COMMERCE COMMITTEE WILL CONSIDER 35% CAP, OTHER FCC CHANGES

Legislation will be needed to rectify other procedural and legal questions, McCain said, and he will include specific language in an upcoming FCC reauthorization bill. The U.S. Appeals Court, D.C., decision that remanded media ownership rules back to the FCC is unclear, he said. McCain argued that the Commission should be able to re-regulate media ownership if it was deemed necessary and while FCC Chmn. Powell said the court ruling still would allow for re- regulation, it clearly had a “deregulatory bias.” McCain said the reauthorization bill would include specific authority for the FCC to re-regulate if necessary. It also could create a longer review period for media ownership than the 2-year cycle established by the Telecom Act, he said.

Powell defended the FCC’s new media ownership rules from skeptical questions from both Republicans and Democrats. He emphasized that while he also believed there should be some form of media ownership restrictions, the language of the court ruling put any level of broadcast ownership cap in jeopardy. “When we got the record, we didn’t believe we could support the 35% cap and there were some doubts if we could keep the ownership cap at all,” Powell told Sen. Snowe (R-Me.).

Several senators said that while the court ruling required the FCC to justify its media ownership rules it didn’t require the Commission to loosen them. But Powell said data collected during the review wouldn’t support a 35% or 40% broadcast ownership cap. Since 2 networks already had reached a 40% cap (under waiver of the rules,) that level couldn’t be justified, he said, and an additional 5% modification of the cap was defendable under the court ruling. “I want to emphasize how dangerous the court case is,” Powell said of the appeals court ruling. Two other networks were nowhere near reaching the cap, he said. But when Sen. Dorgan (D-N.D.) asked why the cap should be raised at all if that were the case, Powell replied: “That was also an argument for removing the cap.” Powell said the ownership cap had been deemed necessary to give affiliates the right to reject network programming in some cases. But he said affiliates rarely used all of the credits given to them by networks to reject programming.

Sen. Sununu (R-N.H.) questioned Comr. Copps about the impression that the FCC had conducted its proceeding unfairly by failing to release the text of order before the vote and by holding few public hearings. Copps said that while the FCC did comply with the letter of the Administrative Procedure Act in its review, it didn’t conform to the spirit of the law that required the proceeding be open. “The dialog was less than ideal,” Copps said. He said the record compiled by the FCC was “not the most comprehensive” and said several questions were left unaddressed, including: (1) How the rules would affect small business. (2) How the rules would affect minorities and minority ownership. (3) Whether consolidation could lead to more sexually explicit and violent content on TV.

Powell said he “rejects with every fiber of his being” the notion that the FCC was unfair in the proceeding. If it were to issue another rulemaking on the final ownership rules, the proceeding would have stretched into the next biennial ownership review, he said. Several senators and other commissioners cited the volume of public comment and that “99.9%” was against further consolidation. But Powell said the public comments, while taken into account, didn’t provide as much insight as might be expected. He said 300,000 nearly identical post cards came from National Rifle Assn. (NRA) members and many letters from the public said they simply were against big media consolidation. “So is Mike Powell,” he said, but few public comments were specific. “These kind of comments weren’t particularly helpful to our review.”

When asked by McCain what legislative changes the Commerce Committee should consider, Powell said Congress should extend the time period for biennial reviews of media ownership. Powell suggested a 5-year period and the other commissioners supported lengthening the review period. Powell said legislation changing the standards for media ownership review would be beneficial, and any new standard should take into account the way the public now is getting its information. He said if the 35% cap was “so integral to democracy,” it should be legislated because it was more appropriate for Congress to handle issues of such importance.

Comr. Adelstein suggested a system in which a market-by- market analysis could be conducted, as opposed to national media rules that didn’t always fit well into smaller markets. McCain asked each commissioner whether a “case-by-case” rule on media ownership would be more productive. Powell said there still was a need for national standards. Comr. Abernathy said the FCC did get some case-by-case discretion through the merger review process.

Sen. Breaux (D-La.), the only Democrat to express support for the FCC’s action, said a new metric needed to be developed for measuring audience reach. The ownership cap is based on a community’s population, he said, not the reach the station actually achieves. “What if it’s a lousy product and no one’s watching,” Breaux asked. Adelstein suggested that the HHI” metric used by the Justice Dept. for antitrust cases could be adjusted for media concentration cases. But Powell said if HHI were used, it would create more incentive to drop the ownership cap altogether. Copps said for radio mergers, “audience share” statistics could be helpful.

McCain asked each commissioner if they thought radio had become consolidated. All generally said yes. Powell said: “In some markets, but not most markets.” McCain has been an outspoken critic of Clear Channel and its growth to more than 1,200 stations since the Telecom Act eliminated many radio ownership restrictions. “Some believe what happened to radio will now happen to TV,” he said. Copps said: “The danger is here and now.”

Powell said while there inevitably would be some mergers TV under the new rules, he didn’t believe they would lead to excess consolidation. While the top 5 media companies control the top 75% of programming, they own only 25% of the stations, he said, adding that media ownership rules couldn’t be used simply to attack popular programming. Powell said the prominence of cable TV created questions about how the public interest standards should be applied to paid platforms.

The hearing included pointed criticism from Democratic senators towards Republican commissioners. Committee ranking Democrat Hollings (S.C.) said Powell was engaged in “spin and fraud” to defend the ruling and said the FCC had become an “instrument of corporate greed.” He said the notion that the court ruling could justify no ownership cap was “absolutely false.” When Dorgan asked who was celebrating the FCC’s decision, emphasizing it wasn’t consumers or other public interest groups, Powell said he didn’t know who was celebrating. “Are you kidding me?” Dorgan asked. “Me and my staff are celebrating because this is finally over,” Powell responded.

Abernathy came under fire from Sen. Boxer (D-Cal.), who took offense at here theme of “fact versus fear” in her testimony. “To dismiss the public’s point of view as fearful is an insult,” Boxer said. The public had a right to be fearful, she said, when the FCC had just one official meeting with the public on the rule changes, but granted communications lawyer Richard Wiley 34 separate meetings before the ruling. Abernathy said many in the public were basing their concerns on “what-if” scenarios. A frustrated Boxer cut Abernathy off, saying she wasn’t addressing her point.