Juteau I

Blanca Camille Juteau

Burchett
Government V
2 November 2015
Regulation of the Regulatory Review

In 1934, the Communications Act was passed and served to regulate communications through wire
and radio. 62 years later, it was amended by the Telecommunications Act of 1996 which opened
markets by deregulating ownership policies and subsequently increasing competition. As time has
proven, however, both regulation and deregulation of media ownership has failed to prevent media
consolidation because the answer is not in changing the framework of the Act or the policies. The
purpose of this bill is to mandate a practice and procedure for the regulatory review conducted by the
Federal Communications Commission concerning the determination of forbearance or continuation of
regulatory policies to ensure that their rulings serve the public's best interest and safety.
The Telecommunications Act of 1996 states that its goal is to open markets, allowing anyone to
enter the communications business, and to allow all of those businesses to compete, thereby loosening
cross-ownership regulation. The public's interest, as defined by section 202 of the act, is marked by
competition, diversity, and localism. In 1983, 50 companies owned 90% of the mass media, however,
presently only 6 conglomerates have a firm grip over what and how the public think. (Gracey 4)
According to the convergence hypothesis, the consequence of consolidation is a proliferation of lesser
diversity in opinion (Ho 15). The convergence hypothesis is the foundation upon which most
regulations stand upon, but in the recent decades, the Commission and the Third Circuit Court have
been requiring more empirically-based evidence. The FCC uses the Diversity Index, a quantitative
measure to determine variety in a data set, to establish whether the current corporations competing in

the market provide enough viewpoint diversity in their material. This is where the problem begins,
because the Diversity Index holds the market under the wrong assumptions. In studies conducted, the
DI counts the outlets within the same medium to have equal market shares, meaning that they have
equal impacts. For that reason, Fox Inc. with a 1% TV market share and Maine PBS with a 3% TV
market share is given equal weight with NBC with a 41% TV market share, and why the Phoenixville
Phoenix with an average daily circulation of 15,000 is equal to the Philadelphia Inquirer and
Philadelphia Daily News, with an average daily circulation of 405,000 (Petition). In theory, entities
using the same medium should have equal market shares because they have the same means of
delivering material and it is the only way to quantify a poorly defined market, but this produces a
distorted image of the marketplace and creates an inaccurate data set. Faulty market analysis results in
faulty conclusions.
The national audience cap is set at 39%, and this factor in the FCC's procedural review is just as
unreliable as the market shares established by the Diversity Index because the rate at which individuals
within a single household absorb the information delivered to them is not accurately measurable, and
therefore a household is not representative of the audience. It is by this lack of data that the FCC freely
approves of mergers. In Denver, A TV station with 100,000 daily viewers cannot merge with a TV
station with 88,000 daily viewers, but a TV station with 152,000 average daily viewers can merge with
newspaper with 420,000 readers. In Baltimore, a TV station with a 71,000 daily viewers cannot merge
with a TV station with 54,000 daily viewers, but a TV station with 150,000 viewers can merge with a
newspaper with 325,000 readers (Petition). The Herfindahl-Hirschman Index is used to measure market
concentration, and the higher the number, the lower the competition. In the Merger Guidelines set by
the Federal Trade Commission, any merger resulting in an increase of 100 or more in HHI becomes
susceptible to further analysis by the designated federal agencies, and yet somehow the FCC has failed
to implement these rules.

Not all cases of media consolidation are bad. On a local scale, small and relatively weak businesses
can benefit greatly from common ownership to form stronger, more efficient companies. It is in these
instances where consolidation promotes competition by allowing the industry to thrive. On a larger
scale, however, consolidation strains the ability for new businesses to enter markets pre-dominated by
more fully-established ones. If the whole basis of court rulings regarding regulation depends on the
convergence hypothesis, which is the assumption that consolidation leads to diminished viewpoint
diversity, it can be asserted that the assumption is wrong. Our article develops and offers a finelytuned, time-varying statistical measure of editorial viewpoint diversity, based on a new database of over
1600 editorial positions in 25 top newspapers from 1988-2004. Using this new measure, we assess the
validity of the convergence hypothesis by examining the evolution of editorial viewpoints over the
course of five major mergers and acquisitions. Our data reveals complex patterns that defy extant
accounts, showing stability, convergence and divergence of viewpoints in the face of and depending
on the circumstances of consolidation (Viewpoint Diversity). A study conducted with a
concentration on empirical evidence showed that viewpoint diversity is maintained despite
consolidation. Further analysis of that study by an independent researcher showed that ...caution,
however, dictates consideration of whether these empirical studies reflect not only particular historical
but potentially changeable circumstances. It also dictates a consideration of whether they adequately
conceptualize the issue under examination, remove the effects of (hold constant) potentially competing,
alternative, or additional causes, properly treat any indeterminacy in the findings, consider alternative
explanations of the data, and so forth... (Baker 667). The secondary study acknowledges the efficient
and accurate methodology used by the initial study, but points out that they do not give any real
attention to the reasons related to democratic discourse for why diversity in the news might be more
central than editorial diversity.3 They also ignore economic reasons--the advantage of redeploying the
same, expensive-to-gather news while creating product differentiation with cheaply written editorial
positions--to fear that here is where consolidation creates the strongest push towards convergence.

Whichever approach is used to analyze current markets, there is still no assurance that it operates
under the pretense of protecting the public's interest. In 1989, broadcast networks aired 70%
independently produced series. In 2010, only 13% of broadcast series were independently
produced, and 87% by media conglomerates (Who Owns). Less regulation
counterintuitively promotes less competition. Media conglomerates act just as any
other of the large corporations would, such that they aim to maximize their profit.
In a business upon which global populations rely for information, just how safe is
the public if its main goal is to generate revenue? There is much risk to be taken
when taking into consideration that media structure is a hierarchy of influence,
wherein the parent company has the most say and explicitly or implicitly
expresses it though the numerous companies that fall under its control. There is a
fine line, however, when arguing diversity in a dispute against consolidation
between ownership regulation and content regulation. No policy shall impede an
individual's or an entity's right to speech, but if conglomerates obstruct the ability
of other companies to carry out their businesses, they shall be subject to scrutiny
by the Antitrust division.

The whole purpose of the Telecommunications Act of 1996 is to promote

competition within the market place by removing regulations. The Commission
shall repeal or modify any regulation it determines to be no longer necessary in
the public interest. [Federal] It is in the process of determining such states where
the fault lies, yet public opinion is polarized between those in favour of regulation
and those against it. The Telecommunications Act of 2015 will stress importance
on the procedures by which the Federal Communications Commission comes to

their decisions regarding the forbearance or continuation of ownership

regulations, since the Diversity Index and Herfindahl-Hirschman Index produce
incomplete and inaccurate results.

Bibliography:
Web:
Armijo, Enrique. Media Ownership Regulation: A Comparative Perspective. University of Georgia,
nd. Print. 24 September 2015.
Baker, Edwin. Viewpoint Diversity and Media Ownership. Federal Communications Law Journal
(2009): 651-665. University of Indiana. Web.
Candebub, Adam. Media Ownership Concentration, The First Amendment, Democracys Future.
Davis: University of California, 2014. Print. 24 September 2015.
Cooper, Mark, Petition for Reconsideration Consumer Federation of America and Consumers
Union. 4 Sep 2003.
Djaknov, Simeon, Caralee Mcliesh, Tatiana Nenova, and Anrei Schleifer. Who Owns the Media?
Diss. Harvard, 2003. Web.
"FCC - Telecommunications Act of 1996." FCC - Telecommunications Act of 1996. Federal
Communications Commission, n.d. Web. 18 Oct. 2015.
Gracey, Jordyn. The Determination of Newspaper Slant in Small Markets. Duke University. Web.
Ho, Daniel E., and Kevin M. Quinn. "Viewpoint Diversity and Media Consolidation: An Empirical
Study." SSRN Electronic Journal SSRN Journal (2008): 1-66. University of Pennsylvania. Web.
Leskovec, Jure. Danescu, Cristan. Niculae, Vlad. Suen, Caroline. Zhang, Justine. The Structure of
Media Coverage as Revealed by Quoting Patterns. Cornell University. Cornell University, 2015. Web.
22 September 2015.
Print:
Cohen, Elliot D. News Incorporated: Corporate Media Ownership and Its Threat to Democracy.
Amherst, NY: Prometheus, 2005. Print.

Herman, Edward S., and Noam Chomsky. Manufacturing Consent: The Political Economy of the
Mass Media. New York: Pantheon, 1988. Print.