The following post was co-authored by R Street Tech Policy Associate Joe Kane.
Local news is in decline. As advertising revenues plummet and both reporters and subscription dollars increasingly flow to a handful of coastal media outlets, local newspapers and broadcasters throughout the rest of the United States struggle to get by.
Shifts in media consumption in the digital age are partly to blame, but these local news outlets also are hamstrung by arcane ownership restrictions that inhibit their ability to innovate and compete. The Federal Communications Commission’s decades-old restrictions on local media ownership may have made sense when Americans’ news outlets were limited to local newspapers, radio and three commercial TV broadcasters (ABC, CBS and NBC — Fox wasn’t formed until the mid-1980s). But with the rise of cable news and the commercial internet, these restrictions now skew the media marketplace and become more outdated every day.
Thankfully, this broken situation is about to be fixed. This week, the FCC is set to pass commonsense reforms to its local-media ownership rules that are long overdue. These updated rules will better reflect the realities of the current media landscape and allow local newspapers and broadcasters to compete with other media outlets on a level playing field. The changes include eliminating bans on media cross-ownership, updating local-broadcast merger rules and allowing broadcasters to enter into joint sales agreements (JSAs) for advertising without automatically qualifying as merged entities for purposes of the ownership restrictions.
FCC Chairman Ajit Pai recently outlined the importance of eliminating the cross-ownership bans. Like many FCC rules, the bans contemplated a siloed and heavily concentrated media market, which in no way resembles the cornucopia of media outlets available to Americans today. The cross-ownership bans date back to the 1970s, when local broadcasters and newspapers provided the only access to news in many markets. At that time, prohibiting any one owner from controlling both a radio station and a television station in the same market, or a newspaper and a television or radio station in the same market, was a way to ensure Americans had access to a diverse array of viewpoints and news sources.
However, with the rise of cable news and the internet, these cross-ownership bans no longer make any sense. Jeff Bezos (Amazon CEO and world’s richest man) was allowed to buy the Washington Post, and Facebook or Google legally could try to buy The New York Times. But a local broadcaster buying a struggling newspaper is strictly forbidden.
That simply makes no sense. Any merger that threatens to create a monopoly or lessen competition substantially (like those NYT hypotheticals), could still be blocked under general antitrust law. But many cross-ownership deals between local newspapers and broadcasters would raise few, if any, antitrust concerns, so the per se ban on them should be removed. Moreover, allowing cross-ownership between broadcasters and newspapers would likely lead to more coverage of local issues.
The FCC is also updating its rules for mergers among broadcasters, again to recognize the changing media marketplace. Previously, a top-four broadcaster and a smaller broadcaster were allowed to merge only if doing so left at least eight independently owned broadcast stations in the market. This so-called “Eight Voices Test” doesn’t count cable news or the internet as even a single “voice” in the market, which is absurd, given the effectively infinite capacity for independent voices on these platforms. Thankfully, the FCC is set to eliminate this outdated test and allow general antitrust law to govern these mergers instead.
Similarly, the FCC is relaxing its rule that prohibits all mergers between top-four broadcasters, choosing instead to review these mergers on a case-by-case basis. Currently, the FCC requires the four biggest TV broadcasters to be independently owned, regardless of how many other stations are in the market. This nationwide, bright-line rule is not appropriate in all markets. For example, in a market with two very large stations and several smaller stations, a merger between the third and fourth biggest stations could benefit both consumers and competition by putting greater pressure on the two biggest stations. In many cases, such a merger would be harmful, but employing case-by-case review will allow the FCC to evaluate actual market conditions, rather than sticking to a rigid line drawn in a bygone era.
Finally, the FCC is amending its rule that treats any broadcasters with joint sales agreements (JSAs) as being under common ownership. Again, this is simply a case of the FCC modernizing its media ownership rules to bring them more in line with the antitrust rules that govern competition in every other sector. The current rules assume that if two broadcasters use a JSA in advertising sales, it automatically gives one station enough control over the other to amount to common ownership. It’s true that such arrangements can amount to collusion and unfair restraints on trade, depending on the degree of control they exert. But they can also greatly reduce costs for struggling broadcasters who cannot afford their own sales teams. The current restriction on JSAs harms the public interest by blocking these efficiency gains. Going forward, whether JSAs are attributable for purposes of ownership restrictions will be assessed under general antitrust standards.
The media marketplace is increasingly converging toward the internet and over-the-top services, yet the FCC’s local media ownership rules were devised before the internet even existed. The commonsense reforms the FCC has proposed for these antiquated rules are well overdue. By removing unnecessary restrictions and updating its standards, the FCC can balance the playing field, stimulate investment and help save local news media.
Image by Zerbor