The media landscape today bears little resemblance to what it was 20 or even 10 years ago. New platforms are emerging, transforming the market and giving consumers an unprecedented selection of news and entertainment accessible through a dizzying array of devices and systems. But archaic government regulations have been slow to adapt to this new reality.
When Congress passed the Telecommunications Act in 1996, it understood that the media industry was likely to evolve significantly in the decades that followed. So lawmakers directed the Federal Communications Commission (FCC) to periodically review its broadcast ownership rules every four years and to adjust its regulations as needed to promote the public interest.
But despite important reforms in 2017 that eliminated prohibitions on newspaper/broadcast and radio/TV cross-ownership, the FCC still hasn’t done enough to remove outdated regulations that stifle innovation and competition in the digital age.
Rules that worked in the 20th century don’t make sense anymore. TV and radio broadcasters, for example, are still subject to restrictions on the number and type of outlets they are allowed to own. Meanwhile, new media sources, like online video and audio services, social media, blogs, and websites, aren’t subject to these restrictions, putting local broadcasters at a competitive disadvantage.
In 1996, many communities had only a few local TV and radio stations and perhaps a city newspaper or two. At that time, regulators were justifiably concerned that allowing a single entity to control too many stations in an area could lead to anticompetitive behavior and hurt the public. Today, the situation is quite different.
While the possibility of broadcasters gaining anticompetitive monopoly power should not be dismissed, relaxing the FCC’s restrictions is unlikely to lead to detrimental market concentration. Instead, modest media consolidation would allow broadcasters to take advantage of economies of scale, strengthening their often-precarious finances and making them better able to deliver high-quality content to their local communities. Without sensible reforms, the financial squeeze local stations face will only grow worse. Some will cut back on staff and content. Others will go off the air entirely.
Intermodal competition between media sources is significantly more intense today than it was in 1996, when Congress set rules preventing a single company from owning more than 8 radio stations in the largest markets (of which no more than 5 can be AM or FM) and only five stations (of which no more than 3 can AM or FM) in the smallest markets. Similar regulations limit the number of local TV stations an entity can own (though the FCC’s 2017 ruling loosened these restrictions). Those who approved these rules more than two decades ago could not have foreseen the competition that would come from streaming audio services like Pandora, Spotify, and YouTube Music, or on-demand video services like Hulu and Netflix, which do not face similar regulations.
These digital competitors have diverted a significant portion — more than 50 percent, by some estimates — of local radio advertising revenue that previously financed broadcasters’ operations. Increasingly, digital audio services are selling advertising to local businesses throughout the country, even in small markets.
The slanted regulatory regime currently in place applies restrictions to broadcasters that do not extend to their digital competitors, making it difficult for local stations to compete on a level playing field or invest in quality programming. As the FCC begins its 2018 quadrennial review of its media ownership rules, it should seize the opportunity to modernize these regulations to reflect the current marketplace and account for the growing dominance of digital media.