FCC Spikes Report Undermining Deregulation

Author’s note. I have significantly reedited this story in light of the fact that Michael Powell denies seeing the report or ordering it purged and that the only source on record states only that the order came from “a senior FCC official.” It is entirely possible that Powell never saw the study, and that someone much lower down the chain took action on his or her own. But this is why we need a thorough investigation.

“Unfortunately, many have turned this critically important policy debate into a political one, substituting personal ideology and opinion for the facts. If we are to craft responsible media policy for the 21st century, everyone involved in this debate must set aside the rhetoric, put the public interest before political interest and focus on ‘just the facts.’”

So wrote Michael Powell in an Op Ed in USA Today in January 2003. Powell was talking about the FCC proceeding to review its media ownership rules. He believed the facts would prove that deregulating the mass media would not harm local news. If anything, I expect Powell believed it would improve it. Doesn’t deregulation make everything better?

But according to this story by the Associated Press, The FCC conducted a study on the impact of deregulation of the media on local news, only to suppress it when it proved deregulation significantly hurts local news.

I do not believe Kevin Martin knew this report even existed before Senator Barbra Boxer (D-CA) sprung it on him yesterday. But I do think Martin has an obligation to investigate and make the results of the investigation known. If the FCC did suppress the report, then it needs to take steps to ensure that such things will not happen again. Because, while Powell was wrong about the impact of deregulation, he was right about one thing: “Only the facts will enable us to craft broadcast-ownership restrictions that ensure a diverse and vibrant media marketplace for the 21st century.”

A bit of back story below.

Make no mistake, Michael Powell really believed all that neo-con dogma that tries to reduce complex economic system down to a few slogans suitable for puting on bumper stickers. He believed “deregulation creates competition” absolutely all the time. To his credit, he believed it even when it meant sticking it to the incumbents as well as helping them (he supported unlicensed spectrum over the protests of the wireless industry, for example).

So in August 2003, Powell found himself in a bit of a pickle. To try to deflect the wrath of the public after his politically disastrous (and ultimately unsuccessful) June 2003 Order massively deregulating media ownership, Powell commenced a proceeding to study the issue of broadcast localism. i.e., Do big media chains owning multiple outlets in the same market serve their local communities as well as local owners and owners of fewer media outlets in the market. Powell, true believer, authorized public hearings to tour the country and collect evidence, confident he would get a resounding “yes — deregulation is wonderfull” once he got out to the real world.

Alas for Mr. Powell, the answer turned out to be “no — deregulation sucks rocks.” The FCC did what they could to guide the hearings to a proper result — having the first hearing in Clear Channel’s home town of San Antonio, changing the way they distributed tickets every hearing to try to screw up organizers — but people kept showing up by the hundreds to explain clearly, articulately, and with considerable factual support how the deregulation of media ownership had sucked along every dimension.

Amusingly enough, the evidence showed that consolidation even hurt the bottom line of the consolidating corporations. They never got the profits they expected out of their “synergies,” so they kept trying to cut costs, lay off local news staff, use “centralcasting” to make centrally produced and distributed programming seeming local, etc. Their programming got so bad people started turning of their radios more and more, and abandoning their tvs in favor of other things to do. But, like drunks driving at 70 mph on local roads, the vast media conglomerates kept careening along, smashing up our news infrastructure, reducing civic discourse to talking heads, and getting suckier and suckier.

This was, of course, totally opposite to the religious catchism that Powell had learned at the Church of the Neo-Con and Pizza Shack (“Because the Market Loves Pizza!”). But media — particularly broadcast media that operate in an environment of protective government spectrum regulation that prevents rivals from offering competing products — don’t behave like the classic “free market” where businesses must respond quickly to market realities or risk failing. In fact, trying to build a media market based on these simplistic rules of “deregulation=free market=competition=good“ works about as well as trying to build a rocket ship using high school physics where you assume friction does not exist and everything happens in exact accordance with Newton’s Laws.

And it just kept getting worse for poor Powell. People submitted about 800,000 comments into the FCC’s docket providing even more evidence that deregulation did not improve competition and programming. In fact, the evidence kept showing that the massive deregulation that had occurred after the 1996 Telecom Act had done serious harm to local and national media programming.

And now things get murky. Somwhere along the line, someone ordered the economists at the Media Bureau to do a ”real“ economic study that would avoid the ”biases“ of the pro-regulatory media reformers. Whoever ordered this must have assumed that a ”real“ study would prove that deregulation did not nhurt local news production.

Except the study proved the opposite; deregulation and accompanying consolidation hurt production of local news. The study, Do Local Owners Deliver More Localism? Some Evidence From Broadcast News found that locally owned media outlets delivered significantly more local news than non-locally owned broadcast stations. And, as ownership of additional broadcast outlets goes up (either in market or out of market), the amount of local news production for the jointly owned outlets goes down. Looking closely at the evidence, real economics (as opposed to the bumper sticker kind) provides a number of explanations for why this turns out to be the case.

At this point, some ”senior official“ ordered the entire report destroyed. Was it Powell? He denies even knowing about the report, let alone ordering its destruction. Was it Ken Ferree, then head of the Media Bureau and an equally fervent believer in Free Market dogma? Was it a career official?

Still, for those of us who were present at the 2002 FCC Meeting that kicked off the Ownership Review Proceeding and heard then-Media Bureau Chief Kenneth Ferree pompously compare the FCC’s reexamination of the media ownership regs to Copernicus challenging the accepted wisdom that the Sun revolves around the Earth, watching the FCC act like the Catholic Church coming down on Gallileo has a delightful irony. And, ultimately, in Prometheus Radio Project v FCC, a federal court reversed the FCC deregulation order on the grounds that the FCC had failed to justify its decision with facts, and that its economic reasoning was a pile of irrational gobbledygook that the judges said ”would require us to take leave of our sense“ to believe. Whether or not Powell or Ferree had anything to do with the suppressed report, it is clear from the record that the decision to deregulate had everything to do with ideology and little to do with the facts, or real economics.

Now flash forward to 2006. The FCC has started its ownership proceeding again. Kevin Martin, new Chair of the FCC, is at a confirmation hearing (having been renominated by Bush for another 5-year term when his term expired). The Dems start to press on ownership. Martin admits he finds trends in the media market ”troubling“ and says the FCC will keep an open mind. Boxer asks about localism and the unfinished localism proceeding. Martin says that Powell started it, but it just never got done and he will go back and revisit it now.

”I’m glad to hear it,“ replies Senator Barbra Boxer (D-CA). ”Then can I ask why the FCC suppressed an important report on the subject back in 2004?“

”Excuse me?“ Asks Martin, apparently having no clue what she is talking about.

”This report right here,“ answers Boxer, who proceeds to pull out a faxed copy of the 2004 Localism study. Because, of course, in classic Washington payback time, someone saved a copy of the report and faxed it to Boxer before the hearing.

”Ummmmmmm……beats the heck out of me.“ Replies Martin, although rather more articulately than I have summarized here. (You can see the video clip here for the full 6+ minute interchange.

I actually believe Martin had no clue about the Localism Report until Boxer sprung it on him at the hearing. For one thing, if Powell is telling the truth, the report never got out of the Bureau. But even if Powell saw it, I doubt he shared it with Martin. By 2004, Martin and Powell were hardly speaking to each other. (Martin’s first task as Chair was restoring cordiality to what had become a very polorized FCC.) I also can’t help but think that if Martin wanted to suppress a report, he would have done a better job — probably by just declining to publish it and allowing the authors to send it some peer reviewed journal in academia where no one in DC policy land would ever see it.

Nevertheless, it now falls on Martin to investogate this mess and make sure that the 2006 ownership review is conducted with transparency and integrity. First, as urged by media reform groups (including my employer, Media Access Project) the FCC needs to investigate these allegations and make its findings public. If nothing else, Powell deserves to have this resolved one way or another.

Martin also needs to make sure that, this time, the FCC’s independent research is open and available to the public. Finally, he needs to make sure that the ownership review takes place in a very public manner with specific rule changes put out on public notice for discussion and comment. This kind of public dialog does more than restore faith in the integrity of the process. It actually makes for better rule makings on the basis of real facts on how markets ”do“ behave rather than random theories about how markets ”should” behave.

Public confidence that the FCC would fairly and impartially review the evidence on media ownership was never very high. It has now dropped to a new low. If Martin wants rules that will survive a court challenge, avoid a political fire storm, and — oh yeah — serve the public interest, he will avoid playing procedural games or stupid research tricks to get to a predetermined results.

Stay tuned . . . .

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