this 
hearing is an important part of that, and I look forward to the 
testimony.
    Thank you, Madam Chair.
    Senator Cantwell. Thank you, and again, welcome to the 
witnesses who are here to have a hearing on the future of 
radio.
    Mr. McCaughan, I think we'll start with you, and just go 
right down the line. And if people could keep their comments to 
5 minutes, we are going to have a timer on this morning. But if 
you could keep track, and obviously we'll accept longer 
statements and information for the record.
    But, again, welcome Mr. McCaughan, thank you for being 
here.

           STATEMENT OF MAC McCAUGHAN, MUSICIAN AND 
                   CO-FOUNDER, MERGE RECORDS

    Mr. McCaughan. Madam Chair and Members of the Committee, 
it's an honor to testify before you today at such a crucial 
hearing. My name is Mac McCaughan, the Co-Founder of Merge 
Records, which is an independent record label, we're based in 
North Carolina. And, we've released over 300 albums from 60 
different bands over the past 20 years.
    I'm also a musician and a songwriter with 11 full-length 
records released by my band Superchunk, 6 albums that I've 
recorded under the name Portastatic--and I'd like to apologize 
in advance for needing to refer to my notes today, I'm used to 
performing on stage, but I can, I have a memory for song 
lyrics, but I hope you trust me when I say, you do not want to 
hear me sing my testimony this morning.
    [Laughter.]
    Mr. McCaughan. Radio has always been important to me, in 
fact, I think it has a lot to do with why I sit here today. 
Unlike any other medium, I think radio fosters a direct 
relationship between music and the listener. As a kid, I went 
to sleep and woke up to the radio, and that was at a time when 
even album rock radio featured music that was chosen by the 
DJ--new records, his or her favorite new records.
    Around the age of 13, I began listening to college radio, 
which exposed me to all different kinds of music that you can 
never hear on Top 40 or album rock stations. And that music, 
that I discovered via college radio, really set me on the 
course of making music myself, and eventually starting a record 
label, which is Merge.
    As both a performer and a label owner, I've relied on radio 
as an essential component of the work that we do in getting our 
music out there to people who want to hear it.
    I come here today to offer my perspective on the current 
state, and possible future, of broadcasting, and I urge you to 
adopt policies that encourage localism, competition and 
diversity on the airwaves.
    I'd like first to talk about the value of community-based 
and noncommercial radio. Low power, college, NPR, and other 
noncommercial broadcasting enterprises are extremely important 
today, especially as local information and entertainment 
options become more scarce. Commercial radio is about 
aggregating the largest possible number of listeners in a 
targeted demographic, but community-based radio is about 
serving its audiences. It has a unique power and desire to be a 
conduit for news and culture, and is essential to the diversity 
that defines cultural life in this country.
    As a record label owner, I can tell you that noncommercial 
radio has been a leading source of support for the music that 
we release, and we would not have had the chance to introduce 
many of our artists to music listeners and build such a 
dedicated customer base without the help of noncommercial 
radio. Broadcasters such as KEXP, KCMP, KCRW, WXPN and in North 
Carolina, WXYC and WXTU continue to program a wide variety of 
independent and local music on the dial, in the community and 
on the web. And WXYC in Chapel Hill, incidentally, was the 
first radio station, 10 years ago, to begin broadcasting over 
the Internet, 24 hours.
    For a label like ours, and many other musicians out there, 
support of noncommercial radio which is programmed by people as 
passionate about music as we are, is essential. Congress should 
take action to allow for the growth of noncommercial radio, and 
the expansion of Low Power FM into more urban settings.
    In 2000, Congress passed legislation to limit the FCC's 
ability to issue noncommercial Low Power FM radio licenses in 
more populated communities across the country. And lifting this 
ban once and for all will lead to a significant expansion of 
community-based stations that will prioritize local and 
independent content and news, not to mention programming that 
highlights the kind of musical genres that are routinely 
ignored by commercial radio.
    I also want to urge this Committee to take the necessary 
steps to ensure that our media landscape does not become even 
more consolidated. The deregulation that followed the 1996 
Telecommunications Act allowed for unprecedented consolidation 
in commercial radio which has resulted in homogeneity, is often 
out of step with artists, entrepreneurs, media professionals, 
and educators, not to mention the listeners.
    Back before the Telecom Act, this commercial radio industry 
was much more competitive. DJs and programmers in markets 
around the country were eager to play new music. This big piece 
of rock history is no longer, as corporate radio's sense of 
adventurism, localism, and risk-taking is a thing of the past. 
Nowadays, you are much more likely to hear new, independent 
music in a TV show, in a car commercial, in a video game, on 
satellite radio or community radio station than on commercial 
radio. Although label owners, artists and listeners would be 
thrilled to hear more independent music on commercial radio, in 
most cases this chance simply does not exist.
    As a specific example, from our experience at Merge, two of 
the albums that we've released in 2007 by the bands Arcade Fire 
and Spoon both debuted on the Billboard Top Ten. The bands both 
played on Saturday Night Live, which is a real coup for bands 
on a label of our size, and the mainstream print media has 
written extensively about them. Both bands tour the world, 
playing highly successful, sold-out concerts. Spoon performed 
here in D.C. last night at a sold out show at the 9:30 Club, 
which was broadcast on NPR, yet both of these bands have been 
virtually absent from the commercial airwaves throughout the 
trajectory of their careers.
    Instead, it's been noncommercial radio that has played a 
leading role in helping these bands reach a mainstream 
audience, just like it does with a majority of our other 
artists, bands like Camera Obscura, M. Ward, The Clientele, 
North Carolina's own Rosebuds. Because the independent music 
community's business model focuses on selling tens of thousands 
of albums instead of millions, Merge and other independent 
labels can rely on a combination of noncommercial radio and the 
Internet for promotion and distribution.
    But if Congress and the FCC implement policies that open up 
commercial radio for independent artists and labels, it could 
change the economics of the independent sector and the culture 
at large.
    It's been widely reported that the FCC is considering 
altering the media ownership rules again, and loosening the 
local ownership caps to allow major radio groups to buy even 
more stations in each market. And no matter what your taste in 
entertainment or news, if you value localism, competition and 
diversity, Congress and the FCC must recognize that further 
deregulation is not the answer.
    Finally, I'd like to talk about the value of the Internet--
--
    Senator Cantwell. Mr. McCaughan, you're a little over your 
time. It's like, you know, song length.
    Mr. McCaughan. OK, sure.
    Senator Cantwell. So, if you could--we're interested in all 
that you have to say, kind of summarize and then we'll get onto 
our other panelists, and then we can take the rest of your 
testimony for the record.
    Mr. McCaughan. OK, great.
    Senator Cantwell. Thank you.
    Mr. McCaughan. I was going to summarize by saying that the 
Internet is incredibly important to a label like Merge, for 
getting our music out there, exposing it to people, and you 
know, we'd like to keep the information flowing and keep 
technology growing without resorting to the old bottleneck that 
would be created by a tiered Internet, things such as this.
    To conclude, artists who thrive outside the commercial 
realm depend on and deserve open access to public platforms 
such as the airwaves and the Internet. Likewise, communities 
and citizens should have access to localized and diverse media. 
This is not just a means of doing business, but also an 
important facet of American life that needs to be nurtured and 
protected.
    I'd like thank Chairman Inouye and the Members of the 
Committee for taking the time to consider these issues, and 
it's my hope that those involved in the decisionmaking process 
on these issues can take something from the statements I have 
made.
    I would be happy to answer your questions after the 
testimony.
    [The prepared statement of Mr. McCaughan follows:]

     Prepared Statement of Mac McCaughan, Co-Founder, Merge Records
    Chairman Inouye, Senator Stevens and members of the Committee, it 
is an honor to testify before you today at such a crucial hearing.
    My name is Mac McCaughan, and I'm the Co-Founder of Merge Records, 
an independent record label based in Chapel Hill, North Carolina, that 
has released over 300 albums from the 60 bands on our roster over the 
past 20 years. I'm also a musician and a songwriter, with 11 full-
length records released by my band Superchunk, and 6 albums I've 
recorded under the name Portastatic.
    Radio has always been very important to me. In fact, it has a lot 
to do with why I sit here today. Unlike any other medium, radio fosters 
a direct relationship between music and the listener. As a kid I went 
to sleep and woke up to the radio in an era when--even on album rock 
radio--the DJ was playing his or her favorite new records. Then, at the 
age of 12, college radio exposed me to music that I had never heard on 
top 40 or album rock stations. The music I discovered then set me on 
the course of making music myself and starting a record label. And 
since that time, as both a performer and a label owner, I have relied 
on radio as an essential component of the work we do helping audiences 
learn about our music.
    I come here today to offer my perspective on the current state and 
possible future of broadcasting, and to urge you to adopt policies that 
encourage localism, competition and diversity on the airwaves.
    First, I'd like to talk about the value of community-based and non-
commercial radio. Low-power, college, NPR and other non-commercial 
broadcasting enterprises are extremely important today, especially as 
local information and entertainment options become scarcer. Commercial 
radio is about aggregating the largest possible number of listeners in 
a targeted demographic. Community-based radio is about serving its 
audiences. It has the unique power and the desire to be a conduit for 
news and culture, and is essential to the diversity that defines 
cultural life in this country.
    As a record label owner, I can tell you that non-commercial radio 
has been a leading source of support for our label's music. We would 
not have had the chance to introduce many of our artists to music 
listeners--and build such a dedicated customer base--without the help 
of non-commercial radio. Broadcasters such as KEXP, KCMP, KCRW, WXPN 
and North Carolina's own WXYC and WXDU continue to program a wide 
variety of independent and local music, on the dial, in the community 
and on the web. For a label like ours, and many other musicians out 
there, the support of non-commercial radio, which is programmed by 
people as passionate about music as we are, is essential.
    Congress should take action to allow for the growth of non-
commercial radio, and the expansion of Low Power FM into more urban 
settings. In 2000, Congress passed legislation to limit the FCC's 
ability to issue non-commercial Low Power FM radio licenses in more 
populated communities across the country. Lifting this ban once and for 
all will lead to a significant expansion of community-based stations 
that will prioritize local and independent content and news, not to 
mention programming that highlights kinds of musical genres that are 
routinely ignored by commercial radio.
    I also want to urge this committee to take the necessary steps to 
ensure that our media landscape does not become even more consolidated. 
The deregulation that followed the 1996 Telecommunications Act allowed 
for unprecedented consolidation in commercial radio, which has resulted 
in a homogeneity that is often out-of-step with artists, entrepreneurs, 
media professionals and educators--not to mention listeners.
    Back before the Telecom Act, the commercial radio industry was much 
more competitive, with deejays and programmers in markets around the 
country eager to play new music. This big piece of rock history is no 
longer, as corporate radio's sense of adventurism, localism and risk-
taking is a thing of the past. Nowadays, you are much more likely to 
hear new independent music in a TV show, in a car commercial, in a 
video game, on satellite radio or community radio stations than on 
commercial radio. Although label owners, artists and listeners would be 
thrilled to hear more indie music on commercial radio, in most cases, 
the chance simply does not exist.
    Let me give you specific examples from our experience at Merge. In 
2007, two of the albums we released--by the bands Arcade Fire and 
Spoon--both debuted in the Billboard Top Ten. They appeared on Saturday 
Night Live. The mainstream print media has written extensively about 
them, and both bands tour the world, playing highly successful, sold 
out concerts. Yet both of these bands have been virtually absent from 
the commercial airwaves.
    Instead, it's been non-commercial radio that has played a leading 
role in helping these bands reach a mainstream audience, just like it 
does with the majority of our other artists, bands like Camera Obscura, 
M. Ward, The Clientele and The Rosebuds. Because the independent music 
community's business model focuses on selling tens of thousands of 
albums instead of millions, Merge and other independent labels can rely 
on a combination of non-commercial radio and the Internet for promotion 
and distribution. But if Congress and the FCC implement policies that 
open up commercial radio for independent artists and labels, it could 
change the economics of the independent sector and the culture at 
large.
    It's been widely reported that the FCC is considering altering the 
media ownership rules again and loosening the local ownership caps to 
allow major radio groups to buy even more stations in each market. No 
matter what your tastes in entertainment or news, if you value 
localism, competition and diversity, Congress and the FCC must 
recognize that further deregulation is not the answer.
    Finally, I'd like to talk about the value of the Internet. Given 
that Merge Records and artists we represent have had little access to 
commercial radio, the Internet has become a powerful new platform 
through which we can promote, distribute and sell our music. Credit 
must go to non-commercial broadcasters and NPR, which are leading the 
way in using technologies to offer new content delivery methods such as 
webcasting and live concert feeds, in addition to their regular 
programming, but that's not all. An exciting range of emerging 
technologies such as Internet radio, satellite radio, music 
subscription services, digital music stores and new webcast services 
like Mog, Pandora and Last.fm that have expanded the opportunities for 
independent bands and labels worldwide. Not just our label, but any 
label and artist should have the benefit of competing on an equal 
playing field, as new technologies emerge that help musicians connect 
with audiences. An Internet based on the principles of network 
neutrality allows these experiments in commerce and technology to grow. 
Any policy decision that enables the reestablishment of old bottlenecks 
or creates a tiered Internet would be a tremendous step backward.
    To conclude, artists who thrive outside of the commercial realm 
depend on and deserve open access to public platforms such as the 
airwaves and the Internet. Likewise, communities and citizens should 
have access to localized and diverse media. This is not just a means of 
doing business, but also an important facet of American life that needs 
to be nurtured and protected.
    I want to thank Chairman Inouye and the members of this committee 
for taking the time to consider the issues surrounding community access 
to broadcasting and other important media concerns. It is my hope that 
those involved in the decision-making on these issues can take 
something from the statements I have made. Thank you for inviting me to 
testify today. I will be happy to answer your questions.

    Senator Cantwell. Thank you, Mr. McCaughan.
    Mr. Withers?

       STATEMENT OF W. RUSSELL WITHERS, JR., FOUNDER AND

        OWNER, WITHERS BROADCASTING COMPANIES, ON BEHALF

          OF THE NATIONAL ASSOCIATION OF BROADCASTERS

    Mr. Withers. Good morning, Chairman Inouye, and members of 
the Committee, my name is Russ Withers, I'm the Owner of 
Withers Broadcasting Companies, which operates 30 local radio 
stations and 6 television stations in 7 states, including 
Missouri and West Virginia.
    I'm testifying on behalf of the National Association of 
Broadcasters where I serve as Chairman of the NAB Radio Board 
and a member of the Executive Committee.
    Radio's future is very bright, and I'll offer a perspective 
today from over 50 years working in radio, on a variety of 
issues, among them Low Power FM, media ownership and copyright 
fees.
    First, with respect to Low Power FM. Broadcasters strongly 
support the current third adjacent channel protection and have 
serious concerns with introducing thousands of micro-radio 
stations to the FM band. Broadcasters do not oppose licensing 
Low Power FM, in fact, the FCC has authorized 811 Low Power FM 
operators, others have received construction permits or have 
applications pending at the FCC, and we encourage the 
Commission to act on these within the existing policy.
    LPFM stations exist today within third adjacent protection 
for a reason, and that's to guard against interference to both 
LPFMs and full-power stations.
    With respect to media ownership, let me also be clear. 
Broadcasters are not asking for total deregulation. Our message 
is simple: We must have reasonable rules that reflect the 
current competitive radio environment. With reasonable rules, 
we can have a vibrant industry that will continue to provide 
the service that our local communities expect--whether that's 
lifeline service in times of emergency, or entertainment and 
informational programming every day.
    Some will argue that the changes to the broadcast ownership 
rules adopted in the 1996 Telecom Act have not served the 
public interest, but they forget that at least part of the 
reason that you, here in Congress, directed the FCC to make 
those changes, was because the fragmented broadcast industry--
particularly for radio--was in serious trouble.
    In the early 1990s, the FCC reported that more than half of 
all stations were losing money, and almost 300 stations had 
gone silent. You can't serve the public interests with no 
service.
    Since 1996, however, numerous studies have shown that the 
changes within local broadcast markets, especially among radio 
stations, have enhanced the diversity of programming offered by 
local stations, and another study demonstrated that localism is 
still alive and well, despite the rule changes. There are more 
radio stations today in the United States than at any time in 
our history.
    Despite claims that the radio industry has been swallowed 
up by a few corporate giants, there are more than 4,490 
different owners of the approximately 13,500 full-power 
stations in this country, and according to the FCC, more than 
6,498 of those are locally owned.
    I can assure you that I and my fellow broadcasters are on 
the job every day, serving and contributing to our communities. 
You need only look at the California wildfires this morning, as 
evidence of our commitment. We need reasonable ownership rules 
to allow us to keep providing the service.
    Turning now to the issue of copyright fees. The NAB 
supports legislation to vacate the Copyright Royalty Board 
decision, and to establish new rules for Internet streaming of 
music. The CRB decision earlier this year caused serious harm 
in two ways.
    First, the cost for radio stations to stream music will 
drastically increase, and second, the new CRB rates are a 
barrier to entry for many stations that want to be part of the 
Internet revolution.
    We support a new and fair rate structure that encourages 
Internet streaming. We've made attempts to work with the 
recording industry to reach compromise, and were left waiting 
92 days for an answer. As a result of their stonewalling, we 
all face a very uncertain future for what was becoming a 
growing and exciting platform for music.
    Lastly, Mr. Chairman, I want to address the issue of 
performance fees, and the attempts by the recording industry to 
impose what broadcasters consider to be a performance tax on 
local radio.
    Local radio and the performing industry have always enjoyed 
a mutually beneficial relationship that can be distilled down 
to one concept--free music for free promotion. Local radio 
offers the recording industry a listening audience of 232 
million listeners a week, to promote and expose music. That 
drives consumers to go buy music, attend concerts, and purchase 
artist merchandise.
    Now, with slowing sales, and arguably a flawed business 
model for the digital age, the recording industry is looking to 
recoup their waning revenues through a performance tax on local 
radio broadcasters. Local radio, however, is not the reason the 
recording industry is suffering from declining profits, and 
local radio should not be used as a bail-out fund.
    Radio broadcasters will fight this tax to preserve a local 
radio system that remains free, essential and available to all 
consumers.
    Thank you for inviting me here today, and I look forward to 
your questions.
    [The prepared statement of Mr. Withers follows:]

   Prepared Statement of W. Russell Withers, Jr., Founder and Owner, 
 Withers Broadcasting Companies, on Behalf of the National Association 
                            of Broadcasters
    Good morning, Chairman Inouye, Vice Chairman Stevens, and members 
of the Committee, my name is W. Russell Withers, Jr., I am the Founder 
and Owner of the Withers Broadcasting Companies, which own and operate 
30 local radio stations and six television stations in seven states. I 
am also a Member of the Board of Directors of the National Association 
of Broadcasters (NAB) and the Chair of the NAB Radio Board. NAB is a 
trade association that advocates on behalf of more than 8,300 free, 
local radio and television stations and also broadcast networks before 
Congress, the Federal Communications Commission (FCC) and other Federal 
agencies, and the courts.
    This is a hearing about the future of the radio industry, so let me 
start with a simple fact: radio, as an industry, is not the same as it 
was 10 years ago, 20 years ago or 40 years ago. I have been a part of 
this industry for more than 50 years, and I have watched the media 
industry change. How people listen to music has changed. How they 
receive and engage with the news has changed. And for radio owners like 
myself, the competitive pressures are very different.
    Originally, we used to just compete with each other, and maybe a 
few local newspapers. Those days are long gone. Now, radio stations are 
competing for the same advertising dollars as television, cable, 
newspapers, Internet sites and huge Internet aggregators like Google.
    Even in the face of these changes and competitive pressures, 
however, my industry has not, and will not, forget that our primary 
task is service to the community. Our core product--top-quality music, 
news, local information, weather and emergency services for our local 
communities provided without charge--remains much the same. We are 
there for our local communities every day. We are there to help inform 
our communities when weather or other emergencies occur. And, 
importantly, we are there to help when the emergency is over. Unlike 
some national entities that show up to report disasters and such, we 
don't leave--we remain part of the community when the effects of the 
disaster linger on and on. In fact, broadcasters contribute more than 
ten billion dollars in community service every year. In short, you 
would be hard pressed to find an industry that contributes more to 
their local communities than broadcasters.
    There are some other interests that will try to tell you a 
different story. Some vocal groups regularly contend that the radio 
industry in this country has been swallowed up by a few corporate 
giants who do not care about the communities they serve. Well, here is 
another fact: there are more radio stations today in the United States 
than at any point previously. In fact, despite all the boisterous 
complaints about media consolidation, there are more radio station 
owners today than there were in 1972. Sure there are some large 
companies, as there are in any industry worth investing in. But, there 
are also thousands of other radio station owners. And we all serve our 
local communities.
Media Ownership
    As a radio owner, I can tell you that we need to have reasonable 
media ownership rules. The rules that govern this industry should 
reflect the undeniable changes in the media marketplace. It is easy to 
see the past through rose colored glasses. But everyday, radio stations 
owners like myself have to deal with reality. And the reality is that 
outdated regulations can hold us back from competing with industries 
that are not regulated like ours.
    You here in Congress recognized the relationship between reasonable 
rules and a healthy radio industry back in 1996 when you mandated 
reform of the highly restrictive ownership rules then in place. 
Remember the state of the broadcast industry before 1996. In 1992, for 
example, the FCC found that, due to ``market fragmentation,'' many in 
the radio industry were ``experiencing serious economic stress.'' 
Revision of Radio Rules and Policies, Report and Order, 7 FCC Rcd 2755, 
2756 (1992) (FCC Radio Order). Specifically, stations were experiencing 
``sharp decrease[s]'' in operating profits and operating margins. Id. 
at 2759. By the early 1990s, ``more than half of all stations'' were 
losing money, and ``almost 300 radio stations'' had gone silent. Id. at 
2760. Given that the radio industry's ability ``to function in the 
`public interest, convenience and necessity' is fundamentally premised 
on its economic viability,'' the Commission concluded that ``radio's 
ability to serve the public interest'' had become ``substantially 
threatened.'' Id. Accordingly, the Commission believed that it was 
``time to allow the radio industry to adapt'' to the modern information 
marketplace, ``free of artificial constraints that prevent valuable 
efficiencies from being realized.'' Id.
    Congress agreed. That is why, in 1996, you acted to ``preserve and 
to promote the competitiveness of over-the-air broadcast stations.'' 
\1\ Congress found that ``significant changes'' in the ``audio and 
video marketplace'' called for a ``substantial reform of Congressional 
and Commission oversight of the way the broadcasting industry develops 
and competes.'' House Report at 54-55.
---------------------------------------------------------------------------
    \1\ H.R. Rep No. 204, 104th Cong., 2d Sess. at 48 (1995) (``House 
Report'').
---------------------------------------------------------------------------
    I submit that we should not ignore these important lessons of the 
past. Policies that would turn back the clock so that broadcasters are 
at a competitive disadvantage against other information and 
entertainment providers clearly would not serve the public interest.
    Like any industry, radio has to adapt to the changes in the 
marketplace. We are embracing new technologies and new plans to remain 
relevant in our local communities for decades to come. We are embracing 
the future by investing significant financial and human resources in 
new technologies, including high definition digital radio or, HD Radio, 
and Internet streaming, so that we can continue to compete in a digital 
marketplace and improve our service to local communities and listeners. 
All we ask is that the policies you adopt here in Washington recognize 
the reality that we face. Let us embrace the future--resist the calls 
of those who would embalm us in the past.
XM and Sirius Merger
    This Committee has held a hearing and heard perspectives on the 
proposed merger of XM Radio and Sirius Satellite Radio. We'd like to 
thank the many Members of Congress who have opposed this proposed 
merger-to-monopoly. A monopoly in satellite radio would clearly harm 
consumers by inviting subscription price increases, stifling innovation 
and reducing program diversity. This monopoly would jeopardize the 
valuable free over-the-air, advertiser-supported services provided by 
local radio stations and their ability to serve local communities and 
audiences. All local stations ask is for a fair opportunity to compete 
in today's digital marketplace on a level playing field.
Low Power FM Stations
    Let me focus for a minute on another subject that I am sure you 
will hear about today--Low Power FM (LPFM) broadcasting. I will speak 
about two issues: the relationship between LPFM and full power FM 
service and the relationship between LPFM and FM translators.
    Regarding the former, local broadcasters oppose S. 1675, the Local 
Community Radio Act of 2007. We believe this legislation would allow 
the FCC to license thousands of micro-radio stations that will cause 
harmful interference to full power FM radio stations providing valuable 
services to local communities and listeners. The proposed bill is based 
on the results of a well-intentioned, but fatally flawed study intended 
to determine the amount of interference these new micro-radio stations 
would cause. That study, however, was deficient in its methodology, 
implementation and analysis of results in assessing the need for third 
adjacent channel interference protection.
    To the contrary, multiple studies commissioned by NAB, the Consumer 
Electronics Association and others have all independently concluded 
that removal of the current adjacent channel protections is not 
practical because receivers will not be able to adequately reject the 
undesired signals that would be created.
    Today, under its current policy, the FCC has licensed over 811 LPFM 
stations around the country, and with many additional granted 
construction permits and applications still pending at the FCC. 
Broadcasters have encouraged the FCC to act on any pending LPFM 
applications and facilitate those that have received construction 
permits. Clearly, there is already an efficient process in place for 
LPFM stations to be licensed and to operate within the current third 
adjacent protection policy that all stations, both low power and full 
power, must follow.
    To be clear, local broadcasters do not oppose the licensing of LPFM 
stations. However, we do oppose the introduction of thousands of micro-
radio stations that would cause significant harmful interference to 
existing full power FM radio stations. Third adjacent protection for 
all broadcasters exists for a reason--to guard against interference and 
to protect our lifeline service to communities.
    Reducing interference protection for subsequently-authorized full 
power FM service could also deny thousands of listeners the benefits of 
FM station upgrades or new FM services, including digital radio. Often 
lost amid the clamor for more LPFM stations is the fact that full power 
FM stations provide vast amounts of community-responsive public 
service. FM stations are a primary source for local news and 
information, political discourse, music programming in a wide variety 
of formats and emergency information. And these valuable services will 
only increase in the future, as more stations convert to digital and 
offer CD-quality audio, additional free programming streams and new 
services such as datacasting.
    We believe that, instead of risking significant interference to 
full power local FM stations, government should focus its efforts on 
creating constructive means by which an operating LPFM station that is 
displaced by new or upgraded full power FM service can be relocated 
without creating harmful interference. Such means could include 
granting the displaced LPFM station priority and expedited processing 
over other LPFM applications without the need for opening an 
application window. Indeed, the FCC has already granted such 
displacement relief in the context of low power television, and given 
the minimal number of LPFM stations in this situation, we would 
encourage that this type of relief be examined first, before other more 
problematic avenues are explored.
    With regard to FM translators, local broadcasters do not favor an 
approach where LPFM stations are granted preferential treatment over FM 
translators. Since the FCC first authorized FM translators in 1970 as a 
means of delivering radio service to areas and populations that were 
unable to receive FM signals because of distance and terrain obstacles, 
translators have proven to be a vital component for delivering 
essential news, weather, emergency information and AMBER Alerts, as 
well as entertainment to many communities.
    The FCC's current system of assigning FM frequencies on a first-
come first-served basis has worked well, and there is no reason to 
think it will not continue to work well in the future. Affording 
preferential treatment to new LPFM stations would jeopardize FM 
stations' delivery of important, locally-oriented programming to many 
parts of the country via FM translators.
    Broadcasters have also urged the FCC to lift the freeze on pending 
FM translator applications and quickly process these applications. In 
2003, the FCC imposed a freeze on the processing of FM translator 
applications presumably because granting translator licenses might 
adversely affect the licensing of future LPFM stations. Nothing could 
be farther from the truth, however. LPFM and translators are not 
mutually exclusive and both can be viable services alongside each 
other.
    As mentioned, broadcasters do not oppose the licensing of LPFM 
stations. We recognize that some of these stations may provide niche 
programming to local communities. However, that does not diminish the 
fact that FM translators are important tools that local full power 
broadcasters need to provide a full complement of diverse, quality 
programming to listeners throughout the country, especially in remote 
areas. The FCC has explicitly recognized that translators ``provide an 
opportunity to import programming formats otherwise unavailable'' in 
local markets. In this light, the valuable service that translators 
provide should be recognized and fostered.
    In sum, there is no demonstrated need for a change in regulatory 
priority status between LPFM stations and FM translators. Pending 
applications for FM translators have not impeded the FCC's ability to 
process LPFM applications under the existing rules. Moreover, to the 
extent that parties are urging Congress to change the law to enable 
LPFM stations to be placed on channels spaced third adjacent to full 
power FM stations, we would strongly encourage Congress to reject these 
calls.
Internet Streaming
    Let me turn now to the issue of Internet streaming. A few moments 
ago, I mentioned Internet streaming as one way broadcasters can adapt 
their traditional business models to include new technologies that 
complement local free over-the-air radio. Unfortunately, current 
conditions make this difficult. Broadcasters are required to pay sound 
recording performance fees when they stream their signals on the 
Internet. However, the most recent rates set by the Copyright Royalty 
Board (CRB) for these fees are so high that a viable business model for 
simulcast streaming is almost impossible. The increase in the sound 
recording performance fees over the next 4 years established by the CRB 
is unreasonable and debilitating to growing this exciting new service. 
There are numerous and serious flaws in the CRB's decision, but let me 
mention just two of them. First, the CRB gave no credit to radio 
broadcasters for the tremendous promotional value we provide to the 
recording companies and artists. This is a major factor in record sales 
and revenues from concerts. Second, the CRB based the rates it 
established on rates paid to the recording industry by interactive 
webcasting services that provide the ability to purchase recordings 
online. We believe there are fundamental differences between such 
services and the free advertiser-supported services broadcasters 
provide.
    This subject falls primarily within the purview of the Senate 
Judiciary Committee, and thus I will not dwell on it today. It is, 
however, very important for the future of radio, so let me briefly 
emphasize that the sound recording performance fee for Internet 
streaming--and the standard by which it is set--must be reformed. NAB 
supports H.R. 2060 and S. 1353 which would vacate the CRB decision, 
establish an interim royalty rate structure and change the current 
``willing buyer, willing seller'' standard that has been a recipe for 
abuse and needlessly inflated royalty rates to levels that are 
suffocating radio streaming services. In fact, the ``willing buyer, 
willing seller'' standard has given rise to a presumption in favor of 
agreements negotiated by the major recording companies, acting under 
the antitrust exemption contained in the Copyright Act. The predictable 
result has been unreasonably high sound recording fees.
    In addition, the conditions imposed on broadcasters that stream 
should be modified. The statutory performance license imposed nine 
conditions on broadcasters that stream, at least three of which are 
wholly incompatible with broadcasters' over-the-air business model. For 
example, one condition prohibits the playing of any three tracks from 
the same album within a three-hour period. Another condition prohibits 
DJs from ``pre-announcing'' songs, and a third requires the 
transmitting entity to use a player that displays in textual data the 
name of the sound recording, the featured artist and the name of the 
source phonorecord as it is being performed. These conditions are 
designed to prevent copying of sound recordings from distribution 
mechanisms far different than radio. Radio stations should not be 
forced to choose between either radically altering their over-the-air 
programming practices or risking uncertain and costly copyright 
infringement litigation.
Performance Tax
    On a related subject, let me address the efforts of the recording 
industry to convince Congress to impose a new levy on local 
broadcasters, in the form of an additional fee for playing recorded 
music on free, over-the-air radio. The imposition of such a performance 
tax would be inequitable and unfair to radio broadcasters, and could 
substantially harm our ability to serve our local communities.
    Radio broadcasters already contribute substantially to the United 
States' complex and carefully balanced music licensing system, a system 
which has evolved over many decades and has enabled the U.S. to produce 
the strongest music, recording and broadcasting industries in the 
world. For more than 80 years, Congress, for a number of very good 
reasons, has rejected repeated calls by the recording industry to 
impose a tax on the public performance of sound recordings that would 
upset this balance. There is no reason to change this carefully 
considered and mutually beneficial policy at this time.
    As we noted in NAB's July 2007 testimony before the House Judiciary 
Subcommittee on Courts, the Internet and Intellectual Property, the 
recording industry's pursuit of a performance tax at this time appears 
from losses that result in part from illegal peer-to-peer sharing of 
sound recordings, and in part from the loss of revenues from the sale 
of recorded music and an inability of record companies to timely adapt 
to rapid developments in digital technology and consumer demands. 
Broadcasters are not responsible for either one of these phenomena, 
and, particularly in the current highly competitive environment, it 
makes little sense to siphon revenues from local broadcasters to 
support international record labels.
    For decades, radio broadcasters have substantially compensated the 
music and recording industries, including making annual payments of 
hundreds of millions of dollars in fees to music composers and 
publishers through ASCAP, BMI and SESAC and providing record labels and 
artists with free promotion of their recordings and concerts. Local 
radio stations have been the driving force behind record sales in this 
country for generations. Music producers and publishers receive royalty 
payments from producers of sound recordings who record their works, but 
those sums are small relative to the receipts by the record companies 
and artists who receive the vast majority of their revenues from the 
sale of sound recordings. In fact, the recording industry enjoys 
tremendous promotional value from radio airplay. From recording 
industry executives:

   ``I have yet to see the big reaction you want to see to a 
        hit until it goes on the radio. I'm a big, big fan of 
        radio.''--Richard Palmese, Executive Vice President of 
        Promotion RCA (2007)

   ``It's still the biggest way to break a band or sell 
        records: airplay. It's very difficult to get it, but when it 
        happens, it's amazing.''--Erv Karwelis, Idol Records (2007)

   ``Radio has proven itself time and time again to be the 
        biggest vehicle to expose new music.''--Ken Lane, Senior Vice 
        President for Promotion, Island Def Jam Music Group (2005)

   ``It is clearly the number one way that we're getting our 
        music exposed. Nothing else affects retail sales the way 
        terrestrial radio does.''--Tom Biery, Senior Vice President for 
        Promotion, Warner Bros. Records (2005)

   ``If a song's not on the radio, it'll never sell.''--Mark 
        Wright, Senior Vice President, MCA Records (2001)

    Throughout the history of the debate over sound recording 
copyrights, Congress has consistently recognized the important and very 
significant promotional benefit from the exposure by radio stations, as 
well as the fact that placing burdensome restrictions on performances 
could alter that relationship, to the detriment of the music, sound 
recording and broadcasting industries. For that reason, in the 1920s 
and for five decades following, Congress regularly considered proposals 
to grant copyright rights in sound recordings, but repeatedly rejected 
such proposals.
    When Congress first afforded limited copyright protection to sound 
recordings in 1971, it prohibited only unauthorized reproduction and 
distribution of records, but did not create a sound recording 
performance fee. During the comprehensive revision of the Copyright Act 
in 1976, Congress again considered, but rejected, granting a sound 
recording performance fee. Congress continued to refuse to provide any 
sound recording performance fee for another twenty years, not 
withstanding a plea by the recording industry in the early 1990s that 
it do so. During that time, the recording industry thrived, due in 
large measure to the promotional value of radio performances of their 
records.\2\
---------------------------------------------------------------------------
    \2\ See, e.g., S. Rep. No. 93-983, at 225-26 (1974) (``The 
financial success of recording companies and artists who contract with 
these companies is directly related to the volume of record sales, 
which, in turn, depends in great measure on the promotion efforts of 
broadcasters.'').
---------------------------------------------------------------------------
    It was not until the Digital Performance Rights in Sound Recordings 
Act of 1995 (DPRA) that even a limited performance fee in sound 
recordings was created. In granting this limited right, Congress stated 
it ``should do nothing to change or jeopardize the mutually beneficial 
economic relationship between the recording and traditional 
broadcasting industries.'' \3\ As explained in the Senate Report 
accompanying the bill, ``[t]he underlying rationale for creation of 
this limited right is grounded in the way the market for prerecorded 
music has developed, and the potential impact on that market posed by 
subscriptions and interactive services--but not by broadcasting and 
related transmissions.'' \4\
---------------------------------------------------------------------------
    \3\ S. Rep. No. 104-129, at 15 (``1995 Senate Report''); accord, 
id. at 13 (Congress sought to ensure that extensions of copyright 
protection in favor of the recording industry did not ``upset[] the 
long-standing business relationships among record producers and 
performers, music composers and publishers and broadcasters that have 
served all of these industries well for decades.'').
    \4\ Id. at 17.
---------------------------------------------------------------------------
    Consistent with Congress' intent, the DPRA expressly did not 
include a sound recording performance fee for non-subscription, non-
interactive transmissions, including ``non-subscription broadcast 
transmission[s]''--transmission[s] made by FCC licensed radio 
broadcasters.\5\ Congress made clear that the reason radio broadcasting 
was not subject to this new limited fee was to preserve the historical, 
mutually beneficial relationship among recording companies, radio 
stations and music composers:
---------------------------------------------------------------------------
    \5\ 17 U.S.C.  114(d)(1)(A).

        The Committee, in reviewing the record before it and the goals 
        of this legislation, recognizes that the sale of many sound 
        recordings and careers of many performers have benefited 
        considerably from airplay and other promotional activities 
        provided by both noncommercial and advertiser-supported, free 
        over-the-air broadcasting. The Committee also recognizes that 
        the radio industry has grown and prospered with the 
        availability and use of prerecorded music. This legislation 
        should do nothing to change or jeopardize the mutually 
        beneficial economic relationship between the recording and 
        traditional broadcasting industries.\6\
---------------------------------------------------------------------------
    \6\ 1995 Senate Report, at 15.

    The Senate Report similarly confirmed that ``[i]t is the 
Committee's intent to provide copyright holders of sound recordings 
with the ability to control the distribution of their product by 
digital transmissions, without hampering the arrival of new 
technologies, and without imposing new and unreasonable burdens on 
radio and television broadcasters, which often promote, and appear to 
pose no threat to, the distribution of sound recordings.'' \7\
---------------------------------------------------------------------------
    \7\ Id.
---------------------------------------------------------------------------
    Proponents of a performance tax for sound recordings in the U.S. 
often point to the laws of foreign jurisdictions to justify imposing 
such an additional fee on local radio broadcasters. This argument 
ignores key differences in the American industry structure, and 
simplistic comparisons using isolated provisions of foreign laws yield 
misleading results. For example, many foreign legal systems deny 
protection to sound recordings as works of ``authorship,'' while 
affording producers and performers a measure of protection under so-
called ``neighboring rights'' schemes. While that protection may be 
more generous in some respects than sound recording copyright in the 
U.S., including the right to collect royalties in connection with 
public performances, it is distinctly less generous in others. 
Additionally, in many neighboring rights jurisdictions the number of 
years sound recordings are protected is much shorter than under U.S. 
law. Further, broadcast systems in many other countries that have a 
performance tax are, or have been, owned or heavily subsidized by the 
government and have cultural and social mandates accompanied by content 
requirements.
    The recording industry's legitimate difficulties with piracy and 
its failure to adjust to the public's changing patterns and habits in 
how it chooses to acquire sound recordings was not a problem created by 
broadcasters, and broadcasters should not be required, through a tax or 
fee, to provide a new funding source to make up for lost revenues of 
the record companies. Indeed, the imposition of such a tax could create 
the perverse result of less music being played on radio or a weakened 
radio industry. For example, to save money or avoid the tax, stations 
could cut back on the amount of pre-recorded music they play or change 
formats to all-talk, providing less exposure to music. This could not 
only adversely impact the recording industry, but the music composers 
and publishers as well. A performance tax would have a particularly 
adverse impact on radio stations in small and medium-sized markets that 
are already struggling financially. Were such additional royalties 
imposed, in the face of competition from other media, many of these 
stations would have to spend more time in search of off-setting 
revenues that could affect the time available for public service 
announcements for charities and other worthy causes, coverage of local 
news and public affairs and other valuable programming.
    With respect to the performance of sound recordings on over-the-air 
broadcasting, NAB urges the Committee to recognize that a new 
performance tax on broadcasters is neither warranted nor equitable. The 
frustrations of the recording industry in its inability to deal with 
piracy and an outdated business model are not sufficient justification 
for imposing a wealth transfer at the expense of the American broadcast 
industry, which has been instrumental in creating hit after hit for 
record labels and artists and whose significant contributions to the 
music and recording industries have been consistently recognized by 
Congress over the decades.
    In conclusion, I firmly believe that the future of free over-the-
air radio broadcasting is bright. Our commitment to our local 
communities, coupled with the momentum for consumers to realize the 
benefits of HD Radio, will propel our industry forward. But to do so, 
we must remain free from interference in our signals and from 
regulations that will hamper our ability to serve our local listeners. 
We look forward to working with this Committee and are happy to answer 
any questions you may have.

    Senator Cantwell. Thank you, Mr. Withers for your 
testimony.
    And Mr. Westergren, before you start, I'm going to allow 
the Chairman, Chairman Inouye, to make an opening statement.

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

    The Chairman. I thank you very much. I'd like to commend 
Senator Cantwell for taking the leadership in this area on 
radio. I suppose radio is not as sexy as Internet, or the other 
high-tech matters before us. I recall, as a child, I was 
brought up on the radio. I knew what time the fishes were 
running, I knew what time was best to surf. But today, with all 
of the consolidation, I wonder if less local news will be the 
result. I'm not suggesting it should all be local, but, I'm 
nostalgic, that's all.
    There are many issues before us, and I'm so happy that 
Senator Cantwell has come out with this bill. And so, we're 
looking to the future, and we're asking your help, because 
frankly there are so many things happening, we don't know where 
to go.
    I was one of the authors of the 1996 Act, at that time if 
you would search the text of the bill, you will find the word 
``Internet'' appearing three times. That's how important it 
was--just three times out of thousands of words.
    Today, everywhere you go, it's the Internet.
    So, with that, thank you very much.
    Senator Cantwell. Thank you, Mr. Chairman for those 
comments, and the Chairman was referring to the legislation 
that we've introduced again on Low Power FM radio.
    Senator Snowe, did you wish to make an opening statement at 
this time?

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

    Senator Snowe. I do have one, and I ask unanimous consent 
to submit it for the record.
    Senator Cantwell. Without objection.
    [The prepared statement of Senator Snowe follows:]

  Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
    Thank you, Mr. Chairman, for holding this hearing on the state of 
the radio industry. Even with the advent of new media, radio still 
plays a crucial role in our lives and while most of the attention has 
been toward Internet and broadband innovation as well as the DTV 
transition, radio too has seen it's share of impressive advancements.
    Radio is one of, if not, the most reliable form of communication 
today. Oftentimes during natural disasters and other emergencies, many 
forms of communications become unavailable to the public but over-the-
air radio is a ubiquitous form of mass media that is available to 
nearly every car and household in the Nation. The system cannot be 
overloaded and operates well under extreme weather conditions. Radio 
has been meeting the demands of local communities for nearly a century 
and is equipped to continue its service well into the next century.
    To meet that service, radio has evolved with the introduction of 
satellite, Internet, and even hybrid-digital or ``HD'' radio. The birth 
of satellite radio less than a decade ago has been a boon to consumers 
looking for increased variety in music, sports and talk programming. 
Never before have consumers had access to over one hundred streams of 
programming in a radio service. Satellite radio has served its niche 
well.
    Internet radio has also seen an amazing growth in popularity. Just 
last year Internet radio listening jumped dramatically, from 45 million 
listeners to 72 million listeners per month and more than seven million 
Americans listen to Internet radio every day. The SHOUTcast radio 
website, which enables users to ``tune-in'' to thousands of online 
radio stations around the world, has access to approximately 21,000 
online radio stations.
    But probably the most significant advancement in radio broadcasting 
since the introduction of FM stereo more than 50 years ago has been 
``HD'' radio. HD Radio technology enables AM and FM radio stations to 
broadcast their programs digitally an in doing so greatly improving 
audio quality for its listeners--FM radio achieves near CD-quality 
sound. Digital signals are also less vulnerable to reception problems 
and eliminate the static, pops, hisses, and fades caused by 
interference. More than 1,500 radio stations are currently broadcasting 
in HD.
    But with all this innovation there are areas that we should 
investigate further. We must look at how we can promote minority and 
women ownership within media. Currently only 6 percent of full-power 
commercial broadcast radio stations are owned by women and 7.7 percent 
are owned by minorities. But yet for general, non-farm business, women 
and minorities account for 28 and 18 percent ownership, respectively. 
The FCC has reported that nearly all of the broadcast stations with 
majority women and/or minority ownership are located in rural areas and 
small towns.
    The FCC is currently conducting six field hearings on media 
ownership and also held a hearing specifically on localism in my state 
of Maine. It was recently confirmed that the FCC Chairman has told the 
other Commissioners he wants to propose revised media ownership rules 
by November 13, provide a 28-day period for public comment, and vote on 
new rules on December 18.
    It is my belief that the 28-day comment period Chairman Martin is 
suggesting is inadequate for comprehensive public evaluation and 
comment for such a critical issue. That is why I have joined my 
colleagues Senators Dorgan and Lott to call for a committee hearing on 
this issue so that we can examine it further and get a better 
understanding of what direction the Commission plans to take.
    I look forward to hearing from our distinguished panels on this and 
other matters pertaining to the radio market.
    Thank you, Mr. Chairman.

    Senator Cantwell. So, Mr. Westergren, if you could re-start 
the testimony from the panel, thank you very much.

    STATEMENT OF TIM WESTERGREN, FOUNDER AND CHIEF STRATEGY 
    OFFICER, PANDORA MEDIA; ON BEHALF OF THE DIGITAL MEDIA 
                          ASSOCIATION

    Mr. Westergren. Chairman Inouye and Members of the 
Committee, on behalf of Pandora, the Digital Media Association, 
and Internet radio industry, thank you for inviting me to speak 
about the future of radio.
    Today I will discuss how Pandora and Internet radio 
innovation offers unique benefits to listeners and artists, and 
I will ask your help as we confront our royalty crisis that 
threatens our innovative company, and our industry.
    Pandora, a company I founded after 10 years as a working 
musician, is radio that listeners enjoy on their personal 
computers, their home stereos, and on mobile phones. Pandora is 
the third-largest Internet radio service in America, with 
nearly 9 million registered listeners.
    Pandora is unique, because when you type in a song or 
artist you like, we instantly provide a radio station that you 
are certain to enjoy. We can do that because our programming is 
based on a sophisticated analytical tool called the ``Music 
Genome Project.'' Hundreds of musical attributes have been 
identified by our musicologists, and then used to analyze every 
song in our database.
    The Music Genome Project connects the dots between songs 
and artists, and the results are dramatic. Listeners enjoy 
radio with more music they like, and more new music they 
discover. Artists compete for listeners on a level playing 
field. Once in our database, a song will play on suitable 
stations, depending only on musical relevance and listener 
feedback. Being famous or having a big marketing budget won't 
change a thing.
    Every month we add roughly 14,000 songs to our database, 
which now includes several hundred thousand songs by more than 
35 artists. More than 70 percent of our recordings, and 50 
percent of our performances are by so-called ``Indie'' artists, 
unaffiliated with a major record label.
    As an example, on Mac's record label, his songs have spun 
over 25 million times. This compares to less than 10 percent of 
Indie music on broadcast radio. To listeners, Internet radio is 
looking more and more like broadcast and satellite radio.
    We are listening to a live Pandora radio transmitting over 
Sprint's cell phone network. This $2 connector can also plug 
into your home stereo or car stereo so media convergence is 
well underway.
    Sorry, that was a little loud.
    Senator Cantwell. I don't know, it was pretty good.
    Mr. Westergren. Ella Fitzgerald.
    But Internet radio is much more powerful. Rather than 
playing several stations for thousands or millions of 
listeners, the Internet can accommodate hundreds of thousands 
of simultaneous channels, allowing unlimited diversity, so 
listeners can hear music they are certain to enjoy, and 
discover new songs and artists that would otherwise be 
invisible to them. Musicians who cannot get airplay on 
broadcast radio have found a home and an audience on Internet 
radio--jazz, big band, klezmer, lute music--the list goes on.
    Internet radio also offers listeners the opportunity to 
immediately buy music or concert tickets, and they do. Pandora 
is a leading referral site for music purchasing, for both 
Amazon.com and the iTunes Music Store, and a recent study found 
that Pandora listeners are three to five times more likely to 
purchase music than the average American.
    But Pandora and Internet radio face early extinction, 
because the Copyright Royalty Board recently imposed absurdly 
high royalties on our industry.
    For example, in 2007, Pandora would pay royalties of nearly 
50 percent of our revenue, and the rate increases by more than 
25 percent in 2008, and again in 2009. In contrast, broadcast 
radio pays zero sound recording royalties. Satellite radio pays 
less than 3 percent of its revenue, and cable radio pays 7\1/4\ 
percent.
    I am proud that in 2006, Pandora paid more than $2 million 
in royalties. But in 2007, our invoice will exceed $6 million. 
The CRB ruling has rendered our business and the entire 
business economically unsustainable.
    After the CRB decision, Pandora joined the SaveNet Radio 
campaign, and together with several million Internet radio 
listeners and more than 6,000 artists, Pandora supporters have 
been calling Congress, and urging support for Internet radio.
    We thank Senators Kerry and Dorgan for cosponsoring the 
Internet Radio Equality Act, which would resolve this crisis by 
setting Internet radio royalties at a reasonable 7.5 percent of 
revenue.
    Today, we remain hopeful that the CRB royalty decision will 
be remedied through Congressional or judicial action, or 
through negotiation. But the moment we believe otherwise, is 
the moment we close down our company, lay off 117 employees, 
and disappoint millions of listeners, and many thousands of 
recording artists.
    As a musician, I am heartbroken at the prospect of 
silencing Internet radio, an extraordinary resource that offers 
artists a wonderful promotional platform. As a listener, I am 
depressed at possibly losing the most powerful music discovery 
tool ever created, and as a webcaster, I am dismayed at the 
prospect of telling 9 million listeners that their radio 
stations are dead.
    Everyone at Pandora, and the Internet radio industry wants 
artists to be paid fairly, but we also want Internet radio to 
survive, and that will not happen unless the CRB royalty 
decision is remedied.
    Thank you.
    [The prepared statement of Mr. Westergren follows:]

   Prepared Statement of Tim Westergren, Founder and Chief Strategy 
   Officer, Pandora Media; on Behalf of the Digital Media Association
    Chairman Inouye, Vice Chairman Stevens, and members of the 
Committee:

    My name is Tim Westergren. I am the Founder and Chief Strategy 
Officer of Pandora, and it is my pleasure today to speak with you on 
behalf of my company and the Digital Media Association (``DiMA''), 
about the radio industry, and particularly about innovation and the 
future of radio.
What is Pandora?
    Pandora is an Internet radio service that listeners enjoy on their 
personal computers, through home entertainment products and on mobile 
phones. Pandora is powered by a very unique musical taxonomy, called 
the Music Genome Project, developed by our team of university-degreed 
musicologists. Our team has identified hundreds of musical attributes 
and they assign values to each attribute in each song. When applied 
across a repertoire of hundreds of thousands of songs, the Music Genome 
Project literally connects the dots between songs and artists that have 
something--often quite subtle things--in common. This is the foundation 
that enables Pandora to offer listeners--quickly and easily--radio 
stations that play music that matches their taste if the listener 
simply tells us the name of a favorite song or artist.
    The result is remarkable in many ways. More than 8.5 million 
registered Pandora listeners enjoy a better radio experience, and they 
are passionate about our service. They listen to more music, they re-
engage with their music, and they find new artists whose recordings 
they purchase and whose performances they attend. Pandora is a bit of a 
phenom--in only 2 years since our launch we have become the third 
largest Internet radio service in America. But the real winners are 
music fans, artists, record companies, songwriters and music 
publishers.
    Something unique about Pandora is that all music, once analyzed by 
our musicologists and entered into our database, wins and loses 
audience in the purest of democratic processes. If listeners vote 
``thumbs up'' a song and artist are electronically added to more 
station playlists, the exposure is greater, and more people can offer 
opinions about that music. If listeners consistently vote ``thumbs 
down'' then the song is performed and heard less. Not even my musical 
tastes or the CEO's favorites can modify the purity of how our musical 
taxonomy determines all Pandora radio performances.
    Equally unique is the breadth of our playlist. Pandora 
musicologists will review any CD that is delivered to us, and in most 
cases enter it into our database and make it available for our millions 
of listeners to hear. Pandora's collection includes hundreds of 
thousands of songs across the genres of Pop, Rock, Jazz, Electronica, 
Hip Hop, Country, Blues, R&B, Latin and in just a few weeks, Classical. 
These recordings range from the most popular artists to the completely 
obscure, and each month our nearly fifty musicologists analyze and add 
roughly 14,000 new songs to the catalogue--a very deliberate process 
that requires between 15 and 30 minutes per song.
    There are no prerequisites for inclusion in the Music Genome 
Project. Indeed, it is quite common for us to add amateur homemade CDs 
to the service. As a card-carrying independent musician I am proud to 
report that fully 70 percent of the sound recordings in our collection, 
representing over 35,000 artists, are recordings of artists who are not 
affiliated with a major record label. Most important, because we rely 
only on musical relevance to connect songs and create radio playlists, 
all artists are treated equally in the playlist selection process and 
as a result independent music is likely heard more on Pandora then 
perhaps any other popular radio service. More than 50 percent of 
Pandora radio performances are from independent musicians, compared to 
less than 10 percent on broadcast radio.
What qualities are unique about ``new media'' radio, and what benefits 
        are associated with those qualities?
    In one sense multimedia convergence has already blurred the line 
between traditional `terrestrial radio', Internet radio, mobile radio, 
cable radio, satellite radio and even community radio. For example:

   Your mobile phone today can transmit a ``webcast'', and with 
        a $2 adaptor you can listen to that Internet radio through your 
        car stereo.

   You can start a ``community'' radio station on the Internet 
        and while content is focused locally, an audience is available 
        (and may actually listen) globally.

   Your car stereo today comes pre-loaded with AM/FM and 
        perhaps XM, but in only a few years cars will have WiMAX 
        broadband access and you will be able to enjoy Internet radio 
        directly and throw away the adaptor I just spoke of.

    To a listener who is hearing a single station at a given time, it 
is just radio and their choices are amazing--which content do I want to 
hear, when do I want to hear it, and on what device?
    But in another sense, Internet radio is uniquely different from 
broadcast, satellite and even low-power FM radio, because on the web 
there are virtually no spectrum limitations and therefore no capacity 
or scarcity issues. As a result, Internet radio offers almost unlimited 
``stations'' which results in unlimited content diversity.
    For music fans, Internet radio means no longer being confined to 
local or even satellite stations playing homogenous music for broad 
audiences of thousands or tens of thousands of listeners. Instead, 
individuals can hear the types of music they enjoy and simultaneously 
discover new songs and artists that would otherwise be literally 
invisible to them. Unconstrained by spectrum limitations, webcasting 
has created a genuine explosion of accessible musical diversity. Lute 
music, classic country, jazz, klezmer, dixie, gospel, Latin and 
Hawaiian music--you name it and you can find it--every kind and color 
of music has found a home and connected with its audience, no matter 
how small, on the Internet.
    Another unique feature of Internet radio is click-to-buy purchasing 
opportunities, and immediate access to artist information, including 
the artist's promotional website and tour schedule. Pandora is a 
powerful platform for recording companies and artists during this 
tumultuous period for recorded music. An August 2007 Nielsen/NetRatings 
research study concluded that Pandora listeners are three to five times 
more likely to have purchased music in the last 90 days than the 
average American. Similarly, Pandora is one of the top referral sites 
for music purchasing from both Amazon.com and the iTunes Music Store. 
Other studies have documented that Internet radio listeners are 
generally more engaged with music, they talk about it more and attend 
more performances, and they inevitably promote artists and music 
through word-of-mouth marketing.
    Finally, of course, there is the issue of royalties to performers 
and recording companies. As you know, traditional broadcasters do not 
pay royalties but the rest of us--cable, satellite and Internet radio--
do pay. You may not be aware that Internet radio has the smallest of 
all radio revenue streams, but we pay proportionately the highest 
royalties.


    I am proud that in 2006 Pandora paid more than $2 million in 
royalties to artists and recording companies, and had the old royalties 
rates stayed in effect, then in 2007 we would be on track to pay over 
$4 million. Instead, unfortunately, the Copyright Royalty Board 
recently increased royalty rates more than 30 percent so our royalty in 
2007 is now likely to reach over $6 million, almost 50 percent of our 
total revenue. And per listener per track royalty rates for Internet 
radio are scheduled to climb an additional 27 percent in 2008, and 29 
percent more in 2009.
    Under the CRB decision Internet music radio is economically 
unsustainable; it is not even a close call. Pandora has skyrocketed 
from a standing start to millions of listeners in 2 years; we were 
getting within sight of cash-flow positive operations under the old 
rates, but now we are back under water with no hope of ever emerging as 
the royalty rates continue to increase. Of course our disappointment is 
magnified because our broadcast and satellite competitors enjoy no 
royalties or very reasonable royalties, respectively.
    It is for these reasons that Pandora and the entire Internet radio 
industry thank Senators Kerry and Dorgan for cosponsoring the Internet 
Radio Equality Act, S. 1353, which would resolve this industry crisis 
by reversing the Copyright Royalty Board's recent rate-setting decision 
and set royalties at a reasonable 7.5 percent of revenue--higher than 
that paid by any U.S.-based radio service and higher than the average 
royalties in Europe that the recording industry references as the 
bastion of sound recording performance royalty fairness.
    In the starkest possible terms, the Committee and the Congress 
should be aware that Pandora and the entire Internet music radio 
industry cannot afford the CRB royalty rates. Today, we still are 
hopeful and we believe that some combination of Congress, the courts, 
or a negotiated resolution with SoundExchange will favorably resolve 
this threat. But if we conclude that the CRB royalty rates are not 
going to be rectified, Pandora would shut down immediately.
    Congress should also understand that Pandora and our DiMA 
colleagues are not alone in our effort to reverse this unfair CRB 
royalty decision. Since the SaveNetRadio campaign began several hundred 
thousand people have contacted Congress and urged support for Internet 
radio and more than 6,000 artists have joined the effort in support of 
the Internet Radio Equality Act and more reasonable royalties for 
artists and recording companies. Everyone in the Coalition wants 
artists to be paid fairly and supports the growth of Internet radio 
which directly and indirectly benefits tens of thousands of working 
artists. But without reduced royalties there is simply no way for 
Pandora, or any other webcaster, to remain in business.
          * * * * * * *
    In just 10 years more than 70 million listeners have flocked to 
Internet radio, a virtual fountain of music discovery. Many of our 
listeners are returning to radio after years of exile spent listening 
to the same CDs they bought in college, or not listening to music at 
all. And musicians are back in business also, as they can now find fans 
and build community with people who want to buy their music and want to 
attend their performances. The Internet continues to be a remarkable 
democratizing force for creativity and innovation.
    It has been a wonderful experience to watch our service grow and to 
witness our listeners' passion and enthusiasm as they have rediscovered 
their love of music. I am Pandora's traveling minstrel, and in the last 
18 months I have visited almost 100 different towns and cities meeting 
in ``town hall''-style with Pandora listeners. From Biloxi and Baton 
Rouge to Seattle and San Francisco I have met with tens and often 
hundreds of listeners at each meeting and enjoyed the energy of 
enthusiastic music fans and musicians who are re-engaged and re-
committed to their music and their newfound radio experience.
    As a former performing musician and composer, it is exciting to be 
at the dawn of a new renaissance for musicians, who are empowered with 
new ways to market their music and successfully develop a fan base. I 
often wish I could start my band now instead of back in the early 
nineties when our resources were a van, a staple gun and a pile of 
flyers that we handed out or stapled to telephone poles.
    It is my hope, indeed the reason I started this company, that we 
are at the beginning of the development of a musicians' middle class, 
as radio services like Pandora allow musicians to find a fan base and 
maintain a steady career making music, which is a real alternative to 
the major-label system that makes you an enormous star or leaves you 
unemployed. These e-mails from Pandora listeners testify to this new 
era for independent musicians:

        ``I think the best thing you've done is introduced me to so 
        many artists that I love but would have never known that they 
        existed otherwise. Now I buy their albums and look for upcoming 
        shows in my area. You've done the music industry a great 
        service from what I can tell.''

        ``Let me tell you that you are a blessing in my life. I'm 77 
        years old and the music I like and grew up with just isn't 
        played much any more. Sometimes tears come to my eyes when I 
        hear certain songs. They bring back so many memories. I don't 
        think I have heard any songs I haven't liked. Thank you from 
        the bottom of my heart. I send you arms full of appreciation.''

    And from a musician:

        ``Hi guys--just wanted to thank you for putting my music into 
        your system. I have had sales all over the U.S. from people who 
        found me via your site. Pandora is great. I use it all the 
        time. And I can't believe what a promotional tool it has become 
        for my own music.''

    Since 1999 Pandora has survived the dot-com collapse thanks to more 
than 30 employees who worked months without salaries, and we are now 
one of the largest payors of sound recording performance rights in this 
great Nation. We employ more than 100 people, most of whom are trained 
and experienced musicians and most of whom work at our headquarters in 
an enterprise zone in Oakland, California. We have invested; we have 
innovated; and we have had some very good initial success. Please 
support resolution of the Internet radio royalty crisis by cosponsoring 
the Internet Radio Equality Act so our industry can continue to grow, 
and continue to benefit artists by paying fair royalties and developing 
new audiences.
    As a musician who spent a decade walking in the shoes of the 
working artist, I am heartbroken at the prospect of silencing what has 
become an extraordinary resource for the artist community. As a 
listener and music lover, I am depressed at the prospect of losing the 
most powerful music discovery tool ever put in the hands of music 
lovers. And as a webcaster, I am dismayed at the prospect of telling 
millions of devoted listeners that their radio stations are dead.
    Thank you for your time and consideration.

    Senator Cantwell. Thank you, Mr. Westergren for the 
testimony and for the demonstration, we appreciate that. It's 
not every day we get a media demonstration.
    Mr. Turner, if you'd like to give your statement?

        STATEMENT OF S. DEREK TURNER, RESEARCH DIRECTOR,

           FREE PRESS; ON BEHALF OF CONSUMERS UNION,

                 CONSUMER FEDERATION OF AMERICA

    Mr. Turner. Madam Chair, Chairman Inouye, and Members of 
the Committee, I thank you for the opportunity to testify today 
on the important issues surrounding the future of radio.
    I'm the Research Director for Free Press, a public interest 
organization dedicated to public education and consumer 
advocacy on communications policy.
    Even in today's multimedia world, broadcast radio remains 
one of the most powerful media in our daily lives. Well over 90 
percent of Americans tune to the radio each week, for an 
average of 19 hours a week.
    New technologies like HD Radio and Internet simulcasting 
hold great promise for the future of this industry, as do 
changing demographics.
    For example, while total time spent listening to radio has 
stagnated for the general population, it has actually increased 
substantially among African-Americans and Latinos, and it 
matters who owns these stations.
    In a democracy, the diversity of ownership should reflect 
the diversity of the population. Sadly, as my testimony will 
show, this is not the case.
    The FCC has a statutory obligation to promote ownership 
diversity. The Communications Act directs the Commission to, 
``avoid excessive concentrations of licenses by disseminating 
licenses among a wide variety of applicants, including 
businesses owned by women and members of minority groups.''
    But the Commission lacks even the most basic understanding 
of what actually the true state of female and minority 
broadcast ownership is. Now, we can't evaluate the problems 
that we don't measure or study, let alone solve them.
    This is why my organization, Free Press, took on the task 
that the Commission has neglected. Using the Commission's own 
data, we found that despite comprising over half of the 
population, women in this country own just 6 percent of the 
radio stations. Minorities make up a full third of our 
population, but own just 7.7 percent of the radio stations, and 
the stations that women and minorities own are fundamentally 
different. Female and minority owners are more likely to own 
just one single station, and are more likely to be local 
owners, which fosters a deeper connection to the communities 
that they serve.
    Now, these characteristics are very important, for they are 
the precise characteristics of those owners who are most 
vulnerable to the pressures of media consolidation.
    The 1996 Telecom Act triggered a wave of consolidation in 
the radio industry, by removing the national ownership limit, 
and increasing local ownership caps. The impact on ownership 
diversity was clear, and it was devastating.
    Since 1996, there has been a whopping 40 percent decrease 
in the number of owners, even as the number of stations has 
increased. In the average local market, just two firms control 
74 percent of the market's revenue--a highly concentrated level 
by any standard.
    Now, how do female and minority owners fare under this wave 
of consolidation? Our research demonstrates conclusively and 
empirically that more consolidation means less female and 
minority ownership. As concentration increases, these single-
station and local owners find it increasingly difficult to 
compete against the big radio giants.
    Now, I mentioned earlier that the FCC has no idea what the 
true state of female and minority broadcast ownership is. This 
is not hyperbole. It may be hard to believe, but the Commission 
has never conducted an accurate count.
    Though the FCC collects information regarding the race, 
ethnicity and gender of every broadcast owner, they have done 
nothing meaningful with this information. Instead, they have 
issued bogus summaries that are deeply flawed.
    For example, our research conclusively showed that the 
Commission, in its most recent effort, missed over half of the 
radio stations owned by women and minorities. In television 
they fared far worse, missing over two-thirds of the television 
stations owned by women and minorities. This is simply a 
shocking testament to the FCC's indifference to the plight of 
women and people of color in this country, and it is also an 
embarrassing record of neglect and incompetence for a Federal 
agency.
    How can the Commission conduct any meaningful analysis 
regarding the effects of its policies, if it can't even conduct 
a basic count of who owns what?
    Congress must send a message to the FCC to stop its rush 
toward more media consolidation. The Commission needs to first 
adequately study the issue of minority ownership, before it 
moves forward with any rule changes. And the Commission needs 
to complete other related tasks, such as the dormant localism 
proceeding, and issue the long-overdue Section 257 report that 
Congress requires on the Commission's efforts to promote 
ownership diversity.
    We also support other measures that increase opportunities 
for women and minorities to access the public radio airwaves. 
The Local Community Radio Act, sponsored by Senators Cantwell 
and McCain, expands Low Power FM and will help create a more 
diverse broadcast system and will provide a crucial path to 
full ownership by women and people of color.
    In closing, ownership rules exist for a reason--to increase 
diversity and localism, which in turn produces more diverse 
speech, more choices for listeners, and more owners who are 
responsive to their local communities.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Turner follows:]

 Prepared Statement of S. Derek Turner, Research Director, Free Press; 
      on Behalf of Consumers Union, Consumer Federation of America
Summary
    Free Press,i Consumers Union,ii and Consumer 
Federation of America iii appreciate the opportunity to 
testify on the important communications policy issues surrounding the 
future of radio. As consumer advocates, we strongly support policies 
that will fulfill the goals of the Communications Act ``to make 
available . . . to all the people of the United States, without 
discrimination on the basis of race, color, religion, national origin, 
or sex'' \1\ a media that favors a ``diversity of media voices'',\2\ 
characterized by ``vigorous economic competition, technological 
advancement'',\3\ and one that serves ``the public interest, 
convenience, and necessity.'' \4\ Ensuring a vibrant future for radio, 
as well as all other communications media, is vital to maintaining our 
economic and social well being in addition to our vigorous political 
discourse. Our democracy thrives on the dissemination of the widest 
possible sources of information, and radio remains one of the most 
important conduits for the propagation of local, national and 
international news, culture, entertainment and information.
---------------------------------------------------------------------------
    \i\ Free Press is a national, nonpartisan organization with over 
350,000 members working to increase informed public participation in 
media and communications policy debates.
    \ii\ Consumers Union is a nonprofit membership organization 
chartered in 1936 under the laws of the state of New York to provide 
consumers with information, education and counsel about goods, 
services, health and personal finance, and to initiate and cooperate 
with individual and group efforts to maintain and enhance the quality 
of life for consumers. Consumers Union's income is solely derived from 
the sale of Consumer Reports, its other publications and from 
noncommercial contributions, grants and fees. In addition to reports on 
Consumers Union's own product testing, Consumer Reports with more than 
5 million paid circulation, regularly, carries articles on health, 
product safety, marketplace economics and legislative, judicial and 
regulatory actions which affect consumer welfare. Consumers Union's 
publications carry no advertising and receive no commercial support.
    \iii\ The Consumer Federation of America is the Nation's largest 
consumer advocacy group, composed of over 280 state and local 
affiliates representing consumer, senior citizen, low-income, labor, 
farm, public power and cooperative organizations, with more than 50 
million individual members.
    \1\ The Communications Act of 1934 (As Amended in 1996), Title I, 
Section 1.
    \2\ The Communications Act of 1934 (As Amended in 1996), Title II, 
Section 257.
    \3\ Ibid.
    \4\ Ibid.
---------------------------------------------------------------------------
    The United States is a diverse melting pot of people and cultures. 
In such an environment it is not unreasonable to expect that the 
privilege of access to the scarce radio broadcast airwaves be 
distributed in a manner that reflects our racial, ethnic and gender 
diversity. Unfortunately, this is not the case. Women and people of 
color comprise 67 percent of our population, but own just 13 percent of 
our Nation's radio stations. This underrepresentation is a national 
disgrace and a true crisis for the millions of Americans who lack 
representative voices on the public airwaves. Compounding this tragedy 
is the simple fact that women and people of color are radio's future. 
African American's and Latinos spend 20 percent more of their time 
listening to radio than whites, over 22 hours each week. And while 
radio listenership has stagnated or declined among whites over the past 
decade, it has actually increased among people of color.
    Though the Communications Act explicitly directs the Federal 
Communications Commission to disseminate ``licenses among a wide 
variety of applicants, including . . . businesses owned by members of 
minority groups and women'',\5\ our research reveals that the FCC lacks 
even the most basic understanding of the current state of female and 
minority ownership, and therefore has no basis to assess the impacts of 
its broadcast regulatory policies on these underrepresented owners.
---------------------------------------------------------------------------
    \5\ The Communications Act of 1934 (As Amended in 1996), Title II, 
Section 309(j).
---------------------------------------------------------------------------
    Our study, Off The Dial (attached to this testimony as an 
appendix),* is to date the only comprehensive assessment of 
the state of female and minority radio ownership and the impacts of FCC 
regulatory policy. Using the Commission's own data, we have done the 
work that the FCC has neglected to do.
---------------------------------------------------------------------------
    \*\ This document is retained in the Committee's files and is also 
available at http://www.freepress.net/docs/off_the_dial.pdf.
---------------------------------------------------------------------------
    The results of this study indicate a perilous state of under-
representation of women and minorities in the ownership of broadcast 
media, where two-thirds of the U.S. population has very few stations 
representing their communities or serving their needs. The results also 
point to massive consolidation and market concentration as one of the 
key structural factors keeping women and minorities from accessing the 
public airwaves.
    We hope that this study reminds policymakers at the FCC and in 
Congress that ownership rules that mitigate media market concentration 
and consolidation exist for a reason: to increase diversity and 
localism in ownership, which in turn produces more diverse speech, more 
choice for listeners, and more owners who are responsive to their local 
communities and serve the public interest.
The Dismal State of Female and Minority Ownership
    We analyzed tens of thousands of pages of official FCC documents to 
determine the racial and gender status of the owner of every single 
full-power licensed commercial radio station broadcasting in the 50 
U.S. states and the District of Columbia--over 10,500 stations in 
total. The results from this effort are stark:

   Women own just 6 percent of all full-power commercial 
        broadcast radio stations, even though they comprise 51 percent 
        of the U.S. population.

   Racial or ethnic minorities own just 7.7 percent of all 
        full-power commercial broadcast radio stations, though they 
        account for 34 percent of the U.S. population.

    Our previous television study, Out of the Picture,\6\ found that 
female and minority ownership of broadcast television stations was 
similarly anemic. Women own 5 percent of broadcast TV stations, while 
people of color own just 3.3 percent of stations.
---------------------------------------------------------------------------
    \6\ S. Derek Turner and Mark N. Cooper, Out of the Picture: 
Minority and Female TV Station Ownership in the United States, Free 
Press, October 2006.
---------------------------------------------------------------------------
    These groups' level of radio station ownership is only slightly 
higher, despite the fact that the cost of operating a radio station is 
dramatically lower than a TV station. Moreover, radio station ownership 
is very low compared to the levels seen in other commercial industry 
sectors:

   According to the most recent figures available, women own 28 
        percent of all non-farm businesses.

   Racial and ethnic minorities owned 18 percent of all non-
        farm businesses, according to the most recent data.

   We found that women own 10.4 percent of all unique broadcast 
        businesses (controlling 6 percent of all stations) while 
        minorities own 10.4 percent of all unique broadcast businesses 
        (controlling 7.7 percent of all stations).

   In sectors such as transportation and healthcare, people of 
        color own businesses at levels near their proportion of the 
        general population. But in the commercial radio broadcast 
        sector the level of minority station ownership is over four 
        times below their proportion of the general population. That's 
        lower than every sector of the economy tracked by the Census 
        Bureau except for mining and enterprise management.

    Not only do women and people of color own few stations, but 
commercial stations have very few women and minorities at the top--in 
the positions of CEO, president or general manager.

   Just 4.7 percent of all full-power commercial broadcast 
        radio stations are owned by an entity with a female CEO or 
        president.

     Only 1 percent of the stations not owned by women are 
            controlled by an entity with a female CEO or president.

   Just 8 percent of all full-power commercial broadcast radio 
        stations are owned by an entity with a CEO or president who is 
        a racial or ethnic minority.

     Less than 1 percent of stations not owned by people of 
            color are controlled by an entity with a minority CEO or 
            president.

    However, minority-owned stations are significantly more likely to 
be run by a female CEO or president than non-minority-owned stations, 
and female-owned stations are significantly more likely to be run by a 
minority CEO or president than non-female-owned stations. And both 
female-owned and minority-owned stations are significantly more likely 
to employ a woman as general manager.
Female and Minority Owners Control Fewer Stations per Owner
    Female and minority owners are more likely to own fewer stations 
per owner than their white male and corporate counterparts. They are 
also more likely to own just a single station.

   Of all the unique minority owners, 67.8 percent own just a 
        single station. However, only 49.6 percent of the unique non-
        minority owners are single-station owners.

   60.8 percent of the unique female owners are single-station 
        owners, versus just 50.4 percent of the unique non-female 
        station owners.

   Only 24.4 percent of the unique minority station owners are 
        group owners--owning stations in multiple markets, or more than 
        three stations in a single market--compared to 29.5 percent of 
        non-minority owners.

   Just 16.9 percent of female owners are group owners, versus 
        30.4 percent of non-female owners.

   Overall, racial and ethnic minorities own 2.6 stations per 
        unique owner compared to 3.9 stations owned per unique white, 
        non-Hispanic owner.

   Women own 2.1 stations per unique owner compared to 4.1 
        stations owned per unique male owner.

    Female- and minority-owned stations differ from non-female- and 
non-minority-owned stations in other ways as well. For example, women 
and people of color are more likely to own less valuable AM stations 
and their stations are more likely to be found in larger, more 
populated markets.
Female- and Minority-Owned Stations Are More Local, More Often
    Localism is supposed to be one of the FCC's key considerations in 
crafting media ownership regulations. Local owners, in theory, are more 
connected to the communities they serve and thus in a better position 
to respond to public needs than absentee owners who reside hundreds or 
thousands of miles away.
    Our study found that female owners are significantly more likely to 
be local station owners.

   64.4 percent of all female-owned stations are locally owned, 
        versus just 41.6 percent of non-female-owned stations.

    For minority-owned stations, the relationship is somewhat more 
complex because the minority population is more concentrated in certain 
areas. Minority-owned stations are more likely to be locally owned than 
non-minority-owned stations in larger markets, which have bigger 
minority populations.

   Among all radio stations, 43 percent of minority-owned 
        stations are locally owned, the same level as non-minority-
        owned stations.

     But in Arbitron radio markets (where four out of every 
            five minority-owned stations are located, and which have 
            significantly higher minority populations), 38.3 percent of 
            minority-owned stations are locally owned, versus 29.4 
            percent of non-minority-owned stations.

                    Local Ownership of Radio Stations
                            [by State (2007)]
------------------------------------------------------------------------
                                     Percent of Radio  Stations That Are
               State                             Locally Owned
------------------------------------------------------------------------
OK                                                                 60.6
TN                                                                 58.2
KY                                                                 57.0
AL                                                                 56.5
MS                                                                 54.8
NM                                                                 54.7
AR                                                                 54.7
ND                                                                 54.1
AK                                                                 54.0
NE                                                                 53.3
ID                                                                 52.7
IN                                                                 51.2
OR                                                                 50.8
GA                                                                 49.9
UT                                                                 49.4
MN                                                                 47.5
MO                                                                 47.2
NJ                                                                 46.4
NC                                                                 46.0
WI                                                                 45.9
MT                                                                 45.6
WV                                                                 45.6
LA                                                                 45.3
KS                                                                 44.2
IA                                                                 42.2
MI                                                                 42.0
WY                                                                 41.5
WA                                                                 41.4
VA                                                                 41.3
NH                                                                 41.2
SC                                                                 40.1
AZ                                                                 38.9
PA                                                                 38.5
IL                                                                 38.0
TX                                                                 37.6
OH                                                                 36.4
FL                                                                 36.0
HI                                                                 35.7
MA                                                                 35.2
NY                                                                 35.0
CT                                                                 34.3
RI                                                                 33.3
VT                                                                 31.5
ME                                                                 30.0
CO                                                                 29.6
CA                                                                 28.3
MD                                                                 27.2
SD                                                                 26.2
NV                                                                 21.1
DE                                                                 16.7
DC                                                                  0.0
========================================================================
  Nationwide                                                       42.9
------------------------------------------------------------------------


     In unrated markets (which have significantly lower 
            minority populations), 56 percent of minority-owned 
            stations are locally owned, compared to 62.9 percent of 
            non-minority-owned stations.

                  Minority Ownership of Radio Stations
                            [by State (2007)]
------------------------------------------------------------------------
                                             Percent of Radio  Stations
   State     Percent Minority  Population   That Are  Owned by People of
                       in State                        Color
------------------------------------------------------------------------
HI                                 75.43                          11.43
DC                                 68.44                          20.00
NM                                 57.59                           8.18
CA                                 57.21                          15.49
TX                                 51.89                          19.15
MD                                 41.68                          17.48
NV                                 41.36                           4.23
GA                                 41.25                          13.15
MS                                 40.74                          14.91
AZ                                 40.51                           7.78
NY                                 39.77                           3.11
FL                                 38.97                          12.22
NJ                                 37.75                          17.86
LA                                 37.28                           8.96
IL                                 34.87                           2.90
SC                                 34.67                          16.43
AK                                 33.74                           0.00
VA                                 32.39                           7.12
NC                                 32.26                          11.85
DE                                 31.25                           0.00
AL                                 31.04                          11.31
CO                                 28.47                           6.15
OK                                 27.99                          10.86
CT                                 25.51                           8.96
AR                                 23.66                           5.98
WA                                 23.60                           4.29
TN                                 22.54                           4.55
MI                                 22.37                           4.10
RI                                 21.06                           4.17
MA                                 20.71                           4.00
OR                                 19.23                           0.00
KS                                 19.05                           1.16
PA                                 18.00                           2.41
MO                                 17.49                           1.75
OH                                 17.18                           7.14
UT                                 17.16                           4.60
IN                                 16.19                           3.66
NE                                 15.16                           0.00
WI                                 14.41                           0.75
MN                                 14.15                           1.56
ID                                 13.72                           1.82
SD                                 13.46                           0.00
WY                                 11.99                           5.32
KY                                 11.65                           1.72
MT                                 11.44                           0.00
ND                                  9.56                           0.00
IA                                  8.98                           1.46
NH                                  6.43                           0.00
WV                                  5.88                           0.00
ME                                  4.73                           0.00
VT                                  4.37                           0.00
========================================================================
Nationwide                          33.8                           7.73
------------------------------------------------------------------------


                   Female Ownership of Radio Stations
                            [by State (2007)]
------------------------------------------------------------------------
                                     Percent of Radio  Stations That Are
               State                            Owned by Women
------------------------------------------------------------------------
DE                                                                25.00
CT                                                                19.40
FL                                                                11.09
ND                                                                10.81
MD                                                                10.68
HI                                                                10.00
AL                                                                 9.54
IA                                                                 9.22
OK                                                                 9.14
WA                                                                 8.57
RI                                                                 8.33
KY                                                                 8.25
VA                                                                 8.19
AK                                                                 7.94
AZ                                                                 7.19
LA                                                                 6.97
WV                                                                 6.80
TX                                                                 6.76
MT                                                                 6.40
OR                                                                 6.22
PA                                                                 6.15
TN                                                                 6.06
GA                                                                 6.03
NH                                                                 5.88
MS                                                                 5.70
CO                                                                 5.59
VT                                                                 5.56
IL                                                                 5.51
IN                                                                 5.28
OH                                                                 5.19
AR                                                                 5.13
NE                                                                 4.92
NC                                                                 4.62
NY                                                                 4.15
MA                                                                 4.00
MI                                                                 3.79
NM                                                                 3.77
CA                                                                 3.76
SC                                                                 3.38
MO                                                                 2.80
WI                                                                 2.61
NJ                                                                 2.38
MN                                                                 2.33
UT                                                                 2.30
NV                                                                 1.41
SD                                                                 1.19
WY                                                                 1.06
ID                                                                 0.91
KS                                                                 0.58
DC                                                                 0.00
ME                                                                 0.00
========================================================================
Nationwide                                                          6.0
------------------------------------------------------------------------

Female- and Minority-Owned Stations Thrive in Less-Concentrated Markets
    Our analysis suggests that both female- and minority-owned stations 
thrive in markets that are less concentrated. Markets with female and 
minority owners have fewer stations per owner on average than markets 
without them.

   The level of market concentration is significantly lower in 
        markets with female and minority owners.

   The probability that a particular station will be female- or 
        minority-owned is significantly lower in more concentrated 
        markets.

   The probability that a particular market will contain a 
        female- or minority-owned station is significantly lower in 
        more concentrated markets.

   Female- and minority-owned stations are more likely to be 
        found in each other's markets.

    Allowing further industry consolidation will unquestionably 
diminish the number of female- and minority-owned stations. The FCC 
should seriously consider these consequences before enacting any 
policies that could further concentration.
Female and Minority Ownership Is Low, Even When They're in the Majority
    The study shows that women and people of color everywhere--
regardless of their proportion of the population in a given market--
have very few owners representing them on the radio dial.

   The average radio market has 16 white male-owned stations 
        for every one female-owned and every two minority-owned 
        stations.

    Minority-owned stations are far more likely to be found in markets 
with higher minority populations. But even in these markets, the level 
of minority ownership is still low.

   Minority-owned stations are found in about half of all 
        Arbitron radio markets.

   In 288 of the 298 U.S. Arbitron radio markets, the 
        percentage of minorities living in the market is greater than 
        the percentage of radio stations owned by minorities.

   23 of the 298 U.S. Arbitron radio markets have ``majority-
        minority'' populations. But in these markets, too, the 
        percentage of radio stations owned by people of color is far 
        below the percentage of minority population.

     In two of these ``majority-minority'' markets 
            (Stockton, Calif. and Las Cruces, N.M.), people of color 
            own no stations.

   Minorities own more than one-third of a market's stations in 
        just seven of the Nation's 298 radio markets. Minorities own 
        more 25 percent of a market's stations in just 24 of the 
        Nation's 298 radio markets.

    Despite making up half the population in every market, the level of 
female-station ownership is still extremely low across the board.

   Female-owned stations are found in about 40 percent of all 
        Arbitron radio markets.

   The Stamford-Norwalk, Conn. market is the only market in the 
        United States where women own more than half of the stations.

   Women own more than one-third of a market's stations in just 
        six of the Nation's 298 radio markets. Women own more than 25 
        percent of a market's stations in just 18 of the Nation's 298 
        radio markets.
Format Diversity, Market Revenue and Audience Share
    Minority owners are more likely to air formats that appeal to 
minority audiences, even though other formats are more lucrative. 
Choosing these different formats has a practical impact on the market 
status of minority-owned stations, as measured by audience ratings and 
share of market revenues.

   Among the 20 general station format categories, minority-
        owned stations were significantly more likely to air 
        ``Spanish,'' ``religion,'' ``urban,'' and ``ethnic'' formats. 
        The Spanish and religion formats alone account for nearly half 
        of all minority-owned stations.

   Primarily because the Spanish, religion and ethnic formats 
        attract smaller segments of the market, the average audience 
        ratings share and share of market revenue held by minority-
        owned stations is significantly lower than the ratings and 
        revenue shares of nonminority-owned stations.

                                 Female and Minority Ownership of Radio Stations
                                               [by Format (2007)]
----------------------------------------------------------------------------------------------------------------
                                                    Percent of  Format's Stations  Percent of  Format's Stations
                  Format Category                      Owned by People of Color            Owned by Women
----------------------------------------------------------------------------------------------------------------
Adult Contemporary                                                           1.8                            5.7
Album Oriented Rock                                                          1.8                           15.1
Classical                                                                    0.0                            6.7
Contemporary Hits                                                            2.7                            3.4
Country                                                                      2.3                            6.8
Easy Listening                                                               2.2                           15.6
Ethnic                                                                      41.7                           11.5
Jazz/New Age                                                                11.3                            8.1
Middle of the Road                                                           1.6                            6.3
Miscellaneous                                                                6.4                            3.8
News                                                                         2.2                            4.8
Nostalgia/Big Band                                                           2.5                            6.1
Oldies                                                                       3.1                            6.3
Religion                                                                    14.0                            7.2
Rock                                                                         2.2                            5.6
Spanish                                                                     39.3                            4.8
Sports                                                                       3.9                            3.9
Talk                                                                         4.8                            4.4
Urban                                                                       32.3                            6.2
----------------------------------------------------------------------------------------------------------------

Ownership and Programming Diversity: A Case Study of Talk Radio
    Though the focus of this study was on structural ownership, recent 
controversy surrounding remarks by two prominent talk radio hosts--Rush 
Limbaugh and Don Imus--spurred an examination of talk radio programming 
on minority- and female-owned stations. We found:

   No minority-owned stations aired ``Imus in the Morning'' at 
        the time of its cancellation.

   All minority-owned stations and minority-owned talk and news 
        format stations were significantly less likely to air ``The 
        Rush Limbaugh Show,'' as were female-owned stations.

   Having a minority- or female-owned station in a market was 
        significantly correlated with a market airing both conservative 
        and progressive programming.

   Overall, markets that aired both progressive and 
        conservative hosts were significantly less concentrated that 
        markets that aired just one type of programming.

    These results suggest that diversity in ownership leads to 
diversity in programming content. This result may seem obvious. But 
policymakers may have forgotten the reason behind ownership rules and 
limits on consolidation: Increasing diversity and localism in ownership 
will produce more diverse speech, more choice for listeners, and more 
owners who are responsive to their local communities.
The Commission Has Failed to Adequately Account for the True Level of 
        Female and Minority Ownership of Full-Power Commercial 
        Broadcast Outlets
    Historically, women and racial and ethnic minorities have been 
under-represented in broadcast ownership due to a host of factors--
including the fact that some of these licenses were originally awarded 
decades ago when the Nation lived under segregation. The FCC, beginning 
with its 1978 Statement of Policy on Minority Ownership of Broadcasting 
Facilities, repeatedly has pledged to remedy this sorry history.\7\
---------------------------------------------------------------------------
    \7\ Statement of Policy on Minority Ownership of Broadcasting 
Facilities, 68 FCC 2d, 979, 980 n. 8 (1978).
---------------------------------------------------------------------------
    Congress also has recognized the poor state of female and minority 
ownership. The Telecommunications Act of 1996 (``The Act'') contains 
specific language aimed at increasing female and minority ownership of 
broadcast licenses and other important communications media.\8\ The Act 
requires the FCC to eliminate ``market entry barriers for entrepreneurs 
and other small businesses'' and to do so by ``favoring diversity of 
media voices.'' \9\ The Act also directs the Commission when awarding 
licenses to avoid ``excessive concentration of licenses'' by 
``disseminating licenses among a wide variety of applicants, including 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women.'' \10\
---------------------------------------------------------------------------
    \8\ 47 U.S.C.  257,  309(j)
    \9\ Section 257 is contained within Title II of the Communications 
Act and thus does not directly encompass broadcast services. However, 
the Commission has interpreted some aspects of the language of  257 to 
apply to broadcast licensing. In 1998, the Commission stated: ``While 
telecommunications and information services are not defined by the 1996 
Act to encompass broadcasting, Section 257(b) directs the Commission to 
`promote the policies and purposes of this Act favoring diversity of 
media voices' in carrying out its responsibilities under Section 257 
and, in its Policy Statement implementing Section 257, the Commission 
discussed market entry barriers in the mass media services.'' See FCC 
98-281, Report and Order: In the Matter of 1998 Biennial Regulatory 
Review--Streamlining of Mass Media Applications Rules, and Processes--
Policies and Rules Regarding Minority and Female Ownership of Mass 
Media Facilities, MM Docket No. 98-43, November 25, 1998, herein after 
referred to as the Form 323 Report and Order.
    \10\ 47 U.S.C.  309(j)
---------------------------------------------------------------------------
    The Commission initially appeared to take this mandate seriously. 
In 1997, the Commission completed a proceeding, as required by the Act, 
which identified barriers to entry for small businesses (and has been 
interpreted to include minority- and female-owned entities) and set 
forth the agency's plan for eliminating these barriers.\11\ 
Unfortunately, subsequent triennial reports have lacked substance.\12\
---------------------------------------------------------------------------
    \11\ ``In the Matter of Section 257 Proceeding to Identify and 
Eliminate Market Entry Barriers for Small Businesses,'' Report, GN 
Docket No. 96-113,12 FCC Rcd 16802 (1997).
    \12\ In his dissenting statement on the 2004 Section 257 report, 
Commissioner Michael Copps described the report as a ``a slapdash 
cataloging of miscellaneous Commission actions over the past 3 years 
that fails to comply with the requirements of Section 257.''
---------------------------------------------------------------------------
    In 1998, the Commission further demonstrated its seriousness by 
taking a crucial first step to determine the actual state of female and 
minority ownership of broadcast radio and television stations. That 
year, the FCC began requiring all licensees of full-power commercial 
stations to report the gender and race/ethnicity of all owners with an 
attributable interest in the license.\13\ In the Form 323 Report and 
Order, the Commission stated:
---------------------------------------------------------------------------
    \13\ 47 C.F.R. 73.3615.

        Our revised Annual Ownership Report form will provide us with 
        annual information on the state and progress of minority and 
        female ownership and enable both Congress and the Commission to 
        assess the need for, and success of, programs to foster 
        opportunities for minorities and females to own broadcast 
        facilities.\14\
---------------------------------------------------------------------------
    \14\ Report and Order, In the Matter of 1998 Biennial Regulatory 
Review Streamlining of Mass Media Applications, Rules, and Processes 
Policies and Rules Regarding Minority and Female Ownership of Mass 
Media Facilities, MM Docket Nos. 98-43; 94-149, FCC 98-281 (1998).

    Other than this monitoring effort, the FCC has done very little to 
promote female and minority broadcast ownership (and the follow-up on 
this monitoring has been abysmal). In its 1999 Order that allowed 
television duopolies, the Commission paid lip service to concerns about 
the policy change's effect on minority and female ownership, but still 
went forward with rule changes that allowed increased market 
concentration.\15\ In 2004, the Commission sought input into how it 
could better implement Section 257 of the Act.\16\ Until this current 
Further Notice, there has been virtually no action made toward 
evaluating the findings of the original Section 257 studies.
---------------------------------------------------------------------------
    \15\ Report and Order, In the Matter of Review of the Commission's 
Regulations Governing Television Broadcasting Television Satellite 
Stations Review of Policy and Rules, MM Docket Nos. 87-8. 91-221, FCC 
99-209 (1999).
    \16\ MB Docket No. 04-228, ``Media Bureau Seeks Comment on Ways to 
Further Section 257 Mandate and to Build on Earlier Studies'' DA 04-
1690, June 15, 2004.
---------------------------------------------------------------------------
    In the 2003 Order the Commission assured the public that ownership 
diversity was a key policy goal underlying its approach to ownership 
regulation.\17\ However, the Third Circuit found otherwise, stating 
that ``repealing its only regulatory provision that promoted minority 
television station ownership without considering the repeal's effect on 
minority ownership is also inconsistent with the Commission's 
obligation to make the broadcast spectrum available to all people 
`without discrimination on the basis of race.' '' \18\
---------------------------------------------------------------------------
    \17\ See 2003 Order, ``Encouraging minority and female ownership 
historically has been an important Commission objective, and we 
reaffirm that goal here.''
    \18\ See Prometheus, note 58.
---------------------------------------------------------------------------
    Before considering the potential effects of policy changes on 
female and minority ownership, the Commission must first know the 
current state of ownership and evaluate the effects of previous policy 
changes. No one should be in a better position to answer these 
questions than the FCC itself. The Commission possesses gender and 
race/ethnicity information on nearly every single broadcast entity and 
knows exactly when licenses changed hands.
    However, the FCC has no accurate picture of the current state of 
female and minority ownership, and shows no sign of taking the matter 
seriously. Though the Commission has gathered gender and race/ethnicity 
data for the past 7 years, it has shown little interest in the 
responsible dissemination of the information contained within the Form 
323 filings.
    This lack of interest or concern is made evident by the FCC's own 
Form 323 summary reports. Station owners began reporting gender/race/
ethnicity information in 1999, and the FCC released its first ``summary 
report'' in January 2003 (for reporting in 2001).\19\ A second summary 
followed in 2004 (for reporting in 2003).\20\ The most recent report 
was issued in June 2006 (for the 2004-2005 period).\21\ However, 
calling these publications ``summary reports'' is somewhat misleading, 
as they are merely a listing of each minority- or female-owned 
station's Form 323 response and not aggregated in any manner. No 
information on the stations not reportedly owned by women or minorities 
is given.
---------------------------------------------------------------------------
    \19\ Though this data summary is not directly displayed on the 
FCC's ownership data page (http://www.fcc.gov/ownership/data.html), it 
can be downloaded at http://www.fcc.gov/ownership/ownminor.pdf and 
http://www.fcc.gov/ownership/ownfemal.pdf.
    \20\ Though this data summary is not directly displayed on the 
FCC's ownership data page (http://www.fcc.gov/ownership/data.html), it 
can be downloaded at http://www.fcc.gov/ownership/owner_minor_2003.pdf 
and http://www.fcc.gov/ownership/owner_female_2003.pdf.
    \21\ http://www.fcc.gov/ownership/owner_minor_2004-2005.pdf and 
http://www.fcc.gov/ownership/owner_female_2004-2005.pdf.
---------------------------------------------------------------------------
    Closer examination of these summary reports reveals significant 
problems. For starters, on the FCC website where the most recent 
summary files are provided for download, there is a paragraph that 
explains the purpose of the data and provides a brief summary of the 
tally.\22\ This website lists the total number of stations that filed 
Form 323 or Form 323-E in the 2004-2005 calendar year, and then lists 
the total number of stations that the FCC determined are owned by women 
or people of color. All commercial stations are required to report the 
race/ethnicity and gender of station owners on Form 323. Form 323-E 
requires all non-commercial educational stations to report the identity 
of station owners, but does not require the disclosure of the race/
ethnicity or gender information.
---------------------------------------------------------------------------
    \22\ http://www.fcc.gov/ownership/data.html.
---------------------------------------------------------------------------
    However, since stations that file Form 323-E don't report gender or 
race/ethnicity information, it is perplexing why the FCC website 
reports the total number of stations that filed either form. This 
ambiguous reporting has led to some observers using these summaries to 
erroneously report the wrong percentage of stations owned.\23\
---------------------------------------------------------------------------
    \23\ For example, Howard University Professor Carolyn M. Byerly in 
an October 2006 report writes: ``FCC data indicate that in 2005, women 
owned only 3.4 percent and minorities owned only 3.6 percent of the 
12,844 stations filing reports.'' This report was based on the flawed 
FCC summaries of Form 323 data (see ``Questioning Media Access: 
Analysis of FCC Women and Minority Ownership Data,'' Benton Foundation 
and Social Science Research Council, October 2006). Also, in his book 
Fighting For Air, New York University Professor Eric Klinenberg writes 
that ``by 2005, the FCC reported that only 3.6 percent of all broadcast 
radio and television stations were minority-owned, while a mere 3.4 
percent were owned by women'' (page 28). These are the exact but 
inaccurate percentages obtained from the information on the FCC 323 
summary website. They were calculated by dividing the number of 
reported stations by the total number of stations that filed Form 323 
or Form 323-E (438/12,844 = 3.4 percent women-owned; 460/12,844 = 3.6 
percent minority-owned).
---------------------------------------------------------------------------
    Other problems exist in these summaries. Some station owners listed 
in the 2003 summary are missing from the 2004 report but reappear in 
the 2006 summary, despite the fact that ownership had not changed 
during the interim period. Certain stations have ownership interests 
that add up to more than 100 percent. In some instances, the type of 
station facility (AM, FM or TV) is not specified.
    But the most alarming problems are ones of omission. Not a single 
station owned by Radio One is listed by the FCC, even though the 
company is the largest minority-owned radio broadcaster in the United 
States. Stations owned by Granite Broadcasting, the largest minority-
owned television broadcaster, are also missing from the summary 
reports. However, examination of the individual Form 323 filings for 
these stations shows that they are indeed minority-owned. Why aren't 
they in the FCC's summary?
    The answer likely lies in how the larger-group stations report 
ownership information, and how the FCC harvests the information for 
their summary reports. Most of the licenses of those stations missed by 
the FCC are ``owned'' by intermediate entities, which are--in some 
cases--many degrees separated from the ``actual'' owner. Some stations 
file more than 20 separate Form 323 forms (one for each holding 
entity), with the true owners listed on only one form. And in many 
cases, the actual ownership information is attached as an exhibit and 
not listed on the actual form. Thus the FCC, which tabulates the 
information for its summaries by harvesting these electronic forms via 
an automated process, misses stations that file in this convoluted and 
confusing manner.
    The Commission's lack of understanding of its own Form 323 data 
became even more apparent when the Media Bureau released previously 
unpublished internal studies that attempted to ascertain the true state 
of female and minority broadcast ownership.\24\ A draft dated November 
14, 2005, reports that there were, as of 2003, 60 television stations 
and 692 radio stations owned by women; and 15 television stations and 
335 radio stations owned by minorities.\25\ However, our previous 
filings in this proceeding (containing the data in the Free Press study 
Out of the Picture) showed that by the fall of 2006 there were 44 
minority-owned stations, and this was not the result of a massive 
increase in minority ownership. Indeed, the same FCC draft report 
indicated just a single African-American-owned television station in 
the 2003 sample period. However, a review of Granite Broadcasting's (an 
African-American-owned company) Form 323 filing in 2003 showed that 
they alone held nine full-power television station licenses.\26\ This 
internal summary is deeply troubling in its inaccuracy and raises 
questions about the data analysis ability of Commission staff, and the 
commitment of the Commission to accurately monitor female and minority 
ownership.
---------------------------------------------------------------------------
    \24\ See http://www.fcc.gov/ownership/additional.html for documents 
released in December of 2006.
    \25\ http://www.fcc.gov/ownership/materials/newly-released/
minorityfemale011405.pdf.
    \26\ Furthermore, FCC data also indicates that during the time-
frame of the FCC analysis, there were at least three more African-
American-owned stations (WJYS, KNIN-TV and KWCV), bringing the number 
of African-American-owned stations to 12. The FCC document reported two 
American Indian-owned stations; but at the time of this draft study, 
FCC records indicate at least four American Indian-owned stations 
(KHCV, KOTV, KWTV, and WNYB). The FCC document reported four Asian-
owned stations; but at the time of this draft study, FCC records 
indicate at least seven Asian-owned stations (KBFD, WMBC, KBEO, KWKB, 
KCFG, KEJB and KKJB).
---------------------------------------------------------------------------
    But the biggest indication of the Commission's failure to take 
seriously its obligation to track female and minority ownership is seen 
in its most recent effort in this area--the 10 Official ``Research 
Studies on Media Ownership''.\27\ Study #2, ``Media Ownership Study 
Two: Ownership Structure and Robustness of Media'' authored by FCC 
staff fails miserably in its effort to tabulate the number of female 
and minority owned broadcast radio stations. It appears that Study #2 
likely missed well over half of all the female- and minority-owned 
broadcast station. As we demonstrate below, the FCC missed 75 percent 
of the TV stations that were female-owned in 2005, and missed 69 
percent of the TV stations that were minority-owned in 2005. It is 
simply astonishing that the Commission could make such an error, 
especially given the fact that the CU/CFA/Free Press census of TV 
station racial/ethnic/gender ownership was readily available both in 
the record in this proceeding, as well as reported in numerous media 
outlets.
---------------------------------------------------------------------------
    \27\ http://www.fcc.gov/ownership/studies.html.
---------------------------------------------------------------------------
    The authors of Study #2 chose to blame perceived imperfections in 
Form 323 data, and relied on flawed NTIA data as their starting point 
for assessing minority ownership. This was a fundamental flaw, and 
indicates a lack of seriousness on the part of the Commission in 
fulfilling the mandates of Sections 257 and 309(j). The simple fact is, 
the raw data contained in Form 323 individual filings is extremely 
reliable and useful. The problems associated with Form 323 are not with 
the data, but how the Commission automates the harvesting of the data 
from these forms. There are various aspects of how Form 323 is 
submitted by owners that appear to be causing the Commission trouble in 
its efforts to automatically harvest the data. Some stations file 
multiple forms for a single station (because of the numerous shell or 
holding companies); some stations do not enter the racial/gender/ethnic 
ownership information in the form, choosing to attach this information 
separately (many forms that do this often have ``See Exhibit'' written 
where the ownership information should be listed); some owners choose 
to write ``No change; information on file'' as opposed to properly 
filling out Form 323.
    These are all roadblocks to the researcher who wishes to use 
automated scripts to harvest Form 323 data. But they are not roadblocks 
to those who actually examine each form. The simple fact is, the 
Commission appears to have taken the lazy way out when faced with the 
choice of inaccurate automated data harvesting or accurate but labor-
intensive manual coding of Form 323 data.
    Fortunately for the Commission, we did do the hard work of 
determining the ownership of nearly every single licensed full-power 
commercial broadcast radio and television station. In total, the FCC 
only accounted for 17 of the 68 TV stations that were actually owned by 
women in 2005. This means that in its most recent, official, and 
presumably best effort at assessing female ownership, the Commission 
missed 75 percent of the actual female-owned TV stations. In total, the 
FCC only accounted for 14 of the 45 TV stations that were actually 
owned by people of color in 2005. This means that in its most recent, 
official, and presumably best effort at assessing minority ownership, 
the Commission missed 69 percent of the actual minority-owned TV 
stations.
    Though we did not verify the accuracy and completeness of Study 
#2's radio ownership data, there is compelling evidence to suggest the 
Commission also omitted a substantial number of female- and minority-
owned radio stations. In our study Off The Dial) we found that there 
were at least 609 female-owned stations and at least 776 minority-owned 
stations as of February 2007. In Study #2 the FCC reported 376 female-
owned and 378 minority-owned radio stations in 2005. There is simply no 
evidence to suggest a near doubling in the level of female and minority 
radio ownership in the interim, suggesting that the FCC missed 
approximately 40 percent of the female-owned radio stations and missed 
approximately 50 percent of the minority-owned radio stations. Given 
that in the case of TV the Commission included in its tally stations 
that were not female- or minority-owned, it is likely that in total, 
the Commission missed over half of the actual female- and minority-
owned broadcast radio and television stations.
    This inability to even come close to accurately assessing the state 
of female and minority ownership simply because of a methodological 
choice shows an obvious lack of concern by the Commission. This lack of 
concern is truly troubling given the Commission's legal obligation to 
foster improved female and minority broadcast ownership. The FCC has 
both the raw data and the resources to adequately address the issues 
raised by the Third Circuit regarding minority ownership but chooses 
instead to ignore this issue and rely on public commenters to do its 
job.
    We hope that this exposure of failure will cause the Commission to 
take pause and reassess its approach toward undertaking this 
proceeding. The issue of ownership diversity is far too important to be 
built upon a flimsy foundation of basic empirical data. Chairman Martin 
recently said, ``To ensure that the American people have the benefit of 
a competitive and diverse media marketplace, we need to create more 
opportunities for different, new and independent voices to be heard.'' 
\28\ If the Chairman and the other Commissioners truly believes this to 
be the case, then they should demand a complete and accurate assessment 
of the ownership status of every single full-power commercial broadcast 
station.
---------------------------------------------------------------------------
    \28\ Remarks of FCC Chairman Kevin J. Martin, 2007 AWRT Annual 
Leadership Summit Business Conference, March 9, 2007, Available at 
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-271371A1.pdf. At 
the same event, Commissioner Robert McDowell stated that the data on 
female and minority ownership was ``extremely troubling'' to him, and 
that he wanted to find out ``why that number is lower than in other 
industries.'' See http://www.broadcastingcable.com/article/
CA6423119.html?title=Article&spacedesc=news.
---------------------------------------------------------------------------
Bottom Line: Consolidation Keeps Women and Minorities Off the Dial
    Data in the official FCC record, particularly data gathered from 
the 2000 Section 257 studies, indicates that the primary factors 
influencing female and minority broadcast ownership are media market 
concentration, access to capital and equity, and access to deals.
    Theory supports these findings. As markets become more 
concentrated, the cost of stations become artificially inflated, 
driving away potential new entrants in favor of existing large chains. 
Concentration has the effect of diminishing the ability of smaller and 
single-station owners to compete for both advertising and programming 
contracts. This, combined with the inflated asset values creates 
immense pressure for the smaller owners to sell their station licenses 
to larger owners.
    This destructive cycle disproportionately impacts women and 
minority owners, as they are far more likely to own just a single 
station in comparison to their white-male and corporate counterparts. 
Current owners are driven out of markets; and discrimination in access 
to deals, capital and equity combined with the higher barriers to entry 
created by consolidation shut out new female and minority owners from 
market entry.
    Thus it is clear: if the Commission intends to promote ownership 
diversity, it cannot accomplish this goal while simultaneously enacting 
policies that increase market concentration.
    It also follows those policies that allow increased market 
concentration concurrently with efforts to increase ownership by 
``Socially Disadvantaged Businesses'' (SDBs) simply won't work. In 
fact, it is likely that any short-term gains from such policies in 
terms of the number of stations owned by women or people of color will 
be offset in the long term by a loss of unique SDB owners, a loss of 
SDB stations, and a loss of unique and independent media voices.
    The Appendix to this testimony contains the results of econometric 
modeling of the factors that influence female and minority radio 
station ownership. The data strongly indicates that as market 
concentration increases, the number of female and minority owned 
stations decreases.
    Figure 1 illustrates the impact of increasing local market 
concentration on the level of female radio station ownership. Figure 1 
plots the predicted probability of a market having a female owner 
present against the HHI calculated from audience share (the probability 
is based upon the size of the market, the percentage of minority and 
female population, the presence of a minority owner in the market, and 
the market audience share HHI; see Appendix for details). As the figure 
shows, a small modest increase in the market concentration level could 
lead to a substantial drop in the number of markets with female owners 
present.



Conclusions and Recommendations
    As the FCC goes back to the drawing board to reconsider media 
ownership rules, it must pay close attention to the Third Circuit's 
strong language regarding the Commission's failure to adequately 
justify its rule changes in regards to female and minority ownership. 
It is not sound policymaking to assert that diversity, localism and 
female/minority ownership are important goals, but then ignore the 
effects that rule changes have on these goals. Furthermore, it is a 
failure of responsibility to gather valuable information on ownership 
but then do nothing with the data. And it is inexcusable to continue to 
release data summaries the Commission knows to be flawed.
    The findings of Off The Dial and those in Out of The Picture are 
crucial first steps toward understanding the true state of female and 
minority broadcast ownership and the effects of FCC policy on these 
owners. But more work needs to be completed, such a longitudinal 
studies examining the changes produced by the 1996 Telecommunications 
Act. The Commission should conduct this work and pay close attention to 
the changes in ownership over time. The FCC must adequately study the 
impact of rule changes on the level of female and minority ownership 
prior to moving forward with any rulemaking. This issue is far too 
important to make superficial attempts at addressing it, while allowing 
more consolidation--the very thing that is a primary cause of the 
problem.
    The results of our two studies on female and minority broadcast 
ownership demonstrate that any policy changes that allow for increased 
concentration in television and radio markets will certainly decrease 
the already low number of female- and minority-owned broadcast 
stations. Enacting regulations that lead to such outcomes directly 
contradicts the Commission's statutory and legal obligations under the 
1996 Telecommunications Act. Instead, the Commission should consider 
pro-active policies that protect and promote female and minority 
ownership.
    It is important to note that the effects of other policies aimed at 
increasing female and minority broadcast ownership--such as tax 
credits, relaxed equity/debt attribution rules, incubator programs, or 
digital channel leasing--will be negligible in an environment of 
increased market consolidation at the local level.
    The Commission needs to think hard about the damages brought about 
by the misguided policies of the late 1990s, which radically increased 
market concentration. In the radio sector alone, it is hard for a new 
entrant to get into the business by purchasing a single station. The 
realities of the consolidated marketplace mean that owners must control 
multiple stations in multiple markets to realize the economies of scale 
that are needed to prosper. But these economies of scale are artificial 
creations based on poor public policy decisions. The FCC has a social 
responsibility to restore an environment that rewards localism and 
dedication to community service.
    In addition, we recommend that Congress urge the Commission take 
the following actions:

   The FCC Media Bureau should conduct annual comprehensive 
        studies of every licensed broadcast radio and television 
        station to determine the true and evolving level of female and 
        minority ownership.

     The study should examine the level of ownership at 
            both the national level and at the local DMA and Arbitron 
            market levels.

     The study should be longitudinal, examining the 
            changes since 1999, when the Commission began gathering 
            gender and race/ethnicity ownership information.

     The study should focus on station format and content, 
            particularly paying attention to local news production.

     The study, as well as the raw data, should be made 
            available to the public.

   The FCC should revise and simplify the public display of 
        individual Form 323 station filings.

     A citizen searching for the owner of a local station 
            should easily be able to ascertain the true identity of a 
            station owner, and the Commission should make it easier to 
            find out the true identity of past owners.

     The practice of station licenses being held by layers 
            of wholly owned entities should be thoroughly examined by 
            the Commission. While this practice may serve a purpose for 
            the tax liability of license holders, it serves no purpose 
            in the identification of the those controlling the public 
            airwaves.

     Broadcast licenses are awarded for temporary use of 
            the public airwaves, and the identities of the owners 
            should be clearly stated on a single form.

   The Commission should expand the universe of stations that 
        are required to file Form 323.

     Currently, no owners of Class-A, translator or low-
            power stations are required to file ownership information 
            with the FCC. However, the Commission states that these 
            classes of stations are important entry points for female 
            and minority owners. To validate this hypothesis, the 
            Commission should extend the obligation of filing Form 323 
            to these stations.

     Currently all noncommercial educational broadcasters 
            file Form 323-E, which does not solicit information about 
            the gender, race, and ethnicities of station owners. The 
            Commission should require their owners to disclose this 
            information.

   The FCC should not take any action on media ownership rules 
        until it has thoroughly studied the issue of female and 
        minority ownership and analyzed the effects of past policies.

     The FCC should also complete the open proceeding on 
            how to better implement Section 257 of the 1996 
            Telecommunications Act before proceeding with any 
            rulemaking.\29\
---------------------------------------------------------------------------
    \29\ MB Docket No. 04-228, ``Media Bureau Seeks Comment on Ways to 
Further Section 257 Mandate and to Build on Earlier Studies'' DA 04-
1690, June 15, 2004.

    In addition, Congress should move to authorize the expansion of 
low-power FM (LPFM) radio licenses to 3rd adjacent channels on the 
dial. The interference problems cited to curtail community radio in the 
past have been disproved, and the distribution of new licenses is long 
overdue. This would open thousands of new local stations across the 
country and promote opportunities for diverse voices to use the public 
airwaves. The LPFM stations that have been licensed to date have been a 
tremendous success, exemplifying the goal of a more diverse media 
system. Expanding access to these localized, non-commercial licenses 
would not solve the problem of minority ownership. But LPFM represents 
the quickest way to bring minority owned stations online while the FCC 
works to solve the long-term structural problems that have perpetuated 
---------------------------------------------------------------------------
a legacy of under-representation.

    Senator Cantwell. Thank you very much, Mr. Turner.
    Ms. Pierson?

    STATEMENT OF CAROL PIERSON, PRESIDENT AND CEO, NATIONAL 
              FEDERATION OF COMMUNITY BROADCASTERS

    Ms. Pierson. Today I'm speaking on behalf of community 
radio, and our project, Native Public Media. NFCB has been 
representing and providing services to community radio stations 
for over 30 years.
    Nearly half of our stations are controlled by people of 
color, and 40 percent serve rural areas of the country. And 
many of the new Low Power FM are also our members.
    I've submitted detailed testimony about the importance of 
community and Native radio, the problems of media 
consolidation, the need to expand Low Power FM, and new 
technology-driven radio platforms. I just want to emphasize my 
major points.
    I'm very happy that the Committee is holding this hearing 
on the future of radio. This is a critical time for radio in 
the country. Radio is thriving on the noncommercial side. In 
many areas, the community or public radio station is the only 
locally owned, and in some cases, the only station with local 
staff. In emergency situations this can be critical, and it is 
why NFCB is working with NPR to be sure that all of the 
community and pubic radio stations are prepared to provide 
emergency information to their listeners.
    We have seen during recent emergencies, the critical role 
that radio plays, and I've attached a letter with my testimony 
from a number of emergency management directors, on how 
important they feel that a local, Low Power FM station can be.
    Community radio stations are also expanding their services 
through webcasting, enhanced web content and other new 
technologies. It's critical that regulations and fees for use 
of these new technologies recognize the budgetary and staffing 
limitations of community radio, while recognizing that artists 
should get paid for their work.
    At the same time, there are many people in this country 
that don't have an opportunity to own a radio station, or even 
hear their issues covered on existing stations. We need more 
community radio stations. The most immediate way to do this, is 
to expand Low Power FM stations into urban areas. This requires 
Congress to authorize the FCC to license LPFM stations closer 
to existing stations, a technology that has been shown to work.
    We know that the consolidation of radio ownership has left 
local, women, and minority owners out in the cold. This is no 
time to further loosen ownership rules. The FCC must re-affirm 
the historic regulatory priorities of localism, competition and 
diversity.
    The other major area I want to tell you about is Native 
Public Media. With a generous grant from the Corporation for 
Public Broadcasting, NFCB was able to create a center to expand 
and support media in Indian country. Currently, there are 33 
public radio stations serving Native American communities. We 
are hoping to nearly double that number in the filing window 
that the FCC recently opened, but there is a great need to 
increase this service.
    If you go to a reservation that has a radio station, you 
will find almost everyone listening to it. It is the ideal 
medium to preserve the culture and language, discuss local 
issues, and to provide health, education and emergency 
services. We have discovered through consultation with Native 
American leaders that complete information does not exist about 
where in Indian country it's possible to put a radio station, 
and where new technologies will be the way to provide a locally 
owned media service.
    Native Public Media is trying to launch a research project 
that will pull together the research that exists, and fill in 
the gaps with new research.
    In summary, radio as a platform for communication and 
information is, in many ways, stronger than it's ever been. 
Congress should look for strategies that bring localism back to 
commercial radio, encourage diversity of ownership, expand and 
protect community radio, including LPFM, and ensure that new 
technology-driven radio platforms are able to succeed.
    I'm glad to answer any questions you have, thank you for 
the opportunity to testify.
    [The prepared statement of Ms. Pierson follows:]

        Prepared Statement of Carol Pierson, President and CEO, 
             National Federation of Community Broadcasters
    Chairman Inouye, Senator Stevens and Members of the Committee, my 
name is Carol Pierson. I am President and CEO of the National 
Federation of Community Broadcasters. I am speaking to you today on 
behalf of the NFCB and Native Public Media, a project of NFCB.
    Today's hearing is so important because Congress and the FCC are 
facing a number of critical decisions that will greatly impact the 
current radio landscape and the future of radio. In my testimony today 
I want to stress several key points:

        1. The overwhelming demand for terrestrial noncommercial radio 
        stations coupled with the explosion of Internet-based webcasts 
        and podcasts demonstrates that radio as a communications 
        platform and art form is thriving.

        2. Terrestrial radio remains the closest thing this country has 
        to a universally accessible platform for locally originated 
        news, information and entertainment. Radio is more than a tool 
        to deliver an audience for advertisers; it's a tool for real-
        time public safety communication, local culture, self-identity 
        and political discourse.

        3. Changes in ownership rules have drastically altered the 
        commercial radio landscape, challenging the historic regulatory 
        priorities of localism, competition and diversity. To a large 
        extent noncommercial and community radio stations are 
        attempting to fill that void, but Congress and the FCC must act 
        to respond to the extraordinary unmet demand for additional 
        noncommercial platforms and resources to support existing 
        stations.

        4. Station ownership remains a major concern, with extremely 
        few opportunities for women or minorities or Native Nations to 
        own radio stations. There is not a lack of interest--rather the 
        regulatory structures have placed potential commercial owners 
        in a market against massive conglomerates with deep pockets. On 
        the noncommercial side, Congress has limited the FCC's ability 
        to license Low Power FM stations, and opportunities like last 
        week's application window for Non Commercial Full Power 
        stations have happened rarely. Recent reports that the FCC is 
        considering loosening existing media ownership rules without 
        addressing key issues of minority ownership and localism are 
        very troubling.

    Radio today is in the midst of a complete revitalization, 
particularly through the growth of noncommercial community broadcasting 
and the development of new Internet and satellite-based radio 
platforms. This explosion of content demonstrates that radio as an art 
form and means for communication is thriving. What is also clear is 
that policymakers should re-emphasize their commitment to the 
traditional regulatory priorities of localism, competition and 
diversity.
    Over the past 10 years, a great deal has been said about the impact 
of the massive consolidation of commercial radio ownership that 
resulted from the 1996 Telecommunications Act. We have heard the 
complaints:

   Over two-thirds of listeners and revenues in the commercial 
        marketplace controlled by just ten companies.

   Over 70 percent of advertising revenues in virtually every 
        market controlled by four broadcast firms or fewer.

   The scandalous lack of ownership opportunities for women and 
        minorities.

   New, structural forms of payola that created economic 
        barriers for local or independent music to be considered for 
        rotation.

   And incidents like Minot, where radio did not live up to its 
        potential to inform the public in an emergency situation.

    Recent reports indicate that the FCC may consider lifting ownership 
rules that limit the number of commercial stations a company can own in 
any given market. I cannot stress strongly enough that the antidote to 
runaway consolidation in the commercial radio market is not more 
consolidation. Congress and the FCC must consider and implement 
policies that will allow for greater diversity of ownership, 
competition and localism. The Commission has built a significant record 
on issues of localism and ownership. It would be a huge mistake to 
allow more consolidation in the face of this record.
    One of the clearest windows into the unmet demand for terrestrial 
radio stations is through the experience of Native Public Media. This 
is a project of NFCB that represents 33 Native owned and operated 
public radio stations throughout Indian country. This project has been 
made possible by a generous grant from the Corporation for Public 
Broadcasting. These stations provide a unique platform for Native 
programming, including news, information, education, cultural and 
language preservation. Listeners enjoy these programs via the radio or 
in some cases webcasts and podcasts. As Native radio blossoms, more and 
more Nations express an interest in owning their own station. One-
quarter of the pleas to NPM for help in starting a radio station came 
from Native communities who were experiencing an epidemic of youth 
suicides. Elders, community leaders and healthcare professionals felt 
that having their own tribal voice would invoke pride and 
revitalization of language and enhance community life.
    A big part of the mission of Native Public Media is to document the 
opportunities for Native Americans to utilize broadcast and new digital 
platforms to create and distribute news, information and educational 
programming created by Native Nations, for the use of Native Nations. 
To that end, we realize there are significant gaps in just the basic 
understanding of how Native peoples access both traditional media and 
new technologies. NPM has proposed a two stage research report that 
will consolidate existing data commissioned by numerous government 
agencies and private foundations and fill in the gaps with new original 
research. Access to media is necessary in today's world, just as access 
to new Internet based technologies will be increasingly critical for 
economic survival. Without accurate data, policymakers are left making 
difficult decisions based on assumptions and instincts. NPM hopes to 
fill in the blanks with hard data.
    This past week, the FCC held a rare opportunity for noncommercial 
entities to apply for a full power noncommercial radio station. The 
window was a significant success, as hundreds of organizations 
submitted applications to the FCC including 26 from Native Nations; 
interesting 6 came from a single state--Hawaii. This window 
demonstrates not only the huge unmet demand for more radio stations, 
but the need for the FCC to open such windows on a regular, predictable 
basis.
    This committee is also well aware of the need to pass legislation 
to allow the FCC to grant additional Low Power FM (LPFM) licenses for 
schools, churches, community groups, local governments, Native Nations 
and other noncommercial entities. Since the service was established in 
2000, nearly 1,000 new LPFM stations have gone on the air, providing 
critically important local programming in small towns and rural parts 
of the country. Because of Congressional action, however, the FCC has 
been blocked from issuing these licenses in larger communities that 
could greatly benefit from the service. The technology is settled, the 
service is a huge success, and it is time for Congress to act once and 
for all to reauthorize the Commission to expand this service.
    Expansion and protection of community radio is particularly 
important in light of the role existing stations play in boosting 
public safety during emergencies. These stations are often the only 
ones with local staff to provide emergency coverage. For example:

   In 2004 KWSO staffers in Warm Springs, Oregon kept the 
        community abreast of the events surrounding the worst fire 
        outbreak of this decade.

   Apache radio station KNNB also played a significant role in 
        keeping area residents and tourists safe during the ``MMM'' 
        fire in 2004 providing coverage in both English and Apache.

    I've attached to my testimony a letter signed by a number of 
emergency management directors. I'd like to quote:

        When the Hurricanes Katrina and Rita hit the Gulf Coast in 
        2005, the Emergency Operations Center of Hancock County turned 
        to a Low Power FM station to provide the essential public 
        safety information those rural communities needed.
    Hancock County was the hardest-hit area on the Gulf Coast. In the 
hours after the storm, all lines of communication connecting Hancock 
County to the outside world were down--including cell phones, land 
lines, Internet, police radio, and broadcast radio stations--except 
one. Through the storm and in its aftermath, WQRZ-LP--a one-hundred 
watt radio station, licensed to the nonprofit Hancock County Amateur 
Radio Club--stayed on the air, thanks to the prodigious efforts of 
station operator Brice Phillips and a few dedicated volunteers. While 
commercial and other larger radio stations did their best to serve 
their communities, doing great work across the Gulf area, it was the 
leadership of that LPFM station, and its local volunteers, that kept 
Hancock County informed.
    When disaster strikes, getting up-to-date and accurate information 
to citizens as quickly as possible is of utmost importance for public 
health and safety. As emergency officials charged with coordinating 
emergency and recovery efforts, we are convinced that the immediate, 
accurate, and local information WQRZ-LP supplied during the storm saved 
hundreds of lives in Hancock County.

    Finally, it is important for Congress to continue to focus on the 
establishment of fair and balanced structures that allow noncommercial 
webcasting to continue. Internet radio provides a boundless opportunity 
for diverse programming, particularly for the thousands and thousands 
of organizations and individuals who would like to run terrestrial 
radio stations but are unable to do so. In addition, the Internet 
allows listeners to access broadcast content anywhere in the world. 
NFCB and other webcasters recognize the need to create fair royalty 
structures that allow artists to be compensated for their work. At the 
same time, the government should establish fair and reasonable rates 
and reporting structures that recognize the value of this service and 
the volunteer and noncommercial nature of many of these stations.
    In summary, radio as a platform for communication and information 
is in many ways stronger than it has ever been. The Congress should 
look for strategies that bring localism back to commercial radio, 
encourage diversity of ownership, expand and protect community radio 
and ensure that new technology-driven radio platforms are able to 
succeed.
    Thank you again for the opportunity to testify, and I look forward 
to any questions you may have.
                                 ______
                                 
                                                    October 8, 2007
 Public Safety Officials Endorse Low Power FM Radio Expansion--Sign on 
                                 Letter
    This letter, authored by Brian Adam, the Emergency Operations 
Center Director for Hancock County, Mississippi, has been put forward 
as a petition letter for emergency response professionals and 
broadcasting experts to endorse, as they lend their support to Low 
Power FM radio. To learn more about Low Power FM, and how these 
stations provide essential services in times of crisis, visit http://
www.prometheusradio.org.

To whom this may concern:

    As public servants working for the safety, protection, and growth 
of our communities, we believe that access to a locally-owned and 
locally-controlled radio station is an essential component of public 
safety. For this reason, we support the expansion of Low Power FM radio 
(LPFM) stations to nonprofit groups, government organizations, and 
municipalities across the United States.
    Please refer to the important example below when considering your 
deliberations as to whether or not you support expanding Low Power FM.
    When the Hurricanes Katrina and Rita hit the Gulf Coast in 2005, 
the Emergency Operations Center of Hancock County turned to a Low Power 
FM station to provide the essential public safety information those 
rural communities needed.
    Hancock County was the hardest-hit area on the Gulf Coast. In the 
hours after the storm, all lines of communication connecting Hancock 
County to the outside world were down--including cell phones, land 
lines, Internet, police radio, and broadcast radio stations--except 
one. Through the storm and in its aftermath, WQRZ-LP--a one-hundred 
watt radio station, licensed to the nonprofit Hancock County Amateur 
Radio Club--stayed on the air, thanks to the prodigious efforts of 
station operator Brice Phillips and a few dedicated volunteers. While 
commercial and other larger radio stations did their best to serve 
their communities, doing great work across the Gulf area, it was the 
leadership of that LPFM station, and its local volunteers, that kept 
Hancock County informed.
    When disaster strikes, getting up-to-date and accurate information 
to citizens as quickly as possible is of utmost importance for public 
health and safety. As emergency officials charged with coordinating 
emergency and recovery efforts, we are convinced that the immediate, 
accurate, and local information WQRZ-LP supplied during the storm saved 
hundreds of lives in Hancock County.
    WQRZ was the source of information for county residents, directing 
them to critical relief resources like food, water and ice, as well as 
to Red Cross, medical and rescue services. Recognizing the opportunity 
to coordinate with this information source, Hancock County officials 
invited WQRZ to move its studio to the Emergency Operations Center, and 
petitioned the FCC to increase WQRZ's signal coverage. The marriage of 
WQRZ-LP radio with the Hancock County EOC and the Public Information 
Office overcame many of the barriers facing emergency management's 
ability to communicate en masse with the citizens of Hancock County.
    Many cities would like to take advantage of these inexpensive, 
reliable, diverse community radio stations--for culture, community, and 
technical training, as well as public safety. The City of Richmond 
works closely with WRIR-LP--a community radio station--to provide 
emergency information to the city, in the event of a crisis.
    Unfortunately, Low Power FM station availability was limited from 
most cities when Congress opted to explore whether or not these new 
radio stations would interfere with those already on the FM dial. 
Congress asked the FCC to prove that there was room for LPFM, which 
they did in 2003, with a $2.2 million taxpayer-funded technical study. 
Now that the government has proved that there is plenty of room for 
more Low Power FM radio on the FM dial, we think it is high time for 
Congress to let the FCC give out licenses across the nation, and to let 
our communities expand their capability to communicate critical 
information to the public in times of disaster.
    The expansion of Low Power FM radio is a goal that all Americans, 
and their elected representatives, can support. And, as emergency 
service providers from many diverse areas, we encourage the government 
to stand behind one form of vital emergency communications that can 
serve our communities, from coast to coast--without costing the 
government a single penny more.
            Signed,

Brian Adam,
District 2 Supervisor,
Hancock County, MS.
  

Bobby Strahan,
Director, Emergency Operations 
Center,
Pearl River County, MS.

Butch Loper,
Director, Mississippi Emergency Management,
Jackson County, MS.

Ernest Jackson,
Director, Emergency Management Agency,
Elizabethton-Carter County, TN.

    Senator Cantwell. Thank you, Ms. Pierson for your 
comprehensive testimony on so many different topics.
    Ms. Rehm?

 STATEMENT OF DANA DAVIS REHM, SENIOR VICE PRESIDENT, STRATEGY 
            AND PARTNERSHIPS, NATIONAL PUBLIC RADIO

    Ms. Rehm. Good morning, Senator Cantwell, Chairman Inouye, 
and Members of the Committee, I'm Dana Davis Rehm, NPR's Senior 
Vice President for Strategy and Partnerships.
    I'm thrilled to share the views of NPR and our member 
stations on the future of radio.
    In our view, radio's future depends on content, and 
connection to communities. In the arena of high-quality radio 
programming, public radio has no peers. Over 30 million 
Americans tune in each week to programs like Morning Edition, 
and All Things Considered. These shows are drawing on reporting 
from our bureaus around the world and throughout the United 
States, but the foundation of this service is the network of 
over 800 local radio stations in communities across America.
    In recent years, NPR has expanded its news, and NPR 
stations are investing in their reporting and local 
programming. When their strengths are combined with NPR's 
national and international reporting, the result is one of the 
largest, most capable and trusted news networks in the world.
    NPR is also creating new shows and services. Tell Me More 
launched a few months ago. It explores how we all intersect and 
collide in a culturally diverse world. News & Notes is a 
relatively new show that explores topics and exposes voices 
that diverse audiences are seeking, and cannot find in 
mainstream media.
    Other public radio organizations--American Public Media, 
and Public Radio International--are also innovating. APM is 
home to a powerful new concept, Public Insight Journalism, 
which has created the Public Insight Network--thousands of 
listeners who volunteer their experiences and knowledge to help 
news staff cover stories with authenticity and depth.
    While content is our first principle, the future of radio 
depends on effective use of technology. Our audience is 
increasingly wanting content when and where it is most useful 
to them, and on a multitude of devices.
    Yet, broadcasting will be the way that most listeners hear 
public radio for the foreseeable future, and even there, 
choices abound. Stations are converting rapidly to digital 
operations, making radio more accessible and more varied. 
Stations can provide not one, but two or more streams of free 
programming. Soon, radio reading services for the blind will 
not need special receivers. Deaf and hard-of-hearing Americans 
will have access to real-time public radio content in the form 
of display text on new receivers.
    Stations can broadcast a new Spanish language service, or 
provide music streams, and this is only the beginning for 
digital radio. We also see the vast space created by the web as 
a place for deeper, and more varied, content and connection.
    To ensure that the experience of the web is as important in 
people's lives as our broadcasting, we seek to present 
perspectives, voices and stories that are not seen on every 
other news site. At their best, their web content will foster 
personal growth, create connections to others, and strengthen 
the civil discourse.
    The upcoming 2008 election is key to realizing our evolving 
world. We plan to pool resources across public media, integrate 
election content on public media websites and on-air. The 
public will benefit from a deep collection of election-related 
content, produced and curated by public broadcasters, and they 
will be invited to contribute their ideas in a nationwide civic 
dialogue.
    Other web-based services are gaining acceptance. Among 
these are podcasting--NPR and a host of public radio stations 
and producers present a service that is among the most popular 
nationwide. Music discovery--soon NPR and stations will launch 
a web-based music discovery service, original concerts, studio 
sessions and discovery features will come together on NPR.org, 
where the audience can learn more about music genres and 
artists rarely heard on commercial radio.
    In the mobile space, we are piloting an NPR mobile 
service--NPR Mobile Web, and NPR Mobile Voice offer stations 
and NPR content on handheld devices, and on any phone line.
    The future of radio depends on equal parts programming and 
technology, so that audiences can be enriched, educated and 
informed at all times and places most convenient and useful to 
them.
    Mr. Chairman, Senator Cantwell, while others have downsized 
their programming investment, NPR and our stations are 
investing more. We have launched a major national effort, known 
as the Local News Initiative, to aid stations in the production 
of high-quality, in-depth, local and regional news. Our goal is 
to strengthen news across the Nation, to build the capacity of 
stations to sustain that effort, and to create meaningful, 
long-lasting relationships between NPR stations and their 
communities.
    The LNI was launched to provide a framework for change that 
will elevate both stations and national producers to better 
serve the public.
    In short, the future of radio rests with programming first, 
and with our wise use of technology, and ceaseless efforts to 
connect with the American people, and in each case, NPR and 
public radio are working hard to lead the way.
    Thank you.
    [The prepared statement of Ms. Rehm follows:]

     Prepared Statement of Dana Davis Rehm, Senior Vice President, 
            Strategy and Partnerships, National Public Radio
    Good morning, Chairman Inouye, Senator Stevens and Members of the 
Senate Commerce Committee. I am Dana Davis Rehm, Senior Vice President 
for Strategy and Partnerships for National Public Radio. I am pleased 
to offer the perspectives of NPR and its 850 member stations on the 
Committee's hearing topic this morning--the future of radio. Actually, 
I'm more than pleased, I thrilled to be here. At NPR and within public 
radio we believe we are charting the future course of radio.
    The future of radio depends on programming and content first and 
foremost. In the arena of high-quality radio content, NPR and public 
radio have no peers. Each week, over some 30 million Americans tune 
into public radio stations to engage with programming like Morning 
Edition, the most listened to morning program in all of radio, and All 
Things Considered, our afternoon newsmagazine, which went live for the 
first time 37 years ago this past May. These two vibrant, enduring 
programs draw on reporting from correspondents based in 18 bureaus 
around the world, and producers and reporters in 19 locations in the 
U.S. But the strength of the NPR and member station news network goes 
far beyond this corps of international and national NPR reporters, and 
reaches into communities across America.
    During the last three decades, leading NPR member stations 
significantly increased the amount of news programming on their 
broadcast schedules, while also investing in local reporting and 
programming. Strong news oriented public radio stations exist today in 
most of the top markets across the country. When the strength of these 
stations is combined with NPR's strength in national and international 
reporting, the result is one of the largest, most capable, and most 
trusted news network organizations anywhere in the world.
    Within NPR and our public radio station partners, nothing is more 
important than the trust of the public in the content we create and 
distribute. We work nonstop to ensure that our programming always meets 
the highest standards of public service in journalism and cultural 
expression. And our audiences demand and expect constant improvement in 
breadth, depth, reliability, perspective, accuracy and access.
    While many radio entities would be satisfied simply with two 
programs like Morning Edition and All Things Considered, NPR continues 
to develop, produce and distribute new shows to improve our public 
service mission. Tell Me More, launched just a few months ago is hosted 
by Michel Martin, a dynamic journalist with deep experience in 
programming, focuses on the way we live, intersect and collide in a 
culturally diverse world. News & Notes, hosted by Farai Chideya, whose 
expertise is in broadcasting and digital media, explores new topics 
that more diverse audiences are seeking.
    Other public radio production and distribution organizations, 
namely American Public Media and Public Radio International, continue 
to develop new programming offerings to explore the ever changing 
composition of America and the world. You may know American Public 
Media for A Prairie Home Companion with the incomparable Garrison 
Keillor, one of America's most accomplished and beloved storytellers. 
But APM is much more. It is home to programs like Marketplace, Speaking 
of Faith and a very powerful new concept, Public Insight Journalism, 
which has now created a Public Insight Network. This network is 
comprised of thousand of listeners who are willing to share their 
experiences and knowledge with radio producers and reporters. It is 
built on the premise that the audience has perspectives and insights 
that can help journalists cover the news with greater authenticity and 
uncover stories that would otherwise go untold.
    Similarly, Public Radio International is innovating in radio and on 
the web. They distribute This American Life, from Chicago Public Radio, 
a remarkable production that documents and describes contemporary life 
in the United States and The World, an international newsmagazine co-
produced with the BBC and WGBH Boston. Through a nonprofit subsidiary 
nonprofit called Public Interactive, they are helping hundreds of 
public radio stations to extend the life of their programming and 
create a vibrant web presence in their communities.
    While content is the first principle, the future of radio depends 
on technology. In public radio, we know that our audience is demanding 
changes in how and when we provide programming to them. The old 
broadcast model of ``if you build it, they will come'', no longer holds 
true. As we often say, our listeners want programming on their terms, 
whenever and wherever it is most useful to them and to be delivered on 
a multitude of reception devices. To them, it is all the public radio 
experience.
    It remains true that over-the-air broadcasting will be the 
principle distribution path for most public radio programs today and 
for the foreseeable future. But even in over-the-air radio 
broadcasting, the last enclave of the old analog world, change is 
rapidly occurring. As of today, more than 600 public radio stations are 
moving to digital operations. By the end of 2007, we anticipate 350 
stations to be on-the-air with digital signals, and of those more than 
100 will be multicasting, serving their communities and listeners with 
not one, but two or more streams of public radio programming.
    We view the transition to digital broadcasting as a tool to improve 
and broaden the reach of our programming to poorly served, un-served 
audiences. We will use it to make radio reading services for the blind 
and hearing impaired more accessible. Our vision is that in the not too 
distant future, listeners to radio reading services will no longer need 
a special receiver; any new digital radio will have the ability to 
offer that public service. And for the first time, the 23 million deaf 
and hard of hearing Americans will have access to real-time public 
radio programming in the form of text that displays on the next 
generation of digital radios.
    This summer we launched Radio Ahora--produced by Radio Netherlands 
for distribution by NPR. It mixes together 10-12 hours of live daily 
programs with documentaries and archival material, all in Spanish. 
Radio Ahora is targeted at people from Central and South America, doing 
so by focusing on editorial concerns of that area, regional accents, 
and a large number of correspondents in those countries.
    We also offer streams of classical music, jazz and folk so that our 
member stations can expand their community service. All of these 
efforts are only the beginning of the public service potential of 
digital radio. Its inherently inclusive nature makes it a perfect fit 
for public radio's relentless pursuit of public service.
    Given the increasing adoption of new content platforms--from online 
to hand-held devices--and the accelerating changes in media usage 
patterns, public radio has significantly greater opportunities to 
gather news, share information, build communities of interest, and 
fulfill its public service mission. Thus, expansion and improvement of 
public radio websites and web content are priorities that demand our 
attention. Public radio stations and public radio program producers are 
taking advantage of the vast ``space'' created by the web to bring 
broader, deeper and more varied content to those who listen to our 
programs and then visit our websites to learn more. The web also allows 
us to serve audiences who are not familiar with public radio, as our 
content increasingly surfaces on search engines. We estimate that the 
primary program producers' websites in the public radio systems--NPR, 
MPR and PRI--have 8 million unique visitors each month. We estimate a 
comparable number of web-visitors to stationsites.
    This expansion in the use of web-based content for public radio at 
all levels is a pattern that will continue into the future. Increased 
use of web-based resources poses numerous challenges, including making 
sure that content found in public radio websites is as compelling and 
important in people's lives as our over-the-air broadcasts. We envision 
a unique and important public service role on the web. First among 
these, we will offer distinctive, insightful perspectives on news and 
issues of the day. Public radio websites bring in voices that aren't 
presented on every other news site. At their best, they put the 
audience in touch with events that foster personal growth, create 
connections to other human beings and strengthen our Nation's civil 
discourse.
    The upcoming 2008 elections provide public broadcasting with 
opportunities to utilize cross platform news gathering tools. NPR and 
PBS, in partnership with our stations, are pooling significant 
editorial and technical resources to engage the public at the local, 
state, regional and national levels. We are developing an online 
infrastructure that enables public media entities to integrate our 
collective election-related content on any public media website, while 
helping to promote local election content throughout the system. 
Stations and other entities that use these content modules will be able 
to leverage election-related resources from across the system for 
online and on-air use. The public will benefit by having greater access 
to comprehensive election-related content produced and curated by 
public broadcasters, as well as new opportunities to contribute their 
own ideas and content to a nationwide civic dialogue.
    Other Internet program distribution platforms are gaining wide 
acceptance among public radio listeners and forcing changes within 
public radio. Podcasting, for example, which is radio programming 
content distributed via the Internet to listeners with portable music 
listening devices, is a term only recently found in the common language 
of media, but it has become a growing presence in public radio. iTunes 
reports that NPR and public radio podcasts are among the most popular 
in this new program distribution service. NPR, in conjunction with a 
host of public radio stations and producers, has launched a common 
podcasting platform that routinely has 9 million monthly downloads, 
with more than 140 million downloads since the project launch 2 years 
ago. Among the most popular are the in-depth interview program Fresh 
Air, NPR News Story of the Day, Talk of the Nation Science Friday, and 
All Songs Considered. This summer we launched three Spanish language 
podcasts. Al Grano, a Spanish-language news roundtable host by Maria 
Hinojosa; a Spanish version of the popular Youth Radio pieces heard on 
NPR newsmagazines; and La Matinal: a 29 minute daily newsmagazine 
produced by Radio Netherlands.
    On November 5, NPR will launch a new music service on npr.org in 
partnership with member stations WBGO, WFUV, WGBH, WXPN, WDUQ, KUT, 
WKSU, WGUC, MPR (also, American Public Media), KEXP and KPLU. Original 
concerts, studio sessions, and song discovery features from all of the 
partners will be brought together in one place where the audience can 
learn more about music genres and artists rarely heard on commercial 
radio. Over time, we plan to expand this service to include more member 
stations.
    Just 2 months ago, we launched the NPR Mobile service, which is 
unique in its content delivery platform and business model. In 
partnership with 10 stations, the two products--NPR Mobile Web and NPR 
Mobile Voice--offer NPR and local station content on handheld devices 
or any phone line.
    The changing demands of new content delivery technologies, and of 
our audiences who use them, are the catalyst for change in way we are 
producing content. Whether it's the delivery of news and information, 
music, entertainment or cultural enrichment shows, assembly of the 
``bits'' that become part of current and future digital delivery 
systems is increasingly important. Our concept for the future is built 
upon full utilization of digital technology.
    The future of radio is dependent on equal parts of programming and 
technology so that audiences are engaged with content that enriches, 
educates and informs at the times and places most convenient and useful 
to them.
    Mr. Chairman, we are investing our resources in both programming 
and technology. We are expanding in both areas and we are adding staff 
. . . reporters, producers, editors . . . to bring the world, community 
by community, to our audience.
    In contrast to the expansion of regional, national and 
international news coverage by NPR and others in public radio, the last 
decade has seen a remarkable retreat in other American broadcast media 
from serious, careful, and balanced presentation of news, information, 
and ideas.
    Public radio is responding to this growing trend with Local News 
Initiative (LNI). This is a national effort to increase public radio's 
listener service through investments that enhance station capacity to 
provide quality, in-depth news. As other media continue to retreat from 
serious local news coverage, many stations have recognized that the 
need for high quality local content and news is becoming more and more 
critical. Our goal is to increase the level and quality of serious 
local news coverage in communities across the Nation; strengthen the 
capacity for local public radio stations to sustain local news efforts; 
and, create meaningful and long-lasting relationships between NPR, 
stations and the stations' local communities. Working in partnership 
with stations and other public radio organizations, the LNI was 
launched to provide a framework for long-term transformational change 
that can elevate the ability of both stations and national program 
producers to better serve the public.
    In short, Mr. Chairman, the future of radio rests with programming, 
technology and ceaseless efforts to connect with the American people. 
In each case, NPR and public radio are leading the way.

    Senator Cantwell. Thank you very much, and I thank all of 
the witnesses for their testimony. I'm going to turn now to the 
Chairman to see if he has any questions he would like to ask.
    The Chairman. Madam Chair, I'm very much impressed by the 
quality of the testimony this morning. I have about 10 pages of 
questions I'd like to submit to all of you for your responses, 
if I may. And this testimony convinces me that this Committee 
must look into matters such as consolidation, diversity, local 
news--diversity, not just on news, but on ownership--and we'll 
be doing that under the aegis of Chairman Cantwell.
    Thank you very much.
    Senator Cantwell. Thank you, Mr. Chairman, Senator Snowe, 
do you have questions?
    Senator Snowe. Yes, thank you very much, Madam Chair and 
Mr. Chairman for holding this hearing, because I think it is 
crucial, particularly at this time, since the FCC is looking to 
further consolidate within the medium. That's why I'm pleased 
to work with Senator Dorgan on this question, and expanding the 
comment period, at the very least, and then go from there.
    But it's a critical question, because we're seeing a 
declining number of radio stations, that has certainly occurred 
in my state. In fact, the FCC held a hearing on localism in our 
state recently, one of the six hearings nationwide. And it was 
a very active hearing. People are very much concerned about the 
fact that we're losing local content, losing the competition, 
losing the diversity that all of you have addressed here today.
    So, I think that ownership consolidation is going to 
really, I think, undermine all of these principles, without 
question. And so, I think that we, I appreciate the fact that 
we're focusing on this question.
    I would like to ask you, Mr. Withers, what steps are your 
members taking to ensure local content of programming? Because 
I, you know, I am concerned about what is happening with radio 
ownership consolidation that affects the consumers and, you 
know, in my state and across this country, and how has it 
affected diversity and the content that's available to people 
in the various communities?
    Mr. Withers. Senator, thank you for the question. As I 
understood it--because I didn't want to answer a question that 
I didn't understand correctly--you wanted to know what steps 
our members had taken to ensure diversity in programming?
    Senator Snowe. In local content.
    Mr. Withers. In local content. I was--and you mentioned the 
hearing that just was attended, was held in your state--I was 
privileged to attend the hearing that was held in Chicago at 
Jesse Jackson's headquarters, where--and the reason I even 
bring it up, is that my daughter, who just finished her term as 
Chairman of the Illinois Broadcasters Association and owns 10 
stations in her own name and right, totally separate from 
anything that I do, was one of the testifiers at that hearing. 
And she basically--I'm parroting what she was saying--but good 
broadcasters do good local service and they understand, whether 
they're group owned or not, they understand that you can't take 
from a community unless you have put into the community and are 
a part of the fiber and fabric of it.
    We're seeing that played out, as we speak now, in Southern 
California, where a commercial broadcaster just gave his 
facility to the public broadcast station that was burned out 
this morning, and they will continue that until it's over with.
    And you know, you've asked me what time it is and I tell 
you why the Swiss are neutral. There is no real answer for 
this. You have to understand what the community is and you have 
to supply their needs. And a good broadcaster will do that. I'm 
sure there are probably bad chiropractors, bad broadcasters, 
and I hope I never get a bad brain surgeon. But we try to be 
the best that we can be.
    Senator Snowe. So, what kind of steps is the membership 
taking in that respect?
    Mr. Withers. What concept----
    Senator Snowe. What kinds of steps are they taking and how 
do you expand diversity and, within the industry? I mean, what 
can we be doing in that regard, and what is your membership 
doing?
    Mr. Withers. We have a, the NAB itself, which is the only 
thing, I represent them, has a Broadcaster's Foundation, which 
has an outreach program, where we train minority people of 
color, females, anybody that frankly wants to take the course. 
We have scholarships for them so they don't have to pay for it. 
We have an incidence rating of, I think, 80 to 90 percent of 
the ones who finish this--this program, wind up in management 
and many of them, and I've kept in contact with them over the 
years, have gone on to become station owners. So we are 
fostering all we can and promoting all we can on a voluntary 
basis within the National Association of Broadcasters.
    Senator Snowe. Thank you.
    Mr. Withers. By, under the aegis of the National 
Association of Broadcasters Education Foundation.
    Senator Snowe. And finally, Mr. Turner, I appreciate your 
passion about the issue of media consolidation. I couldn't 
agree with you more. Many of us on this Committee and certainly 
Senator Dorgan in that respect. What steps do you think that 
this Committee should take in response to the announcement made 
by the FCC, as they prepare to look at changing the media 
ownership consolidation rules?
    Mr. Turner. Well, that's a really good question. Just to 
give a little bit of background. This is such an important 
issue, that the Commission had 10 separate studies conducted on 
the issue, that took the authors over 8 months to actually 
perform the work. Now, there was no public input on how those 
studies were conducted, but once the studies were released, we 
were given 60 days to comment on thousands of pages and very 
complex statistical studies.
    Yet, 30 days into that comment period, we still hadn't 
received the underlying data. Only 10 days before the comments 
were due, did the Commission finally release all the underlying 
data and allow us to conduct some meaningful analysis of this 
from the public interest perspective.
    Now, they gave us a 20-day extension on filing comments, 
which we did this Monday, and we filled the record with over 
2,500 pages of comments on these studies. Now, mostly we dealt 
with the issue of newspaper or television broadcast ownership, 
but if we would have had our 90 days, we would have given 
another 2,500 pages on the issue of radio.
    But fundamentally, I think what the current data shows, is 
that the best way to promote localism and diversity in radio is 
to simply roll back consolidation. That will produce more 
stations that can get in the hands of local owners.
    Now, what you can do as Congress to step in and make sure 
this process is conducted in an open and transparent manner, is 
to send a message to the Chairman and say, you know, bring them 
up here, ask him some questions, ask him what is his opinion on 
the impact of media consolidation and how it impacts 
communities of color and women. And, send a strong message that 
there's a bipartisan consensus on this Committee and throughout 
this body as a whole, that media consolidation should not be 
permitted.
    Senator Snowe. I appreciate that and we are going to follow 
up on all of those issues. And, I thank you very much.
    Senator Cantwell. Thank you, Senator Snowe.
    Senator Dorgan?
    Senator Dorgan. Madam Chair----
    Senator Cantwell. And I will remind my colleagues, we 
didn't start the clock for members, but since we are expecting 
a vote, if everybody could keep their questions to 5 minutes, 
that would be appreciated.
    Senator Dorgan. Mr. Turner, as you know, the previous rules 
that the FCC promulgated, which were struck down by the court, 
the Senate expressed itself very strongly opposing the rules in 
a vote on this floor of the Senate, would have in the largest 
cities of the country, allowed one company to own eight radio 
stations, three television stations, the newspaper, and the 
cable company. And that was going to be just fine. Well, it 
wasn't with the U.S. Senate. And, it wasn't with the circuit 
court.
    But, those who counsel for unlimited, virtually unlimited 
concentrations say, ``You know what, this is good. It's 
localism, it's fine. Nobody's going to do anything that's 
counterproductive to local interests.'' We've had hearings in 
here where we've heard about voice tracking, a guy sitting in a 
basement in Baltimore saying, ``It's a great day here in Salt 
Lake City. The sun's up, we're going to have a wonderful day 
and I'm glad you have joined me,'' pretending that he's in Salt 
Lake City. In fact, he's broadcasting out of a basement in 
Baltimore. That's called ``voice tracking.'' How prevalent is 
voice tracking? Do you have any data about that?
    Mr. Turner. There doesn't exist a lot of data on voice 
tracking because this is primarily something that is in its 
nature, phantom, and hard to keep track of. And this is 
something that we would encourage the Commission, along with 
its efforts to track issues like payola, to start looking at 
the issue.
    Senator Dorgan. It's kind of a virtual localism, isn't it? 
I mean, it's, let's pretend that we're part of your community, 
but are not. The reason I mentioned that is, in addition to 
that sort of pretending that they're part of the local 
community, we also see a substantial diminution of personnel in 
the newsroom in many cases. And Mr. Withers, I'll ask you about 
that in a moment.
    But there's, I think, a fairly substantial amount of 
evidence about consolidation of newsrooms. For example, in one 
North Dakota community--I would say to you Mr. Withers--one 
radio company from out of state bought all six commercial radio 
stations. And so, you know, they run homogenized music through 
their board, I guess, and they basically emasculated most of 
the news gathering in those areas. I suppose they would 
consider themselves local, but they're really not. Tell me, 
what kind of information with respect to cross-ownership, 
allowing as the Commission seems to want to do, the common 
ownership of newspapers and radio and television stations in 
the same market?
    Mr. Turner, you have analyzed the data by the FCC. The FCC 
maintains that there's no problem here at all. Tell me your 
analysis of that data?
    Mr. Turner. Well, that's right, Senator. During this 
process, the former chief economist at the FCC, a woman by the 
name of Marx, she wrote a memo, basically starting with the 
question, ``How can we loosen these rules?'' She didn't start 
with the question, ``What's in the public interest?'' And the 
resulting way the research was framed and was conducted in 
these 10 studies, was trying to look at whether or not a 
station does more local news if it's in a cross-owned 
relationship.
    We said, the actual question that should have been asked 
is, ``What happens at the market level?'' Because simple 
economic theory predicts that as you have a more powerful owner 
in a market, it may push out the other owners who are doing 
diverse news. And lo and behold, when we actually looked at the 
FCC's own data in three separate studies and aggregated at the 
market level, it's exactly the result we found. The strong 
statistically significant effect that cross-ownership of 
newspapers and television stations in a local market leads to 
far less local news.
    Senator Dorgan. That's an important contribution.
    Mr. Withers, let me--let me say this. There are some 
wonderful broadcast owners across this country who do 
remarkable local service, and I admire the work they do every 
day. But, there is a localism proceeding that has never been 
completed. Localism is a very important part of providing the 
license to use the airways free of charge. And with those 
licenses, we've now gone from 3 years to 8 years and basically 
send a postcard and make a few assertions and you continue to 
have the license.
    I do think that concentration is at odds with localism, and 
I think that's demonstrated in many markets across the country. 
You obviously disagree with that, I expect. Tell me how 
concentrations of 400 or 200 or 1,200 radio stations serve 
localism, the interest of localism, in your judgment?
    Mr. Withers. Senator, it depends on, in many cases, and I 
think I'm familiar with the foreign--I hate to call them 
foreign--the out-of-state owner that owns the six radio 
stations in the community in which you refer. I compete against 
the same out-of-state company in an area where they have one 
newsman, I have 16. So, granted, I've spread it over, it's 
spread over several stations and we do election returns, we do, 
literally, region-wide election returns, and then there might 
be as many as 50 people that we have stringers out doing that.
    Their competition in one of these markets only has a half a 
newsperson. I don't agree with that. That's not the way that I 
said when I addressed Senator Snowe a moment ago. We, you have 
to put into a community before you can take anything out of it, 
whether it's advertising revenue or anything we do.
    And so, I agree with you. If it's abused, it's like any 
other thing. If it's been abused, it's not good. If it's done 
well, then it's, I can afford to put the different news people 
into a town that wouldn't have one, ordinarily. I mean, we're 
talking about towns of 8,000, 9,000 people.
    But we'd, and we do it and believe in it and it has helped 
grow, grow, grow. And so, it's yes and no, it's hot and cold, 
it depends on how well they operate and who they are. And I'm 
not saying that I'm the fantasy, I'm the know all, see all 
about any of this. It's just after 50 years, I can, I have seen 
what works and I've also seen what doesn't work. And it works 
if you're there serving the local communities.
    Senator Dorgan. And, I will finish my time here. Serving 
local interests works, it's no question about that, and I don't 
think there's any question either about what concentration does 
to diminish the service to local interests. It's happened all 
around the country. And, I think that failure to serve local 
interest by this dramatically increased concentration is what 
persuades many of us to suggest that what the FCC wants to do 
is exactly the wrong thing.
    Mr. Withers. I respectfully feel that the concentration in 
and of itself does not cause diminution of service. It's the 
approach in which it's taken by the different people. There are 
some markets, I mean, I've got a market now where I have to 
replace, and I hope he's not watching this or listening to it, 
where I have to replace the manager. He's got four stations 
under him.
    Senator Dorgan. Well, tell us the market.
    [Laughter.]
    Senator Dorgan. We won't leak a word of it.
    Mr. Withers. Oh, you won't say a word. Yes.
    But it's because I don't feel he serves the community 
correctly. But, and that's, the buck stops here. I'm the one 
that hired him, so I'll be the one that will, that will allow 
him to take instant retirement, which is a nice fringe benefit 
that we occasionally offer to some of the people that don't 
function. But I know what needs to be done. He doesn't agree 
with me.
    And so therefore, I'll replace him. But the fact that it's 
a market that's about 250 miles from where I live has nothing 
to do, the consolidation didn't do it. If I lived in the town 
and he were the manager, it wouldn't improve it any. It might 
somewhat. I'd probably get invited to more parties, but that 
would be about it. I don't think that the consolidation of 
itself is bad, it's the way in which the consolidators have 
approached it.
    And, in the case of the 500-pound gorilla in the room is 
Clear Channel, and they have seen, I think, so they were trying 
to run two different companies, a large-market company and a 
small-market company. And as you are well aware, they are 
selling off 440 some-odd radio stations. And they're going into 
diverse hands and much smaller group operators, and I think 
you'll see that the marketplace is taking care of, in this 
case, a lot of the lack of attention or difference in 
management philosophies that might occur in a large or a small 
market.
    Senator Dorgan. But I think the very thing you've 
described, represents the failure, however, and represents the 
reason that we have to take action to prevent the FCC from 
further damaging the radio and television and the industries 
that we rely on.
    I've taken more time. There's much more to say at some 
point later. I thank the entire panel. It's some really 
terrific testimony. Mr. Withers, thank you, and the NAB as 
well.
    Senator Cantwell. Thank you.
    Senator Sununu?

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

    Senator Sununu. Thank you very much. Sorry for arriving a 
little bit late. I read much of your testimony. I did not hear 
it all, so I apologize if I mention anything or ask anything 
that's a little bit redundant.
    Mr. Withers, I wanted to start with you. And, you know we 
hear a lot of talk about consolidation and big media and, you 
know, big isn't necessarily a bad thing. We can think of a lot 
of industries where we've seen large companies competing and 
driving down prices for consumers, maybe in manufactured goods 
and other areas. And I suppose large can be good when it comes 
to distributing information or content, broadcasting. It's not 
necessarily a bad thing. But oftentimes the rhetoric is, 
``Well, concentration is bad. We need to move away from that.''
    The reason I make this point, is because despite all of the 
rhetoric, you've got information in your testimony that there 
are more radio station owners today than there were in 1972. 
And if you listen to all the rhetoric out there, you would 
think just the opposite. There must be one-tenth the number. 
There must be half the number. There must be one-third the 
number that there were 25 or 30 or 35 years ago. So, I want you 
to talk a little bit about that statistic, to what extent have 
the number of owners increased since 1972 and why?
    Mr. Withers. Thank you for the question. The number of 
owners has increased because there are more stations that have 
come on the air. They've had several proceedings where they've 
opened up--8090 was the great one, where they, I think they 
decreed that anybody born within a certain period of time was 
not given a Social Security card, but was given a license for 
an FM station.
    [Laughter.]
    Mr. Withers. But in an attempt to--no, that wasn't how I 
got in the business. I don't think we had Social Security when 
I got in the business, but the, no it wasn't.
    But there have been more--and part of it is attributable to 
the fact that as we've had more educational systems and 
programs, like the one that the NAB has, and there are more and 
more and better broadcast schools. Southern Illinois University 
in Carbondale, for example, has a tremendous broadcast school. 
And as you produce more good product, the eagles will want to 
fly and they want to fly to their own nest. And so, they'll get 
stations.
    There are plenty of stations there. We have, because of the 
technological changes that the Commission has, FCC has done, 
there are more stations that fit in, in more places. And the 
computer modeling has allowed that to happen. And more and more 
people have applied for and gotten and are running stations.
    So you know, when you look at, the first, the top two or 
three companies probably control 8 to 10 percent of the radio 
stations. The next 50 owners, own less than 50 stations. And 
once you get past that, it's all very small groups. There might 
be a man and his wife that will have four. My daughter, for 
example, has 10 scattered in two states, Missouri and Illinois. 
And so there are a lot of small owners that own a, they're not 
single station owners, but they don't own a lot of stations.
    And so, when you--it looks--it's always easy, that's why 
they don't call it Lieutenant Motors, it's General Motors. 
There's always a big one that everybody throws darts at. But 
then, once you get past the top two or three and you get down 
past that next 50, who don't own a lot of stations, 
collectively, when you consider the universe of stations, the 
rest of those are all small operators. And that's what, where 
the number comes from.
    Mr. Turner. Senator Sununu, can I possibly respond to that?
    Senator Sununu. Sure.
    Mr. Turner. When we talk about concentration, we're not 
just talking about the number of stations. We're also talking 
about the actual market shares of these owners in the local 
markets. Now, I think it's unacceptable that in the average 
market, about 75 percent of the revenue is controlled by the 
top two owners. Now, this has created artificial economies of 
scale in the industry that have not only hurt the local owners 
of the radio stations, but it's also hurt local businesses who 
look to advertise on some of these local stations.
    So, when we talk about the issue of concentration, we 
shouldn't just focus on the concentration of stations, but the 
actual market power that these owners have been able to exert.
    Senator Sununu. Well, I don't know that that's entirely 
correct. Because all things being equal, if you have five 
participants in the marketplace, each with the same opportunity 
to reach listeners on the basis of the power of their station, 
or the coverage of their station. And it turns out that 
everyone in the market is listening to one station because the 
other four are horrible, they may have 100 percent so-called 
market share or market power by your definition, but I would 
argue that there's every opportunity in the world in that 
market for competition.
    Now that may be a slightly simplified example, but I think 
if you look at demographics and the fragmentation, the 
ownership structure, in many cases, the revenue figures that 
you cite have more to do with listenership than they do with 
fragmentation. So, I think we need to be careful and clear and 
honest when we're talking about whether there is or is, aren't 
competitive forces.
    Now, if you're talking about a market with, where there 
might be only, you know, one radio station, which is very rare, 
I'm sure there might be places where that's the case, then 
obviously concentration is a greater concern.
    Let me move on, because we don't have too much time and you 
both obviously had ample time to address that point.
    Mr. Withers, I want to talk about a slightly more 
controversial issue, which is the licensing and performance 
rights and copyright and royalties for composers and the like. 
You talked a little bit about that in your testimony.
    First, talking about the broadcasters having to pay sound 
recording performance fees when they put signals on the 
Internet. And, that you thought that those fees were too high. 
And, I think it's important when we're dealing with copyright 
content ownership and licensing that, you know, we have fee 
structures that make sense, as level a playing field as 
possible, and we have a good system for protecting those 
rights.
    But in this case, you're talking about performance fees for 
streaming signals on the Internet not being fair. But don't 
others, who are streaming content digitally on the Internet or 
satellite radio, XM and Sirius, they're paying these same 
performance fees, are they not?
    Mr. Withers. Yes sir, they are. Mel Karmazan, who you 
gentlemen know----
    Senator Sununu. He's been here before.
    Mr. Withers. He's been here before, got to sit at my 
immediate right. He--he's now stated that they're usurious and 
he doesn't feel he should have to pay them. What a surprise. 
But----
    Senator Sununu. So you take consolation in the fact that 
everyone's complaining about them now.
    Mr. Withers. I don't take consolation, I'm just pleased 
that we have, for one thing, we have a topic that people are 
united on and behind us and everybody else, I think, at the 
panel. You heard testimony today that it would put, it's going 
to put Pandora out of business because of the size and impact.
    My opinion, personal opinion, the Copyright Royalty Board 
got about 15 times more than they thought they would get. And 
it's unconscionable, frankly, that when the NAB sends what I 
thought was a reasonable, and a reasoned offer to them, it took 
13 weeks to turn it down.
    Senator Sununu. So, do you object to paying performance 
fees for those who own the copyright or do you just think that 
the fees as currently structured by the CRB is too high?
    Mr. Withers. Talking, you're talking about Internet 
streaming?
    Senator Sununu. Well, why would we--why would we make a 
distinction?
    Mr. Withers. Because over the air, it always been----
    Senator Sununu. Well, we'll get to that, then.
    Mr. Withers. Well if----
    Senator Sununu. We'll see if you want to narrow your answer 
to Internet.
    Mr. Withers. I want to narrow my answer. Yes, I'm talking 
about--we frankly weren't at the--why we were asleep at the 
switch and weren't at the table about 15 years ago when they 
did the digital thing, I have no idea.
    Senator Sununu. I'm sorry. I didn't ask a yes or no 
question though. I asked whether you felt, whether you objected 
to paying performance fees, or whether you simply felt that the 
CRB has set them too high for Internet streaming.
    Mr. Withers. We object to paying them.
    Senator Sununu. So you don't think the performance, 
performance copyright should be getting anything from anyone, 
anytime?
    Mr. Withers. Given the choice you gave me with the 
question, that was where we objected to paying it. But since I, 
we are where we are on this slippery slope, because it is a new 
and different business model from our business model and plan, 
the Internet streaming part. We had made an offer. So, since we 
made an offer, we obviously wouldn't have made it unless we 
were sincere about it.
    Senator Sununu. I'm a--you refer to the performance fee for 
Internet streaming, and I think your position is reasonably 
clear there. But then, on the next page in your testimony, you 
talk about a performance tax for over-the-air broadcasts. Now, 
we're really talking about the same thing, are we not?
    Mr. Withers. We don't feel so. We think it's a totally 
different business model. For 40 years--for 40 years Congress--
--
    Senator Sununu. But in both cases you're talking about 
paying money to the performer, who has a copyright on a piece 
of music. Correct?
    Mr. Withers. We're talking about--well, if, it's a 
typical--if it's a typical record company deal, the money 
doesn't go to the performer to begin with. So, that's a 
misnomer.
    Senator Sununu. In both cases, the money doesn't--you're 
claiming that in both cases, the money doesn't go to the 
performer?
    Mr. Withers. In both cases of, if we paid a performance 
right?
    Senator Sununu. Yes.
    Mr. Withers. The, for the last 40 years, Congress has 
agreed with our position that we are free play on our part. 
They get free promotion. We're giving them free play.
    Senator Sununu. I'm just trying to ascertain whether we're 
talking about the same thing. You used a phrase performance 
tax, but we're not talking about the government collecting the 
money?
    Mr. Withers. I disagree with the term, the performance tax. 
It's a performance fee, but that's my personal----
    Senator Sununu. Excellent.
    Mr. Withers.--that's my personal.
    Senator Cantwell. Senator Sununu, if you could wrap up, 
because I do want to get to Senator McCaskill.
    Senator Sununu. I appreciate that.
    I just, this is important, I think. I want to be clear, I 
mean, it's in your, the phrase performance tax was in your 
testimony. So, we're talking about a performance fee or 
license----
    Mr. Withers. Yes, sir.
    Senator Sununu.--in both cases.
    OK, I appreciate that very much. Could I ask one last 
question of Mr. Westergren?
    You've got Pandora, and I understand vaguely, sort of, what 
kind of a system you have set up and why, with such a narrow 
casting or, you know, focused play list, the performance fees 
could be extremely onerous for you. So, you don't have to go 
into that. I think I understand.
    I want to ask you a broader question to you because you're 
obviously doing something that many would be considered 
evolutionary, at least, in taking advantage of some of these 
new platforms. Whose business model is most threatened by what 
you do? And, what part of the industry or what kinds of 
business do you think will be most affected over the medium and 
long-term by the kinds of products and services that you're 
providing? And I'll close there.
    Thank you, Madam Chair.
    Mr. Westergren. I guess the best way for me to answer that 
is to look at who we consider our competition. And, when I'm 
asked who we compete against, it's anybody who's trying to 
attract someone else's listening hour. So, we are competing 
with radio in its many, many forms, whether it's cable, other 
Internet radio providers, broadcast radio. And increasingly, 
those various forms of radio are converging. You weren't here 
earlier, but I actually played a sample of Pandora's stream 
through a cell phone, which with a little adapter you can stick 
into your car and listen to it while you're traveling on the 
highway. And so, we're in a marketplace where you sit adjacent 
to all these other forms of radio. And our intention is to 
compete with them.
    We think, you know, if I was in their shoes, I would be 
worried about Internet radio, because I think it's--I'm hearing 
its footsteps behind me. And I think one of the, sort of, most 
important messages I'd like to deliver today, is the idea of 
parity. That we have a situation where we compete directly, but 
are under radically different licensing structures, by orders 
of magnitude.
    Senator Sununu. Are you making any money?
    Senator Cantwell. I'm going to have to----
    Mr. Westergren. We're losing hand over fist right now.
    Senator Cantwell. I'm going to have to go to Senator 
McCaskill. She's been patiently waiting. And I want to make 
sure we get her in before the vote.
    We aren't going to come back after the vote, so let me 
thank the panel in advance for being here, and your good 
testimony. Members will be able to submit additional questions 
for the record. And, if you could answer those in a timely 
fashion, we'd greatly appreciate it.
    Senator McCaskill?
    Senator McCaskill. Thank you, Madam Chair.
    I've got several different--it's hard for me in 5 minutes 
to go to the different areas I'd like to go to.
    Let me start with Mr. Turner. Mr. Turner, are you ever 
aware, do you have any record or could you give the Committee 
any information about the licensing renewal process, in terms 
of accomplishing the goals that you have eloquently spoken 
about this morning? Are you aware if a broadcaster has ever 
been sanctioned or license revoked for not serving the public 
interest?
    Mr. Turner. Senator, throughout history, there has only 
been a few instances of that actually occurring, where actual 
licenses was revoked. One of the most famous cases involved a 
station in Mississippi that actually gave airtime to the Klan, 
but didn't give opposing time to Medgar Evans.
    You don't really see anything like that happening today. 
The license renewal process is largely a rubber stamp. Even in 
the event where they have broken specific regulations, such as 
the amount of advertising aired during children's broadcasting, 
there's often a three or four thousand dollar fine and a thank 
you very much, your license is renewed. So, from our point of 
view, the license renewal process has largely lost the 
oversight of the public's input into this.
    Senator McCaskill. If you could provide the Committee, if 
your organization has such a compilation, I think it would be 
really helpful for the members of the Committee to get a, 
really a grasp on how silly the notion is that license renewal 
provides some kind of stick, in terms of enforcing the public 
interest, in terms of broadcasting that's ongoing.
    Mr. Turner. We certainly will. This is a very rich area 
that we think Senators should know about.
    Senator McCaskill. Thank you very much.
    To Mr. Withers--first of all, every time you start talking, 
I feel like I can shut my eyes and I'm listening to the radio. 
What a radio voice you have. Obviously that's where you started 
in the business, was behind a microphone, and you still have 
the melodic voice that competes very well, I think, over the 
airways with other voices.
    I know your stations in Cape Girardeau. I'm very familiar 
with them. I know that most of the megawatts you've got down, 
most of the wattage you have down there are classic rock, 
you've got contemporary hit radio, and then you've got the very 
important St. Louis Cardinals, and country.
    If you look at your major wattage stations in Cape 
Girardeau, I'm familiar with what kind of news coverage there 
is in Cape Girardeau, since I'm, you know, sometimes my mouth 
is on the other side of the microphone when I travel Cape 
Girardeau. I don't quarrel that you may cover the news on 
those, but I don't know that those large stations are news 
heavy, in terms of local news.
    And the other thing I would say about those stations is 
that they would be probably the ones that you would be most 
likely to want to stream, in terms of your listening audience. 
And, to follow up on what Senator Sununu said, I mean, I 
understand your angst about this, but what Mr. Westergren said 
is true. I find my listening habits have changed remarkably 
since I have gotten decent headphones for my computer. And 
because the sound I can now get out of my computer is 
remarkable and it is so convenient and it is so easy. And I got 
this for my kids, by the way, who are 20 and 18. They're the 
ones who said, ``Mom, you know, get a life. Quit turning on the 
radio at home, just plug into your computer.''
    How in the world can the computer Internet radio industry 
compete with you, if you get what they have to pay for, for 
free? How does that work in a market? How can Mr. Westergren 
have to pay for these--for these artists--and I know you said, 
``Well, the performers don't get it,'' but surely you don't 
want us to interfere in the contracting between record labels 
and artists. I don't think you want Congress to begin 
controlling that private contract between record labels and the 
artists they represent?
    Mr. Withers. No ma'am, I do not.
    Senator Cantwell. Mr. Withers, before you answer, I just 
want to say that we have a couple minutes left now on the vote. 
I'm going to excuse myself. You can stay at your own peril here 
to get the information.
    [Laughter.]
    Senator Cantwell. But again, thank those who were here 
today to testify.
    Senator McCaskill. And I have to, I can't stay for the 
answer either. I've got to go because this is a very important 
vote. So, if you want to hold that thought, and even though I 
have two other hearings I'm supposed to be at, I will come back 
for it.
    Senator Cantwell. I think that what we should do is put, 
submit this for testimony back. If you could provide us a 
written response. This is a very important hearing, very 
important issues. As you see, my colleagues care greatly about 
diversification efforts and consolidation concerns, as well as 
Low Power FM.
    So, we appreciate you being here and we appreciate you 
getting us written responses to our questions.
    Thank you, the meeting is adjourned.
    [Whereupon, at 11:18 a.m., the hearing was adjourned.]
                            A P P E N D I X

  Prepared Statement of Hon. Gordon H. Smith, U.S. Senator from Oregon
    Thank you, Mr. Chairman, for holding this important hearing to 
examine the future of radio.
    Traditional over-the-air radio is enjoying a renaissance today, the 
likes of which it has not seen since the golden age of radio. The 
advent of high definition radio which enables AM stations to sound like 
FM stations, FM stations to deliver CD quality music, and both to 
multicast additional programming streams and provide real-time on 
demand traffic and weather services, will completely change the way 
communities interact with their local broadcasters.
    As technology has evolved and the FCC enacted policies enabling the 
licensing of more radio stations, the number of outlets and owners in 
the marketplace has flourished.
    Indeed, the tapestry of voices that consumers can access in the 
radio marketplace has never been more rich. Today, an abundance of 
choices quells our appetite for audio programming. We can listen to 
traditional over-the-air radio, subscribe to satellite subscription 
services, plug into a personal library of music via a digital music 
recorder, download and time shift local news and public affairs 
podcasts from the Internet, and stream Internet radio programs to our 
computers.
    Similarly, competition for listeners in a market traditionally 
dominated by free, over-theair radio, has never been more vigorous. The 
proliferation of myriad new platforms to deliver audio programming has 
completely revamped the competitive landscape in radio.
    Paradoxically, this sea change of innovation in the radio 
marketplace has seen a dramatic increase in the number and type of 
media outlets, while ownership of those outlets by minorities and women 
has plummeted. Minority and women owners of media outlets provide a 
rich diversity of information to consumers of all races and both 
genders. Under-representation of minorities and women as owners of 
instruments of the federally regulated media industry is unacceptable 
in a democratic society. I believe that there is a compelling 
governmental interest in seeing that policies are enacted to address 
this incongruity.
    Our challenge of course is to define policies that encourage broad 
ownership opportunities for all in our society, promote the continued 
innovation in the marketplace, and secure the future competitiveness 
and continued vibrancy of traditional over-the-air radio.
    As we work to promote greater diversity of media ownership in radio 
we must acknowledge the new competitive pressures that threaten the 
continued viability traditional radio and its future ability to 
adequately serve the public interest. We must recognize that as markets 
evolve, there are situations where enabling greater media ownership 
opportunities can serve the public interest by improving economies of 
scale and bolstering the quality of service that consumers receive.
    Let me close by stating that I am particularly committed to this 
endeavor and look forward to working with my colleagues on both sides 
of the aisle to enact sound polices that will increase diversity in 
media ownership.
                                 ______
                                 
                                  Future of Music Coalition
                                  Washington, DC, November 15, 2007
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.

Members of the Committee:

    Future of Music Coalition (FMC) is a national nonprofit education, 
research and advocacy organization that identifies, examines, 
interprets and translates the challenging issues at the intersection of 
music, law, technology and policy. FMC achieves this through continuous 
interaction with its primary constituency--musicians--and in 
collaboration with other creator/citizen groups.
    FMC respectfully submits the Executive Summary from our December 
2006 report, False Premises, False Promises: A Quantitative History of 
Ownership Consolidation in the Radio Industry for member review 
following two recent hearings: the ``Future of Radio'' hearing on 
October 24, and the hearing on ``Localism, Diversity, and Media 
Ownership'' on November 7. FMC believes that these documents could be 
helpful for the Committee as it moves forward with its work on both 
media ownership and radio.
    FMC has been conducting quantitative research on the effect of the 
1996 Telecommunications Act on radio, musicians and the public for the 
past 5 years. In 2002 we published Radio Deregulation: Has It Served 
Citizens and Musicians?, a report that was widely read, filed at the 
FCC in the 2003 media ownership docket, and cited by the Third Circuit 
Court of Appeals in Prometheus v. FCC. In a 2003 New York Times 
interview, Commissioner Adelstein cited the evidence in FMC's study as 
a key reason that further radio deregulation was removed from the media 
ownership rulemaking.
    The full report is available at: http://www.futureofmusic.org/
research/radio
study.cfm.
    In 2006, FMC conducted additional research. False Premises, False 
Promises, released in December 2006, covers thirty years of historical 
data wherever possible; in other places, the study focuses on the last 
ten to twelve years--the main period of interest for examining the 
impact of the Telecom Act. The report relies on industry-collected data 
to measure changes in radio consolidation and programming including 
Media Access Pro (Radio Version) from industry consultants BIA 
Financial Networks, Duncan's American Radio, and Radio and Records 
magazine.
    The full report is available at: http://www.futureofmusic.org/
research/radio
study06.cfm.
    Key findings that are documented in the 2006 report include:

Emergence of Nationwide Radio Companies
    Fewer radio companies: The number of companies that own radio 
stations peaked in 1995 and has declined dramatically over the past 
decade. This has occurred largely because of industry consolidation but 
partly because many of the hundreds of new licenses issued since 1995 
have gone to a handful of companies and organizations.
    Larger radio companies: Radio-station holdings of the ten largest 
companies in the industry increased by almost fifteen times from 1985 
to 2005. Over that same period, holdings of the fifty largest companies 
increased almost sevenfold.
    Increasing revenue concentration: National concentration of 
advertising revenue increased from 12 percent market share for the top 
four companies in 1993 to 50 percent market share for the top four 
companies in 2004.
    Increasing ratings concentration: National concentration of 
listenership continued in 2005--the top four firms have 48 percent of 
the listeners, and the top ten firms have almost two-thirds of 
listeners.
    Declining listenership: Across 155 markets, radio listenership has 
declined over the past fourteen years for which data are available, a 
22 percent drop since its peak in 1989.
Consolidation in Local Radio Markets
    The Largest Local Owners Got Larger: The number of stations owned 
by the largest radio entity in the market has increased in every local 
market since 1992 and has increased considerably since 1996.
    More Markets with Owners Over the Local Cap: The FCC's signal-
contour market definition allowed companies to exceed local ownership 
caps in 104 markets.
    Increasing Local Concentration: Concentration of ownership in the 
vast majority of local markets has increased dramatically.
    How Lower Caps Can Be Justified: The FCC's local caps--in fact, 
even lower caps than the current caps--can be justified by analyzing 
how the caps prevent excessive concentration of market share.
    Declining Local Ownership: The Local Ownership Index, created by 
Future of Music Coalition, shows that the ``localness'' of radio 
ownership has declined from an average of 97.1 to an average of 69.9, a 
28 percent drop. See report for methodology and details.
    Restoration of Local Ownership is Possible: To restore the Local 
Ownership Index to even 90 percent of its pre-1996 level, the FCC would 
have to license dozens of new full power and low-power radio licenses 
to new local entrants and re-allocate spectrum to new local entrants 
during the digital audio broadcast transition.
Radio Programming in the Wake of Consolidation
    Homogenized Programming: Just fifteen formats make up 76 percent of 
commercial programming.
    Large Station Groups Program Narrowly: Owners who exceed or exactly 
meet the local ownership cap tend to program heavily in just eight 
formats.
    Only Small Station Groups Offer Niche Formats: Niche musical 
formats like Classical, Jazz, Americana, Bluegrass, New Rock, and Folk, 
where they exist, are provided almost exclusively by smaller station 
groups.
    Small Station Groups Sustain Public-Interest Programming: 
Children's programming, religious programming, foreign-language and 
ethnic-community programming, are also predominantly provided by 
smaller station groups.
    FMC would like to reiterate to this committee that radio 
consolidation has no demonstrated benefits for the public. Nor does it 
have any demonstrated benefits for the working people of the music and 
media industries, including DJs, programmers--and musicians. The 
Telecom Act unleashed an unprecedented wave of radio mergers that left 
a highly consolidated national radio market and extremely consolidated 
local radio markets. Radio programming from the largest station groups 
remains focused on just a few formats--many of which overlap with each 
other, enhancing the homogenization of the airwaves.
    From the recent new-payola scandal to the even more recent 
acknowledgements that giant media conglomerates have begun to fail as 
business models, we can see that government and business are catching 
up to the reality that radio consolidation did not work. Instead, the 
Telecom Act worked to reduce competition, diversity, and localism, 
doing precisely the opposite of Congress's stated goals for the FCC's 
media policy. Future debates about how to regulate information 
industries should look to radio for a warning about the dangers of 
consolidated control of a media platform.
    Future of Music Coalition urges this committee to resist any 
attempts by the FCC to further loosen or eliminate media ownership 
regulations.
            Respectfully submitted,
                                              Jenny Toomey,
                                                Executive Director.

                                             Michael Bracy,
                                                   Policy Director.

                                           Kristin Thomson,
                                                   Deputy Director.
                                 ______
                                 
                    False Premises, False Promises: 
           A Quantitative History of Ownership Consolidation
Executive Summary
    This report is a quantitative history of ownership consolidation in 
the radio industry over the past decade, studying the impact of the 
Telecommunications Act of 1996 and accompanying FCC regulations.
A Brief History of Radio Regulation
    Since the 1930s, the federal government has limited the number of 
radio stations that one entity could own or control. In the 1980s and 
early 1990s, the Federal Communications Commission (FCC) began 
gradually to relax these limits. Finally, in the Telecommunications Act 
of 1996 (Telecom Act), Congress eliminated the national cap on station 
ownership, allowing unlimited national consolidation. With the same 
law, Congress also raised the local caps on station ownership. In 
addition, as this study describes in detail, the FCC regulations 
implementing the Telecom Act allowed more consolidation to occur than 
alternative regulations would have allowed.
Methodology and Data Sources
    To keep the quantitative analysis as simple and transparent as 
possible, we have not included technical statistical analysis. Instead, 
we have filled this report with standard, antitrust-style measures of 
concentration; our own new methodologies for measuring localism and 
diversity; and many time-series analyses that simply track who owned 
what when. The study covers thirty years of historical data wherever 
possible; in other places, the study focuses onthe last ten to twelve 
years--the main period of interest for examining the impact of the 
Telecom Act.
    The FCC's own efforts at collecting data on the radio industry are 
inadequate, as we emphasize throughout the study. Just as the FCC does, 
we have relied on industry-collected data to measure changes in radio 
consolidation and programming. These proprietary sources include: Media 
Access Pro (Radio Version) from industry consultants BIA Financial 
Networks, Duncan's American Radio, and Radio and Records magazine.
Major Findings of the Study
    Highlights from the study are organized here in similar fashion to 
its three chapters. The first chapter focuses on national radio 
consolidation, the second on local radio consolidation, and the third 
on radio programming.
Emergence of Nationwide Radio Companies
    1. Fewer radio companies: The number of companies that own radio 
stations peaked in 1995 and has declined dramatically over the past 
decade. This has occurred largely because of industry consolidation but 
partly because many of the hundreds of new licenses issued since 1995 
have gone to a handful of companies and organizations.
    2. Larger radio companies: Radio-station holdings of the ten 
largest companies in the industry increased by almost fifteen times 
from 1985 to 2005. Over that same period, holdings of the fifty largest 
companies increased almost sevenfold.
    3. Increasing revenue concentration: National concentration of 
advertising revenue increased from 12 percent market share for the top 
four companies in 1993 to 50 percent market share for the top four 
companies in 2004.
Figure 1: National Share of Radio Listeners, Commercial Sector, 2005.



    4. Increasing ratings concentration: National concentration of 
listenership continued in 2005--the top four firms have 48 percent of 
the listeners, and the top ten firms have almost two-thirds of 
listeners [see Figure 1].
    5. Declining listenership: Across 155 markets, radio listenership 
has declined over the past fourteen years for which data are available, 
a 22 percent drop since its peak in 1989.
Consolidation in Local Radio Markets
    6. The Largest Local Owners Got Larger: The number of stations 
owned by the largest radio entity in the market has increased in every 
local market since 1992 and has increased considerably since 1996 [see 
Figure 2].
Figure 2: Number of Stations Owned in a Market by the Largest Owner in 
        a Market, 1975-2005, Average by Market Group.


        
        
    7. More Markets with Owners Over the Local Cap: The FCC's signal-
contour market definition allowed companies to exceed local ownership 
caps in 104 markets.
    8. Increasing Local Concentration: Concentration of ownership in 
the vast majority of local markets has increased dramatically.
    9. How Lower Caps Can Be Justified: The FCC's local caps--in fact, 
even lower caps than the current caps--can be justified by analyzing 
how the caps prevent excessive concentration of market share.
    10. Declining Local Ownership: The Local Ownership Index, created 
by Future of Music Coalition, shows that the localness of radio 
ownership has declined from an average of 97.1 to an average of 69.9, a 
28 percent drop.
    11. Restoration of Local Ownership is Possible: To restore the 
Local Ownership Index to even 90 percent of its pre-1996 level, the FCC 
would have to license dozens of new full power and low-power radio 
licenses to new local entrants and re-allocate spectrum to new local 
entrants during the digital audio broadcast transition.
Radio Programming in the Wake of Consolidation
    12. Homogenized Programming: Just fifteen formats make up 76% of 
commercial programming.
    13. Large Station Groups Program Narrowly: Owners who exceed or 
exactly meet the local ownership cap tend to program heavily in just 
eight formats.
    14. Only Small Station Groups Offer Niche Formats: Niche musical 
formats like Classical, Jazz, Americana, Bluegrass, New Rock, and Folk, 
where they exist, are provided almost exclusively by smaller station 
groups.
    15. Small Station Groups Sustain Public-Interest Programming: 
Children's programming, religious programming, foreign-language and 
ethnic-community programming, are also predominantly provided by 
smaller station groups.
    16. Format Overlap Remains Extensive: Radio formats with different 
names can overlap up to 80% in terms of the songs played on them.
Figure 3: Average Pairwise Overlap Between Stations in the Same Format, 
        By Owner, June 25-July 1, 2006.

        
        
    17. Individual Stations Use Highly Similar Playlists: Playlists for 
commonly owned stations in the same format can overlap up to 97%. For 
large companies, even the average pairwise overlap usually exceeds 50% 
[see Figure 3].
    18. Network Ownership Is Also Concentrated: The three largest radio 
companies in terms of station ownership are also the three largest 
companies in terms of programming-network ownership.
Conclusion
    Radio consolidation has no demonstrated benefits for the public. 
Nor does it have any demonstrated benefits for the working people of 
the music and media industries, including DJs, programmers--and 
musicians. The Telecom Act unleashed an unprecedented wave of radio 
mergers that left a highly consolidated national radio market and 
extremely consolidated local radio markets. Radio programming from the 
largest station groups remains focused on just a few formats--many of 
which overlap with each other, enhancing the homogenization of the 
airwaves.
    From the recent new-payola scandal to the even more recent 
acknowledgements that giant media conglomerates have begun to fail as 
business models, we can see that government and business are catching 
up to the reality that radio consolidation did not work. Instead, the 
Telecom Act worked to reduce competition, diversity, and localism, 
doing precisely the opposite of Congress's stated goals for the FCC's 
media policy. Future debates about how to regulate information 
industries should look to the radio consolidation story for a warning 
about the dangers of consolidated control of a media platform.
About Future of Music Coalition
    Future of Music Coalition (FMC) is a national non-profit education, 
research and advocacy organization that identifies, examines, 
interprets and translates the challenging issues at the intersection of 
music, law, technology and policy. FMC achieves this through continuous 
interaction with its primary constituency--musicians--and in 
collaboration with other creator/citizen groups.
About the Primary Author
    Peter DiCola is a Ph.D. candidate in economics at the University of 
Michigan in Ann Arbor. He received his J.D. magna cum laude from the 
University of Michigan Law School in May 2005, and was awarded the 
Henry M. Bates Memorial Scholarship. Currently, he serves as the 
Research Director of the Future of Music Coalition while he works on 
his dissertation. He has research interests in the fields of 
telecommunications law, intellectual property law, law and economics, 
labor economics, and industrial organization. He is the co-author, with 
Kristin Thomson, of Radio Deregulation: Has It Served Citizens and 
Musicians? (2002), which was cited by the U.S. Court of Appeals for the 
Third Circuit in Prometheus Radio Project v. FCC. He has also written a 
chapter, ``Employment and Wage Effects of Radio Consolidation,'' for 
the scholarly collection Media Diversity and Localism (Lawrence Erlbaum 
and Associates, 2006).
                                 ______
                                 
  Response to Written Question Submitted by Hon. Daniel K. Inouye to 
                             Mac McCaughan
    Question. As several of our witnesses have noted, there was a wave 
of consolidation in radio following the 1996 Telecommunications Act. 
With fewer stations owned by individuals from within the community, 
what impact has this had on localism?
    Answer. As I stated in my testimony before the Committee, 
consolidation has had a chilling effect on broadcast diversity and 
localism. The radio that I grew up listening to is in danger of 
extinction. Locally owned, non-commercial and college stations are 
dwarfed by corporate broadcasting, which places advertising revenue and 
stockholder interests above the programming needs and desires of 
communities. For musicians and labels, this means dwindling 
opportunities for their releases to be heard on the mainstream 
stations. Non-local ownership means important relationships and 
connections between broadcasters and members of communities are simply 
not made. Listeners are aggregated into the broadest possible 
demographics in order to sell more ads, with little to no regard for 
local and regional characteristics. Our label, Merge Records, counts 
its success almost exclusively on non-commercial and college radio, as 
well as the Internet. Congress and the FCC need to not only nurture and 
protect existing non-com broadcasters, but also provide the means by 
which more commercial stations can be independently and diversely 
owned.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                             Mac McCaughan
    Question 1. Do you consider low-power FM service a success? Do you 
believe that Low&wer FM service has promoted competition, diversity, 
and localism?
    Answer. Low&wer FM certainly helps offset some of the damage done 
by consolidation. Given its inherent spectrum limitations, however, 
there is no way LPFM can compete with Big Radio. But since commercial 
broadcasters often fail to serve the communities in which they do 
business, every little bit helps. I'd say there's more work to be done 
in this area, and strongly encourage Congress to remove existing caps 
on LPFM stations in urban markets.

    Question 2. It sounds like your label, Merge Records, is having a 
very successful year. As you mentioned in your testimony, albums by 
Arcade Fire and Spoon have both debuted in the Billboard Top Ten, and 
their tour dates are selling out. And this is in spite of the fact 
these albums are receiving very little airplay on commercial radio 
stations. Your label has been is business for over twenty years. What 
would you say is the biggest difference in how commercial radio 
stations promote artists' works today as compared to prior to the 
Telecom Act of 1996? Do you attribute these changes to increased 
concentration in radio ownership?
    Answer. I don't actually see a huge difference in how commercial 
stations promote artists' work today versus how this was handled pre-
1996. My personal feeling is that commercial radio has always supported 
the most mainstream and middle-of-the-road artists because those acts 
have typically been the ones who sold the most records. Commercial 
radio is first and foremost concerned with selling advertising, and 
less interested in exposing listeners to new or adventurous music. As 
an independent label, Merge has never depended on commercial radio to 
reach potential listeners. College, non-commercial and public radio has 
traditionally provided our strongest platform to the airwaves.
    That having been said, I believe the Telecom Act hastened the 
disappearance of DJ-driven commercial radio. Within a handful of years, 
the Nation was deprived of the few remaining commercial proponents of 
``alternative'' music. It seems odd, but we now live in a time in which 
independent labels such as ours are growing, while major label sales 
continue to plummet. Although Merge artists are selling more records 
than ever before and making a mark on the Billboard charts, the 
corollary radio outlets one would expect to be supporting such growth 
in the independent sector are simply not there.

    Question 3. In your testimony you say that commercial radio is 
about aggregating the largest possible number of listeners in a 
targeted demographic. If that is the case, can you explain why bands 
such as Arcade Fire and Spoon that appears to appeal to certain 
targeted demographic groups by virtue of CD sales; concert ticket 
sales; etc.; do not receive airplay on broadcast radio? What are some 
of the barriers that bands such as the ones on your label are facing?
    Answer. In the same way that I cannot explain why the major labels 
continue to pursue failing policies in the music marketplace, I 
likewise have no explanation regarding commercial radio practices. As I 
previously stated, Merge has never been able to rely on commercial 
radio, meaning we've essentially operated as though it were not an 
option. We've simply found other ways to get our music out there. I can 
say that commercial radio (as well as television and print media) has 
historically responded more favorably to labels that spend huge amounts 
of money advancing their releases, and have failed to pay much 
attention to grassroots promotion until the results of these often fan-
driven campaigns are such that they can no longer be ignored.
    Still, commercial rock radio--or ``modern rock,'' as it's often 
called--wants to be seen as introducing new bands, rather than playing 
catch up. But in the case of Spoon and Arcade Fire, programmers are 
essentially behind the curve. Oftentimes, if a band gets big without 
the help of commercial radio, these stations keep the groups at arm's 
length. They would rather ``break'' a band that's being promoted at 
great expense by a major label than spin a song from an indie act 
popularized through word-of-mouth, college radio or the Internet.

    Question 4. As a label owner, are you concerned about payola? Do 
you believe that different forms of payola continue to be engrained in 
radio industry practices? Do you believe that the action the FCC has 
taken will be effective in curbing, if not eliminating these practices? 
Do you believe Congress may need to intervene?
    Answer. I have to say I've never been terribly concerned about 
payola because Merge has essentially operated under the assumption that 
commercial radio was not going to provide a supportive platform for our 
artists. As I previously stated, we have forged a parallel path, 
surviving and thriving on a network of non-commercial broadcasters more 
inclined to support our releases. In other words, I've never felt like 
it was payola that was keeping Merge artists off the corporate 
airwaves. I instead blame the unadventurous and homogenous programming 
of the majority of commercial radio formats. Alongside such 
programming, our bands could never be accepted.
    There is another form of payola I'd like to address. It's more 
invisible, but also more institutional. Bands are often encouraged to 
perform at station-sponsored events, many of them in support of worthy 
causes. As the acts often aren't receiving any money for these 
appearances, they pay equipment, travel and associated expenses either 
out-of-pocket, or from a label fund. The implication is that if the 
band plays such an event, they are more likely to get airplay on the 
sponsor station. This is, of course, not explicit in any of the 
corresponding contracts. But many developing acts feel that this is the 
only way they'll be considered for inclusion on certain radio 
playlists.
                                 ______
                                 
  Response to Written Question Submitted by Hon. Daniel K. Inouye to 
                        W. Russell Withers, Jr.
    Question. Payola has a long and unfortunate history on the radio 
dial. In recent years, however, we have seen efforts by then-New York 
State Attorney General Eliot Spitzer and the FCC to put a halt to this 
practice. In the aftermath of these settlements in New York and at the 
FCC, do you think we have put an end to payola? Do these settlements 
enhance the ability of local and independent artists to get on the air?
    Answer. I can only speak directly on behalf of Withers 
Broadcasting, which has a strict policy against payola, and has never 
had any allegations of failing to comply with Section 507 of the 
Communications Act. With respect to NAB, NAB has a long history of 
cautioning and informing its members regarding payola. Just last year, 
NAB sent a comprehensive packet of information to each of its more than 
8,300 radio and television members reminding them of the importance of 
ensuring compliance with all sponsorship identification rules, 
including the payola rules, and also discussing the settlements in New 
York. NAB urged broadcasters to renew their familiarity with the rules 
and their stations' procedures for ensuring compliance with them. NAB 
reminded broadcasters to ensure they have a current sponsorship 
identification/payola compliance plan, and to ensure that such 
compliance procedures are followed, NAB urged stations to consider 
conducting a review of their plans with all employees. As part of that 
communication, NAB also released a revised version of a long-standing 
legal memo regarding payola that is available on our website. NAB will 
continue these efforts on a consistent basis going-forward.
    I am not aware of any relationship between the settlements in New 
York and independent artists' access to radio stations.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                        W. Russell Withers, Jr.
    Question 1. Do you consider low-power FM service a success? Do you 
believe that low-power FM service has promoted competition, diversity, 
and localism?
    Answer. As a general matter, we believe that the expressed goals 
for low-power FM service are admirable. NAB has always supported the 
concept of allowing nonprofit organizations and state and local 
governments to operate low-cost, micro-power, commercial-free stations 
for the benefit of small community areas, so long as such services do 
not cause harmful interference to existing full-power stations. We 
applaud those entities that follow the FCC's rules governing LPFM 
service and welcome them as complements to full-power radio service. 
For example, there are certainly some LPFM stations that target niche 
listeners not reached by commercial radio, and we appreciate that in 
these instances, LPFM service can benefit the entire radio industry by 
attracting audience members who otherwise might not listen to the 
radio.
    On the other hand, NAB and others are troubled by the portion of 
the LPFM industry that use their licenses for other purposes. We have 
seen press reports and heard complaints from NAB members that certain 
LPFM stations do little more than air syndicated programming that is 
not produced locally, and that other LPFM stations routinely air 
commercials. Moreover, despite the FCC's best efforts, there are 
certain LPFM stations that frequently flout the rules prohibiting 
harmful interference to full-power stations. Finally, what often gets 
lost in the debate over LPFM is the wide array of locally-oriented 
news, public affairs, emergency information and other programming that 
experienced, committed full-power FM stations deliver every day, all of 
which could be irreparably diminished by interference from neighboring 
low-power FM services.

    Question 2. Are there full power radio stations that operate short-
spaced? How many full power short-spaced stations are broadcasting in 
the U.S. today? What is the NAB's position on short-spaced stations?
    Answer. Yes, there are full power radio stations that operate on a 
short-spaced basis. Although we do not have firm recent figures, to the 
best of our knowledge, I believe that approximately 50 percent of Class 
B and Class A stations operate short-spaced vis-a-vis other full-power 
stations. As a general matter, NAB believes that all full power 
stations must be able to operate free of interference in order to 
continue to offer their audiences a wide array of high-quality local 
programming.

    Question 3. Current law says the FCC may not eliminate or reduce 
the minimum distance separations for third-adjacent channels for low-
power FM stations. Does the FCC have the ability to eliminate or reduce 
the minimum distance separation for second-adjacent channels for low-
power FM stations?
    Answer. Current law is intended to protect the public from harmful 
interference that would harm their ability to hear their local radio 
stations. Although the Radio Preservation Act does not address whether 
the FCC is precluded from relaxing second adjacent channel protections, 
it would make no sense for the FCC to do so. Such an action would be 
even more harmful to full-power FM service than would be the removal of 
third-adjacent channel protection. Third adjacent channel protections 
are necessary to ensure interference is minimized; eliminating second 
adjacent channels has the potential to wreak havoc on the FM band and 
render both full power FM stations and LPFM stations virtually 
unlistenable. For radio broadcasters that are making a substantial 
investment in their communities to offer greater amounts of local 
programming through HD Radio multicasting, the potential harm from such 
action would be tremendous.

    Question 4. Unlike the transition to digital television, the 
transition to digital radio is voluntary. Does the voluntary nature of 
the transition present any unique challenges? Is there a timeline for 
completion of the transition? Do you believe that any government 
intervention will be wanted or necessary? Do you believe that there is 
a critical mass of consumer electronics companies willing to build 
digital radio receivers?
    Answer. The voluntary nature of the digital radio transition 
presents an inevitable ``chicken or egg'' challenge which broadcasters 
have stepped-up to, as evidenced by the high penetration of HD Radio 
signals in the major U.S. radio markets. Additionally, a significant 
consortium of broadcasters has been formed to promote HD Radio (HD 
Radio Alliance), and the technology developer, iBiquity Digital 
Corporation, is actively promoting HD Radio to receiver manufacturers 
and automobile companies.
    There is no precise timeline for completion of the transition and 
we do not believe that government intervention will be desirable or 
necessary. In fact, although stations do not have to go digital, we 
anticipate that the pace of stations launching digital will remain 
steady and perhaps accelerate as stations recognize that it is in their 
interest to do so.
    We believe that a critical mass of consumer electronic companies 
willing to build digital radio receivers is forming. Perhaps of greater 
importance is the need to approach critical mass of auto manufacturers 
including HD Radio receivers as standard equipment--this has not yet 
been reached. A major milestone will be reached in the next year or so 
as portable HD Radio receivers start to become available.

    Question 5. Research conducted by the Free Press shows that the 
ownership of commercial radio stations does not reflect the diversity 
of this country. Mr. Withers, does the low number of women and minority 
ownership of radio licenses concern the NAB? If so, what steps do you 
believe your organization, the FCC, and us here in Congress can take to 
foster greater diversity in the ownership of radio licenses?
    Answer. Broadcasters have long supported programs that promote 
minority and female participation in the media business. Through our 
partnerships with the National Association of Broadcasters Education 
Foundation (NABEF) and Broadcast Education Association, NAB has helped 
create a comprehensive educational system that has brought hundreds of 
new participants, from all backgrounds, into the broadcast industry. 
NABEF, for example, conducts seminars and programs that nurture 
participants at every level of career development--from entry-level 
sales institutes to managerial-level professional programs at major 
universities, to executive-level Broadcast Leadership Training (BLT) 
for those who aspire to own stations.
    More specifically, NABEF sponsors Media Sales Institutes at Howard 
University, Florida A&M and the Spanish Language Media Center of the 
University of North Texas. These intensive ten-day training programs 
prepare talented students with diverse backgrounds for sales careers in 
the broadcast industry. To date, these programs have trained over 220 
students for media sales careers. Close to 90 percent have been hired. 
More recently, NABEF has created an internship program, open to college 
seniors and recent college graduates, for women and people of color who 
are interested in broadcast technology and engineering careers. At the 
management level, NABEF sponsors an Executive Development Program for 
Radio Broadcasters at Georgetown University and a Management 
Development Seminar for Television Executives at Northwestern 
University. For senior level broadcast managers who aspire to advance 
as group executives or stations owners, particularly women and people 
of color, NABEF offers the BLT program, modeled after weekend MBA 
programs. To date, more than 15 percent of BLT graduates have gone on 
to acquire stations, and many others are in various stages of station 
acquisition.
    As NAB has frequently explained, the public interest is best served 
by policies designed to encourage minority and female participation in 
a competitively vibrant broadcast industry. Creating a fragmented, 
undercapitalized and uncompetitive broadcast industry via undue 
restrictions on broadcast ownership would not represent an effective 
means of promoting minority and female ownership. Instead, Congress and 
the FCC should look for solutions promoting the long-term viability of 
women and minority entrants into broadcasting.
    Thus, NAB strongly supports policies that would help ameliorate the 
lack of access to capital that everyone agrees inhibits small and 
minority- and female-owned businesses from entry into the broadcasting 
and other communications-related industries. The FCC's previous tax 
certificate program was such a policy. Congressional reinstatement of a 
similar tax incentive program would be, in the opinion of many 
including the FCC Advisory Committee on Diversity for Communications in 
the Digital Age, one of the most direct and effective methods of 
encouraging minority ownership in broadcasting. Congressman Charles 
Rangel of New York and Congressman Bobby Rush of Illinois have each 
introduced tax incentive legislation in this Congress. NAB encourages 
prompt Congressional approval of such tax incentive legislation. NAB 
also supports a range of other proposals made by the Minority Media and 
Telecommunications Council to the FCC to promote the entry and 
participation of minorities and women in broadcasting. These proposals 
include modifying FCC attribution rules that discourage existing 
broadcasters from providing investment capital to potential entrants 
into the broadcast industry; providing economic incentives for 
broadcasters to create and nurture incubator programs; providing 
incentives to encourage the leasing of spectrum to new entrants; 
modifying FCC rules that limit the ability to sell certain 
``grandfathered'' clusters of radio stations to small and minority/
female owned businesses; encouraging banks and other financial 
institutions to provide debt financing to qualified small or minority/
female entities; etc. NAB has also previously expressed concern about 
overly restrictive FCC auction rules that would impair small business 
participation in spectrum auctions by inhibiting their ability to raise 
capital and attract investors (including larger communications 
entities) without stripping these small businesses of benefits (such as 
bidding credits) designed to help them succeed in auctions. In sum, NAB 
believes the best way for private industry, the FCC and Congress to 
promote greater participation by minorities and women in the broadcast 
industry is through public-private partnerships and market-based 
stimulants that will promote both entry and the long-term viability of 
new entrants in a competitively healthy broadcast industry.
    NAB further observes that the assumption that permitting the common 
ownership of broadcast stations automatically has a deleterious effect 
on minority participation in the broadcast industry is unwarranted. 
Data recently provided to the FCC by public interest groups concerned 
about the level of minority ownership in broadcasting in fact shows 
that members of minority groups owned a greater number of television 
stations in 2006 than they did in 1998, before the FCC modestly relaxed 
the television duopoly rule in 1999. Earlier studies conducted in 2000 
and 2002 had found that minority groups increased their radio station 
ownership after passage of the 1996 Telecommunications Act.

    Question 6. Do you believe that the consolidation in the radio 
industry as a result of the Telecom Act of 1996 has led to a loss in 
localism?
    Answer. The increase in common ownership that occurred after 
passage of the 1996 Act has in fact enabled radio stations to better 
serve their communities of license by helping ensure the financial and 
competitive viability of free, over-the-air stations, especially 
smaller ones. An examination of the history of the radio industry prior 
to 1996 clearly demonstrates that localism is best sustained by 
permitting broadcasters to compete effectively in the digital 
multichannel marketplace.
    In a detailed survey of the radio industry in 1992, the FCC found 
that, due to ``market fragmentation,'' many in the radio industry were 
``experiencing serious economic stress.'' Specifically, stations were 
experiencing ``sharp decrease[s]'' in operating profits and margins. 
FCC Radio Order, 7 FCC Rcd at 2759. By the early 1990s, ``more than 
half of all stations'' were losing money (especially smaller stations), 
and ``almost 300 radio stations'' had gone silent. Id. at 2760. Given 
that the radio industry's ability ``to function in the `public 
interest, convenience and necessity' is fundamentally premised on its 
economic viability,'' the FCC concluded that ``radio's ability to serve 
the public interest'' had become ``substantially threatened.'' Id. 
Accordingly, the FCC believed that it was ``time to allow the radio 
industry to adapt'' to the modern information marketplace, ``free of 
artificial constraints that prevent valuable efficiencies from being 
realized.'' Id.
    Motivated by such concerns, Congress in the 1996 Act acted to 
``preserve and to promote the competitiveness of over-the-air broadcast 
stations.'' Congress found that ``significant changes'' in the ``audio 
and video marketplace'' called for a ``substantial reform of 
Congressional and Commission oversight of the way the broadcasting 
industry develops and competes.'' House Report at 54-55. In 2003, the 
FCC concluded that changes made possible by the 1996 Act had brought 
financial stability to the radio industry.
    Because, as the FCC found, financial viability is necessary for 
radio stations to function in the public interest, ownership changes 
following the 1996 Act have promoted localism by enabling radio 
stations to continue serving their local communities and audiences with 
entertainment and informational programming and vital emergency 
information. The real threat to locally-oriented broadcast services is 
not the joint ownership of stations but those stations' inability to 
maintain their economic vibrancy in the face of multichannel and 
Internet-based competitors that are not constrained by restrictions on 
local ownership structure. Only competitively viable broadcast stations 
sustained by adequate advertising revenues can serve the public 
interest effectively and provide a significant local presence. 
Proposals to turn back the ownership regulatory clock would create a 
fragmented, undercapitalized broadcast industry unable to compete 
against multichannel and other information/entertainment providers and 
unable to serve the public interest effectively.
    NAB moreover points out that thousands of radio stations remain 
locally owned. According to the FCC, as of 2005, 6,498 radio stations 
were locally owned. And all radio stations--whether locally owned or 
not--provide valuable entertainment and informational programming as 
well as other important services to local communities. In 2005, the 
average radio station ran 169 public service announcements per week, 
the equivalent of $486,187 in donated air time per radio station per 
year, or a projected total for all radio stations of $5.05 billion. 
Sixty-one percent of the PSAs aired by the average radio station were 
about local issues. More than 19 out of 20 radio stations (98 percent) 
reported helping charities, charitable causes or needy individuals by 
raising funds or offering other support in 2005. Among radio stations 
that raised funds for charities and causes, the average raised per 
station was $94,299, with the projected amount raised by all radio 
stations in 2005 totaling $959 million. See NAB, National Report on 
Broadcasters' Community Service (rel. June 12, 2006). Clearly, the 
radio industry continues to serve local communities and audiences 
effectively.
                                 ______
                                 
  Response to Written Question Submitted by Hon. Daniel K. Inouye to 
                             Tim Westergren
    Question. As several of our witnesses noted, there was a wave of 
consolidation in radio following the 1996 Telecommunications Act. With 
fewer stations owned by individuals from within the community, what 
impact has this had on localism?
    Answer. This is not a question to which I feel qualified to give an 
answer. I have only operated in the Internet Radio business. My only 
observations would be as a listener, in which capacity I have noticed a 
steady decrease in the diversity of programming on local radio 
stations, including a decrease in the amount of local content.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            S. Derek Turner
    Question 1. As several of our witnesses noted, there was a wave of 
consolidation in radio following the 1996 Telecommunications Act. With 
fewer stations owned by individuals from within the community, what 
impact has this had on localism?
    Answer. As the question suggests, the wave of consolidation 
unleashed by the 1996 Act resulted in large national chains acquiring 
many stations that for decades had been locally owned and operated. 
``Localism'' became the primary casualty of the cost-cutting measures 
implemented by the new national-chain owners of these stations.
    In many localities, the market power wielded by the largest players 
increased dramatically in the years following the 1996 Act. Prior to 
1996, the top firm in the average local market controlled about \1/3\ 
of the advertising revenues; by 2002 the average top firm had increased 
its marketshare to near 50 percent. The share controlled by the top 
four firms increased from 83 percent in 1996 to 93 percent by 2002. 
This level of market power is seen in both large and small markets. 
According the latest FCC report on the radio industry:

        ``In the 50 largest markets, on average, the top firm holds 34 
        percent of market revenue, the second firm holds 24 percent, 
        and firms three and four split the next 26 percent. For the 100 
        smallest markets, on average, the first firm holds 54 percent, 
        the second firm holds 30 percent, and the next two firms split 
        13 percent. Overall, in 189 of the 299 Arbitron radio markets 
        (over 60 percent of the markets), one entity controls 40 
        percent or more of the market's total radio advertising 
        revenue, and in 111 of these markets the top two entities 
        control at least 80 percent of market revenue.''

    This concentration of market power in the hands of a few dominant 
national conglomerates has had a strong negative impact on localism. 
First, these companies are prone to operating their 6-8 local stations 
from one single studio, severely limiting the access points local 
citizens formerly had to these stations when they were individually and 
locally owned. Second, these national conglomerates favor the practice 
of ``voice tracking'', where a DJ pre-records a programming block in a 
studio hundreds of miles away from the local community where it will 
air. These DJ's will often ``pretend'' that they are actually in the 
local community, when in fact they have likely never set foot there. 
Finally the large national owners substitute nationally syndicated 
programming, national recording artists and national news for local 
programming. This move away toward localism has resulted in a loss of 
regionalism and diversity that used to be present on the radio dial.
    The concentration of market power has also had real impact on the 
remaining local station owners and new local owners wishing to enter 
the market. The large chains can use their local dominance to unfairly 
compete with stations that wish to offer competing formats, by 
temporarily lowering their advertising rates to undercut the local 
competitor. The large chain can afford to cross-subsidize certain 
stations, making it impossible for a less powerful local owner to 
compete. The chains can also offer local advertisers multi-station 
deals that the local single-station owner can't match. The national 
chains are often vertically integrated, and can give their own local 
stations preference when selling popular syndicated programming. The 
vertically integrated companies also often own promotional vehicles 
such as concert venues and billboards, which allows them to further 
cement their competitive advantages over the smaller local owners.
    Cumulatively, the consolidation enabled by the 1996 Act has created 
artificial economies of scale in an industry that is supposed to be 
local in focus. These artificial economies of scale favor national 
content over local content, and crowd out local owners--those most 
likely to best serve the goals of localism. This market is not natural, 
and a rollback of consolidation can bring the market back to an 
equilibrium where local service is the rewarded outcome.

    Question 2. Your testimony discusses FCC policies that hinder the 
agency's ability to assess the current state of minority ownership. 
What steps should the FCC take to improve its data on minority 
ownership?
    Answer. The Commission currently collects highly accurate 
information on the gender, race and ethnicities of licensees of full-
power commercial broadcast stations. The problem lies in how they have 
used and summarized this raw data.
    Currently all licensees of full-power commercial broadcast stations 
file ``Form 323'' every 2 years. On Form 323, licensees disclose voting 
and equity interests of all owners with greater than 5 percent stake in 
the license. Since many broadcast companies consist of layers upon 
layers of ``holding companies'', there are often dozens of Form 323 
forms filed for each station. This practice complicates the 
Commission's current method of analyzing the data (automated 
harvesting). Furthermore, many of the larger companies do not actually 
fill out Form 323, instead submitting their ownership information as a 
pdf file attached to Form 323. Companies that file in this manner are 
completely missed by the FCC's automated harvesting process.
    The Commission could easily remedy this situation by overhauling 
the way in which companies submit Form 323. They should require each 
license holder to submit a single form for each station that lists the 
ultimate parent company of the license, as opposed to the current 
practice of filing dozens of forms for each ``holding company''. The 
Commission should also require that each parent company list on this 
single form the ownership information, prohibiting the companies from 
filing the information as separate ``attached'' documents. The 
Commission should also conduct random periodic audits to ensure that 
each licensee is properly and timely filing Form 323 (our research 
indicates that a small number of station owners have submitted 
improperly filled out forms, or have not submitted forms biannually as 
required).
    The Commission currently does not require non-commercial or non-
full-power licensees (i.e., Class A or Translator stations) to file 
gender, race and ethnicity information. It also does not require sole 
proprietors to file. We feel that a more complete understanding of the 
broadcast market can be gleamed by requiring all stations to file.
    Once the Commission has adequately dealt with its own deficiencies 
in analyzing Form 323 data, we feel that it should conduct annual 
updates on the state of female and minority ownership, and investigate 
how Commission ownership rules impact market entry and exit by female 
and minority license holders. Having a basic understanding of the 
market and the impact of policy is inherent to the Commission's ability 
to adequately fulfill its mandates under Sections 257 and 309(j) of the 
Communications Act.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                            S. Derek Turner
    Question 1. Do you consider low-power FM service a success? Do you 
believe that low-power FM service has promoted competition, diversity, 
and localism?
    Answer. I certainly feel that the current stable of low-power FM 
channels to be a success. These stations provide hyperlocal information 
to communities; information that is often deemed unimportant by local 
commercial broadcasters, and information that is sometimes missed by 
public radio stations that often have a state-wide focus as opposed to 
the neighborhood focus heard on LPFM stations.
    However, the third-adjacent channel restrictions imposed on LPFM 
have pushed these stations away from urban cities, where hyperlocal 
information is rarely aired on the large commercial radio stations. 
This restriction is totally unnecessary from a technical perspective, 
and is stifling access to the airwaves in the urban cities--access by 
groups that are more likely to be from underrepresented minority 
communities.
    LPFM has unquestionably promoted localism and diversity. LPFM 
licensees are by design local and focused on local service. LPFM has 
also enabled communities of color and women to gain access to the 
airwaves, lowering (in a narrow fashion) barriers to entry. However, 
LPFM is only a part of the solution to the problem of lack of diversity 
on the public airwaves. Our country needs women and minority ownership 
of full-power stations, and reversing the trend of consolidation is a 
key component of the solution.
    On the question of competition, the competitive threat posed by 
LPFM to the larger commercial stations is negligible. Promotion of the 
goal of competition in broadcast media, especially the radio market, 
can only be achieved through a rolling back of the unprecedented level 
of consolidation that occurred after the implementation of the 1996 
Act.

    Question 2. With digital radio, the ability for a radio station to 
broadcast multiple digital audio streams from a single channel offers 
great promise for increasing the diversity of programming in both 
commercial and noncommercial radio. First, in your opinion, should the 
FCC look at public interest obligations for digital radio broadcasters? 
If so, what would be your top three things that you believe should be 
done to promote competition, diversity, and localism? Second, how 
should the FCC treat multicast digital radio channels? Should the FCC 
allow a secondary market for these additional channels? Finally, should 
the FCC count digital and multicast stations against the local radio 
ownership caps?
    Answer. We strongly feel that public interest obligations should 
apply to digital radio broadcasting. Currently, the FCC has allowed 
license holders access to more spectrum to broadcast digitally (using 
so-called ``In-Band-On-Channel'' technology that requires the station 
to use spectrum adjacent to their primary broadcast frequency), but has 
not imposed even the most basic public interest requirements on the 
users of this public spectrum.
    In response to the request for the three top PIOs to apply to 
digital broadcasters, we support (1) Mandatory localism requirements 
mandating the airing of a minimum level of local civic or electoral 
affairs programming and independently and locally produced programming; 
(2) The prohibition of remote ``tracking'' programming and the 
requirement of a person to be physically present in the station at all 
times; and (3) Meaningful reporting requirements on the fulfillment of 
local service, with reports made accessible via the Internet as well as 
the station.
    In addition to enforcing public interest obligation on digital 
radio broadcasters, the Commission must address the issue of 
subscription-based services. If the Commission chooses to allow a 
secondary market, all public interest obligations should still apply, 
and spectrum-fees should be collected. For example, the Commission 
should limit the number of subscription-based services a station can 
offer, and impose spectrum fees on subscription-based services that are 
offered (and because they are generating an additional revenue stream 
from a public resource, broadcasters should pay a ``spectrum use fee'' 
for their use of this public resource).
    Multicasting increases each owner's ability to reach an 
increasingly segmented audience. This furthers the ability of dominant 
local owners to consolidate market power. This in addition to the 
current litany of ill effects of consolidation in local radio markets 
raises important regulatory questions for the Commission. I feel that 
Congress should reinstitute a national cap on radio ownership and the 
Commission should conduct an overhaul of its local ownership rules. In 
conducting this process, the Commission should explore the socially 
optimal level of local consolidation that best serves the goals of 
localism, competition and diversity. When determining this market 
optimum, the Commission should consider the impact of digital 
multicasting.

    Question 3. Your research shows that the ownership of commercial 
radio stations does not reflect the diversity of this country. What 
steps should we take to foster greater diversity in the ownership of 
radio licenses? Do you see this happening under current law?
    Answer. The results of our research demonstrate that any policy 
changes that allow for increased concentration in television and radio 
markets will certainly decrease the already low number of female- and 
minority-owned broadcast stations. Enacting regulations that lead to 
such outcomes directly contradicts the Commission's statutory and legal 
obligations under the 1996 Telecommunications Act.
    To promote female and minority radio ownership, the Commission 
should enact policies that de-concentrate local media markets. By 
reducing consolidation at both the national and local level, the 
Commission can help to deflate the bubble of artificial economies of 
scale that its pro-consolidation policies helped to create. This will 
result in lower barriers to entry and more stations available for 
purchase by local single station owners, who are far more likely to be 
women and people of color. The simple answer is for the Commission to 
roll back local ownership caps that currently allow a single owner to 
control 8 stations in certain markets. These caps should be far lower.
    Congress needs to play a role, enacting de-concentration policies 
that are currently beyond the Commission's authority. Congress should 
reinstate a national ownership cap, reinstate the tax-certificate 
policy, and set the license renewal period for every 3 years (ensuring 
that the renewal process is meaningful and involves the public).
    It is important to note that the effects of other policies aimed at 
increasing female and minority broadcast ownership--such as tax 
credits, relaxed equity/debt attribution rules, incubator programs, or 
digital channel leasing--will be negligible in an environment of 
increased market consolidation at the local level. Rolling back 
consolidation is paramount.
                                 ______
                                 
  Response to Written Question Submitted by Hon. Daniel K. Inouye to 
                             Carol Pierson
    Question. As several of our witnesses noted, there was a wave of 
consolidation in radio following the 1996 Telecommunications Act. With 
fewer stations owned by individuals from within the community, what 
impact has this had on localism?
    Answer. Chairman Inouye, it is our belief that the massive 
consolidation that followed passage of the 1996 Telecommunications Act 
had a devastating impact on localism, competition and diversity in 
local markets. Research demonstrates that we have lost over \1/3\ of 
local owners in the past 10 years, as these firms struggle to compete 
against out of town conglomerates. While supporters of consolidation 
claim that this consolidation actually leads in an increase of 
available formats, the Future of Music Coalition demonstrated that in 
the commercial sector, niche musical formats (including classical, 
jazz, blues, bluegrass, opera, folk, etc.) are nearly exclusively 
programmed by companies that are below the local ownership cap. I have 
attached for your reference a letter to the Committee from FMC that 
details some of their findings. If Congress is concerned about bringing 
localism and a true diversity of culture back to commercial radio, they 
must explore strategies to re-prioritize local ownership and control.
    Ironically, this loss of localism in many ways creates a 
competitive advantage for the non-commercial sector, as locally based 
community radio stations have emerged as the dominant source for local 
news, cultural programming and information. This does not necessarily 
mean commercial consolidation has been a good thing for community 
radio, as many disgruntled listeners have left the FM band altogether 
and adopted new technological platforms. Instead, the best world for 
community and commercial broadcasters alike would feature robust and 
innovative local broadcasting on the commercial band complemented by 
expansion and protection of the noncommercial sector. This combination 
will bring listeners back to terrestrial radio, which will benefit both 
commercial and non-commercial broadcasters.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                             Carol Pierson
    Question 1. Do you consider low-power FM service a success? Do you 
believe that low-power FM service has promoted competition, diversity, 
and localism?
    Answer. LPFM has been a significant success. When the service was 
first proposed in the late 1990s, advocates believed that several 
hundred organizations would be interested in running their own 
stations. Clearly, the demand for the service was underestimated, as 
thousands of churches, schools, community groups, Native Nations and 
local governments have expressed interest in gaining licenses.
    The effectiveness of the initiative has obviously been limited by 
the Congressional ban that has limited LPFM to smaller communities and 
rural areas. Even with these restrictions, however, LPFM broadcasters 
have demonstrated their commitment to locally-originated, innovative 
programming. From coverage of local political issues, to providing a 
platform for local culture, to serving as a critical partner for first 
responders, LPFM broadcasters have provided a significant service for 
communities across the Nation.

    Question 2. A single entity can own multiple translator stations, 
in effect creating a network. Should there be a limit to the number of 
low-power FM stations one entity should be able to license? Should the 
FCC require a low-power FM licensee to be located within the coverage 
area of its signal?
    Answer. LPFM is intended to be a locally originated and locally 
based service. At some point it may be worth considering revisiting 
some of the local origination rules, but at this point the local 
restrictions are key to ensuring that LPFM provide a unique local 
voice. Regarding your second question, in some situations the physical 
address of the licensee is outside the limited coverage area of its 
signal. This is often due to the Congressional restrictions on placing 
LPFM stations on third adjacent channels. While we agree with existing 
FCC rules that emphasize local control and content, we do not believe 
it is necessary for the physical address of the licensee to be within 
the coverage area, but the licensee organization should be 
headquartered or their Board of Directors should live within a 
reasonable distance of the transmitter site, perhaps 10 miles in urban 
areas and 25 miles in more rural locations.

    Question 3. What do you see as the most significant challenges an 
organization faces in determining whether or not to apply for a Low 
Power FM license?
    Answer. As Native Public Media experienced in the recent NCE window 
process, the largest challenge is matching interested organizations 
with available spectrum. There is a vast amount of unused spectrum that 
potential community broadcasters are unable to access because of the 
Congressional ban on issuing LPFM licenses in urban markets and the 
significant length of time between opportunities to apply for full 
power stations.
    There are numerous other challenges--running a LPFM station is not 
easy. Potential licensees have to identify and hire engineers, develop 
corporate structures, make programming decisions, develop a budget, and 
raise funds to make the station sustainable. Fortunately, there are 
hundreds of case studies now operating and significant mentoring and 
resource sharing opportunities through organizations like Native Public 
Media, National Federation of Community Broadcasters, Prometheus Radio 
Project and others.

    Question 4. Do organizations that obtain construction permits from 
the FCC for low-power FM stations usually go forward in constructing 
the station?
    Answer. The overwhelming majority of truly local LPFM applicants 
who are granted a construction permit move ahead with building the 
station. In a few instances, organizational or budgetary concerns made 
the building or operation of a station unfeasible. Thankfully, these 
instances have been rare. As a general rule, LPFM applicants are very 
aware of what they are doing.

    Question 5. Is the FCC currently experiencing a significant backlog 
in processing applications for low-power FM construction permits?
    Answer. It is our understanding that virtually all of the pending 
LPFM applications have been processed.

    Question 6. Based on your experience in community media, do you 
believe the current content origination rules for low-power FM stations 
are too strict or not strict enough with respect to supporting 
localism?
    Answer. We believe the existing rules create an appropriate 
balance. LPFM is meant to serve a very specific local niche that is at 
its heart local. While the rules permit transmission of some syndicated 
or network programming, no organization should attempt to use a LPFM 
license as a de facto translator or network affiliate. While the 
current rules are adequate, we generally support efforts by the FCC to 
ensure localism. For example, the FCC is currently considering making 
permanent its initial rule that no entity can own more than 1 low power 
station, and we agree with such limitations to ensure that these radio 
stations are used by and for the local communities.

    Question 7. Are community radio broadcasters giving any thought 
about broadcasting in digital at this time?
    Answer. Many community radio stations have converted to digital 
broadcasting (HD), in most cases with support from the Corporation for 
Public Broadcasting or the Public Telecommunication Facilities Program 
at the Department of Commerce. Several community radio stations have 
been pioneers in developing new applications for digital broadcasting 
including multicasting and surround sound. The opportunity that HD 
radio offers to expand local service is significant. Community radio 
stations, particularly in rural areas, find themselves trying to serve 
multiple communities of interest, sometimes in different languages. HD 
radio's multicasting capability allows separate channels in different 
languages or offering varied formats which can better serve the 
audience. It is important that Federal support for this conversion 
continue so that community and public radio stations can utilize this 
enhanced service. The Corporation for Public Broadcasting (CPB) will be 
doing a day-long intensive meetubg just prior to NFCB's Annual 
Community Radio Conference, March 25, in Atlanta. The stations that are 
least likely to have converted are the ones with the smallest budgets 
in the most rural areas. This includes nearly all of the Native 
American stations. CPB is trying to be sure these stations are not left 
behind. According to CPB, 312 community and public stations 
transmitters have converted to HD; another 300 are in the process; and 
87 are multicasting. This leaves nearly 400 transmitters yet to be 
converted. We want to be sure that Federal support continues so that a 
``digital divide'' isn't created in public broadcasting.
                                 ______
                                 
  Response to Written Question Submitted by Hon. Daniel K. Inouye to 
                            Dana Davis Rehm
    Question. As several of our witnesses noted, there was a wave of 
consolidation in radio following the 1996 Telecommunications Act. With 
fewer stations owned by individuals from within the community, what 
impact has this had on localism?
    Answer. Passage of the 1996 Telecommunications Act seems to have 
enabled successful ownership consolidation in commercial radio, but any 
benefits beyond some short-term economic returns are questionable at 
best. What is most often called localism--the appreciation of and 
investment in local/regional assets to gather and distribute a 
collection of programming that informs and improves community--has 
suffered. While public radio has committed more resources to localism 
and community, the last decade has seen a remarkable retreat in other 
American broadcast media from careful, serious and balanced 
presentation of news, information and ideas.
    Many different groups and sources have documented this decline in 
localism, or commitment to community. The Future of Music Coalition, 
for example, released a study in December 2006 which found that ``the 
rapid consolidation of the commercial radio industry that followed the 
Telecommunications Act of 1996 has led to a loss of localism, less 
competition, fewer viewpoints and less diversity in radio programming 
in media markets across the country.'' The trends identified by the 
Future of Music Coalition bring greater clarity to the impact of 
consolidation on localism, or as we describe it, community. Not only 
are there fewer owners of commercial radio outlets, fewer viewpoints 
and decreased diversity, but not surprisingly, there are fewer 
Americans tuning in, and they are spending less time listening. The 
Coalition notes a 22 percent drop over the past 14 years in commercial 
radio listening.
    These trends in commercial radio are bad enough, but there is 
further cause for concern considering the trends in local newspapers 
that traditionally covered the full range of community life, according 
to the ``The State of the News Media 2007'' report from the Project for 
Excellence in Journalism at the Pew Research Center. ``In contrast with 
most other news media such as network television and radio, the 
newspaper industry has stood out because it sustained and in many cases 
enlarged its newsrooms in the 1980s and 1990s, even as its share of the 
audience declined. That trend is now over, probably permanently. The 
newsrooms of America's newspapers are shrinking. The industry began 
2006 with roughly 3,000 fewer full-time newsroom staff people than it 
had at its recent peak of 56,400 in 2000. Over the course of the year, 
that number fell further, and more cuts are coming in 2007.''
    As mentioned in my written testimony, public radio is responding to 
this increasing gap between the public's needs and the service provided 
by broadcast and print media with the Local News Initiative, a national 
effort to increase public radio's service to communities. We are 
investing in building the capacity of local, independent stations to 
provide in-depth, contextual and balanced news. Our goal is to 
strengthen high-quality local news programming in communities across 
America. To accomplish this we are developing and promoting standards 
of quality and craft; growing, diversifying and developing the talent 
of those who work on public radio's locally produced news/talk/
information programming and piloting collaborative approaches to make 
more effective and efficient use of limited resources.
    It is also worth noting that the audience for public radio has 
increased, not decreased, over the past decade. Today some 30 million 
Americans turn to public radio stations each week for news and 
information covering world, national, regional and local events. With 
that said, the decline in commercial radio listening and relevance to 
local communities is a matter of great concern to public radio, as it 
may signal the decline of free and accessible service to the public.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                            Dana Davis Rehm
    Question 1. Do you consider low-power FM service a success? Do you 
believe that low-power FM service has promoted competition, diversity, 
and localism?
    Answer. NPR and most of the public radio community support the 
concept of Low Power FM stations and the potential it has to bring 
greater diversity to radio programming. In several instances, most 
recently the hurricane disasters in the Gulf, Low Power FM stations and 
public radio stations were the only stations on the air with local news 
about changing events, disaster relief information and other essential 
information.
    It may be too early in the development of Low Power FM and its roll 
out to arrive at a sound conclusion about its impact on competition, 
diversity and localism. Certainly, the potential exists within the 
concept of Low Power FM to broaden content diversity and connections to 
community. Many stations that are members of the National Federation of 
Community Broadcasters can serve as role models for what Low Power FM 
stations could contribute to diversity and localism.

    Question 2. NPR has been at the forefront in the rollout of digital 
radio. In your written testimony you state that by the end of the year 
you anticipate that 350 public radio stations will be on the air with a 
digital signal. What have been some of the challenges your stations 
have faced in rolling out the technology? How critical has the Federal 
Government's role been in contributing to the pace of the rollout? Do 
you believe that there is a critical mass of consumer electronics 
companies willing to build digital radio receivers today?
    Answer. NPR and public radio have embraced digital broadcasting 
technology because it offers the potential to expand public service 
programming. In fact, NPR was the leading proponent within all of radio 
for testing and demonstrating the workability and utility of 
multicasting. Today, multicasting is a central component of public 
radio's plans to utilize the inherently inclusive nature of digital 
broadcasting technology to broaden our programming diversity and deepen 
our connections to communities.
    The challenges facing public radio stations are significant. Most 
important among these are the relatively slow appearance of affordable 
digital radio receivers and low awareness of multicasting among the 
public. Stations can readily present traditional public radio formats 
on their new HD channels, such as news and talk programming, classical, 
jazz, folk and eclectic music. Development of new formats or of highly 
localized services is expensive and difficult to justify when the 
audience doesn't yet have wide access to HD receivers. As with all new 
content distribution technologies, there will be phases of 
experimentation to determine which programming offerings are needed and 
supported by our audiences.
    The Congress' funding support of public radio's digital transition 
has been indispensable. Without these additional annual appropriations 
from Congress, it is doubtful that many public radio stations would 
have been able to afford the costs of conversion. Congressional funding 
assistance will remain important for many years to come to ensure that 
all public radio stations, especially those serving rural audiences, 
are able to afford this absolutely essential conversion to digital 
technology.
    The encouragement and support of the Federal Communications 
Commission have also been critical; each action has affected the pace 
of conversion within public radio and the pace of receiver development 
and deployment by consumer electronics companies. The experimental 
multicasting authority granted by the Commission in 2004 made it 
possible to develop and test multicasting in communities across the 
country, leading to improvements that allow not just one, but two 
additional channels of service beyond the main broadcast signal.
    The permanent authorization earlier this year accelerated receiver 
development and marketing. Currently, 60 receiver makers are providing 
over 50 models of HD receivers equipped for multicasting, and prices 
have dropped from $399 to entry level units selling at $99. We continue 
to hope the Commission will permit public radio stations to utilize the 
connection potential of digital radio with as few conditions as 
possible so that we can fully develop the public service potential of 
this emerging technology.

                                  
