[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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91-517 PDF WASHINGTON : 2015
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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.]
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