February 8, 1995

Re: Applications of Capital Cities/ABC, Inc. and The Walt Disney Company For Consent to the Transfer of Control of Broadcast and Television Station Licenses

It is no overstatement to characterize the pace and scale of change in the media marketplace as staggering. The transaction we consider today is the largest media merger in U.S. history. More "mega-mergers" may be in the works. The merger of Capital Cities/ABC, Inc. ("CC/ABC") and the Walt Disney Company ("Disney") was proposed prior to passage of the Telecommunications Act of 1996, but the legislation that was signed into law this morning will undoubtedly accelerate the extraordinary market transformation that is already underway.

Today we approve the transfer of numerous radio and television broadcast licenses from CC/ABC and various affiliates to Disney. We find that Disney is qualified to be a Commission licensee and that the transfer of the CC/ABC broadcast licenses to Disney will serve the public interest, convenience, and necessity. We also resolve various associated requests for waiver of the Commission's rules.

I strongly support each element of our ruling. CC/ABC and Disney are two companies renowned for producing quality programming. Of course, our analysis focuses on issues of broadcast competition, not programming content. And measuring by the yardstick of competition, I am confident that we are reaching the right result.

Here, as in other media transactions, we must weigh considerations that are not present in other industries. Media companies create and distribute not cars or food or widgets, but information. To varying degrees, these companies control what news we hear, which opinions are given voice, which values are honored and which are not.

Our central concern is the public interest. In particular, will the public continue to have access to a diversity of viewpoints? Will economic competition be enhanced -- or diminished?

Competition is important not just because of the salutary economic results of multiple market participants vying for success, but also because of the benefits that result when diverse voices can be heard. In a very real sense, we are concerned not just with the dynamics of competition for particular products and services, but also with competition in the local marketplace of ideas. A diversity of viewpoints is vital to the preservation of our democracy.

The size of this transaction tells us little about its likely effects on competition and diversity. Big is not inherently bad, and big is not inherently good. Immense resources of capital and experience may be needed to undertake certain challenges, especially as global competition intensifies. Other tasks may be better accomplished by smaller, more nimble and entrepreneurial entities. It is not our role to try to determine, in advance, which kind of entity is best suited to a particular role. Rather, our job is to promote fair opportunities for the widest possible array of market participants to provide to the public the multiplicity of viewpoints necessary to a functioning democracy.

In that vein, our attentions appropriately focus more on the horizontal aspects of this transaction than on the vertical. The acquisition of a company whose primary strength is in distribution by another company whose primary strength is in content can be benign if there remains, after the transaction, a healthy diversity in both the content and distribution markets. The only problematic aspects of this transaction involve local combinations, where diversity considerations are significantly impacted.

Accordingly, we conclude here -- as did the Department of Justice -- that it is necessary to order the divestiture of one of the two VHF television stations that Disney otherwise would own in Los Angeles. In addition, consistent with our long-standing newspaper-broadcast cross-ownership rules, we order the divestiture of either the radio stations or the newspaper in Detroit/Pontiac, Michigan and also in Fort Worth, Texas. These decisions comport with our clear precedent and measurably promote the availability of diverse sources of information and economic competition in these communities.

When the cross-ownership rules were adopted, policymakers had no difficulty agreeing that common ownership of a newspaper and a broadcast property in the same market deprived the public of the opportunity for exposure to diverse voices. At the time, the intensely debated issue was whether most existing combinations should be broken up immediately or should be permitted to continue until a subsequent change in ownership. For most combinations, the Commission chose the latter course, and as a result various markets -- including Fort Worth and Pontiac -- have for two decades experienced less diversity of ownership than they would have otherwise. Throughout, the operative principles have been clear to all marketplace participants: they have known that divestiture to break up "grandfathered" combinations would be required upon sale. It is therefore entirely fair that we grant only a temporary, transitional waiver for cross-ownership of the Fort Worth and Detroit/Pontiac properties.

Media markets, of course, have changed substantially over the last two decades, and (to the extent permitted by Congress) I believe it is time to initiate a proceeding to reevaluate our newspaper-broadcast cross-ownership rules. It is essential that we review our rules periodically, to inquire whether they still make sense or whether they should be revised or eliminated. But it would be neither fair nor prudent to change those rules on an ad hoc basis, without opportunity for all parties who care about these issues to have their say.

Certainly the record in this proceeding presents none of the extraordinary considerations that justified either of the two prior waivers of the newspaper-broadcast cross-ownership rule. Moreover, the only evidence we have before us pertains to the broader "designated market areas" as a whole, not the narrower relevant market, which is the overlap area (e.g., in Michigan, our analysis must center on Pontiac, not the greater Detroit area).

Those living in the shadow of a major city are often frustrated by the limited sources of available information concerning their local community and government. While a newspaper in the smaller outskirt community may have little subscribership in the larger market, the impact of cross-ownership is likely to be considerably greater in the local market. Our current policies give this factor great weight. There may, of course, be countervailing considerations, all of which can best be considered in a multi-party rulemaking proceeding.

I also want to say a word about children's programming. There has been considerable debate over the manner in which the Commission should implement the Children's Television Act. Unlike the CBS-Westinghouse transaction we approved in December, the applicants here have made no specific commitment regarding the future airing of a specific quantity of programs that meet the educational and informational needs of children. But Disney's record in this area is commendable, and the trend in children's programming at the one television station Disney currently owns and operates has been steadily upward -- and would pass muster under any of the proposals being considered by the Commission. Outside the context of the children's television rulemaking, I see no basis for requiring anything more.

In short, I believe that the proposed transaction will bring benefits to consumers. I am pleased that we have made such sensible decisions that serve the overall public interest and promote a robust competitive marketplace.