[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




                MEDIA OWNERSHIP IN THE 21ST CENTURY

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                    
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 11, 2014

                               __________

                           Serial No. 113-152


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


                                    ______
 
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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
GREG WALDEN, Oregon                  ELIOT L. ENGEL, New York
LEE TERRY, Nebraska                  GENE GREEN, Texas
MIKE ROGERS, Michigan                DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee          JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                      JIM MATHESON, Utah
PHIL GINGREY, Georgia                G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana             JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   DONNA M. CHRISTENSEN, Virgin 
GREGG HARPER, Mississippi            Islands
LEONARD LANCE, New Jersey            KATHY CASTOR, Florida
BILL CASSIDY, Louisiana              JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky              JERRY McNERNEY, California
PETE OLSON, Texas                    BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia     PETER WELCH, Vermont
CORY GARDNER, Colorado               BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas                  PAUL TONKO, New York
ADAM KINZINGER, Illinois             JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

                                 7_____

             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
ROBERT E. LATTA, Ohio                ANNA G. ESHOO, California
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               MICHAEL F. DOYLE, Pennsylvania
LEE TERRY, Nebraska                  DORIS O. MATSUI, California
MIKE ROGERS, Michigan                BRUCE L. BRALEY, Iowa
MARSHA BLACKBURN, Tennessee          PETER WELCH, Vermont
STEVE SCALISE, Louisiana             BEN RAY LUJAN, New Mexico
LEONARD LANCE, New Jersey            JOHN D. DINGELL, Michigan
BRETT GUTHRIE, Kentucky              FRANK PALLONE, Jr., New Jersey
CORY GARDNER, Colorado               BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas                  DIANA DeGETTE, Colorado
ADAM KINZINGER, Illinois             JIM MATHESON, Utah
BILLY LONG, Missouri                 G.K. BUTTERFIELD, North Carolina
RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)

                                  (ii)
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     3
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     4
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................    10
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    15
Hon. Robert E. Latta, a Representative in Congress from the State 
  of Ohio, opening statement.....................................    16
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................    17

                               Witnesses

William T. Lake, Chief, Media Bureau, Federal Communications 
  Commission.....................................................    17
    Prepared statement...........................................    20
    Answers to submitted questions...............................   101
Jessica J. Gonzalez, Executive Vice President and General 
  Counsel, National Hispanic Media Coalition.....................    26
    Prepared statement...........................................    28
    Answers to submitted questions...............................   107
Bernard Lunzer, President, The Newspaper Guild-CWA...............    49
    Prepared statement...........................................    51
    Answers to submitted questions...............................   118
Paul J. Boyle, Senior Vice President of Public Policy, Newspaper 
  Association of America.........................................    53
    Prepared statement...........................................    55
    Answers to submitted questions...............................   120
David Bank, Managing Director, Global Media Equity Research, RBC 
  Capital Markets................................................    62
    Prepared statement...........................................    65
    Answers to submitted questions...............................   124
Jane Mago, Executive Vice President and General Counsel, Legal 
  and Regulatory Affairs, National Association of Broadcasters...    73
    Prepared statement...........................................    75
    Answers to submitted questions...............................   126

                           Submitted Material

Letter of June 20, 2014, from Michael Copps, Special Advisor, 
  Media and Democracy Reform Initiative, Common Cause, to Mr. 
  Walden and Ms. Eshoo, submitted by Ms. Eshoo...................     6
Letter of June 10, 2014, from Jason T. Lagria, Senior Staff 
  Attorney, Asian Americans Advancing Justice, to Mr. Walden and 
  Ms. Eshoo, submitted by Mr. Butterfield........................    11
Letter of June 10, 2014, from Wade Henderson, President & CEO, 
  and Nancy Zirkin, Executive Vice President, The Leadership 
  Conference on Civil and Human Rights, to Mr. Walden and Ms. 
  Eshoo, submitted by Mr. Butterfield............................    13

 
                  MEDIA OWNERSHIP IN THE 21ST CENTURY

                              ----------                              

                        WEDNESDAY, JUNE 11, 2014

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:35 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Greg 
Walden (chairman of the subcommittee) presiding.
    Members present: Representatives Walden, Latta, Shimkus, 
Terry, Blackburn, Lance, Guthrie, Kinzinger, Long, Barton, 
Eshoo, Braley, Lujan, Rush, Butterfield, and Waxman (ex 
officio).
    Staff present: Ray Baum, Senior Policy Advisor/Director of 
Coalitions; Sean Bonyun, Communications Director; Matt Bravo, 
Professional Staff Member; Andy Duberstein, Deputy Press 
Secretary; Gene Fullano, Detailee, FCC; Kelsey Guyselman, 
Counsel, Communications and Technology; Grace Koh, Counsel, 
Communications and Technology; David Redl, Counsel, 
Communications and Technology; Charlotte Savercool, Legislative 
Coordinator; Tom Wilbur, Digital Media Advisor; Shawn Chang, 
Democratic Chief Counsel, Communications and Technology; 
Margaret McCarthy, Democratic Professional Staff Member; and 
Ryan Skukowski, Democratic Policy Analyst.
    Mr. Walden. I want to call to order the Subcommittee on 
Communications and Technology, and welcome you all for our 
Media Ownership in the 21st Century hearing, and thank our 
witnesses for taking time to be here. We really appreciate your 
counsel and your testimony.
    I will open with my opening statement, and then we will 
move to Ms. Eshoo for hers.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    What do the founding of Microsoft, the first episode of 
``Saturday Night Live,'' and the establishment of the 
broadcast/newspaper cross-ownership ban have in common? Well, 
they are all about ready to turn 40, because they all took 
place in 1975. But where Microsoft has innovated and moved past 
a world where MS-DOS was the state of the art, and ``Saturday 
Night Live'' continues to reinvent itself as an essential piece 
of Americana, the media ownership rules persist as though the 
Internet simply did not exist. Our laws need to reflect the 
reality of the world we live in today, not the world of the 
Ford administration. It is my sincere hope that today's 
discussion can spur us to rationalize the rules and regulations 
for a media industry that serves consumers in this century and 
not in the last. The Ford administration, as noted there, with 
one chairman of the subcommittee posed with Mr. Ford, just to 
put in context how things have changed, beyond just my 
hairline.
    In today's media environment, traditional media like Bend, 
Oregon's, KTVZ-TV and the town's Bulletin newspaper compete 
with Twitter, The Drudge Report, The Huffington Post, Fox News, 
MSNBC, CNN, the Wall Street Journal, and the New York Times. 
You can get it all right there. We live in an era of a 24-hour 
news cycle and on-demand national media, but our laws assume a 
world where local newspapers and broadcast stations are so 
influential that economies of scale are dangerous to the public 
interest. While proponents of the status quo express their love 
of localism and the laws intended to guarantee it, I fear that 
laws intended to ensconce our love of local media are, in fact, 
loving it to death.
    Promoting localism is a goal that we all share; but 
localism is not cheap. Producing the kind of high-quality 
content that has been the hallmark of American broadcasting is 
an expensive labor of love for local broadcasters and 
newspapers, and as Americans' habits have changed, so too 
should the way we look at local media. We live in a competitive 
landscape where increasingly we cherry pick articles; we scroll 
through feeds and aggregators; and we have multiple national 
news programming options, and we DVR almost everything to time-
shift the programming that we love. It is a different world, so 
why don't our media laws reflect these changes?
    The fact is, the FCC has tried to change these rules as 
early as its 2002 review of media ownership rules, when it 
recognized the competitive force of the Internet. The 
Commission would have done away with the ban on cross-ownership 
of a daily newspaper and a broadcast station, and expanded the 
caps on local ownership of television and radio stations, but 
the courts overturned the FCC's proposed rule, not because it 
believed that repeal was unreasonable. In fact, the court 
determined that, and I quote, ``reasoned analysis supports the 
Commission's determination that the blanket ban on newspaper/
broadcast cross-ownership was no longer in the public 
interest.'' The Third Circuit threw out the proposed new rules 
because it thought the Commission relied too heavily on the 
Internet as a significant competitive factor. I wonder what the 
court would say today if the same proposal were before it, now 
that newspapers' annual revenues are down more than half since 
2003. Would the same bench consider the Internet a significant 
competitive factor now that the average online video ad often 
outprices national TV day-parts?
    Sadly, following two court losses, it seems that for a 
while the FCC simply gave up on trying to save this industry 
from antiquated regulation. The Commission failed to complete 
the 2010 quadrennial review, its statutorily mandated review of 
media ownership rules, and instead has doubled down by making 
changes that make it more difficult for local media to compete. 
The Commission's recent decisions to unwind many joint sales 
agreements and to look askance at shared service arrangements 
ignore the realities of the broadcast business and are 
affirmatively harmful to the localism they purport to protect.
    I am happy to see that the Commission intends to return to 
reasoned rulemaking consistent with its statutory mandate. 
Chairman Wheeler has announced his intention to comply with the 
law and complete the 2014 quadrennial review in a timely 
manner. And while the law is very specific in the Commission's 
mandate to deregulate media ownership where warranted, given 
the recent set of FCC decisions, I am, to quote the man for 
whom this room is named, ``comforted very little.'' Without 
relief, I fear that local broadcast and newspaper companies 
will continue to struggle against unregulated competitors whose 
businesses are not hamstrung by decades-old regulatory 
assumptions. Newspaper classified advertising peaked in 2000 at 
$19.6 billion. In 2012, classified advertising brings in $4.6 
billion. That is a 77 percent drop in revenues just from 
classified advertising, primarily due to shifts in classifieds 
to such Internet entities as Craigslist. Unsurprisingly, 
hundreds of newspapers have shuttered operations or migrated to 
digital-only since '07, and the U.S. has lost 62 daily 
newspapers since 2004.
    We are all committed to promoting a local media industry 
that is healthy; to fostering competition, localism, and 
diversity of voices, and to ensuring that local media continues 
to serve the needs of their communities, but pretending that 
laws designed for an era before smartphones and the Internet 
will get the job done is an effective death sentence for many 
local media outlets.
    I would like to thank our witnesses again for joining us 
today to offer their opinions on these matters. We appreciate 
your taking the time, and we look forward to your testimony.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    What do the founding of Microsoft, the first episode of 
``Saturday Night Live,'' and the establishment of the 
broadcast/newspaper cross-ownership ban have in common? They 
are all about to turn 40, because they all took place in 1975. 
But where Microsoft has innovated and moved past a world where 
MS-DOS was the state of the art, and ``Saturday Night Live'' 
continues to reinvent itself as an essential piece of 
Americana, the media ownership rules persist as though the 
Internet simply doesn't exist. Our laws need to reflect the 
reality of the world we live in today, not the world of the 
Ford administration. It is my sincere hope that today's 
discussion can spur us to rationalize the rules and regulations 
for a media industry that serves consumers in this century--not 
the last.
    In today's media environment, traditional media like Bend, 
Oregon's KTVZ-TV and the town's Bulletin newspaper compete with 
Twitter, The Drudge Report, The Huffington Post, Fox News, 
MSNBC, CNN, the Wall Street Journal, and the New York Times. We 
live in an era of a 24-hour news cycle and on-demand national 
media, but our laws assume a world where local newspapers and 
broadcast stations are so influential that economies of scale 
are dangerous to the public interest. While proponents of the 
status quo express their love of localism and the laws intended 
to guarantee it, I fear that laws intended to ensconce our love 
of local media are loving them to death.
    Promoting localism is a goal we all share; but localism 
isn't cheap. Producing the kind of high-quality content that 
has been the hallmark of American broadcasting is an expensive 
labor of love for local broadcasters and newspapers. And as 
Americans' habits have changed, so too should the way we look 
at local media. We live in a competitive landscape where 
increasingly we cherry pick articles; we scroll through feeds 
and aggregators; we have multiple national news programming 
options, and we DVR almost everything to time-shift the 
programming we love. It's a different world, why don't our 
media laws reflect these changes?
    The fact is, the FCC tried to change these rules as early 
as its 2002 review of the media ownership rules, when it 
recognized the competitive force that is the Internet. The 
Commission would have done away with the ban on cross-ownership 
of a daily newspaper and a broadcast station and expanded the 
caps on local ownership of television and radio stations. But 
the courts overturned the FCC's proposed rule notbecause it 
believed that repeal was unreasonable. In fact, the court 
determined that ``reasoned analysissupports the Commission's 
determination that the blanket ban on newspaper/broadcast 
cross-ownershipwas no longer in the public interest.'' The 
Third Circuit threw out the proposed new rules because it 
thought the Commission relied too heavily on the Internet as a 
significant competitive factor. I wonderwhat the court would 
say if the same proposal before it today--now that newspapers' 
annual revenuesare down more than half since 2003. Would the 
same bench consider the Internet a significantcompetitive 
factor now that the average online video ad often outprices 
traditional TV day-parts?
    Sadly, following two court losses it seems that for a while 
the FCC simply gave up on trying to save thisindustry from 
antiquated regulation. The Commission failed to complete the 
2010 quadrennial review--its statutorily mandated review of 
media ownership rules--and instead has doubled down by 
makingchanges that make it more difficult to for local media to 
compete. The Commission's recent decisions to unwind many joint 
sales agreements and to look askance at shared service 
arrangements ignore the realities of the broadcast business and 
are affirmatively harmful to the localism they purport to 
protect.
    I am happy to see that the Commission intends to return to 
reasoned rulemaking consistent with its statutory mandate. 
Chairman Wheeler has announced his intention to comply with the 
law and complete the 2014 quadrennial review in a timely 
manner. And while the law is very specific in the Commission's 
mandate to deregulate media ownership where warranted, given 
the recent set of FCC decisions, I am, to quote the man for 
whom this room is named, ``comforted very little.'' Without 
relief, I fear that local broadcast and newspaper companies 
will continue to struggle against unregulated competitors whose 
business models are not hamstrung by decades-old regulatory 
assumptions. Newspaper classified advertising peaked in 2000 at 
$19.6 billion; in 2012, classified advertising brings in $4.6 
billion--a drop of 77 percent in just over a decade, primarily 
due to shifts in classifieds to such Internet entities as 
Craigslist. Unsurprisingly, hundreds of newspapers have 
shuttered operations or migrated to digital-only since 2007, 
and the U.S. has lost 62 daily newspapers since 2004.
    We are all committed to promoting a local media industry 
that is healthy; to fostering competition, localism, and 
diversity of voices; and to ensuring that local media continues 
to serve the needs of their communities. But pretending that 
laws designed for an era before smartphones and the Internet 
will get the job done is an effective death sentence for many 
local media outlets.
    I'd like to thank our witnesses for joining us today to 
offer their opinions on how we might improve our media 
ownership rules. We appreciate your taking the time to join us 
today, and we're looking forward to hearing what you have to 
say.

    Mr. Walden. And with that, I would recognize the ranking 
member of the subcommittee, the gentlelady from California, Ms. 
Eshoo, for her opening statement.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Thank you, Mr. Chairman. And welcome to the 
witnesses, and thank you for being willing to testify today at 
this important hearing that the chairman has called.
    I believe that one of the most important manifestations of 
a vibrant democracy is that there are many voices speaking to 
the many, and so whatever I say in my opening statement really 
fits in with that principle because I think it is such an 
essential one, and I think it is one that should guide us in 
everything that we do relative to these undertakings in the 
examination of media ownership in this, the 21st century.
    In an era when corporate media outlets have become 
increasingly concentrated in the hands of a few conglomerates, 
our goal, and the chairman mentioned this, should be to promote 
localism, advance competition, and encourage diversity, not to 
roll back what few protections we have in these key areas. I 
would like to put forward some facts that I find troubling. 
Despite a national broadcast television ownership cap, 10 
station groups now own over 650 stations, or nearly \1/2\ of 
all commercial full-powered broadcast stations in the United 
States. The source of that is free press. Ten companies control 
55 percent of all local TV advertising revenues. Twenty-five 
percent of the Nation's 952 local news stations do not produce 
their newscast themselves. You combine these statistics with 
the fact that 20 out of the top 25 news Web sites rely heavily 
or even exclusively on news gathered from traditional media 
sources, such as a daily newspaper, broadcast network or a 
cable news network, and you have a picture of what I think is 
an unhealthy media landscape.
    So as the FCC takes steps to close existing loopholes in 
its rules, I am pleased that the Agency is moving forward with 
its review of our Nation's broadcast ownership rules. The 
completion of the long overdue 2010 quadrennial review and the 
2014 review will ensure the FCC can fully assess the impact of 
further consolidation on ownership, diversity and localism in 
our Nation's media system. And while some have criticized the 
FCC for cracking down on sidecar deals before concluding its 
2010 review, I think that the Agency has an obligation to 
enforce the existing rules on the books, regardless of the 
outcome of its review.
    Congress has long entrusted the FCC with upholding the core 
values of competition, localism and diversity of media, and 
while the media landscape may change, and we welcome those 
changes, the role that the these values play in advancing 
public disclosure and strengthening our democracy, I think, 
should remain intact.
    So again, thank you to our witnesses, and I would like to 
not only submit for the record a letter written by Common 
Cause, Mr. Chairman, supporting FCC action on JSAs, and I would 
like to yield the remainder of my time to Mr. Butterfield.
    Mr. Walden. Without objection.
    [The information follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Ms. Eshoo. Thank you.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. I thank the ranking member for yielding 
this morning, and certainly thank you for your passion on 
diversity. It is very much appreciated.
    Mr. Chairman, I offer the following statement. African-
Americans, Hispanic-Americans and Asian-Americans own a 
combined 3 percent of all full-powered, commercially owned and 
operated TV stations here in the United States, and the number 
for radio are not much better. Access to capital, consolidation 
and outdated ownership rules further stifle minority ownership. 
Increasing diversity ownership is important. It ensures the 
content--that content will be delivered in formats that mirror 
the cultural experiences of our citizens, and generates 
economic opportunities for the Nation, particularly as these 
companies create and maintain jobs. The future of our media 
will also be dependent upon our ability to factor-in the impact 
of emerging and evolving digital technologies on traditional 
media models. The FCC regularly says that diversity is one of 
its objectives, but the 2014 quadrennial NPRM doesn't reflect 
that commitment. Some proposals, including legislative ones 
pending for 20 years, were reduced to footnotes. Many of those 
proposals were supported by the FCC's own Diversity Advisory 
Committee.
    I am hopeful, Mr. Chairman, the FCC's long-awaited further 
notice of proposed rulemaking for 2014, if not done correctly, 
will seek to gather data that will help us to address the 
disparities that exist in minority media ownership. We must 
increase meaningful media ownership opportunities for people of 
color. That is the point I am trying to make.
    Thank you very much. I yield back to you--to the ranking 
member.
    Ms. Eshoo. And I yield back, Mr. Chairman. Thank you.
    Mr. Butterfield. Mr. Chairman, I failed to do one thing. If 
I momentarily could ask----
    Mr. Walden. Of course.
    Mr. Butterfield [continuing]. Unanimous consent to include 
in the hearing into the record a letter dated June 10, 2014, 
addressed to you and to the ranking member.
    Mr. Walden. I believe so, yes. Without objection.
    [The information follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Butterfield. All right. Thank you.
    Mr. Walden. Are there any members on our side seeking an 
opening statement? OK. Mr. Waxman, I would turn to you.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman.
    Americans have more choices today than ever before about 
where to get news, information, entertainment. Broadband and 
mobile platforms are altering how content is produced and 
consumed, but these incredible new innovations do not alter key 
policy goals, promoting localism, diversity and competition in 
the media. These core values represent a commitment that 
stretches all the way back to the founding of our country. They 
have animated the FCC's policies for nearly a century. A 
commitment to localism means timely delivery of news and 
information relevant to our daily lives, such as emergency 
alerts in a time of crisis. Competition means original, in-
depth reporting that not only informs and educates the public, 
but helps distinguish the quality of journalism. Striving for 
diversity helps the delivery of a wealth of perspectives that 
more closely reflect the diverse makeup and experiences of our 
community.
    The FCC's longstanding media cross-ownership rules are 
tools for preserving these values. Despite the wonder and power 
of the Internet, broadcasters and newspapers continue to be the 
dominant sources for local news and information across old and 
new medium. That makes these rules relevant even today.
    Under both Democrats and Republicans, the FCC has tried to 
revise the media ownership rules, but the Agency has little 
success in navigating the legal, political and resources 
challenges in meeting the congressional directive to review 
these rules every 4 years. Chairman Wheeler has appropriately 
set a deadline to complete the long-overdue 2010 quadrennial 
review, and the currently pending 2014 quadrennial review. As 
the Agency works to complete these reviews, I believe it is 
time for Congress to examine whether this statutory mandate is 
still helpful or necessary.
    One constructive step the FCC has recently taken is closing 
a loophole created by the proliferation of joint sales 
agreements between broadcasters. The FCC struck the right 
balance in adopting rule changes to end JSAs manufactured 
solely to evade the media ownership rules, while allowing truly 
beneficial ones to continue through waivers. The committee 
worked on a bipartisan basis in the recently reported Satellite 
Reauthorization Bill to provide incentives for broadcasters to 
file timely requests for waivers, and the FCC to expeditiously 
act on them.
    A key consideration for the FCC should be helping ensure 
the health of the newspaper sector, which has been challenged 
by the growth of online news. A broadcast company that wants to 
invest in a newspaper could be a boon to a struggling 
newspaper, but one that wants to raid its assets could hasten 
its demise.
    These are not just theoretical questions. Late last year, 
the Tribune Corporation, the owner of the Los Angeles Times, 
other newspapers and broadcast stations across the country, 
announced that they would be spinning off its newspaper 
holdings, including the LA Times. The original terms would have 
forced the LA Times to rent its own building from the Tribune 
Company, and to borrow over $300 million to pay a cash dividend 
to the Tribune Corporation. I raised questions and consulted 
with independent media experts who advised that the terms could 
cripple the LA Times. To its credit, the Tribune Corporation 
has recently reduced the size of the cash payment it will 
demand from the newspaper, LA and other newspapers. I hope it 
will take further steps to ensure the viability of the Times 
before the deal is complete.
    Finally, our discussion today would be incomplete without 
an examination of the abysmal state of media ownership 
diversity. Women and minorities represent a tiny fraction of 
the owners and decision-makers in the media companies that 
shape our national discourse. The FCC has had great difficulty 
crafting policies that could improve ownership diversity and 
survive legal challenge. I hope today's witnesses can bring 
some fresh thinking and new ideas to help advance this issue, 
which is so critical for a healthy democracy.
    I thank all the witnesses for being here today. I must 
apologize in advance that I have to be present at another 
subcommittee, and won't be here for all of your testimony. I 
will try to get back for questions, but I appreciate your 
participation and I look forward to reviewing what you have to 
say, both orally and your written submissions.
    Thank you, Mr. Chairman. Yield back my time.
    Mr. Walden. Thank you, Mr. Waxman. And I will turn now to 
the vice chair of the subcommittee, Mr. Latta, for opening 
comments.

OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Latta. Well, thank you, Mr. Chairman, and thank you 
very much for holding today's hearing, and I appreciate all the 
witnesses being with us today.
    The media landscape, much like many other sectors in the 
communications and technology industry, has evolved 
considerably over the last 20 years. With the introduction of 
the Internet and digital technology, we have seen convergence, 
increased competition, innovative content delivery services, 
and rapidly shifting preferences in consumer demand come to 
define the media market. However, many of the laws that govern 
this space are outdated. As a result, long-time industry 
participants that are subject to these rules and regulations 
are placed at a competitive disadvantage to newer market 
entrants. This has thwarted their ability to flexibly and 
quickly respond and compete in this dynamic marketplace. Of 
particular concern is the FCC has been negligent in completing 
its mandatory review of the media market that could help 
address today's competitive realities.
    As we continue our efforts to examine the Communications 
Act and consider updates to the law that would better reflect 
the 21st century communications landscape, I look forward to 
hearing from our witnesses today about the current regulatory 
framework governing media ownership and the impact that it is 
having on businesses, consumers, and the economy.
    And, Mr. Chairman, if I could, I would yield to the 
gentleman from Illinois.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. I want to thank my colleague. I want to 
welcome you all here.
    There is no reason why the 2010 and 2014 quadrennial review 
has not been filed. It is just not complying with the law, and 
it is a failure of the bureaucracy and the Federal Government 
to do its job. Having said that, one reason why, because this 
sector is moving so fast, I mean how do you get a handle on it? 
Late-breaking story last night. How did I find out about it? 
Someone did a Twitter feed that one of my staff members picked 
up and emailed to me. I didn't get it over broadcast, I didn't 
get it over cable, I didn't get it over radio, I definitely 
didn't get it out of print media, I got out of this new world 
age of information flow.
    There is more access to information now than ever before. 
These media ownership rules stifle the ability for localism in 
rural America.
    I look forward to this hearing, and I thank you all for 
coming.
    Mr. Walden. Gentleman yields back the balance of his time. 
All the opening statements are concluded, and we will now go to 
testimony from our witnesses.
    And again, we thank you all very much for the work you have 
put into your testimony.
    We will start off with Mr. William T. Lake, who is the 
Chief of the Media Bureau of the Federal Communications 
Commission. Mr. Lake, we are delighted to have you here before 
the subcommittee. Pull that microphone pretty close to your 
mouth or we won't be able to hear your fine words, sir. So 
thank you, and we look forward to your testimony.

  STATEMENTS OF WILLIAM T. LAKE, CHIEF, MEDIA BUREAU, FEDERAL 
COMMUNICATIONS COMMISSION; JESSICA J. GONZALEZ, EXECUTIVE VICE 
    PRESIDENT AND GENERAL COUNSEL, NATIONAL HISPANIC MEDIA 
COALITION; BERNARD LUNZER, PRESIDENT, THE NEWSPAPER GUILD-CWA; 
    PAUL J. BOYLE, SENIOR VICE PRESIDENT OF PUBLIC POLICY, 
    NEWSPAPER ASSOCIATION OF AMERICA; DAVID BANK, MANAGING 
 DIRECTOR, GLOBAL MEDIA EQUITY RESEARCH, RBC CAPITAL MARKETS; 
 AND JANE MAGO, EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, 
     LEGAL AND REGULATORY AFFAIRS, NATIONAL ASSOCIATION OF 
                          BROADCASTERS

                  STATEMENT OF WILLIAM T. LAKE

    Mr. Lake. Good morning, Chairman Walden, Ranking Member 
Eshoo, and members of the subcommittee. My name is Bill Lake. I 
am the Chief of the Media Bureau at the FCC, and I am very 
happy to be with you today.
    I would like to highlight a few points from my written 
statement about the actions that the Commission and the Media 
Bureau took in March relating to media ownership.
    First, the Quadrennial Review. The FCC is very aware of its 
responsibility to review its media ownership rules every 4 
years. As you know, in March the Commission began its most 
recent review, adopting a Further Notice that builds on the 
record of the ongoing 2010 proceeding. The Further Notice 
analyzes the evidence to date on each of the rules, and 
discusses the diversity issues remanded to the Commission by 
the Third Circuit.
    I recognize that some observers, including members of the 
subcommittee, are concerned that the Commission has yet to 
complete its 2010 Quadrennial Review. As Chairman Wheeler noted 
in March, the Commission's inability to complete that review 
was not for lack of effort. We began the proceeding early in 
November 2009, compiled an extensive record, and circulated a 
proposed Order in 2012, which remained before the Commission 
for over a year but failed to receive a majority. The Further 
Notice will enable all interested parties to supplement the 
record with information about the 2014 marketplace. The 
Chairman has committed to present recommendations to the 
Commissioners by June 30, 2016.
    Second, shared services agreements, or SSAs. As part of the 
Further Notice, the Commission sought to improve its 
understanding of the sharing of services between separately 
owned TV stations. The Commission does not now require SSAs to 
be disclosed, and that makes it hard for us or the public to 
know what impact these agreements may have on our policies. The 
Further Notice invites comment on whether and how best to 
disclose SSAs.
    Third, TV joint sales agreements or JSAs. The Commission 
also adopted a report and order on TV JSAs. JSAs are agreements 
between stations in which one station sells advertising time on 
behalf of the other--typically, all of it. Unlike SSAs, they 
are well known to the Commission. We have long recognized our 
duty to identify any interests that give holders a realistic 
potential to influence a station's programming or operations. 
We treat such interests as attributable--that is, we count the 
stations as being commonly owned for purposes of our ownership 
rules. The Commission tentatively concluded in 2004 that it 
should attribute TV JSAs just as it had done for radio JSAs in 
2003. The rationale is that someone who controls a station's 
main source of revenue has a significant potential to influence 
the station's operations.
    Based on the record, and in light of the growing prevalence 
of TV JSAs, the Commission decided that it should attribute 
these agreements with a 2-year transition period for existing 
JSAs, as we had done for radio.
    Finally, I can provide a bit of context for the Media 
Bureau's Public Notice in March, which gave guidance to the 
industry on how the Bureau will process pending and future TV 
license transfer applications. In releasing the Public Notice, 
the Bureau sought to provide greater transparency to the 
industry about concerns that had come to light in our review of 
proposed license transfers. Transactions we have seen in recent 
years have involved increasingly complex relationships between 
stations that our rules do not allow to be jointly owned. In 
particular, more and more transactions involve combinations of 
sharing arrangements and financial ties, such as options and 
loan guarantees. We have found that determining the economic 
effects of a transaction requires much more extensive analysis 
when stations have such complex entanglements, and, though we 
must decide each case on its particular facts, case-by-case 
decisions by themselves may not give broadcasters the 
predictability they want as they structure deals.
    The Public Notice is intended to increase transparency by 
making sure that broadcasters appreciate that deals involving 
complex interrelationships require more extensive review, and 
by highlighting the combinations of relationships that we have 
found most troubling as we evaluate whether one station may 
have undue influence over another. By arming the parties with 
this knowledge, we sought to guide them as they structure 
future deals or consider amendments to pending transactions.
    From what we have seen so far, this increased transparency 
has been helpful. Far from coming to a halt, deal-making in the 
industry continues. Since mid-March, we have approved the sale 
of 36 full power stations, representing 12 different deals.
    Again, thank you for the opportunity to be here today, and 
I am happy to take any questions.
    [The prepared statement of Mr. Lake follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Mr. Lake, thank you for your service and for 
your testimony. We look forward to continuing the discussion.
    We will now go to Jessica J. Gonzalez, Executive Vice 
President and General Counsel, the National Hispanic Media 
Coalition. Ms. Gonzalez, thank you for being here. Please go 
ahead.

                STATEMENT OF JESSICA J. GONZALEZ

    Ms. Gonzalez. Thank you, Chairman Walden, Ranking Member 
Eshoo, and members of the subcommittee.
    I represent the National Hispanic Media Coalition, a media 
advocacy and civil rights organization working towards a media 
that is fair, inclusive and accessible to all people.
    What happens in an overly consolidated media system that 
fails to reflect American multiculturalism? Here is an example 
from the radio industry, which is already plagued by major 
consolidation. On Clear Channel radio stations across the 
country, listeners are fed a steady diet of racism and 
stereotyping. According to some Clear Channel pundits, Latinos 
and African-Americans are dangerous, Asians are cheaters, women 
are sluts, immigrants are animals. At a time when this country 
should be developing its proud, multicultural identity, 
instead, this dehumanization of women and people of color is 
normalized over the public airwaves.
    We as parents of young children of color and young girls 
have to figure out how to explain these slurs to our children, 
who don't see color, but yet are told at a young age that they 
are different or they are feared, or they are less than. The 
harms of this rhetoric are deep and well documented. Clear 
Channel has 850-plus stations in over 150 cities across the 
country. It exploits the lack of strong radio ownership limits 
to insulate its stations from free market accountability 
mechanisms, such as losing audience share or revenue. It is 
totally out of touch with the communities it serves.
    Media ownership limits are vital to the health of our 
democracy. These content and race-neutral rules promote 
ownership diversity, viewpoint diversity, localism and 
completion. Broadcasters and newspapers play a critically 
important role in informing Americans, and influencing 
attitudes towards people of color and women. Broadcast TV and 
radio reach over 98 percent of us, and reliance on over-the-air 
TV is prevalent in poor, rural and non-English-speaking 
communities.
    Internet sources are far from achieving parody with 
broadcasters when it comes to disseminating information, 
particularly local news. First of all, 1 in 3 Americans does 
not have home broadband access. Rural communities, Latinos, 
African-Americans, seniors, the poor, people with disabilities, 
and non-English speakers are far less likely to be connected to 
the Internet. And traditional media sources like broadcasting 
and newspapers are still responsible for the vast majority of 
online local news and information. The courts, Congress and the 
FCC have long recognized a nexus between minority ownership and 
broadcasting diversity, yet people of color, who make up more 
than 36 percent of the U.S. population, own less than 3 percent 
of TV stations. Women own less than 7 percent. Media 
consolidation and joint sales agreements that allow big media 
companies to circumvent the ownership rules are bad for 
diversity.
    Immediately after the 1996 Act, relaxed ownership limits 
and the minority tax certificate was abandoned, women and 
people of color were pushed from the market as conglomerates 
grew. According to a 1997 NTIA report, relaxed ownership limits 
created a significant competitive advantage for group owners 
who are more likely to be nondiverse and have greater financial 
resources. That media concentration drove up station prices.
    The FCC's recent JSA ruling, on the other hand, creates 
opportunities for diverse owners and small businesses to enter 
the market.
    An agency envisions a country in which broadcasters reflect 
American multiculturalism and serve the information needs of 
all communities. Promoting diversity and localism with strong 
media ownership rules within the FCC's existing regulatory 
framework, and using your law-making power to reinstate the 
minority tax certificate, are important steps towards achieving 
that vision.
    Thank you and I look forward to questions.
    [The prepared statement of Ms. Gonzalez follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Ms. Gonzalez, thank you for your powerful 
testimony. We appreciate your comments.
    We will now turn to Mr. Bernard Lunzer, President of The 
Newspaper Guild-CWA. Mr. Lunzer, thank you for being here. We 
look forward to your testimony as well, sir.

                  STATEMENT OF BERNARD LUNZER

    Mr. Lunzer. Thank you, Mr. Chairman, ranking member and the 
committee for allowing me to testify.
    News Guild-CWA represents workers in broadcast, print and 
digital. Our sister sector, NABET-CWA, represents workers 
throughout broadcast. Along with our employer rep, some of them 
that are here, we seek solutions to the current challenges in 
media.
    The Internet will continue its disruption of media, while 
also offering room for innovation and new revenue. Right now, 
there are no simple solutions or clear ways forward.
    We support Chairman Wheeler's stated intent to rein in 
JSAs, study shared service agreements, and maintain the status 
quo on cross-ownership between print and broadcast. Further 
consolidation will not help. It is not about saving call 
letters, NASTADs or Web sites, if they only duplicate 
information from elsewhere. JSAs, SSAs, and more cross-
ownership will result in fewer employees, less news coverage, 
and less diversity in both areas. It also will not stimulate 
diversity in ownership.
    Already, JSAs and SSAs have substantially reduced coverage 
in towns like Youngstown, Ohio, and Honolulu, Hawaii. In 
Youngstown, for example, four TV stations are operated by Lynn 
Media, with duplicated material being presented on those 
stations. Lynn Media is in competition with two other stations 
that are owned and operated in conjunction with the Youngstown 
Vindicator newspaper. When Lynn consolidated stations, it 
eliminated most newsroom jobs in the accreted newsrooms. The 
Vindicator and its broadcast stations have small staffs in 
their newsrooms and share material. Overall, employment has 
shrunk and diversity of coverage as well. Cable, by the way, 
adds almost nothing locally.
    We are often told that combinations allow for more 
coverage. That is just not the case, as the efficiencies are 
used purely to increase profitability through less staff.
    Honolulu is a similar case to Youngstown, and well 
documented. Three of five stations operate as if they were a 
single news operation, with almost identical news, 
significantly diminishing local coverage.
    In Syracuse, New York, and Peoria, Illinois, Granite and 
Barrington Broadcasting swapped and combined news operations in 
each city. Our union commissioned a national study done by the 
University of Delaware. The study reported that 70 workers were 
laid off and 16 were reassigned. Barrington Broadcasting now 
runs 3 stations in Syracuse with the same news staff. The 
Syracuse and Peoria markets both lost competing and different 
points of view in news coverage through duplication.
    We get to a situation where some broadcast stations are 
essentially zombies. Broadcasting continues but there are few, 
if any, employees involved. The JSAs allow for consolidation on 
the advertising side.
    We believe the goal of restricting JSAs where more than 15 
percent of sales are attributed to another station is a good 
one. We also agree with the FCC about studying SSAs to see if 
similar restrictions would be in order. There needs to be a 
procedure and a test to revive such stations, allowing for more 
hiring, diversity of coverage, and the potential for diversity 
of ownership. The FCC is on the right track, if that really is 
the goal.
    Again, further concentration will make this worse. The 
status quo continues the current dilemma. Only new guidelines 
will provide for a better competition, and a robust landscape 
that may allow for diversity of ownership, which is at 
scandalous levels, as has already been discussed here.
    Let me also strike at the heart of the myth of diverse 
content, because the Internet is adding so many voices. This is 
a very important point. Much of what the Internet has added is 
opinion, not well-sourced and not particularly helpful. A Pew 
Study of Baltimore Tribune Paper in 2012 demonstrated that 
although there were 53 news outlets for local content, 83 
percent of stories were repetitive, with no new information. 
Legacy print content providers accounted for 48 percent of 
content, with local broadcast providing about \1/3\. Almost no 
breaking information came from the nonlegacy platforms. Since 
the study, the Baltimore Sun, the principle provider of news, 
has shrunk substantially.
    As a labor union that cares deeply about democracy, we 
believe further concentration will mean less credible news and 
information to citizens as major debates take place over the 
future of America. Citizens should expect their rights to be 
paramount over broadcasters, as has been established in law. We 
need real innovation and investment as we continue forward in 
the 21st century. Consolidating existing organizations with 
fewer employees does not get us there.
    I would also note that the breaking news last night on the 
Virginia election, I got that through a print source that 
actually came in through a tweet. The original news actually 
came from a print organization.
    I look forward to any questions. Thank you.
    [The prepared statement of Mr. Lunzer follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Mr. Boyle, you are now recognized for your 5 
minutes.

                   STATEMENT OF PAUL J. BOYLE

    Mr. Boyle. Congressman Terry, Ranking Member Eshoo, and 
members of the subcommittee, on behalf of our 2,000-plus member 
newspapers, thank you for providing this opportunity to 
testify.
    The subcommittee's focus on Media Ownership in the 21st 
Century is appropriate. Many of our ownership regulations are 
creatures of the 20th century, and are no longer suitable for 
today's multimedia world. My testimony will focus on one such 
outdated regulation; the newspaper/broadcast cross-ownership 
ban. The FCC adopted this ban in 1975. The rule prohibits 
investors from owning both a daily newspaper and a television 
or radio station in the same market. At the time, the 
Commission feared that one owner could control all of the news 
and editorial viewpoints in a community.
    Many ideas that sounded perfectly reasonable in 1975 now 
appear behind the times. Those were the days of a single 
nationwide telephone company, gasoline rationing and 
bellbottoms. Today's media ownership regulations must reflect 
today's media. You recognized this need when, in 1996, you 
required the FCC to conduct a comprehensive review of its media 
ownership regulations every 4 years, and to repeal or modify 
any regulation that it determines to be no longer in the public 
interest. Well, NAA is getting ready to file comments in the 
Commission's eighth proceeding in nearly 20 years, examining 
the validity of the 1975 cross-ownership ban. Remarkably, none 
of these proceedings has resulted in any changes in the rule, 
creating an endless cycle of regulatory uncertainty for 
newspapers and broadcasters. We all know that American 
consumers have access to more information and viewpoints today 
than ever before. According to a recent report on the personal 
news cycle, the average American recalled getting her news from 
between 4 and 5 different sources in a week, and new digital 
news players have exploded on the scene. This same report found 
that nearly \1/2\ of those surveyed received their news from 
online-only reporting sources. Quite simply, there are no 
longer any barriers to entry in the distribution of news and 
information. However, in-depth investigative original reporting 
that is professionally edited takes a substantial commitment of 
resources. Newspapers have always made this commitment.
    Some have argued that the repeal of the cross-ownership ban 
will lead to a massive wave of mergers. Nothing could be 
further from the truth, but in light of rapid changes in media 
consumption, some newspapers likely will come on the market. 
The ban reduces the number of potential buyers who might want 
to invest in a newspaper, including an owner of a broadcast 
station with deep resources and a commitment to journalism. And 
when local television or radio stations become available for 
sale, the only media companies that are barred from bidding on 
them are newspaper companies; companies that have had a long 
history of producing local news in that community.
    Some of the Nation's top journalism has occurred in 
communities that have cross-owned newspapers and broadcast 
stations. For example, two of the primary news sources that 
broke and dug deep into the story about mismanagement at the 
Department of Veterans Affairs were newspaper-television 
combinations in Arizona and Ohio. This was not a surprise. 
Public service journalism is a part of their DNA.
    According to FCC Commission research, a cross-owned 
television station produces 50 percent more local news, devotes 
40 percent more time to candidate speeches, and airs 30 percent 
more coverage of State and local political candidates. Removing 
the cross-ownership restriction would serve, not harm 
communities. It is time to eliminate this barrier that has 
stifled much-needed investment in local journalism.
    Thank you and I look forward to your questions.
    [The prepared statement of Mr. Boyle follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Mr. Boyle, thank you for your testimony. We 
will now go to Mr. David Bank who is the Managing Director of 
RBC Capital Markets.
    Mr. Bank, we especially appreciate your testimony today, 
and look forward to hearing it. So thanks for being here.

                    STATEMENT OF DAVID BANK

    Mr. Bank. Thank you. OK, good morning.
    Mr. Walden. You have to push that little button right there 
in front. There we go.
    Mr. Bank. Shows my lack of Governmental experience. Thank 
you.
    Good morning, Chairman Walden, Ranking Member Eshoo, and 
members of the subcommittee. My name is David Bank and I am a 
managing director and the equity research analyst responsible 
for covering the media sector at RBC Capital Markets.
    RBC Capital Markets is the corporate and investment banking 
arm of the Royal Bank of Canada; Canada's largest bank and the 
twelfth largest bank in the world, based upon market 
capitalization.
    I primarily advise institutional clients such as pension 
funds and mutual fund managers with respect to broader themes 
and specific company fundamentals in the media industry. I help 
advise investors with respect to how they should be positioned 
in the media space, given current and future industry dynamics. 
I have covered the media space for approximately the last 15 
years, during which a tremendous amount of change has occurred 
in the broad media landscape, especially with respect to three 
things: the first, how consumers apportion their time consuming 
different media; the second, the new media outlets that have 
become available to those consumers; and third, the business 
models available to those operators, and the competitive forces 
within the media space.
    Much has already been made of the fact that the current 
regulatory framework for media ownership dates back to 1975 for 
newspaper cross-ownership, and basically, to the late 20th 
century for much of the framework for TV and radio broadcast 
with respect to both cross-ownership and single media ownership 
concentration across single markets, as well as in the U.S. in 
totality.
    The financial markets, the capital markets, are keenly 
aware that this regulatory framework was created before the 
dynamically changing nature of the media ecosystem, that has 
overtaken us at light speed over the past few years, had been 
developed. The financial and capital markets are even more 
keenly aware that consumer behavior itself has changed 
massively as a result of the evolving ecosystem. Specifically, 
the current regulatory framework was constructed in a media 
ecosystem that basically didn't include the Internet. While it 
may have contemplated a broad PC-based Internet consumption 
environment, it certainly didn't contemplate a mobile 
application-based ecosystem. For an illustration of this point, 
I would ask you to look at Exhibit 1. As you can see, 
hopefully, from this exhibit, about 45 percent of consumers' 
media time is now spent on either the Internet, on PC or some 
sort of mobile application. That is 45 percent. We think this 
is a reasonable starting point to view the framework through 
which we might want to evaluate the relevance of current rules 
to the existing ecosystem.
    In terms of traditional media, there is probably no 
surprise that consumers still spend more of their time with 
television than any other medium, as they have for decades, 
including the time period in which the current regulatory 
framework was constructed. However, the consumption within the 
TV paradigm has shifted greatly in a way not necessarily 
reflected in a regulatory paradigm shift. The primary shift has 
been the consumption of TV moving meaningfully from a world 
dominated by broadcast content, to an increasingly fragmented 
one where the American viewer now consumes the majority of TV 
content from dual-stream advertiser and subscription fee-
supported cable channels.
    Exhibit 2 illustrates, even 10 years ago, the majority of 
adult 18 to 49 primetime audiences was not on the big 4 
networks, but rather skewed slightly more toward nonbroadcast. 
Today, that shift is even more pronounced with broadcast 
controlling only about \1/3\ of the primetime audience. As a 
result, it is clear to us that broadcast TV regulation should 
probably consider a framework in which paid TV in total, as an 
ecosystem, is a competitor. This is the case in small and big 
markets alike.
    Further, TV isn't the only medium that has seen an 
increased fragmentation audience over the past 15 years. The 
radio ecosystem has clearly undergone an evolution beyond 
simply a broadcast transmitter since the time when the 
regulatory framework was constructed. Broadcast radio has 
probably been less impacted by the advent of traditional 
subscription services, such as Sirius satellite radio, than the 
television ecosystem, despite the fact that Sirius has 26 
million paying subs today with millions more of trials and 
inactive radios currently on the road just waiting to be 
activated. This has eaten into traditional radio's share of the 
audience on some level, but radio has been more directly 
impacted by the advent of the Internet, with services such as 
Pandora, Spotify or download and podcast services on iTunes, 
especially on a nonsubscription basis. Simply considering, 
digital radio services offers a framework for which the world 
has dramatically changed.
    Digital's audience skews younger, but the trend of total 
population penetration is irrefutable, as illustrated in 
Exhibit 3. Digital radio listeners are now at mass market 
proportions, representing just more than \1/2\ the population 
and \2/3\ of Internet users. Clearly, the game has changed in 
radio with respect to consumer behavior. This has also put some 
pressure on the typical radio business model.
    The newspaper business model is not a major focus in our 
coverage universe, but it is quite clear that the industry has 
undergone a great deal of tumult, in no small part due to 
changes in consumer behavior and alternatives as well. Most 
specifically, consumers simply have more choices with respect 
to how to consume news.
    In 1975 when the newspaper/TV cross-ownership rules were 
essentially constructed, consumers had no digital or cable news 
choices. By 2003, over 10 years ago, consumers were getting 20 
percent of their news from online sources. Today, that figure 
is around 40 percent, as illustrated in Exhibit 4. That is an 
astounding change in consumer behavior, having a material 
impact on the ecosystem.
    The bottom line regarding these shifts in the ecosystem is 
that they seem to call into relief what some of the existing 
regulatory framework might not. Digital media has now created, 
at least on the macro level, a powerful competitor to the media 
ecosystem that existed in isolation in the prior century. The 
markets are keenly aware of it. It plays a significant role in 
the way they fund growth and choices that consumers have.
    That said, there have been some movements more recently on 
the part of the FCC to re-regulate some elements of media 
ownership, and ownership concentration issues in the TV 
landscape in particular. The merits of these rule changes 
specifically aren't what we would focus on in this venue, but 
rather, we put the focus on the isolated nature of the rule 
changes, without consideration to adjacent issues. For 
instance, the UHF discount itself is probably something 
increasingly obsolete in an evolved ecosystem where most people 
under the age of 40 couldn't tell you the difference between a 
UHF or a VHF station; there is no separate dial on the cable 
box, but rather the choice to address such changes on a 
piecemeal basis adds limited visibility to the financial 
marketplace. The financial markets would probably have found it 
more constructive to view the UHF discount rule considered in a 
broader framework related to overall ownership cap regulation. 
The financial markets sometimes struggle with how to interpret 
broader ramifications.
    That concludes my prepared remarks. I would like to thank 
Chairman Walden, Ranking Member Eshoo, and the subcommittee 
members for giving me the opportunity to speak today.
    [The prepared statement of Mr. Bank follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Thank you, Mr. Bank. We appreciate your 
testimony. Thanks for coming down.
    We will now turn to Jane Mago, who is the Executive Vice 
President and General Counsel, Legal and Regulatory Affairs, 
The National Association of Broadcasters, for our final 
testimony from our witnesses today. Ms. Mago, thanks for being 
back before the subcommittee. We look forward to your comments.

                     STATEMENT OF JANE MAGO

    Ms. Mago. Thank you. Thank you, Chairman Walden, Ranking 
Member Eshoo, members of the subcommittee. I appreciate the 
invitation to speak to you this morning.
    Let me put my spin on 1975, that year that we have been 
talking about all morning here. In 1975, I was starting law 
school, watching a black-and-white television with no remote 
control, and like everyone else, I had only three broadcast 
networks to choose from. Cable wasn't available to me, and 
satellite television was only delivered to huge earth stations 
that were owned by cable companies. That was the world when 
some of these broadcast ownership regulations were created.
    Since then, we have cable and satellite and 
telecommunications companies that are all offering video 
services. The Internet and the massive proliferation of news 
outlets that you have heard about this morning have absolutely 
revolutionized the way we consume media, yet time has seemingly 
stood still at the FCC.
    The current broadcast ownership rules are simply out of 
touch with the reality of today's media marketplace. They 
distort competition. Cable, satellite and Internet-based media 
outlets who operate without these cumbersome regulations 
continue to proliferate and take both audience share and 
advertising revenues.
    The local television rule, for example, which generally 
prohibits the ownership of 2 television stations in the same 
market, assumes the television broadcasters operate in a 
bubble, only competing against other television broadcasters. 
That is almost laughable in today's marketplace. One need only 
look at the growing cable practice of selling local advertising 
across hundreds of cable programs to understand that there is a 
direct and real competition between broadcast and cable.
    The FCC has recently decided to effectively prohibit 2 
broadcast stations from engaging in the joint sale of 
advertising, but the large cable operators, along with 
satellite companies and AT&T and Verizon, have been unimpeded 
as they join forces to create a single source that jointly 
sells to local television advertising. It is increasingly 
difficult for broadcasters to compete in a marketplace that is 
so skewed by disparate regulation. The 1975 newspaper cross-
ownership rule that we have heard about this morning also 
relies on assumptions of a media landscape from a bygone era. 
The FCC itself has said that the prohibition against newspaper/
broadcast cross-ownership is not necessary to advance its goals 
of localism and competition, and it has recognized that the 
rule is overly broad as related to the alleged goal of 
promoting viewpoint diversity, particularly with regard to 
radio; yet, this outdated rule is still on the books.
    To maintain the ability to provide quality local service, 
and compete with newer technologies, broadcasters need a more 
level playing field with our competitors.
    That leads to my second point. Broadcast ownership rules 
must keep pace with market changes. Congress wisely required 
the FCC to take a fresh look at the ownership rules on a 
regular basis, in light of competition, and repeal or modify 
those that no longer serve the public interest, but the FCC has 
failed to follow your direction. The last review was done in 
2007, and rather than complete the most recent Quadrennial 
Review, as required by statute, the Commission rolled its 2010 
review into 2014, and then announced that it would not likely 
complete that review until at least mid-2016.
    NAB is challenging this most recent FCC decision in court, 
not just because the FCC failed to live up to its statutory 
obligation, but also because the Commission is imposing new 
restrictions on joint sales agreements amongst television 
stations, despite the fact that these agreements have produced 
tangible public interest benefits. NAB has shown that these 
agreements produce more news, more foreign language television, 
and other community-focused programming. Amazingly, the new 
rules will force broadcasters to unwind agreements that the 
Commission had previously approved.
    Finally, consideration of the broadcast ownership rules 
must be based on real evidence, not speculation. To address 
this, NAB asks Congress to undertake an examination of how the 
FCC's administration of the broadcast ownership rules has 
stifled investment and opportunity in broadcasting. In this 
time of intense consolidation in other parts of the 
communications industry, these ownership rules are increasingly 
outdated and have significant harmful consequences on local 
media. Regulatory practices that starve media of capital 
investment are a proven failure. They serve no one. Not current 
broadcasters, not interested new entrants, and most 
importantly, not the American people.
    In sum, NAB is asking for you to ensure timely and fair 
revision of the broadcast ownership rules. Maintaining the 
status quo, creating new restrictions, or even just kicking the 
can down the road is a disservice to the American people.
    Thank you and I am happy to answer any questions.
    [The prepared statement of Ms. Mago follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Ms. Mago, thank you for your testimony. We 
appreciate it. And we thank all of you for sharing your 
thoughts with us today.
    We will go now into the Q and A portion of our hearing.
    So, Mr. Lake, in the Sirius-XM merger in 2008, the Justice 
Department acknowledged that satellite radio services do not 
just compete with each other, but with a broad array of 
possible consumer substitutes, including AM and FM radio, CDs, 
iPods and other MP3 players. And as you know, many new cars now 
have docking stations or Bluetooth capability to connect all 
that up with other audio services, including Internet radio Web 
casting over Wi-Fi, cell phones and other handheld wireless 
devices, and the new digital HD radio receivers, which allow 
old-fashioned broadcasters to send up to three digital channels 
of programming over AM and FM bands, bundled together with the 
XM analog channel. Terrestrial broadcasters now contend with 
Spotify and Pandora and other services, so it is a much-changed 
audio market in terms of competition for ears.
    What is the delay? How do you justify not changing the 
radio rules on ownership?
    Mr. Lake. We have looked very carefully at that in our 2010 
review----
    Mr. Walden. Yes.
    Mr. Lake. We have compiled a great record, and we are 
looking at those trends in the use of radio and other audio 
sources. They haven't indicated to us yet that we should change 
the local radio rules.
    Mr. Walden. Really?
    Mr. Lake. Again, we have just called for further input. We 
are very interested in knowing how----
    Mr. Walden. Have you changed anything relative----
    Mr. Lake [continuing]. The market will change in 2014.
    Mr. Walden [continuing]. To the radio rules since 1996?
    Mr. Lake. No, those rules have not been changed----
    Mr. Walden. Right.
    Mr. Lake [continuing]. Since Congress put the current----
    Mr. Walden. Do you think the market has changed since 1996 
in terms of audio offerings and competition in the audio 
marketplace?
    Mr. Lake. The entire marketplace has changed, both audio 
and----
    Mr. Walden. But the rules have not.
    Mr. Lake. Our task is to try to determine in this--at the 
current state of evolution, what are the appropriate rules. 
And, again, we are very open to all input on that subject.
    Mr. Walden. Because I sense from your testimony you are 
not. I mean it kind of indicates you are going to go with the 
existing rules. Right?
    Mr. Lake. What we have done, I think, is to analyze the 
record as it now stands. We have a very extensive record, but 
we are very open to further input, and----
    Mr. Walden. Yes.
    Mr. Lake [continuing]. I think if you read----
    Mr. Walden. So----
    Mr. Lake [continuing]. The Further Notice carefully, it 
says what it says, which is that we are open to all further 
input. Those--all of the issues are open.
    Mr. Walden. OK. I am glad to hear that because, as you 
know, I was a radio broadcaster, we had to do the Olympic ring 
theory to justify having two AMs and three FMs in a market that 
was, I don't know, several hundred square miles probably. And 
ours had competition with XM and Sirius. That was really before 
Pandora took off. I have got five audio platforms out there, 
and you all allow, and justice allowed XM and Sirius to merge, 
and said here is the marketplace as we see it. And then for 
broadcasters, you say, no, no, no, you can't have another 
platform in a market. We, frankly, rescued some stations that 
were in pretty bad shape, and restored local programming, split 
them apart. I just think you guys don't get it, that the 
marketplace has changed dramatically. And the statute requires 
you to get it. And here we have been a Quadrennial Review, and 
for a whole set of reasons, not yours, you don't have a vote at 
the Commission so I am picking on you, but not really, OK, but 
the message will get through because I imagine the 
Commissioners listen in occasionally. And I just wonder, 
television has changed, newspapers are going broke, Craigslist 
has done amazing things to classified advertising. Mr. Lunzer, 
you probably don't have a lot of people working in the 
classified ad bureau anymore, do you? And a lot of it was 
propped up by legal notice requirements through the housing 
crash with foreclosures. That made up a lot of revenue, but 
that is going away, and I worry about the future of newspapers. 
I don't even like what they write about me sometimes and I 
still worry about them. Some of the time. Yes, well, but the 
point is it is a vibrant marketplace, and I think our rules are 
outdated. And so, again, I worry about what you are doing with 
the JSAs, because I sense from your testimony, Mr. Lake, it is 
almost like you think that the sales department controls the 
news department.
    Mr. Lake. The conclusion we reached with respect to both 
radio and TV JSAs is that, if one station controls the 
principal source of revenue for another, it is likely to have 
an influence, or the ability to influence, the conduct of the 
second station. And that is the test under our attribution 
rules.
    Mr. Walden. OK. I would like to go to Ms. Mago. You said 
that because of some consolidation, the market is actually 
better served. What is your evidence for that?
    Ms. Mago. We showed a number of different markets where 
there was the specific advantages that came from the shared 
services arrangements. For example, in Wichita, Kansas, they 
were--stations were able to do a JSA combination to provide the 
first Spanish language news in the entire State of Kansas. 
Similarly, in a situation in Eureka, California, you had two 
stations that didn't have any local news at all. By combining 
their resources to be able to get the efficiencies that came 
through those shared operations, both were able to start news 
operations in the Eureka market where there had only been one 
before that, and that is something that was a great advantage 
to the communities.
    Mr. Walden. All right, my time has expired. Thank you all 
for your testimony and the work you do in this area.
    Ms. Eshoo for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you to each 
one of our guests today.
    Varying views and I have listened hard to what each one of 
you said, and I can't help but think that some of my thinking 
relative to what--some of the testimony is the opposite of what 
you said. And so I want to go the other way and test out some 
of the things that have been put out about how great media 
consolidation is and how well it serves our country.
    I started out today by stating I think one of the most 
important principles relative to a democracy. Now, our 
democracy is old, India's I think is large and vibrant as well, 
but would anyone suggest that because that is an old idea, it 
is a bad one, that we should take up something that would 
change the whole idea of democracy? I don't think so. So I--
while I celebrate the new platforms, the new services, so many 
of them, I will--I would be willing to wager the majority of 
them, being established in my congressional district, that we 
need to examine this in terms of what consolidation is actually 
going to do for the American people.
    I understand business models, capital markets, how they 
want to invest, what is going to serve them well. That--in many 
ways, many of those business approaches were blown apart in 
2008 when we had a near total economic collapse in our country. 
That was one hell of a business model that was brought to the 
American people. So I think that, you know, it has been said 
that, you know, nothing has changed since 1975, we are out of 
touch with ourselves and markets, and what we need to do, I 
would suggest that some of the business models are out of touch 
with what the American people should be receiving. I don't know 
who is going to stand next to the model that Ms. Gonzalez 
described. I mean that is really, as the chairman said, 
powerful testimony.
    So if we consolidate more, are minorities in our country 
going to progress? No one addressed that. I never heard anyone 
address that. So if you have some points to make on that, I 
think it would be terrific, but honestly, I just don't--I think 
that people care. They care enormously if, in their market, 
there is one outfit that owns the newspaper, runs the TV 
stations and the radio stations, what kind of line of 
information, what is the value and the texture and the fabric 
and the content of just that one line being fed to people? I 
think that there are some countries in the world where we shun 
and make fun of that model because this one line to people. I 
want to hear diversity of thinking, and I would suggest that 
there is a lot of junk out there too, even though we have many 
more things at our fingertips, and for, you know, for the 
broadcasters, God bless you, you do a lot of things for--in 
terms of localism, we have had testimony on that, but you also 
have the airwaves that belong to the American people, and you 
don't pay for that. So that is a pretty darn good deal. So why 
would I want to consolidate something even more? For what? What 
is the reason? I mean what is the prime reason? Anyone have an 
answer to that? What is the prime reason? Is it for a better 
business model for someone, or is this in the name of 
democracy, localism, diversity, competition?
    Ms. Mago. If I can----
    Ms. Eshoo. I mean, I think that is the central question 
here.
    Ms. Mago. If I can, Ranking Member Eshoo. I think I would 
like to put the right perspective on this of what we want, and 
what I--what broadcasters are calling for is a healthy, vibrant 
broadcast industry, and I think it can achieve all of those 
goals that you were just talking about.
    Ms. Eshoo. Yes, well, I don't know how though. I--that is--
--
    Ms. Mago. By being able to compete in the current 
ecosystem. You cannot simply look at the broadcast industry as 
if it is only in its own little bubble. You have to recognize 
all of the changes that we talked about here this morning, and 
recognize that for broadcasters to create--be able to provide 
the kind of local information, the kind of truly competitive 
services that we have to have the kind of----
    Ms. Eshoo. Well, I----
    Ms. Mago [continuing]. Autonomy to do that.
    Ms. Eshoo [continuing]. Appreciate you jumping in, and I 
am--I think it is very interesting today that there is not a 
camera here. We have print media that is here, but I don't 
know----
    Mr. Walden. The camera is right there.
    Ms. Eshoo [continuing]. Are we Webcast or----
    Mr. Walden. Sure. Of course.
    Ms. Eshoo. Is C-SPAN carrying this?
    Mr. Walden. It is up to them to carry it or not. We don't--
--
    Ms. Eshoo. I see.
    Mr. Walden [continuing]. Dictate it.
    Ms. Eshoo. Well, I am----
    Mr. Walden. Yes.
    Ms. Eshoo. I am proud that the print media is here, so----
    Mr. Walden. We have print over here. We have print. Raise 
your hand if you are with the newspeople.
    Ms. Eshoo. I will submit my questions to you, but I really 
think, Mr. Chairman, that, when you look across America, we 
really have to understand what more consolidation is going to 
do, and myself, I don't think it really feeds democracy simply 
to consolidate because that is someone's business plan. I just 
don't buy that. I have seen a lot of peoples' lives wrecked and 
bad information being put out in the region as a result of it. 
I don't want more than that.
    So thank you very much, and I will submit my questions to 
the witnesses for their response. Thank you.
    Mr. Walden. Thank the gentlelady.
    And now we will go to Mr. Latta, the vice chair of the 
subcommittee, for questions.
    Mr. Latta. Thank you, Mr. Chairman. And, again, thanks for 
our panel for being with us today. Appreciate your testimony.
    Ms. Mago, if I could start with you at this time. What 
would be the effect of the FCC's proposal to attribute stations 
under a JSA in calculating a broadcaster's media ownership cap?
    Ms. Mago. For many of the stations that have been operating 
under the JSAs that were, in fact, proved by the Commission, it 
is going to mean that they are going to have to unwind those 
operations within the 2 years, as Mr. Lake described, and that 
means that they are going to have to either go out of business, 
they are going to have to find other sources of revenues, 
because those efficiencies that they have been operated under 
have been what have allowed them to provide greater service to 
their communities. So there is going to be a reduction of the 
amount of the service that is available in the communities.
    Mr. Latta. OK, and the next part of the question then, what 
effect would that have when you are talking--looking at a 
reduction for services in that community, or communities? What 
would you see that as?
    Ms. Mago. I seem that as harmful to the American public, 
and that reduction could be that, for example, where you have 
the station that I referred to before in Wichita, Kansas, where 
the Spanish news operation is being facilitated by the fact 
that there is a joint sales agreement that is in that market. 
That might well have to go away or find some other way of being 
financed that would not give it the kind of resources that they 
need. Other markets have similar stories that go with it, where 
the Tuvalu College that is also operating under a JSA, and they 
have presented evidence to the Commission that they would not 
be able to provide the services that they could to their 
community.
    Mr. Latta. All right, thank you.
    Mr. Lake, you note in your testimony, ``The Further Notice 
tentatively affirms that media ownership limits remain 
necessary in the current marketplace, despite the prevalence of 
new electronic media.'' So how is the FCC making that 
determination without first having conducted a thorough review 
of the marketplace to justify those limits?
    Mr. Lake. We looked at the record as it now exists, and 
while my friend Jane is right that the market has evolved quite 
a bit since she began law school, it continues to evolve. I am 
sure it will be very different 5 years or 10 years from now. 
And our task is to try to determine what rules are appropriate 
for the current state of evolution. And one of the things that 
we find in the current record is that, while distribution of 
news--local news and information, in particular--has become 
much more diverse, people find it on the Internet and 
elsewhere, the sources of that news and information remain 
principally the traditional media: newspapers and broadcast 
television. We also note that, while broadband is changing 
everything in the country, there remains about 20--30 percent 
of the population that doesn't have broadband at home.
    In 5 years or 10 years, if that figure is much closer to 
100 percent, and if the electronic media are generating more 
original news than they do today, that might have tremendous 
implications for our media ownership rules. What we are trying 
to do is to look at the state of the market today and decide 
what rules are appropriate to the market today. And, as I say, 
we are basing our tentative conclusions on the 2010 quadrennial 
record. We have invited comments on our Further Notice and will 
look very carefully at the updated information that people 
submit.
    Mr. Latta. OK. Well, thank you.
    Mr. Bank, if no changes are made in the current regulatory 
system, and the ownership caps remain where they are today, 
what is your prediction for the world of traditional media in 
the next 5 years?
    Mr. Bank. Well, what I would say is that the perspective of 
the capital markets on a daily basis, on an hourly basis, is 
the intense increasing competition that is being ratcheted up 
by a competing ecosystem from the online media world.
    I think that over that period of time, over a 5-year period 
of time, we would expect to see continued wallet-in-mind share 
loss by the traditional medial players to online media. I don't 
think they are going out of business in the traditional media 
world, but I think it risks being a less healthy environment. 
And because of that, you know, the capital markets will have to 
evaluate how they are willing to fund growth in that area.
    Mr. Latta. Let me follow up with--your testimony is very 
helpful in showing us the trends in today's media consumption. 
What does that mean to the investment community overall when 
you look at that?
    Mr. Bank. I am sorry, what----
    Mr. Latta. When you look at the trends that you are talking 
about, what does it mean to the investment community when you 
are looking at today's----
    Mr. Bank. Well, I----
    Mr. Latta [continuing]. Today's world out there, and into 
the next few, you know, 4 to 5 years?
    Mr. Bank. I think, again, the focus of the capital markets 
is to invest for the greatest potential return, and that is 
often connected with the long-term growth perspective. And I 
think if you look at a lot of those exhibits, what you see is, 
on some level, a decline of share potentially, going from 
traditional media to online, and typically dollars will follow 
that share, whether it is advertising revenue, viewership, 
whatever it is you can measure, I think those are the kinds of 
things that capital tends to chase.
    Mr. Latta. Thank you very much.
    And, Mr. Chairman, my time has expired and I yield back.
    Mr. Walden. Thank the gentleman and for his questions, and 
you for your answers.
    We will now go to Mr. Lujan from New Mexico. Thank you 
for----
    Mr. Lujan. Mr. Chairman----
    Mr. Walden [continuing]. Your questions.
    Mr. Lujan. Mr. Chairman, thank you very much.
    Mr. Boyle, with your recommendation to eliminate the ban, 
are there any restrictions that you would replace the ban with?
    Mr. Boyle. No, we think that the ban should be fully 
eliminated for radio-newspaper combinations, but also TV-
newspaper combinations. It makes no sense that a top-rated 
television station in a market that has resources and a deep 
commitment to journalism can't invest in a local newspaper in 
that market if that newspaper becomes available. Investigative, 
original reporting that is professionally edited is very 
expensive to do. And we don't think there is going to be a 
massive wave of mergers. There may be some markets that a 
newspaper comes on the scene, and we think, for too long, 
investors have been on the sidelines.
    Mr. Lujan. Mr. Boyle, while I have concerns with the 
response, with this reason. If there are no restrictions, I 
don't see anything that keeps one entity from controlling 
everything, and we only get news from one source. And that is 
where my concern is, and that is why I was hoping that I would 
hear some restrictions, but maybe we could have a conversation 
about that later. I only have a few minutes, I am going to move 
on.
    Ms. Mago, I appreciate very much the remarks bringing 
attention to an outdated rule, a bygone era, a marketplace that 
has changed dramatically with rules that were put in place in 
the '70s. Should we get rid of DMAs?
    Ms. Mago. I am sorry?
    Mr. Lujan. Should we get rid of DMAs?
    Ms. Mago. DMAs are actually fairly current. They reflect 
the market patterns in----
    Mr. Lujan. DMAs were put in place in the '40s and '50s.
    Ms. Mago. The designated market areas are something that 
has been created for the Nielsen services, and, in fact, they 
get----
    Mr. Lujan. So----
    Ms. Mago [continuing]. They are adapted as you go along----
    Mr. Lujan. So----
    Ms. Mago [continuing]. That indicate----
    Mr. Lujan. If I may. So we should get rid of an antiquated 
rule that was written in the '70s, but not antiquated rules 
that were written before then?
    Ms. Mago. No, sir. I am contesting the notion that it is 
simply that the DMAs have not changed. In fact, they do change, 
and they are reflective of the market patterns and the commerce 
that is within any given area.
    Mr. Lujan. So DMAs create a bubble.
    Ms. Mago. I am sorry?
    Mr. Lujan. DMAs create a bubble for broadcasters to upgrade 
them, correct?
    Ms. Mago. No, they reflect the markets where the 
broadcasters are, in fact, operating. They are the commerce 
area around where the broadcasters and the others in that 
market are. They reflect the businesses that advertise on 
whatever broadcasting service is there, and they, in fact, are 
updated.
    Mr. Lujan. Very good. That is another conversation I hope 
that we can have----
    Ms. Mago. I would be happy to talk with you more about 
that.
    Mr. Lujan [continuing]. In the future as well. Yes, I--
although we have learned about that where there are local 
communities all around the United States and orphan counties 
that don't get local broadcast news.
    Ms. Mago. It----
    Mr. Lujan. So, clearly, something is broken when local, 
rural Americans are left out in the dark and don't know what is 
happening in their backyard, and when local newspapers are 
providing coverage up there because it is too far to commute to 
take a local newspaper. I come from a State where my 
legislative district takes 8 \1/2\ hours to drive across. Out 
here, I drive through six or seven States.
    Ms. Mago. Um-hum.
    Mr. Lujan. But people seem to forget about rural America, 
and that is where my concern is in that particular area, but we 
will talk----
    Ms. Mago. I would be happy to talk with you more about 
that, and really address your concerns.
    Mr. Lujan. I appreciate that.
    Ms. Gonzalez, you noted in your testimony that since 2006, 
there has been nearly an 80 percent decrease in full-powered TV 
station ownership by African-Americans. Some have used that 
number to argue that existing media cross-ownership rules have 
done little to preserve diversity in broadcast ownership. I 
find it interesting, however, that over roughly the same 
period, the use of GSAs by broadcasters has grown 
substantially. For example, data indicates that while JSAs were 
only found in 4 percent of the ownership transfer applications 
pending before the FCC between 2001 and 2004, by earlier this 
year had ballooned to 25 percent.
    Based on these figures, do you think there is a correlation 
between the tremendous uptake in the use of JSAs that, in many 
instances, help broadcasters go around the media cross-
ownership restrictions, and the decline in minority ownership 
of broadcast TV stations?
    Ms. Gonzalez. Yes. There seems to be a correlation. I will 
note, in Ms. Mago's testimony, she mentioned one example in 
Kansas where there is a JSA that is providing Spanish language 
news that didn't otherwise exist in that DMA. I think that 
example is a prime candidate for the waiver process that the 
FCC articulated in its JSA order several months ago, and--but 
for the most part, these JSAs seem, and the consolidation 
generally, seem to have been diminishing owners of color, 
making it more difficult for us to enter the market, and all 
around just not a good situation for diversity. In fact, there 
are also examples of JSAs where there is an owner of color 
involved, but that person doesn't have control of the 
programming and a path toward sole ownership of the station.
    We want genuine involvement and ownership by people of 
color. That doesn't seem to be happening in this current 
marketplace.
    Mr. Lujan. I appreciate that.
    Now, Mr. Chairman, I know that I have not heard any of my 
colleagues say anything to the contrary that we don't want to 
see more ownership with minorities as well. And I think this an 
important question that I hope that we can flush out and just 
get more information on as we have the conversation pertaining 
to JSAs as well, and I really appreciate the panel that you 
have put together and the responses today. I still have many 
questions as well that I will submit into the record, but 
again, thank you for bringing this panel together, Mr. 
Chairman, and, Ranking Member Eshoo. Thank you.
    Mr. Walden. Yes, thank you, and thanks for your 
participation.
    We will now go to Mr. Kinzinger from Illinois.
    Mr. Kinzinger. Well, thank you, Mr. Chairman, and thank you 
all for being here on these very important issues.
    I am going to start with you, Mr. Lake. I have just a 
couple of kind of quick questions.
    The last time that the media ownership rules were 
substantively updated was 1999. That was quite literally the 
last century, and in the ensuing 15 years, the media landscape 
and specifically the options people have to obtain and consume 
information have expanded exponentially. It is largely thanks 
to the Internet and the availability of online mediums.
    It has become apparent that the FCC is either unable or 
unwilling to complete the congressionally mandated media 
ownership review. Is Congress going to have to rewrite and 
deregulate the current media ownership rules to finally match 
the intent of the 1996 Telecommunications Act, and to finally 
provide regulations that match the realities of the current 
media landscape?
    Mr. Lake. I can say the Commission takes very seriously its 
responsibility to review the ownership rules, and the current 
Chairman has committed to take a very serious look and to have 
recommendations for the Commissioners by mid-2016.
    Mr. Kinzinger. Good. And I hope you can take back the 
concerns of the committee on that, very loudly. And, Mr. Lake, 
the Commission adopted an expedited process to review requests 
for waivers of the recently adopted JSA rules. As you noted, 
the Bureau is tasked with acting on any waiver request within 
90 days of the close of the record, provided there are no 
circumstances requiring additional time for review.
    Could you describe what those circumstances are, and how 
will applicants know that such circumstances exist?
    Mr. Lake. We haven't confronted circumstances such as that, 
and I don't know what they might be. There might be a need for 
further information that hasn't been available, but we don't 
anticipate that that circumstance will happen very often. We 
are very much aware of the commitment we have to act, if at all 
possible, within 90 days after the record closes, and that is 
what we will try to do.
    Mr. Kinzinger. And so if there is a circumstance, will you 
guys be communicating this well to the applicants?
    Mr. Lake. Absolutely. If we identify such a circumstance, 
we will make clear what that is.
    Mr. Kinzinger. And will they know immediately?
    Mr. Lake. We might not know, except during that 90-day 
period, but again, I think this is very hypothetical because we 
don't anticipate that that will occur very frequently.
    Mr. Kinzinger. And how will this new speed of disposal 
metric be incorporated into the management of the Bureau? What 
happens if it is not met, and will you commit to seeing this 
deadline met?
    Mr. Lake. Excuse me, will we commit to?
    Mr. Kinzinger. To seeing this deadline--to seeing any 
deadlines met?
    Mr. Lake. Yes, we are committed to meeting that deadline if 
at all possible. And, again, I don't anticipate there will be 
many circumstances in which it is not.
    Mr. Kinzinger. OK. Ms. Mago, the FCC has an open proceeding 
to do away with the UHF discount in terms of how UHF stations 
are countered against the national broadcast ownership cap. 
This discount was put into law at a time when UHF signals were 
seen as inferior to VHF signals, which, after the digital 
television transition, is no longer the case.
    Does NAB have a position on that proceeding?
    Ms. Mago. Yes. NABs position is that you really shouldn't 
be looking at just the UHF discount aspect of this without 
looking at the larger rule regarding the national ownership 
cap. It makes no sense in a world where you have grown up with 
the various discounts, with the ownership sizes, to look at 
that without considering the larger rule. It is not a 
standalone rule.
    Mr. Kinzinger. OK.
    Mr. Chairman, I still have a minute and 30, but I will 
yield back.
    Mr. Walden. Gentleman yields back.
    Chair now recognizes the gentleman from Illinois, Mr. Rush. 
Turn on your mic, please.
    Mr. Rush. Mr. Chairman----
    Mr. Walden. We are glad to have you back, Mr. Rush.
    Mr. Rush. Well, and I am very glad to be back, Mr. 
Chairman, and thank you for all your concern, both for me and 
my wife. I really appreciate it.
    I want to welcome all the witnesses, and I want to let you 
know I appreciate your testimony, and I appreciate you spending 
this time with us to discuss the FCC media ownership rules. And 
this is an issue, an area of concern that I have had over the 
last 21 years that I have been in Congress, and certainly in 
terms of my years on this committee and on this subcommittee, 
it has been one of my primary concerns. And I have taken the 
position over these past couple of decades that one of the 
reasons why I sit on this committee is to increase the number 
of minority owners of media across the country. And I must say, 
I am dismally disappointed. I have been disappointed over a 
number of years because I don't see the vigorous commitment 
from the FCC. I am disappointed in the excuse-making and the 
continual excuse-making, and it is worse now than it has ever 
been in the last 20 years that I have been in this Congress--21 
years that I have been in Congress. This is the worst time for 
media ownership by minorities. As a matter of fact, if I am not 
mistaken, in the last 3 or 4 years, the percentage of media 
ownership by minorities has dropped almost 60 percent. That is 
not a good report. That is a horrible report. And as we sit, 
there are only four African-Americans who own television 
stations in the Nation, in this great Nation of ours. And we 
have an agency that is responsible for ensuring that the 
airwaves of the American people--that there is some equality, 
equal access not only to content and viewership, but also from 
a point of view of ownership.
    And so my question to you, Mr. Lake, is, Does the FCC know 
how many minorities and women are employed by minorities, and 
women broadcasters, compared to how many are hired by 
nonminority and nonwomen broadcasters? Do you all keep that 
kind of information?
    Mr. Lake. We do not have that employment breakdown. We have 
EEO rules that require all stations, regardless of their 
ownership, to do outreach in their employment.
    Mr. Rush. Well, how do you justify in the FCC, how do you 
justify a decrease of 60 percent of minority owners?
    Mr. Lake. The Commission does have a longstanding goal, as 
you know, of promoting minority and women ownership of 
broadcast stations----
    Mr. Rush. No, I don't----
    Mr. Lake. We hear your dissatisfaction.
    Mr. Rush. I don't know it because I hear about it, but I 
have never witnessed it. I have never seen that posture and 
that attitude. I have never seen that program and that 
commitment by, I would say, most of the Commissioners over 
there. I hear of good intentions, I hear a lot of platitudes, I 
hear a lot of tear-jerking, but it is all saying, and it is 
all--I don't see the work being done. I don't see them rolling 
up their sleeves and solving this problem that should be 
solved. It should have been solved a long time ago, but I still 
just hear a lot of--from the FCC, I hear a lot of, ``Yes, you 
are right, yes, we are--it is longstanding,'' but how long is 
longstanding?
    Mr. Lake. We share your dissatisfaction with the results so 
far, but we are taking concrete action. One of the results of 
our recent action on JSAs, we think, will be to open more 
opportunities for truly independent owners of TV stations, 
including minority and women owners. As you probably know, 
there was a list of about 30 civil rights and other public 
interest groups that supported our taking that action, and we 
hope that they are right and that we are right; that it will 
open opportunities for minority owners.
    We also recently relaxed our approach to foreign investment 
in broadcast stations. Again, civil rights groups urged us to 
do that as a way of trying to solve some of the access-to-
capital problems that minority owners face. So we are taking 
concrete action. We are constantly looking for additional 
things we can do. We are always subject to the very strict 
Supreme Court rules that have been put down as to taking any 
action that is actually race- or gender-based, but, again, one 
of the things that we did in our Further Notice that was 
recently announced was to review that constitutional law very 
carefully, and the state of the evidence that we have, and to 
call for further evidence that might someday allow us to 
actually be able to justify to the Supreme Court taking race- 
or gender-based action.
    Mr. Rush. Mr. Chairman, I have one more question, if you 
don't mind.
    Mr. Walden. Go ahead, Mr. Rush.
    Mr. Rush. If I could. Have you ever heard of the critical 
information need study?
    Mr. Lake. Yes, I certainly have.
    Mr. Rush. Why was it terminated?
    Mr. Lake. The study was intended to gather data anonymously 
to help determine what the information needs of communities are 
and whether they are being met. When the current Chairman took 
a fresh look at that study, he decided that some of the 
questions appeared inappropriate, and he terminated the study.
    Mr. Rush. OK. Again, here we go again, all right. So the 
study wasn't done according to maybe the standards of the new 
Chairman, but instead of revising it, you end it. All right? 
Instead of adapting or coming up with some new questions that 
might have fit the standards of the Chairman, you ended it. And 
it was a study that should take place, and FCC was headed in 
the right direction, but again, you have ended that study, 
which would have given us information, all right, that would be 
able to--Mr. Chairman, I thank you for your indulgence. I am so 
upset and angry about this, I think I should end this right 
now, my line of questioning. Thank you so very much, and I 
thank the witnesses, but please I want to go on the record that 
I am absolutely, totally disappointed in the FCC and their 
position on minority ownership of marketplace.
    Mr. Lake. And I would be happy to respond on that if you 
want to take the time.
    Mr. Walden. We need to actually move on, but, Mr. Rush, 
thank you. I know you are passionate about this, and we all 
know that, and I appreciate your participation in the hearing.
    We will turn now to, I believe, the gentleman from 
Illinois, Mr. Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. And I do have great 
respect for my friend from the Chicago area, and it was 
important for him to get his time that he needed to finish up.
    I too am disappointed with the FCC, but not for the totally 
same--and I said in the opening statement, when Federal 
agencies, regardless of who they are, don't comply with the law 
and delay, it makes it difficult for those of us and 
conservatives that are in the country to say there is a 
legitimate reason to have that agency. If our Government and 
our agencies would comply with law and be expeditious in the 
processing, it would make it easier, and I would just hope you 
would take that back to the FCC and the Commissioners. That is 
the importance of getting these Quadrennial Reviews. I mean it 
has to be embarrassing to come up here and say, really, we 
haven't done 2010 and 2014, and we are going to get around to 
it. So I am just beating a dead horse, but again, you don't 
make it easier for us.
    Let me go to Mr. Bank, please. Unless you addressed this in 
a question and answer while I was gone, because I am up at the 
Health Subcommittee meeting too, I am not sure you addressed 
the impact of the FCC's changes to the attribution of joint 
sales agreement in your statement. You may have gotten it in a 
question, and if you did, I apologize. Can you tell us about 
the investment community's reaction to the FCC's recent 
announcement that they will force broadcasters to unwind joint 
sales agreements if the broadcaster finds itself over the local 
ownership cap?
    Mr. Bank. Well, the sun setting of the JSA provisions for 
some of those stations without a grandfathering provision has 
been certainly concerning to the capital markets. You know, I 
think the capital markets were initially just kind of confused, 
but the reality is those are events that took value away from 
those companies. I think it was reflected in the reaction of 
the capital markets.
    Mr. Shimkus. Yes, and people know who follow this committee 
and follow my service here, you know, I represent \1/3\ of the 
State of Illinois, I only have 6 media markets, most of them 
are small or medium-to-small markets. Without this ability, 
they are not broadcasting, or they are broadcasting 
inadequately. So the argument--so I am very concerned, as other 
communities are concerned about, as Bobby is concerned about 
minorities, as the Hispanic community is concerned, I am 
concerned about everyday news to rural America, and that is the 
opportunity that we are losing by what the FCC is proposing. 
And I think Mr. Bank identified one of them.
    Ms. Mago, it is expensive, and this kind of ties into the 
whole debate, it is expensive to run a TV station or a 
newspaper in this day and age. I think it would be difficult to 
make it work, that is why I am here and not out there trying. 
Mr. Walden tried in a different era, pretty much, but there are 
successful companies out there----
    Ms. Mago. Um-hum.
    Mr. Shimkus [continuing]. With proven track records, and 
have continued to do so, and do it well. Doesn't it make sense 
to a lot of good companies with good resources to put their 
expertise to work in failing stations or newspapers?
    Ms. Mago. Absolutely. We believe that good stations can 
invest in their communities, create greater localism, also 
create more opportunities. They can invest in quality 
journalism, provide better service to the communities, and that 
is all good for the American people.
    Mr. Shimkus. And just the stories that I know from local, 
small to medium-sized markets, you have helicopter access where 
you didn't have it before, you have real news broadcasting 
versus satellite in news, you might have a new state-of-the-art 
weather station that may be more predictive than the old one on 
the old station. So that point needs to be made as we do, as 
members of Congress, bring our differing voices here to try to 
collectively raise those concerns. Rural America cannot be left 
out in the ability to receive real-time, accurate information, 
and these agreements help them maintain that in a very 
competitive world. So I appreciate you all being here, and 
again, I apologize for not spending more time with you, Mr. 
Chairman. A great hearing. And I yield back my time.
    Mr. Walden. Thank you, Mr. Shimkus. We appreciate your 
participation, as always.
    We will now turn to Mr. Long as our final Member with 
questions. Mr. Long.
    Mr. Long. Thank you, Mr. Chairman.
    Ms. Mago, you may not be able to answer this question, as 
executive vice president and general counsel, legal and 
regulatory affairs, the National Association of Broadcasters, 
but I hope you can. Are you familiar with a program that the 
NAB has to encourage minority ownership of stations?
    Ms. Mago. Absolutely. In fact, my other capacity at the NAB 
is that I am the general counsel advisor to the National 
Association of Broadcast Education Foundation, which runs the 
program that you are talking about.
    Mr. Long. OK, good. And this was not a setup because I had 
not talked to you before, and I didn't know that you were that 
familiar with it, but I am familiar with that and I am given to 
understand that it is a very intense program, very successful. 
I have talked to people that have gone through and become 
owners of stations. So for my friend from Illinois, I hope you 
realize that the NAB is reaching out and doing a lot in that 
direction.
    My next question is for Mr. Lake. If you have a successful 
broadcaster, what advantages have that successful broadcaster 
to fold into a JSA with another company, what would be his 
advantage? If I have a successful, rock 'em, sock 'em station, 
on the air, making a lot of money, what is my advantage to fold 
that in with a JSA with another station?
    Mr. Lake. What a number of stations seem to have concluded 
is that they would very much like to have a duopoly in a market 
in which our rules don't allow a duopoly, and that going into a 
JSA, which is often combined with a number of other 
entanglements between the stations, is a way, essentially, to 
go around our local TV rule and establish a de facto duopoly 
where a true duopoly or a legal duopoly wouldn't be allowed.
    Mr. Long. So it would be good to give up a large percentage 
of my profits and things so I could fold into this arrangement 
if I am a successful station?
    Mr. Lake. Typically, these arrangements are not between two 
established, successful stations.
    Mr. Long. Exactly. In my area, we have a station that came 
on the air as a UHF, and, yes, I am old enough to remember 
that, and it was, for all these years forward, it was kind of 
like ``Ted Mack's Amateur Hour,'' and there are a few of you in 
here old enough to remember Ted Mack, but it was going to fold, 
it was going to be out of business. I don't care if you would 
have brought in a minority owner, a nonminority owner, whoever 
it is, at the end of the day, these stations have to make 
money, they have to be successful. And I think that the message 
I would like for you to take back to the FCC, other than trying 
to do a Quadrennial Review in less than 10 years or something 
like that, would be that they need to be cognizant of these 
operations, the stations I am talking about in my market, in my 
hometown that I am talking about in particular, that news 
station that used to look like ``Ted Mack's Amateur Hour'' now 
is winning national awards. Yes, they folded and they closed 
the building they were in, and tried to lease it or tried to 
sell it. They moved across town into a successful station, but 
that--I don't understand, I mean, I came from a 30-year 
business background, I don't come from politics. I, you know, I 
wasn't a politician before I ran for this, so at the end of the 
day, I did talk radio for 6 years and I know, when you do talk 
radio, you want to put people in those stores. You have to be 
motivated to do a good show, get in there, and sell product and 
have people support your sponsors. So it is all about 
capitalism, making a profit, and I just think that if you all 
blow up this thing, that station that is getting all these news 
awards now that used to do terrible, is going to be gone. 
Whether you bring in a minority owner, or whatever kind of 
owner you bring in, if it is not a successful station, it is 
not going to work very well.
    So I guess another question for you would be, would you 
rather that these failing broadcasters, such as the one I 
described, go out of business, than to be influenced, as you 
said earlier, by having a JSA with a successful broadcaster? 
Are you really that worried about the influence they may have 
if--would you rather they be out of business?
    Mr. Lake. A few things in response to that. The facts of 
these----
    Mr. Long. Answer that question first, if you will.
    Mr. Lake. Yes.
    Mr. Long. Yes or no, would you rather they be out of 
business?
    Mr. Lake. We have expressly in our rules an opportunity for 
a station that is failing to obtain a waiver of our local TV 
rule, and we have granted failing station waivers. So if a 
station is failing, it doesn't have to take a backdoor of 
trying to become dependent on another station through a JSA, it 
can come in and seek a waiver. We also have indicated that we 
are wide open to consider waivers of the JSA attribution rule 
itself in appropriate circumstances. There are very different 
circumstances. There are circumstances in which these de facto 
duopolies have been established between two major network 
stations. Clearly not a failing station situation.
    Mr. Long. But if this failing station did a JSA with a 
successful station like I have described, and you blow this up 
or unwind it, then that station would either have to cease to 
exist, or they would have to go find another space across town 
and go back to being a failing station. I mean it is going to 
be too late to come in for this waiver you are talking, 
correct, or not?
    Mr. Lake. It may not be too late. Again, we have 
entertained and granted a number of failing station waivers.
    Mr. Long. OK. Thank you all for being here today.
    And I have gone over my time, so if I had any time, I would 
sure yield her back.
    Mr. Walden. I appreciate that. Thank the gentleman for his 
participation, and all of our witnesses for your testimony and 
answer to your questions. I am sure we may have a few more for 
the record that, if we do, we will send to you and look forward 
to getting your response to it. Obviously, this is an issue 
that spans the spectrum of philosophy and the committee in a 
marketplace that is changing pretty dramatically and rapidly, 
and it is an issue we will continue to pursue one way or 
another. So thank you all for your participation.
    We stand adjourned.
    [Whereupon, at 12:16 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
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