Green Light for Mergers Could Result in Media Giant Dominating 100 Local Markets

GROUPS CHARGE FCC PROPOSAL GUTS PUBLIC INTEREST STANDARD

FOR IMMEDIATE RELEASE
Wednesday May 21, 2003
Mark Cooper, 301-384-2204
Liz Rose, Consumers Union, 202-462-6262 x1119

WASHINGTON, DC -- The Consumer Federation of America (CFA) and Consumers Union (CU) today warned that the Federal Communications Commission's (FCC) proposal to relax media ownership rules will lead to dramatic consolidation of the two most important sources of news for as many as 70 million households. In a comprehensive critique, the groups argue that the FCC proposal effectively guts the public interest standard of the Communications Act and affords less protection for media mergers than the antitrust laws traditionally do for economic mergers.

"Unfortunately, the proposed rules circulated by the FCC are driven by political deals and deregulatory ideology, not rigorous analysis or First Amendment principles," said Gene Kimmelman, Senior Director for Public Policy at Consumers Union. "We do not think this is consistent with the Communications Act or the recent court decisions on ownership rules."

FCC Chairman Powell has argued that Federal Appeals court rulings that say that the current media ownership restrictions lack sufficient legal basis require a loosening of longstanding rules aimed at protecting the public from media concentration. CFA and CU dispute that assertion.

"The court just asked for rules based on sound analysis of empirical data. The draft order ignores audience size, actual patterns of media use and the dramatic difference between entertainment and the dissemination of news and information," said Mark Cooper, Director of Research at Consumer Federation of America and the principle author of the critique.

The CFA/CU analysis shows that mergers would be allowed in 140 concentrated local markets. In as many as 100 of these local markets, representing nearly half the national population, there is one dominant newspaper. Allowing a merger between a dominant newspaper and a large TV station would create a local news giant that threatens alternative news viewpoints. In these markets, one firm would have half of the total audience and employ half the total news employees.

"Such a news and information giant is a frightening prospect for democracy," stated Kimmelman. "Public policy should err in favor of more competition rather than less so communities can enjoy a greater diversity of viewpoints so critical to democratic dialogue and debate."

The report points out that the FCC's mistake in opening markets to cross-ownership mergers is not limited to small rural areas. One-paper cities include Atlanta, Louisville, New Orleans, and San Antonio. In these localities the media giant would have a 90 percent or larger share of the newspaper circulation and a merger would also typically secure one-third of the TV audience. No second entity could come close to matching this media power.

In typical two-newspaper markets (such as Buffalo, Las Vegas, Little Rock, and Richmond) the dominant paper still has, on average, five times the circulation of the number two paper. A merged firm would have four-fifths of the newspaper market, and one-third of the TV market.

According to CFA and CU, the FCC proposal:

fails to properly define product markets by ignoring the fact that almost half of all broadcast stations do not provide news

ignores the local market by counting stations and outlets that do little, if any local news

relies on an improper market structure analysis by failing to consider the audience (market shares) of the media outlets

sets a dangerously low standard for competition in local media markets-allowing the count of major news media voices to decline as low as three or four in many markets.

The report charges that the FCC's analysis is arbitrary and capricious as it applies logically inconsistent approaches across media markets. This inconsistent treatment biases the rules towards greater concentration and less diversity. It appears to be driven by a results-oriented political agenda rather than sound analysis. For example:

UHF stations appear to be discounted for the purposes of the national cap on network ownership of local stations, but not for purposes of the cross-ownership and the duopoly rule.

The FCC recognizes the importance of major TV voices by banning duopoly mergers between two TV stations ranked in the top four in any market. However the FCC does not recognize the importance of newspapers for broadcast newspaper cross-ownership. It fails to impose a similar restriction on a top four TV station combining with a newspaper.

CFA and CU contend that a responsible approach, consistent with the record in this proceeding, would produce a set of rules based on a rigorous analysis of the current media market structure and would adopt a high public interest standard. They propose that:

no mergers between TV stations and newspapers should be allowed if the overall media market in a locality is or would become concentrated because of the merger.

no mergers involving TV stations should be allowed if the TV market in a locality is or would become highly concentrated because of the merger.

This approach would allow cross-ownership mergers in ten of the largest markets.

An Executive Summary and full text of the report can be found at:

http://www.consumerfed.org/pdfs/FCCcritique.05.21.03.pdf

The Consumer Federation of America is the nation's largest consumer advocacy group, composed of two hundred and eighty state and local affiliates representing consumer, senior, citizen, low-income, labor, farm, public power and cooperative organizations, with more than fifty million individual members. CFA is online at www.consumerfed.org.

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only consumers. CU is comprehensive source for unbiased advice about products and services, personal finance, health and nutrition, and other consumer concerns. Since 1936, CU's mission has been to test products, inform the public, and protect consumers. CU's income is derived solely from the sale of Consumer Reports and its other services, and from noncommercial contributions, grants, and fees. CU is online at www.consumersunion.org.