August 5, 1999

In the Matter of Review of the Commission's Regulations Governing Television Broadcasting, MM Docket No. 91-221; and in the Matter of Television Satellite Stations Review of Policy and Rules, MM Docket No. 87-8.

I regret that I must, for the reasons that follow, dissent from this Report & Order on local broadcast ownership regulation.

The instant regulations owe their existence, in large part, to the regulatory goal of "diversity." See supra at paras. 15-24. I do not believe that the Commission has carried its burden of defining this traditional, and oft-invoked, policy in the context of broadcast ownership rules. This sometimes amorphously-defined goal, and the assumptions upon which it rests, have not been clearly articulated or supported by empirical facts. Instead, it seems to be based on what Ogden Nash once wrote about in Has Anybody Seen My Noumenon?⁽¹⁾ Noumenons may be fine for as bases for decisions about whether two pair might beat three of a kind, but they are no basis for federal administrative regulations.

I am afraid that all we have here, where the goal of "diversity" in broadcasting is concerned, is an "overwhelming hunch." More specifically, a hunch that more "voices" is better. But that is as specific as the Commission ever really gets. Critically, the Commission never attempts to define the baseline for measuring diversity: how much diversity is enough? how much is too little? how much is just right? It cannot be the case that pure "voice" maximation is the goal, for at some point the need for added outlets or formats or owners (or whatever the precise concern is) diminishes, as does its practical utility. Yet without a starting point from which to measure the adequacy of diversity, there is simply no way to know whether a particular level is too much, too little, or just right. Cf. supra at para. 24 (stating that goal is to achieve a "sufficient number of independently owned outlets" but providing no basis for the assessment of "sufficiency").

Accordingly, I fail to see any substantive basis for the selection of 8 (television only) "voices" as being the "right" number in order to protect diversity for purposes of the television duopoly rule, as opposed to a number on either the higher or lower end. Similarly, I can ascertain no record support for the choice of 20 (television, radio, cable and newspaper) "voices" as the best number for purposes of the one-to-a-market rule, as opposed to something on either side of that number. The item simply does not explain why diversity is preserved, while efficiencies achieved, at these levels. To be sure, the Commission need not necessarily be able to justify as fine a line as the choice between 8 and 9, cf. supra at para. 40 ("Our decision today is an exercise in line drawing"), but it ought to at least be able to articulate the reasons why 8 is generally in the ball park and why, say, 15 is not.

This, the Commission has not done. Instead, it offers truisms, stating that it has struck the right balance without explaining why this is so. See, e..g, id. at para. 67 ("[T]he eight voice standard we adopt today strikes what we believe to be an appropriate balance between permitting stations to take advantage of the efficiencies of television duopolies while at the same time ensuring a robust level of diversity.") The selection of these numbers thus seems arbitrary.

In addition to the lack of any benchmark for measuring diversity, the Commission has failed to define the substance of the term "diversity." Does it mean just the numerosity of outlets? Does it mean a variety of owners? Does it signify lots of formats? Or are the Commission's concerns related to variation in specific kinds of programming? Of course, if the Commission means diversity in programming, "[a]ny real content-based definition of the term may well give rise to enormous tensions with the First Amendment. Lutheran Church v. FCC, 141 F.3d 344, 354 (D.C. Cir. 1998). Instead of refining the meaning of "diversity," this item simply quotes back the standard Commission boiler-plate on the term.

In short, the Commission never specifies a clear theory of "diversity." Thus, to my mind, "the government's formulation of the interest seems to abstract to be meaningful." Id.

Because the Commission has yet to adequately define the meaning of one of its chief reasons for the continued existence of these regulations, I find it difficult to support the regulations themselves.⁽²⁾ We should not regulate when we lack a clear -- and clearly defensible -- understanding of our aims. Instead of simply modifying the regulations, I would have repealed them entirely.

Even if the Commission had articulated a lucid definition of the "diversity" that the broadcast ownership rules are meant to achieve, I have serious doubts about the continuing validity of these rules under the First Amendment.⁽³⁾ This constitutional concern also prevents me from endorsing the instant regulatory scheme, which, even as modified, imposes significant limitations on the freedom of broadcast speech.

As I have previously expressed, I question the current factual basis of the 30-year-old spectrum scarcity theory -- the predicate for the Supreme Court's decision to subject broadcast regulations to an intermediate standard of review under the First Amendment. See Separate Statement of Commissioner Harold Furchtgott-Roth, In the Matter of 1998 Biennial Regulatory Review: Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Communications Act, MM Docket (rel. March 12, 1998) (noting that "[t]he empirical basis of the "spectrum scarcity" argument has been roundly criticized by some of America's most distinguished jurists and commentators, even by former members of this Commission").

I can not say it better than did my colleague Commissioner Powell:

[T]he time has come to reexamine First Amendment jurisprudence as it has been applied to broadcast media and bring it into line with the realities of today's communications marketplace. As far back as 1984, the Supreme Court indicated in the League of Women Voter's case, that it would await "some signal from Congress or the FCC that technological developments have advanced so far that some revision of the system of broadcast regulation may be required." I believe we should be getting those signal fires ready.

As you all know, there is a dual standard that exists today, which holds that broadcasting is somehow less deserving of First Amendment protection than other mass media. This theory, which derives primarily from the Supreme Court's 1969 decision in Red Lion Broadcasting Co. v. FCC, has been the target of much criticism. Many scholars have pointed out that the factual assumptions underlying this case and its progeny, if they were ever true, clearly are not true today. . . . I think it useful to step back and look at how drastically the communications marketplace has changed in the time since Red Lion.

It is undeniably true that the communications industry of 1969 that served as the frame of reference for the Red Lion Court was very different from the industry that exists in 1998. Think back to 1969: telephones, by and large, were black, rotary dialed devices

that people rented from AT&T, the legendary "Ma Bell" controlling about 90% of the telephone industry in the United States. And, Mom was only concerned about telephone service -- she was not concerned about providing Internet connections that might, in turn, provide video programming to consumers.

In 1969, cable television systems reached less than 30% of the country and offered not much more than clear local broadcast signals. Nothing even remotely approximated the significant video programming source cable has become. Today, cable passes more that 97% of the households in this country, and more than 2/3 of the country subscribes to cable. Additionally, there are more than 165 national cable video networks offering a wide array of programming.

In 1969, broadcasting consisted of a handful of radio stations in any given market plus 2 or 3 television stations affiliated with one of the three major networks. Occasionally, larger markets had an independent television station too. Three major television networks held more than 90% of the market for video programming. Not so anymore. Not only has the market share of the three largest networks been eroded by cable programming, the last time I looked there were about seven "declared" national television networks working feverishly to bring new stations on the air. Obviously, things have changed a lot.

It is also true that in 1969, no one, except large corporate organizations and universities, owned a computer. In part, because computers were huge, clunky and very expensive devices. No one had ever heard of the Internet, except maybe a couple guys buried deep in the Pentagon. . . .

Most importantly, the advances in technology have been astonishing since the time of Red Lion. Digital convergence, rather than reinforcing the unique nature of broadcasting, has blurred the lines between all communications medium. The TV will be a computer. A computer will be a TV. Cable companies will offer phone service, and phone companies will offer video service.

Digital convergence means sameness in distribution. What one sees or hears is dependent only on the order of zeros and ones, nothing more. It will become impossible to separate "broadcast" from other services, and to continue to maintain the historic fiction of "uniqueness" of broadcasting is to see the world through Lewis Carroll's looking glass.

Even this brief overview of the marketplace makes the reasoning of Red Lion seem almost quaint and leads unavoidably to the simple question: Should we continue to apply the reasoning of Red Lion to determine the First Amendment rights of broadcasters in today's communications environment? At the very least, any responsible government official who has taken an oath to support and defend the Constitution must squarely address this important question.

The Court in Red Lion grounded its analysis in "the scarcity of broadcast frequencies, the Government's role in allocating those frequencies, and the legitimate claims of those unable without governmental assistance to gain access to those frequencies for expression of their views. .. ." How can these rationales continue to be applied today?

Above all else, scarcity -- the need to ration licenses -- stands as the single greatest justification for dual track First Amendment analysis. Yet, contrary to the Court's assertions, there is nothing unique about the scarcity of radio frequencies. They are no more scarce than any other natural resource, such as oil, timber or gas, that is an essential input to other industries. As the D.C. Circuit noted in the TRAC case, in at least some sense, scarcity is a "universal fact" pertaining to all economic goods, and thus cannot really explain the different treatment afforded to broadcasters. Moreover, as I mentioned, technological convergence is shattering any technical distinction between mediums. . . .

With scarcity and the uniqueness of broadcasting such demonstrably faulty premises for broadcast regulation, one is left with the undeniable conclusion that the government has been engaged for too long in willful denial in order to subvert the Constitution so that it can impose its speech preferences on the public -- exactly the sort of infringement of individual freedom the Constitution was masterfully designed to prevent.

Michael K. Powell, "Willful Denial and First Amendment Jurisprudence," Speech delivered to the Media Institute, Washington, D.C. (April 22, 1998) (www.fcc.gov.commissioners) (footnotes and citations omitted).

For the reasons expressed so well by Commissioner Powell,⁽⁴⁾ I believe that the constitutional status of even these "modified" ownership regulations is open to substantial doubt. If spectrum is no longer scarce, then the justification for the lower standard of review afforded to broadcast regulations fades away. Notably, this Commission has already sent the signal that scarcity is a myth: in Syracuse Peace Council, 2 FCC Rcd 5050, aff'd, 867 F.2d 654, the Commission stated that "the scarcity rationale developed in the Red Lion decision and successive cases no longer justifies a different standard of [First Amendment] review for the electronic press." Id. at 5053. The 1985 Fairness Report, the Commission explained, had documented "an explosive growth in both the number and types of outlets providing information to the public." Id.; see also 1985 Fairness Report, 2 FCC 2d at 198-221 (citing data). This expert agency has repudiated spectrum scarcity as a factual matter.

If strict scrutiny applies here -- as it does in the context of the print media, the internet, and cable -- the constitutionality of these limits on broadcast speech is highly doubtful. Generally, when strict scrutiny applies to a regulation, the regulation is presumptively unconstitutional: defense of the regulation is an uphill battle. More specifically, under strict scrutiny, the government must assert a compelling, not merely an important, interest in the limitations. The D.C. Circuit has ruled that "it is impossible to conclude that the government's interest [in diversity of programming], no matter how articulated, is a compelling one." Lutheran Church v. FCC, 141 F.3d at 355. In short, due to the lack of a compelling interest here, these regulations would likely fail to pass strict scrutiny review. Even if the government could come up with some other interest that qualified as "compelling," I doubt whether these regulations are narrowly tailored to any goal: they are broad, structural, prophylactic bans on ownership of outlets for speech, based on no prior evidence of actual harm or abuse resulting from common ownership.

I also have particularized concerns with some of the decisions reached in this Report & Order, which I set forth below.

First, I would have provided all existing television LMAs, consistent with section 202(g) of the Telecommunications Act of 1996, greater protections in terms of "grandfathering" than does this item. Cf. supra at paras. 126-147. Permanent (or rather, real) grandfathering, rather than a temporary period of relief followed by an open-ended "pubic interest" review, would have provided more certainty to the companies involved in these private business arrangements. The question of how to treat LMAs has dragged on for far too long, and we should have resolved it cleanly, for once and for all.

Also, as a matter of equity, I would have protected all LMAs in existence as of the date of the adoption of this Report & Order, rather than November of 1996. Broadcasters who entered into LMAs before the release of our broadcast attribution item, also adopted today, did so without a final, unambiguous statement that their arrangements would be attributable for purposes of FCC ownership rules. They entered into these contracts with FCC approval and in accordance with the regulations then in effect, making substantial investments in reliance on these approvals. I would not run the risk of causing these broadcasters economic harm by forcing them to unwind their operations, in the event that they fail to comply with the new duopoly rules on a going-forward basis. Nor would I run the risk of causing harm to the viewers in their area who might lose the benfefits that these arrangements have produced.

Second, I believe that limitations on radio ownership under the one-to-a-market rule that constrict the statutory radio ownership caps in section 202(b) of the Telecommunications Act of 1996 are legally unsound. As the item acknowledges, there are instances where ownership of a television station in addition to radio stations will trigger application of the one-to-a-market rule, which may impose lower caps on radio ownership than does section 202(b). See supra at para. 9 & n. 19 (explaining that a party may own "up to six radio stations (any combination of AM or FM stations, to the extent permitted under our local radio ownership rules) in any market where at least 20 independent voices would remain post-merger" but adding that "if the radio/TV combination at issue is in a market where our local radio ownership rules would allow a radio-only combination to own eight stations, five of which are FM and three of which are AM, the radio/TV combination could own five FM stations and one AM station").

Nothing in section 202(b), however, indicates that radio ownership rights are contingent on non-ownership of a television station. Section 202(b) is not phrased in the conditional; it does not say that ownership of other kinds of communications properties should adversely affect the rights established by that section. Nor are the ownership rights created there limited to "radio-only" combinations, as the Commission suggests; rather, the provision simply speaks of radio ownership, without reference to broadcast combinations.

The one-to-a-market rule is, of course, based on the generalized "public interest" standard, whereas the caps established in 202(b) are very specific. Regulations promulgated under the general public interest grant of authority should not trump such particularized decisions by Congress. In short, the Commission cannot by rulemaking shrink statutorily granted ownership rights.

Third, we should not "encourage" broadcasters to do anything that could not be defended, if attempted by rule or regulation, on constitutional grounds. See supra at para. 14 (acknowledging that at this time Commission has insufficient evidentiary support for race- and gender-based ownership rules stating that "[w]e encourage broadcasters to establish incubator programs and to engage in other cooperative ventures that will boost new entry into the broadcast industry, particularly with regard to the participation of women and minorities in the mass media"). If the Commission is not yet willing to make the case for race- and gender-based preferences (I am not sure it ever can), it should not ask broadcasters to do "voluntarily" do what would be well unconstitutional for the Commission to require. As I have observed:

The use of voluntary standards allows administrative agencies better to skirt statutory limits on their authority, an offense to the concept of administrative agencies in possession of only those powers delegated to them by Congress. Their use can also more readily permit agencies to impose requirements violative of the Constitution. . . . Voluntary standards are tempting to regulators for technical reasons too. They allow agencies to bypass the seemingly cumbersome and time-consuming requirements of the Administrative Procedure Act, such as notice and comment.

"Voluntary Standards Are Neither," Speech by Harold W. Furchtgott-Roth Before the Media Institute (Nov. 17, 1998) (www.fcc.gov/speeches/furchtgott_roth/sphfr817.html).

Finally, I return to the Commission's overall regulatory scheme of limiting ownership based on the number of remaining "voices" in a market. In particular, I am troubled by the concept of counting "voices." The enterprise of counting "voices" in a market strikes me as akin to counting angels on the head of a pin; moreover, the notion that a "voice" does not exist until the Government says that it does is downright Orwellian.

Putting those issues aside, however, I believe that the Commission has taken an excessively narrow view of the communications outlets that qualify to be counted under its ownership rules. See supra at para. 69 (declining to include radio, cable television, DBS, MMDS, VCRs, and newspapers and deciding to restrict "voices" to broadcast television only for purposes of television duopoly rule); id. at para. 114 (declining to include DBS and the internet, among other things, for purposes of one-to-a-market rule but deciding to count one cable voice per market, regardless of existence of overbuilders, and newspapers with 5% circulation).

The most striking thing about today's decision as to which media to count as a real "voices" when assessing compliance with the voice counts (especially in the context of the duopoly rule, limited to broadcast television) is that this new list is scarcely different from the one that one might have drawn up after surveying the industry 40 years ago. Aside from the limited acknowledgement of the existence of cable television and newspapers, the Commission's list of relevant media still has not changed for decades. Today's decisions to basically limit relevant media to broadcasting implies that the opportunities for dissemination of a message have increased only slightly, if at all, in the last decades. Meanwhile, as we all know, there has been a veritable explosion in information outlets, which the Commission even documents elsewhere in the Report & Order. See id. at para. 37.⁽⁵⁾ Ironically, while the Commission continues to cite the special importance of broadcasters as a justification for continued shacking of their industry, it is the broadcasters who are falling further behind in this new age of competition for viewers.⁽⁶⁾

In conclusion, I believe that these structural regulations suffer from fatal general flaws. First, one of their primary raisons d'etre -- diversity -- is so vaguely defined that I find it difficult to justify the continued existence of the regulations. I also believe that the marketplace, if left to function, is more likely to produce the right mix of services for the public than this Commission. As for competition, antitrust enforcers, both state and federal, are the better equipped institutions to protect that interest. In addition, I believe the rules are constitutionally dubious. Finally, I believe existing LMAs should have been afforded more protection than they were; that the Commission has impermissibly restricted radio ownership rights granted by statute; and that its view of the media that qualify for voice-counting purposes is unrealistically constricted.

6. See New York Times, "TV Networks Are Scrambling to Deal With Era of New Media," A-17 (May 17, 1999) (stating that "[f]aced with a continuing loss in audience and an explosion in technological advances, the networks are attempting to transform themselves into far more versatile institutions" and noting that "[t]he major networks once dominated the airwaves but their hegemony has been steadily eroding") (providing viewer share percentages).