Copyright 2001 Federal News Service, Inc.  
Federal News Service
July 17, 2001, Tuesday
SECTION: CAPITOL HILL HEARING

LENGTH: 22828 words

HEADLINE: HEARING OF THE SENATE COMMERCE, SCIENCE AND TRANSPORTATION COMMITTEE
 
SUBJECT: MEDIA CONCENTRATION
 
CHAIRED BY: SENATOR ERNEST HOLLINGS (D-SC)
 
LOCATION: 253 RUSSELL SENATE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES:
 
PANEL I
 
MEL KARMIZAN, PRESIDENT AND COO, VIACOM;
 
ALAN FRANK, CEO, POST-NEWSWEEK STATIONS, INC.;
 
JACK FULLER, PRESIDENT, TRIBUNE PUBLISHING COMPANY;
 
WILLIAM BAKER, PRESIDENT, WNET, NEW YORK, NEW YORK
 
PANEL II
 
GENE KIMMELMAN, CO-DIRECTOR, CONSUMER'S UNION;
 
ELI M. NOAM, PH.D., PROFESSOR OF FINANCE AND ECONOMICS AND DIRECTOR OF THE COLUMBIA INSTITUTE OF TELE-INFORMATION, COLUMBIA BUSINESS SCHOOL
 


BODY:
SEN. ERNEST HOLLINGS (D-SC): Good morning. The committee will come to order. In order to get us a good start here with this outstanding panel, let me see if I can include my full statement in the record and summarize it, in a sense. We have a hearing this morning, of course, on media concentration. And for years now, the genius of the American Broadcast System, which is the best in the world, has emphasized diversity. Diversity in ownership creates opportunities for smaller companies, local businessmen and women. Diversity in ownership allows creative programming and controversial points of view to find an outlet. Diversity in ownership promotes choices for advertisers. And diversity in ownership preserves localism, promotes competition.

And, in fact, it gives us on the committee, and the citizens generally of the country, our freedom of speech. I've heard that, "Wait a minute. We've got to do away with these ownership rules to give the owner the freedom of speech." The truth of the matter is that that's a temporary license to amplify his freedom. But to make sure that it's not exclusive, we've injected diversity for at least the past 30 years. Now what's happened is that we're being attacked from every particular angle. In other words, you've got the insatiable industry. We've got the courts and judges that appear to be ignoring the Supreme Court, when they set the precedent about the government's strong interest in serving a multiplicity of information sources.

And, of course, we have had our distinguished chairman of the Federal Communications Commission, and I read a quote from him from the latter part of last year, and Chairman Powell, and I quote, "I start with the proposition that the rules are no longer necessary and demand that the commission justify their continued validity," end quote. That's not the law. This, of which I read again this morning in an article about this particular hearing that "these old rules back in 1970." You should have been here, gentlemen of the panel, in 1996, just five years ago, at the tremendous debate that we had about just this -- these rules. We had it on the Senate side, and it only prevailed. At one time, it prevailed one way by one vote, and then on a revote, Senator Dole changed and we had the reestablishment or reaffirment, I should say, of these particular rules, by two votes.

So, they've been thoroughly debated. The Congress has been watching these, and the problem is certainly not too little mergers, too little consolidations. But, we might hear differently. We have been preparing a bill. I've been working with colleagues on both sides of the aisle trying to fashion a bill, because I like to get things done -- not just make headlines, but to see if we can make headway. And in that light, we really appreciate the appearance of these witnesses here this morning.

Let me stop there and yield to our distinguished ranking member.

SEN. JOHN MCCAIN (R-AZ): Thank you very much, Mr. Chairman. I also welcome our distinguished panel, and I agree that this is an important hearing. Existing regulatory caps on broadcast station and newspaper ownership were created decades ago to preserve competition in a mass media market consisting of a limited number of radio stations, television stations and newspapers. But since that time, the mass media market has expanded exponentially. As a result, broadcasters and others are now saddled with anachronistic ownership rules that limit their ability to compete in the modern mass media market.

Changes in the mass media market are self-evident. To put the matter bluntly, in the digital era, insight and commentary on matters of public policy will no longer be dominated by Cronkite, Brinkley, the Times and the Post. In their place, have arisen CNN, CNBC, MSNBC, Salon, Wired, Slashdot, and innumerable other sources of information and news. Last night, I was flipping through the channels and saw BBC news. I hope that our panelists will look at BBC news and then take a page from their book and cover some foreign news for a change, as well.

This new mass media market is dominated, not by broadcasters and newspapers, but by multi-channel mass media entities like cable TV, direct broadcast satellite television, wireless cable, and of course, the Internet. These new media are not only powerful economic competitors, they're also driving all forms of media to become more interactive. Interactive communications limit mass media's ability to dictate public opinion, and they allow ordinary citizens to be more than passive recipients of institutionalized news. Many websites, for example, let readers respond to a story by posting their reactions, rebuttals, or questions.

In the face of these new competitors, new technologies and new market demands, ownership restrictions on traditional media have not only become unnecessary, they have become anticompetitive. Faced with new sources and new methods of competition, broadcasters and newspapers saddled with potentially outdated infrastructure, desperately need the increased efficiency that relaxed ownership rules permit. None of these observations are new to this debate or to this Congress. Indeed, Congress recognized all of these points when it enacted the 1996 Telecommunications Act, that directed the FCC to review all of its broadcast ownership rules every two years. But, unfortunately, that directive has gone unfulfilled. To be sure, the commission has overhauled some of its ownership rules, but it left others in place, including the rules that are arguably the most anachronistic and anticompetitive -- the newspaper/broadcast cross- ownership ban, and the 35 percent national broadcast ownership cap.

These actions are inconsistent with the letter and intent of the 1996 Telecommunications Act. That act directed the commission to review all of the rules every two years, because changes rendered those rules inherently suspect. Unfortunately, change in the market has proved once again that it can and will outpace change and government bureaucracy.

There are several sources feeding the bureaucratic inertia that have kept these ownership rules in place, even as permanent and unmistakable changes in the mass media market continue to render them obsolete. Some of these sources sprang from the misguided notion that we should more heavily regulate broadcasters who profit from the free use of valuable public spectrum. Others sprang from ingrained notions about the power of the broadcast networks and newspapers.

But if we're truly to serve the American people, than none of these concerns can justify continued inaction. I firmly believe that broadcasters should pay for the spectrum they use, but burdensome and pointless regulation is no substitute for public revenues obtained from a competitive broadcast industry. I firmly believe that this Congress and the FCC should remain vigilant to prevent undue concentration of power in the mass media markets, but punishing yesterday's victors will only aide tomorrow's would-be monopolists.

Mr. Chairman, thank you for convening this hearing today.

SEN. HOLLINGS: Thank you.

Senator Inouye.

SEN. DANIEL INOUYE (D-HI): Mr. Chairman, I commend you for calling this hearing. I have a rather lengthy statement, but if I may, I'd like to just summarize it, and ask that my full statement be made part of the record.

SEN. HOLLINGS: It will be.

SEN. INOUYE: Last year, we have received reports that all four networks turned a profit. And I understand that the newspaper industry continues to generate profits at a pace much greater than many American industries. Therefore, Mr. Chairman, I believe that we must be exceedingly cautious before we give in to industry's claim that, absent regulatory relief, their businesses will suffer. In many ways, Mr. Chairman, these companies occupy a public trust. Broadcasters, through their grant of free spectrum, inform the public of local and nationally relevant news and information, and newspapers do the same.

The ownership restrictions that limit aggregation of these businesses are premised on the need to protect that public trust. Those ownership restrictions help preserve diversity of ownership and viewpoints, both nationally and market-by-market. In turn, that diversity enhances a vibrant localism that keeps our citizens informed when they pick up the morning paper or turn on the evening news. Such localism permits the coverage in local papers and stations to more truly reflect the communities they serve.

And, Mr. Chairman, I ask that the full statement be made part of the record.

SEN. HOLLINGS: It will be included in the record.

Senator Wyden.

SEN. RON WYDEN (D-OR): Thank you very much, Mr. Chairman. Mr. Chairman, I want to commend you, because I think you're holding hearings on an extraordinarily important subject. And I just want to walk through briefly an example of what could happen if all of these rules on media consolidation are lifted. And you're correct in noting that there are some in this country who are saying, "let's just throw them all out the window." If that was the case, you could have AOL Time Warner going out and buying AT&T Cable, which would give it a huge percentage of the nation's cable market. That new entity could go out and buy NBC, if all the rules were lifted, and then start snapping up individual television and radio stations, until they had a nationwide chain with a very large presence in most major markets.

That new, very large entity then could go out and buy Gannett, giving them newspapers in many of the same markets where they already control cable, broadcast TV and radio. My concern, Mr. Chairman, and why I think your hearings are so important, is that if you just went out and lifted all these rules, as some have proposed, you could have on our watch the most radical media consolidation in this country's history. And so I think that it is important that we take the time to think through the ramifications of this possibility, and that's why I think your hearings are so important, and I look forward to working with you and our colleagues to example these questions.

SEN. HOLLINGS: Very good.

Senator Kerry.

SEN. JOHN KERRY (D-MA): Well, Mr. Chairman, thank you for having these hearings. Let me just very briefly say that we've been through this a number of times in the last years. In 1996, most recently, we saw the ownership shifted to the 35 percent from the 25, and we've seen the shift from sort of a finite number of stations to a percentage of national audience. And I think that shift reflected a change in the marketplace itself and in our perceptions of it. Like Senator McCain, I think I would observe that the marketplace has changed even further, very significantly in a lot of different ways.

And all of us understand that this fight, to a large degree, is over advertising revenues and the structure by which local affiliates are able to make their pitch, and what kind of package they can present versus the consolidated packages that other larger, more diverse entities are able to present. Our interest, I think, Mr. Chairman, has to still remain -- the question of protecting people's access to diversity in information, and there's a principle of localism, which you have very articulately and forcefully advocated both in your letter to the FCC and otherwise here this morning.

I agree with that fundamental concept of both the diversity and localism. On the other hand, I think it's appropriate for this committee at this juncture to be analyzing whether or not that marketplace has changed in a way that the mix is different, in the way in which diversity may be protected currently, or the way in which people will have access to information, which is obviously, on its face, so different from the original broadcast structure that we sought to protect when the principle was first established.

We do notice, however, that there has been this extraordinary media consolidation -- AOL purchasing Time Warner, Viacom-CBS, Newscorp presently trying to get 10 television stations from Criscraft -- so that in the television broadcast industry, you've got, I think, the percentage of commercial television stations controlled by the largest 25 groups has climbed from 25 percent to 45 percent since passage of the 1996 act. But none of those percentages adequately reflect the other kinds of changes that have taken place and how people have access to information, what information they have available to them.

I have a sense this issue is probably going to be decided either by the FCC or the courts, because I think they may do so faster than we're capable of. But, it's entirely appropriate that we look at it and examine whether or not any of those changes in the marketplace currently, and in the way people get information, mandate that we perhaps think differently about how we're measuring what the impact in diversity and localism really is, and how it's best protected. So I think it's appropriate that we're measuring that today.

And I apologize to the witnesses and to my colleagues that we have a markup on two trade bills in the Finance Committee in about 10 minutes, so I can't be here through all the testimony, but I will try to come back. Thank you, Mr. Chairman.

SEN. HOLLINGS: Very good.

Senator Burns.

SEN. CONRAD BURNS (R-MT): I'll just ask that my statement be made part of the record and I'll listen to the witnesses before I make up my mind.

SEN. HOLLINGS: Very good. That's a change. (Laughter.)

SEN. BURNS: Minority status does that. (Laughter.)

SEN. HOLLINGS: Senator Cleland.

SEN. MAX CLELAND (D-GA): Thank you very much, Mr. Chairman.

I understand that antitrust is defined as, quote, "opposing or intended to regulate business monopolies such as trusts or cartels, especially in the interest of promoting competition," end of quote. Well, these federal laws that we're talking about, created to protect American citizens from the concentration of power in two few hands, govern all industries. While these laws are enforced by the Department of Justice, there are often other agencies involved in merger reviews, with responsibility of examining aspects other than antitrust, but complimentary to the merger review.

With regard to broadcasting mergers, the FCC has an appropriate role of reviewing broadcast license transfers to ensure they're in the public interest. Essentially, regulations and laws, like ownership caps, are designed to be additional protections for the public. In this case, these regulations promote a diverse and free exchange of ideas. When one entity reaches 35 percent of the nation's homes, is that enough to attract the attention of antitrust officials? Maybe not. But this single entity is now able to reach millions of homes. In this case, I believe that the law limiting broadcast ownership enables and promotes diversity above that of antitrust review by itself.

However, I can certainly understand why a group would want to exceed this cap. According to Kevin Sauter (ph), in the broadcast television industry book, the profit margin for network-owned and operated stations can still reach an amazing 25 percent or more, which translates into yearly profits that can be in the tens of millions of dollars -- a significant amount for networks struggling with decreasing viewership and increasing costs. The FCC, as the guardian of the public's interests and the public's manager of radio spectrum, owes the American public an appropriate review of the transfer of broadcast licenses. Although multi-channel service providers have increased the number of outlets people can turn to for video information and entertainment, about 20 percent of Americans still remain dependent on free, over-the-air television for their information.

This portion of the population should not be overlooked when contemplating removing or increasing the cap. I support the continuation of the FCC's biannual review of the broadcast ownership cap, and the newspaper broadcast ownership cap, as they've been directed. Although relaxation of these two caps has been rejected up to this point, I'll be watching closely for the results of the FCC's next review. Given the relaxation of the duopoly rules, I believe we'll be able to see more clearly the potential for greater consolidation. Antitrust officials play an important role in our economy, however, there are additional factors that might be overlooked if other agencies are removed from the merger review process.

When we are discussing the precious and finite commodity of our national spectrum, I believe it is appropriate for the FCC to examine these mergers. I also believe due deference should be given to its decisions. I look forward to the commission's continuing examination of ownership rules, keeping in mind that every regulation should continue to be examined for its relevance in this ever-changing world. Thank you, Mr. Chairman.

SEN. HOLLINGS: Thank you.

Senator Dorgan.

SEN. BYRON DORGAN (D-ND): Mr. Chairman, thank you very much. I apologize. I was at a leadership meeting and missed your opening statement, which I'm sure would have been illuminating for me. We have --

SEN. HOLLINGS: I did mention your amendment. Don't you remember when we voted for a change with respect for ownership? Only by two votes do we have the 35.

SEN. BYRON: In 1996, when the committee reported on the bill, it expanded the audience cap to 35 percent, I believe, and I offered an amendment on the floor of the Senate, which about 4:00 in the afternoon prevailed. Senator Dole was on the other side, and I actually prevailed, and I was the most surprised man in Washington, D.C. And then I believe Senator D'Amato changed his vote at the request of Senator Dole so that they could reconsider it. And then dinner intervened and several senators had some sort of epiphany over their dinner, and we had a revote about four hours later, and I ended up losing. Such is the work of the Senate, well within the rules, I might add.

But I felt the need to offer the amendment at that time because I worried about what was going to happen. Even then, I was worried about what was happening. But we have had since then, as you know, an orgy of mergers in this industry. I think in 1996, the largest radio ownership group had 39 stations -- now 1,100 stations plus. What's happening in broadcast, in my judgment, is unhealthy. There are competing interests -- the private interests of those who are engaged in this, and they have every right to hold that interest and want to become big and big and bigger, and the public interest.

And I would say to the FCC that I hope they pay some attention to this hearing, Mr. Chairman. I'm pleased you're holding the hearing. The question of whether we ought to have ownership limits, and the question of whether caring about localism is some old-fashioned anachronism is a very important question. I answer it one way. Some others might answer it another way. But I feel very strongly about it. The FCC has a responsibility to us, a responsibility to this country, to understand that these airways belong to the American people and that localism is not some old-fashioned notion about what we ought to have as a public policy.

And I think the burden -- the FCC somehow seems to suggest the burden is on the Congress to demonstrate why there should be limits. That's not the case at all in my judgment. The burden ought to be on the FCC and the broadcasters to demonstrate why the limits ought to be increased. In my judgment, there is no basis and no case that can be made to increase these broadcast limits. If anything, we ought to go back to the 1996 limits, but I fear that that horse is long out of the barn.

Mr. Chairman, thank you for calling these hearings. They are very important.

SEN. HOLLINGS: Thank you.

Senator Fitzgerald.

SEN. PETER FITZGERALD (R-IL): Thank you, Mr. Chairman, and I would like to welcome one of my constituents, Mr. Jack Fuller, who's from Evanston, Illinois, and president of the Tribune Company. The Tribune, in addition to owning newspapers and television stations, is the owner of the Chicago Cubs, a great baseball team, and they're doing very well this year and I hope we can have a World Series at least sometime this century. The Cubs haven't won a World Series since 1908. Anybody can have a bad century, I guess, in Chicago. (Laughter.)

MR. : That's right, and seven years ahead of time.

SEN. FITZGERALD: But anyway, I am glad that the chairman has called this hearing. I think it's an important issue. I do agree that the public owns the airways. I do have questions, however, as to whether the ownership restrictions make sense in today's current climate, where you have so many media outlets, so many cable television stations, and so many satellite TV channels, and so many radio and other broadcast outlets. So I look forward to this hearing, as far as going into depth and exploring the issue. I do wonder whether the restrictions, that date back to the late 1940s or 1946, when there were only three broadcast networks around the country, continue to make sense.

Thank you, Mr. Chairman, for holding this hearing.

SEN. HOLLINGS: Thank you. In presenting these witnesses, let me make it as part of the record, unless there's objection, the Columbia Journalism Review ownership listing of Viacom, and the Columbia Journalism Review Ownership of Tribune. I'm just trying to summarize, for example, Viacom has got 19 Paramount stations, (a net?) group, 15, and the MTV, 14, Nickelodeon, 4, country -- which ones. Showtime networks, 8, Black Entertainment Television, there's six -- or 17 -- and Paramount Production and Distribution, and right on down, 20 in publishing.

CBS television ownership, some 17 stations there. Ten in news media, and radio is just too much to count. I counted 40 different cities, and there are several in each city. So, but excuse me, Mr. Karmizan, you're behind Tribune. You've got to play catch up ball with the Tribune.

I'm putting theirs in also.

Let me present and introduce Mr. Mel Karmizan, the President and Chief Operating Office of Viacom; Mr. Alan Frank, the Chief Executive Office of Post-Newsweek Stations; Jack Fuller, President of the Tribune Publishing; William Baker, President of WNET in New York, and the committee is indebted to each of you four.

Mr. Karmizan, we'll start with you, sir.

MR. MEL KARMIZAN: Thank you, Mr. Chairman, Senator McCain and other members. I really appreciate the opportunity of being here today.

SEN. HOLLINGS: Pull that microphone a little --

MR. KARMIZAN: I didn't think you wanted to hear what I had to say. I'm sorry.

SEN. HOLLINGS: I love to hear what you say. If I was running CBS, I'd hire you this afternoon. Don't worry about that. (Laughter.)

MR. KARMIZAN: By way of background, I do go back a long time in the broadcasting business. I went to work in 1967 for Mr. Paley's CBS, and had as mentors, you know, Mr. Paley and John Klugey (ph). Both of those fine broadcasters, and I like to call myself a broadcaster, talked about localism and diversity. So let there be no mistake, we are obviously very interested, at all of our television stations and all of our radio stations, in localism. And certainly are prepared to demonstrate our localism in our communities, whichever community you're sitting in, as compared to any other broadcaster, whether or not they live in the market or don't live in the market. But certainly, localism and diversity are something that we think is very important.

I'd like to go back to those days, by the way, if you could mandate it, to where there were only three networks, and the diversity was just those three. So, I don't think that, Senator, as you said, the train left the barn or the horse left the barn, or whatever leaves the barn. But I think those things are gone. When I first started in the business, there were three networks. Nine out of 10 people watched primetime on the network televisions. The average viewer had seven television stations available to them and there was no VCR. Today, the three networks, together in primetime, have less than 35 percent of the audience on television. The average home has 54 channels available to them. There are VCRs in almost 90 percent -- or actually 90 percent of the country. There are items like TiVo and UltimateTV, and the Internet.

But even more important than what's here today is that there are more choices coming, and the changes are going even more dramatic. There's going to be very soon, available in every car, satellite radio, so that you will be able to receive 100 radio stations in your car here in Washington, D.C. in CD quality, controlled by one company, and it'll be a subscription service, so the American public is going to have to pay to receive those hundred different radio stations. And we, free over-the-air broadcasting, is going to have to compete with them. And there's also -- if you follow what's going on with technology, the Internet is also going to be available in your car. Internet access is available today on your personal -- you know, your PDA. It's available on your cell phone. It's going to be available in your car. radio stations on the Internet that you're going to be able to reach in your home, or you're going to be able to reach in your car. And the whole world is changing. Technology is changing dramatically. We're not just in a vacuum. Consolidation is taking place in every industry. So we are now competing to get advertising dollars from banks that are consolidating. We are competing to get advertising revenue from airlines that are competing. Our advertisers have consolidated. There are fewer and fewer of them. As have the advertising agencies consolidated, there are fewer and fewer of them. And that consolidation is continually.

So, you mentioned earlier AOL Time Warner and alluded to the possibility that AT&T might do a transaction and possibly AT&T could do a transaction with Comcast. And it is possible that DirecTV that has access into 100 percent of the homes in America -- that DirecTV might even combine with Newscorp. So we're not sitting here suggesting those things should not be allowed to take place -- it's wrong to take place. But in order for us to compete against them, we need to have a stronger, free over-the-air broadcasting system, and I believe that we need to see changes that have to be made in order to be able to have a fair seat at the table with these companies that have consolidated.

A lot's been talked about, about radio consolidation, so let's talk about that. There's a little over 10,000 radio stations in the United States. One company -- not ours -- owns a little bit over 1,000. That is 10 percent of the stations. So, the largest company in this industry owns 10 percent. To some people, that might seem like a lot. To me, it's not Microsoft as far as a consolidated position in this country. But the effect of consolidation -- and the effect has not been less diversity, it's been more. So, take Washington, D.C. The same number of radio stations exist today that existed in the past, fewer operators, more programming choices. There are far more programming choices available today to the people of Washington than existed prior to the 1996 Telecommunications Act.

So, I think the consolidation, deregulation has been good for the American public. I think we need to see the world when we can own two networks. We're channel 350 on DirecTV. We're channel 20-something here in Washington on some cable systems. We're on another channel with dish TV. There needs to be consolidation on the network side of things. We need to see that 35 percent arbitrary cap removed, so that we can make money on our TV stations, so we can bid for programming, so we can afford to keep good programming on free, over-the-air broadcasting. And we need to see further deregulation in the radio industry to compete with the technology that's satellite.

If somebody is concerned about too much concentration, for 30 years I've been dealing with the Justice Department. They're pretty good at doing their job. And obviously, there is a mechanism for unfair consolidation or too much consolidation. I see my time is up, so thank you.

SEN. HOLLINGS: Mr. Frank.

MR. ALAN FRANK: Good morning, Mr. Chairman and members of the committee. My name is Alan Frank. I'm the president of Post-Newsweek Stations, and chair of the Network Affiliated Stations Alliance, representing more than 600 local television stations affiliated with ABC, CBS and NBC. I also serve on the NAB board. Both NAB and NASA strongly believe that the national television ownership cap should not be increased. We appreciate the recent letter from Chairman Hollings, Senator Stevens, and other members of the committee, emphasizing that the 35 percent ownership cap should be retained.

The question facing the committee as it reviews media concentration is not whether I'm a better broadcaster than Mel Karmizan. I run a high quality television station in Detroit that competes with one of the CBS O&Os. And even though Mel's station does no local news, it's a pretty good station. The question instead is, will there continue to be a variety of companies -- Mel Karmizan's, my company, Cosmos, Benedict (ph), Fisher, Hubbard, and dozens of dozens of others -- making critical news and programming decisions in America, or at the next ownership hearing five years from now, will Mr. Karmizan be here alone -- one person able to testify for the entire broadcast industry because the networks, run out of New York and Hollywood, will own most of the country?

Localism and diversity are at the core of the American broadcast system. Local affiliates are the embodiment of these principles. When NBC told its affiliates last fall to air game one of the American League Playoffs instead of the first presidential debate, it was the affiliates that complained, and ultimately the network relented and allowed affiliates to preempt the baseball game for the debate. Allowing the networks to own more stations means that next time, there will be no local pressure to correct the network's bad judgment.

Limits on national television ownership sustain our uniquely American form of broadcasting. Other countries, like Japan or Britain or France, have no such thing as local news. What happens in Tokyo or London or Paris sets the agenda. There is no community or regional coverage. Increase the ownership cap and you place in peril our balanced national/local system of strong networks and strong local affiliates. Since the ownership cap was increased to 35 percent, the networks have gained substantial power -- power that's been used to diminish the role of affiliate stations.

We believe the cap should be at 25 percent, and that a legitimate question for the committee is, why not move the cap back to 25 percent -- a number which many of you supported in 1995?

Certainly, any increase beyond 35 percent would jeopardize localism and diversity. As you review the current state of media ownership, please consider these three points. First, the more stations the networks own, the more they will nationalize and homogenize news and programming. The networks have one goal -- to make certain that 100 percent of their programming is carried by affiliate stations. There's tension between the network's business model and business objective, which is maximum exposure, and my business and legal objective, which is to meet the needs of the community I serve.

My written testimony has several examples of how we preempt network programming to meet community needs, but let me give you one here. At our television stations in Jacksonville, Miami and Orlando, we preempt hours of network programming each year to carry the Children's Miracle Network Telethon. This program, and others like it, reflect local interests, local concerns and local needs. We make these decisions not because we want to harm the network's bottom line, but because we seek to meet the special needs of our communities.

If the ownership cap is relaxed further, the networks will buy more local stations. How will that change their operations? Think about the general manager of an O&O in South Carolina, or Montana, or Oregon, or Mississippi, who has to decide whether to preempt network programming to carry a local ballgame or candidate debate. Trust me, no GM of an O&O wants to call Mel saying that the station won't be showing a network program in order to carry a debate or high school ballgame. Second, I want to dispel the myth propagated by the networks that the future of free, over-the-air broadcasting is at stake unless the cap is raised. Quite to the contrary, localism and diversity are at stake if the cap is raised.

In 1996, when the ownership cap was being debated, the networks complained that they were going broke in the network business and needed to own more stations. They were granted their wish, but are now back repeating this plea. This claim suffers from the fallacy of Hollywood accounting. It fails to take into account the profits network companies earn from program syndication, cable, and their own television stations. The networks are doing just fine, thank you. Wall Street reports show that the four networks collectively in year 2000, had profits of over $4 billion. Free, over-the-air television does not need more network ownership to survive.

And, finally, the dramatic changes in the broadcast industry since 1996 show that the cap must be retained. Since then, Fox has agreed to buy Criscraft, Disney bought ABC/Cap Cities, Westinghouse bought CBS, CBS bought Infinity Broadcasting, and Viacom bought CBS. And this doesn't even touch on the networks' aggressive move into the programming and syndication markets following the repeal of FIN/SYN, where most of the competition has been eliminated. These developments led the FCC to report recently that since 1996, competition in the broadcast industry was reduced rather than increased.

In conclusion, while the world of television has changed substantially, the need for safeguards has not. In fact, it's increased. Whether it's local weather, or news, or candidate forums, or sports, or charity events, local broadcasters remain a trusted source of information and other important service to their communities. And for those millions of Americans who don't subscribe to pay TV, local broadcasters are their sole source of news and programming. So though it's easy for the networks to say that these ownership rules don't make sense in Internet time, the truth is that the values of localism and diversity endure and are as much in need of protection today as they have ever been.

Thank you, Mr. Chairman.

SEN. HOLLINGS: Thank you, Mr. Frank.

Mr. Fuller.

MR. JACK FULLER: Mr. Chairman, as a newspaperman, ordinarily I wouldn't be here on Capitol Hill asking for anything but information. But because of the ongoing revolution in the way Americans get their information, I am here to ask that you permit newspapers to compete freely with other media for a share of a fragmenting news audience, unhampered by legal restrictions on ownership of the means of communication. Since the cross-ownership rule was established nearly three decades ago, the news business has been transformed. In addition to newspapers, magazines, broadcast television and radio, now Americans can get news from a proliferation of national all-news cable operations such as CNN, Fox News, and so on, as well as from local cable operations such as New York One News and Newschannel Eight here in Washington.

On the Internet, they can get news from a wide variety of sites from all over the country and all over the world. With a few keystrokes, they can search the Worldwide Web for news that interests them, from what you have said in the Senate, and the way you have cast your votes, to information about their local schools and parks. This profusion of new sources is good for the country, but it's a challenge for newspapers, whose readership has been under pressure because of media fragmentation, and whose advertising revenue is targeted by every new competitor, as well as by the old ones. This has put newspapers under some financial stress. You've probably seen reports of significant cutbacks most have had to make in this period of economic softness.

The cost of covering the news, however, is not declining. It's increasing. Covering the meetings and activities of hundreds of municipal government bodies, local school boards, and other public policy events is a huge and expensive undertaking. Building teams of journalists who are capable of understanding the complexity of public policy issues today and translating them for lay people is not easy or cheap. Not to mention the cost of serious, sophisticated, original coverage of the nation and the world, as Tribune newspapers are committed to providing.

In Chicago alone, the Chicago Tribune employs nearly 700 editorial staffers and hundreds of freelancers, most of them devoted to news of local interest. In Los Angeles, the numbers are even higher -- 1,130 editorial staff at the Los Angeles Times. And even in the small markets, such as Newport News, the Daily Press employs 155 full-time editorial staff, which is nearly three times the size of a broadcast news operation, even in the major metropolitan areas. The question is whether, in a fragmenting media environment, we'll be able to find the economic model to continue to support local coverage at this level. I believe we can, but it will mean spreading the cost of high quality journalism over more than one distribution channel.

We will have to reach audiences in the many new ways that people like to receive their news. And to do so, we have to have the burden of the cross-ownership rule lifted. In an environment where people's choices for obtaining information have radically multiplied, there is no risk of one voice dominating the marketplace of ideas. In fact, in the clamorous cities like Los Angeles, Chicago, and New York, it's frankly a challenge for any voice -- no matter how booming it may seem -- to get itself heard. And so long as distribution channels continue to proliferate -- and the explosion of bandwidth guarantees that they will -- the public's demand for diversity of voices will always be satisfied.

The public interest will be served by freeing newspapers to compete in the new highly competitive news environment. Let firms own newspapers and broadcast television stations and people who get all their news from broadcasting today will hear new voices. Let the cross-ownership rule fall and you'll see enriched newscasts. Here's an example of what is possible. It comes from Chicago, where the Tribune's ownership of the Chicago Tribune and WGN have been grandfathered under the cross-ownership rule. Last year, more than 40 reporters, editors, and visual journalists from the Chicago Tribune, WGN and CLTV, which is our all news cable channel, worked together on a series of stories entitled, "Gateway to Gridlock," about the effect of air traffic snarls at O'Hare Airport on people's lives all over the country.

Stories appeared in every medium -- each medium telling the story as it was best for that audience. The public was the beneficiary, and the Chicago Tribune was honored with a Pulitzer Prize for the effort. No broadcast, cable, or Internet news operation alone could have devoted the resources it took to research, write, edit, and package "Gateway to Gridlock." So with cross-ownership, public access to high-quality local news increases. It does not decrease. And that's why neither your files, nor the Federal Communications Commission's, are filled with complaints from the communities where cross-ownership now exists.

In contrast, in South Florida, the ban on cross-ownership has actually impeded the introduction of new voices in broadcast news. Just to put the situation in historical context, when the cross- ownership ban went into effect, there were seven over-the-air television stations in Miami. Cable was in its infancy and made little impact there. The Internet information superhighway wasn't even a dirt road. Today, residents of Miami can watch 15 over-the-air television stations. They can choose from eight daily newspapers or listen to one of 67 radio stations. Cable delivers in excess of 75 channels, including all the news channels.

Tribune owns the Sun-Sentinel in Ft. Lauderdale, and awhile back it acquired a group of stations that included a small UHF station, ranked seventh in the Miami market. That station programmed no local news when we bought it. To close the transaction, we got a waiver of the cross-ownership ban from the FCC, but the waiver forbade us from putting any local news from the Sun-Sentinel on the channel. So instead of partnering with Sun-Sentinel and providing broadcast viewers access to the work of 370 members of the newspaper editorial staff, our television station has had to partner with the local NBC affiliate, airing that station's newscast.

The combination of two television stations is permitted by law, as is ownership of television by the Internet companies, by cable providers, by telephone companies, by wireless service providers. Anybody, it seems, can own a television station except aliens, drug dealers, and newspaper publishers. I believe the cross-ownership ban is anachronistic in today's world. I believe it is making it much more difficult for newspapers, which are vital to serve communities with news and public service journalism, to compete and I believe it's time for it to be lifted. Thank you, Mr. Chairman.

SEN. HOLLINGS: Thank you.

Mr. Baker.

MR. WILLIAM BAKER: Chairman Hollings and distinguished Senators, thank you for inviting me to speak today here about an important issue that cuts to the very heart of our national spirit and our public vitality. I'm president and CEO of public television station Thirteen/WNET in New York. Before coming to Thirteen, I served a dual role as president of Westinghouse Television from 1979, and then chairman of Group W Satellite Communications, the cable programming businesses, from 1981. During my years at Westinghouse, five cable networks were launched, including Discovery Channel and Disney Channel. We also established the successful national PM Magazine program and introduced Oprah Winfrey, along with Ellen Frank's (ph) help, as a talk show host. I'm author of "Down the Tube: The Failure of American Television."

This background in public and commercial television broadcasting has given me a perspective on the issues the committee is facing today. Arguably the most important entitlements Americans possess are the rights to free speech and an independent press. These rights are pillars of our Constitution and make our way of life a model that is admired in every corner of this planet. Today, however, trends in the media industry and regulatory policy are severely threatening free, independent and diverse expressions in America. The two rules being examined by this committee -- national television station ownership caps and cross-ownership of television and newspaper outlets in the same market -- were put in place for a simple and essential reason: to ensure that control over news, information and the expression of ideas did not fall into the hands of a few powerful players. But this is exactly what's happened in a few short years.

In 1983, 50 companies controlled more than half of the media in the United States. On paper at least, a mere 50 companies controlling most of American media would seem to be a cause for concern in itself. But today, just 20 years later, the number has dropped to six. Six gigantic corporations control the vast majority of television, cable, radio, newspapers, magazines and the most popular Internet sites, and consequently, the majority of information, public discourse, and even artistic expression in the United States. We have on our hands what one might call a "merger epidemic" in the media industry. And like any other epidemic, this is an unhealthy one.

If ownership caps are repealed, television will surely follow the example of radio. Since the passage of the 1996 Telecommunications Act, 10,000 radio station transactions, worth approximately $100 billion, have taken place. As a result, there are 1,100 fewer station owners today, down nearly 30 percent since 1996. Before 1996, the largest owner of radio stations in America controlled some 60 stations. Now, one company owns about 1,200 and two others own about 200 each. Consequently, in nearly half of the largest markets, the three largest companies control 80 percent of the radio audience.

The numbers show that competition is not increasing. While the number of channels may be slightly on the rise, the number of owners is dropping. And, where free and independent media is concerned, it is the number of owners, not the number of stations, or channels, or formats that matter. The media hold a special place in our society. By helping us learn about the world, exchange ideas and understand who we are, they help us enable our conscience individuals and as a free people. When they are treated as mere economic products, they simply cannot play the vital role -- social and cultural roles that make them so central to our way of life.

When a local newscast focuses on the real-life story behind that evening's "Movie of the Week" sent down from the network, shouldn't we raise our eyebrows? If a television news editor is under pressure from top brass to increase ratings, which of the following stories will she give priority: Julia Roberts' new boyfriend or a school board debate over teaching standards? As one independent journalist has written, "When commercial interests are set against democratic or professional values it is inevitable that the interests of the market take priority." This is self-evident. Cost-cutting to improve margins diminishes diversity.

Throughout America, media giants are closing newsrooms, merging staff, and producing multiple newscasts on different stations from the same source. A healthy trend for the corporate bottom line, but where does it leave local viewers looking for varying perspectives? Logically, we must also be wary of cross-ownership between broadcast media and newspapers. There are more and more one-newspaper towns. Although some have argued that the two industries are distinct and should be treated separately, I believe that the final measure should be the overall quality, diversity and objectivity of the information being delivered in a given market.

We need various print and broadcast outlets to serve as local critics of one another. Can we truly expect the management of a company that owns both a broadcasting station and a newspaper in the same market to operate those two media outlets with distinct, discreet and independent editorial voices? If the answer is no, and I think it could be, then when that situation exists in a given market, we have lost a pair of diverse and antagonistic voices in that market. And, therefore, we have lost what the Supreme Court views as essential conditions for a vigorous marketplace of ideas.

The underlying motivation for commercial producers is to increase shareholder returns. Good business? Yes. But broadcasting is not only a business, and it must not be allowed to become only that. It is a public trust. Like our national parks, the airwaves belong to the people. The people have granted commercial broadcasters free license to this precious national resource with the understanding that they will be used in the public interest. This was established by the Communications Act of 1934. Deregulation has made fundamental changes in the industry and ramifications extend throughout the national and global economies. But it is not too late to slop, to slow, or to even reverse the trend that has been threatening the very foundations of free, unhindered, independent media in our nation. Thank you.

SEN. HOLLINGS: Thank you very much, Mr.Baker. Right to the new word I'm learning here this morning. You know, you come to Washington and everything is exacerbating, egregious. You don't have a debate, you have a dichotomy. The best word I learned and the time I learned it, they eliminated it, and that was honorarium. (Laughter.)

But now it's anachronistic -- old-hat, I guess, outdated, never considered, nonsense. We debated it and we had the most vigorous debate and hang up on the 25 to 35 percent. And Mr. Frank has testified, like to go back to the 25. The reason we went to the 35 was to get the bill passed. Now when we got that bill out, there were a lot of compromises.

We had 95 votes, bipartisan, and 96, but it wasn't an anachronistic situation with respect to ownership. And the numbers there -- it's not an arithmetic problem. We used to have in my hometown three stations. All three had news. One had popular music and the other two had rock. Now I've got 11 stations, but I can tell you right now there's no choice at all, other than the public radio.

In fact, I never use that little tape deck for music. Now I'm buying tapes and everything else because if public broadcasting doesn't have a particular program that's interesting, then I listen to music. Because the other 10 stations have got -- out of California -- and they're hollering at each other and debate. They've got an epileptic fit. They're swallowing their tongues and everything else, about to die. I can't get music out of it. And so I buy a music tape. So, the fact that I've got 11 radio stations -- don't give me the numbers problem.

I'm back now to Mr. Fuller, where for example, when they put these limitations about the cross-ownership of a newspaper and a TV station, the FCC said, and I quote, "It's unrealistic to expect true diversity from a commonly owned station/newspaper combination." Now, go fast forward here to just a couple of years ago, and the American Journalism Review, entitled "Synergy City." It described the Tribune Company's attempts to repurpose its news content across all its property. And the article states and I quote, "Entering the newsroom of the Chicago Tribune, your eye is drawn to a massive multimedia desk, around which are (arrayed?) editors from WGN-TV, WGN radio and so forth, the 24-hour local cable news channel, the Tribune's Internet edition. In most companies, a Berlin wall separates the different media. At the Tribune, all media units report to David Underhill, Vice President for Video and Audio Publishing. The goal of our unit, says Underhill, is to be a synergy group. I love the word," end quote.

So, you can see that the genius, namely the diversity, is not anachronistic at all. It's disappearing. Why do we have that with the Tribune? Because of the lethargic FCC. They're not calling the rule about cross-ownership, because they're waiting for the time for relicensing every eight years. Otherwise, they should have called the rule. We don't wait -- if somebody's speeding, you don't wait for next year's new chairman of the highway commission. I mean, you arrest them. You stop it. It's a violation right now. Not the case with the FCC. They have given everybody, and I don't blame you at all, Mr. Karmizan. Like I say, I'd hire you. Where is that thing? I mean, here, look at this success here.

The quality report for CBS network and I quote, "achieved double digit revenue growth in primetime with increased ratings and pricing in the first quarter of 2001." On May the 28th, in the edition of Broadcasting & Cable, reported, quote, "Fiscal 2000 was a profitable year for ABC, CBS, Fox, and NBC, with decent profit margins." The article indicated that in 2000, the CBS network enjoyed $200 million in profits. Your own TV stations enjoyed $775 million in profits, and your TV production and syndication businesses enjoyed $450 million in profits. Well, it doesn't sound to me like CBS and Viacom need any more relief. In fact, I hope Sumner gives you a raise.

MR. KARMIZAN: Senator, I didn't think making a profit is something that I should be embarrassed about.

SEN. HOLLINGS: No, sir-ee. I'm proud of it. And you're not embarrassed, are you?

MR. KARMIZAN: Oh no, not at all. And by the way, you know, I think that that's what you need, in order to make investments, is profits. So I think that the profit margin, since you're bringing it up, on a television network is in the single digits -- marginally profitable, not a lot of money for the invested capital. We spend about $3 billion a year for programming on our network and news. And of that $3 billion, let's assume that the $200 million number were accurate, that isn't the best return on capital that a company could get.

I think the first point that I'd like to make is that there are some facts that were wrong. We do do news in Detroit on our television stations. We did it as a function of consolidation. And we managed to do it as one of the benefits that we have. But the sense for me is that when 1996, it was probably okay what the deregulation was. Since 1996, a lot has changed in America. The pipe has gotten broader. There has become much -- many, many more competitors in that market. So there needs to be, as was the intent at the time, to have a biennial review of the rules because, even at that time, it was believed and that the FCC was ordered to take a look every two years to see whether or not there should be any further relaxation.

And regarding the programming in South Carolina, sir, I don't own any radio stations. But if you would give us some further deregulation, I will put more stations to your choosing on in South Carolina. (Laughter.)

SEN. HOLLINGS: Very good.

Senator McCain.

SEN. MCCAIN: Thank you, Mr. Chairman. I think we can agree or disagree on the specific issue we're discussing today. I don't think we disagree that the information technology -- I don't think we disagree that the information technology has profoundly affected the way we live, work, are entertained and receive information. And a lot of it is in the eye of the beholder.

Mr. Frank, you pointed out that, in your statement today, Mr. Karmizan has a station reaching 41 percent of America; his colleagues, ABC, Fox, NBC control stations reaching 24, 40 percent and 27 percent respectively. To balance that statement out, I think it's important to recognize prime-time viewership among the top six broadcast networks has declined from 71 percent in '96 -- when this law was passed -- to 58 percent in the year 2000.

Cable has made tremendous inroads. Now, 70 percent of American TV households, compared to just 13 percent in 1975 -- satellite, Internet, the list goes on and on. And I appreciate, Mr. Frank, your powerful argument for -- as you say, we commend Chairman Hollings and the many members of the committee whose strong letter in support of localism and against any increase in National Television Broadcast Act and obviously for local news, sports, weather coverage. And yet, in your organization, NASA, five companies alone that belong to your organization have a combined $14.4 billion in revenue, reach 63 percent of the nation. These companies own or have financial stakes in cable companies, newspapers, radio stations, magazines, websites and publishing houses -- companies that belong to your organization, NASA, such as Belo, Hearst-Argyle, Cox, Gannett, Washington Post.

You own stations in cities such as Palm Springs, Jacksonville, Seattle, Louisville, while their corporate headquarters are located in New York, Atlanta and Dallas. Is it your belief that these stations are able to maintain, including the ones you own in five different cities across America, are able to maintain localism while their headquarters are located elsewhere?

MR. FRANK: Senator, the question is -- about localism -- is not necessarily local ownership. Localism is not the same as local ownership. And it's more than local programs. The question is where the incentive is for the local community. And it has to do with a mindset. The O&Os have different business interests, as opposed to local groups that own stations. You know, our objective is to serve the local community, period.

SEN. MCCAIN: And so you do that --

MR. FRANK: Post-Newsweek, as a for instance, sir, has six stations around the country. And we have two things that unite us. One is strong journalism because we are, after all, the Washington Post Company. And the other is a belief in serving the local community. So therefore, our station in San Antonio looks very different than our station in Jacksonville, looks very different from our station in Detroit or Houston or Orlando. We don't have a Post- Newsweek set. We don't have Post-Newsweek pins. We don't have Post- Newsweek blazers because each station reflects the community it serves and is run by the local general manager.

SEN. MCCAIN: So you have that commitment. But the other people who own stations across the country don't have that commitment.

MR. FRANK: The question is not --

SEN. MCCAIN: Who are headquartered away from Jacksonville, San Antonio, Orlando, Miami/Ft. Lauderdale, Houston and Detroit, stations that you own. You're committed to localism. But the CBS who own some affiliates, they aren't.

MR. FRANK: Senator, the question is not "us versus them." I said before, Mel Karmizan is a good broadcaster.

We have no problems with the way he runs stations. And what I said in my testimony, by the way, was that that CBS-owned station in Detroit does not have its own news department. They now do carry a newscast, as Mel said, from the Paramount station. They just don't have their own news department.

It's not a question of that they're not good broadcasters. The question has to do with diversity and the number of ownership and the number of owners throughout the country. We just don't believe that, if the cap is raised, obviously you're going to have fewer owners. We don't believe that's good policy. We don't believe that's good for the country. We say, "Diversity." We say, "The more the merrier at the table." Others say, "Mine, mine, mine." We think the more the merrier is the answer, not fewer.

SEN. MCCAIN: I won't belabor the subject. But it's pretty obvious to me that your commitment to localism, because you own stations all around the country, should not be any different from that of others who own perhaps more stations around the country. But let me move to Mr. Fuller very quickly.

Mr. Fuller, you were a Pulitzer Prize-winning journalist. And you've been in journalism for over 30 years, as you stated. First of all, what's the state of competition when you entered the business as is the state of competition now? And what specific trends are you seeing, given the emergence of new technologies, particularly the Internet? If I want to know what's in your newspaper tomorrow, I can go, early evening -- and I don't have to buy your paper at the local newsstand. I can go online. The same way with the Washington Post and the same way with every other newspaper in America. I'd be interested in your comments on the state of competition and how it's going to affect your business.

MR. FULLER: When I started in the newspaper business, in order to get into my business, you had to have tons and tons of newspaper presses, a huge facility, a fleet of trucks and a distribution system that go to everybody's doorstep in the morning before 6:00. Today, all it takes to get into my business is a server, a staff to write and report the news and an Internet connection. It's vastly different. That's not even to speak of the national distribution of newspapers that used to not be available in other cities. It's not to speak of the proliferation of cable news. CNN didn't exist when I started in the newspaper business. There were three networks.

The fact is, from where I sit, we're not in a period of concentration. We're in a period of radical fragmentation. And what you're seeing is serious journalistic organizations trying to find ways to deal with that so they can continue to support serious journalism for their communities.

SEN. MCCAIN: I thank you, Mr. Chairman.

SEN. HOLLINGS: I thank you.

Senator Wyden.

SEN. WYDEN: Thank you, Mr. Chairman.

Mr. Karmizan and Mr. Fuller, is it your position that there should be no ownership restrictions at all?

MR. KARMIZAN: I think that my viewpoint should be -- is that the Department of Justice should measure what is unfair competition and that there is the opportunity, within that department, to assess whether or not one company is buying too many. Right now, we go through that process whenever we make an acquisition. And a number of acquisitions that we have made, they have determined had too much control in a given position and we've had to make divestitures.

What we saying is, today the concept of the 35 percent cap and the concept of owning one network of the full broadcast networks, that rule should go away. I have no horse in the race on newspaper, television ownership. But I would support that relaxation.

SEN. WYDEN: But you would be troubled then by the scenario I painted, because the scenario I painted in my opening statement is, if you have all of these ownership rules, you know, lifted, you could have a single, massive media company in this country.

MR. KARMIZAN: No, you couldn't, sir, with all due respect.

SEN. WYDEN: Well, we've done some checking. And if you take this proposal where you throw all of the rules out the window, you start with Time Warner AOL buying AT&T Cable. They could do that. We've reviewed this. And they could buy NBC. And then they start in with newspapers, radio and TV. And your theory is that, somehow, somebody at Justice is going to block some of this. But our analysis is if you get rid of all of the ownership rules whatsoever, you could have this single, huge media entity. And I'm curious whether you think there would be any downsides in that for the American people.

MR. KARMIZAN: Well, with all due respect, I don't think that you could say without the Justice Department. I mean, there is a, you know, Justice Department. There is a judicial -- I mean, there is a whole lot of control that would potentially stop that from occurring. So I don't think you have to worry that that's going to happen. I also don't believe that the marketplace is going to let that happen.

What we're saying is that there is probably, between no regulation and where it is today, room for significant improvement. There is a difference between the scenario you have outlined and the scenario that exists today. There is a huge gap.

SEN. WYDEN: There may be grounds then for coming up with a bipartisan proposal because what concerns me is that I've asked about what's going to happen if you lift the rules completely. And I am convinced we will have scenarios like I've described -- not very many, maybe two of them. But we'll have them. And there may be something in between that and leaving everything exactly the way it is. And that was why I wanted to explore it with you.

Mr. Fuller.

MR. FULLER: Well, I'm most concerned about the restrictions on newspapers, which are hobbling our capacity to compete in the current environment. My inclination is that antitrust law is an effective instrument against undue market power. It's worked for more than 100 years in this country. And it will work in this industry as well. And frankly, it seems to me that the least justifiable place for special restrictions is in the area of expression. It's not the most justifiable area. It's the least justifiable area. We're willing to live with antitrust constraints. And we're happy to live with them.

SEN. WYDEN: You have to have tools that have the opportunity to be effective. And if the United States Congress or the FCC steps in and says, "The sky is the limit," which is what I've been concerned about in terms of those who say there should be not rules at all, I think we're headed for trouble.

Just a couple of other questions if I might, Mr. Chairman? When the cap is lifted, Mr. Karmizan, is there any question that what will happen is the major networks will acquire the affiliates around this country, rather than having to deal with independent stations?

MR. KARMIZAN: Yeah, I think there's a big question about that because if you take a look at where NBC and ABC are today, they're not anywhere near at the 35 percent cap. So if, in fact, there was such an appetite for that to happen, I would suspect that you would be finding all of these companies at the 35 percent cap level. And, in fact, NBC and ABC are not.

I think the concept of an affiliate that is willing to preempt the network and the fact that our own stations aren't looking to improve their local relationship is silly because we, too, preempt the network at our local stations. And they're encouraged to do whatever is serving in their local community. And the other thing that really has come up that's inaccurate -- I wish we were sworn in, in this testimony, you know? The other thing that was inaccurate is what happens when there are some mergers.

So, as Mr. Baker is aware, we own two radio stations in New York City. They're all news radio stations -- WCBS and WINS. Those two news stations have not consolidated. Those two news stations are operated independently. They have a totally separate viewpoint.

And I haven't been in the newsroom of those two stations or CBS -- ever -- other than to congratulate them.

SEN. WYDEN: One last question, if I could, Mr. Karmizan. I want to make sure I understand. It's your view that when networks own distribution channels -- if these changes go through, a network owns the local station -- in your view, this would not end up in any significant changes with respect to priorities for local programming in this country?

MR. KARMIZAN: That's correct because I think the only way that a television station can be successful, the only way it could justify what will be these extraordinary prices that the people who choose to sell their stations are going to get, the only way you're going to justify those prices is if, in fact, you're able to grow that business. And the way you grow the business is by getting higher audience and by having better programming. So think the effect is better programming.

Just one example, if I may? We got back into the business of carrying the NFL a few years ago. And, you know, I guess there may be an argument that says it doesn't matter whether the NFL is available on free, over-the-air broadcasting or is available on cable. We happen to think that it should be on free, over-the-air broadcasting and did our part. The way we justified the price was not the amount of money we would make at the network because we lost money at the network. At the network level, from an accounting point of view -- legitimate point of view, not Hollywood accounting -- we lost money. But what we did do was the stations that we owned contributed toward that profit, as well as some of our affiliates. So I think that you need to look at the importance of the CBS-owned television stations and the profits that they make in supporting the news operation. We have 1,500 or 1,600 people with CBS News. It's not being supported based on the half-hour newscast that we run at night. In part, it's contributed to these other assets that the company has.

So no, I don't think that there is a weakness. I think it's better programming. I think if you were to look in the effect of deregulation on the radio industry, which consolidated more than the television business did. Today there is a little over 1,000 television stations. We own 3.5 percent. We have 35 television stations. I mean, you know, there is room for that and to -- between that and the egregious scenario that you're discussing.

SEN. WYDEN: Thank you, Mr. Chairman.

SEN. HOLLINGS: Very good.

Senator Burns.

SEN. BURNS: I think what we've seen here is a classic discussion between Mr. Karmizan and Mr. Fuller is one looks at it from a news standpoint and the service to the public and the other one looks at the bottom line. And that's the way it should be. We've always had that clash in this. And also, when you had trouble, you know, it's hard to -- it seems a fruitless exercise to lock the barn after the horse is gone. Well, the horse is gone and we've been left with what we're left with, sometimes. (Laughter.) I'll not mention that.

Mr. Fuller, the FCC has an obligation -- (laughter) -- although we all deal with it every day. (Laughter.) Hate to pass that up. It's a great line. Anyway, the FCC has an obligation under the '96 Telecommunications Act to review all of its broadcast ownership rules on a biennial basis. And closing out the '98 review in May of 2000, the FCC put in an order that they would begin rulemaking on broadcast- newspaper cross ownership. Can you tell us what they've done to date? And when do you expect them to act? And to what do you attribute the delay?

MR. FULLER: Well, they've not done it. There has been a change in the administration. That slowed things down. You know, I think that all we've been asking for is that that process go through so that we'll have a chance, in the commission, to have our say. They'll be able to evaluate, in fact, the current state of the market and the current state of the information market and make a decision as to whether these rules are out-of-date or they're not.

SEN. BURNS: You know, I want to bring up something else. I heard everybody is saying that you have an obligation under -- because you're -- and especially the broadcast companies -- radio and television. About you operating over free, over-the-air, you're using the spectrum at no cost. And the American people gave it to you. I think we tend to look back in history, back when radio started, the government asked radio stations to go on the air. They said, "You take this spectrum and you put it on the air." And in the '50s, they did the same thing to television. "Take this spectrum, put it on the air." And especially your company, like WGN, I wish I had Mr. Baker's pipes. You know, I'd still be back in the farm broadcast business. There's only two guys that's got pipes like that, that I know of. And Orrin Samuelson (ph) is one of them, you know, a Wisconsin kid there.

But the government urged you to do that, to put these radio stations on the air. Now, both WGN and even your publication companies in Chicago, they have positions of great prestige. You're looked at as a pace setter in the industry. Tell me -- and then they come up with a cross ownership rule in 1975 -- what has changed? What has changed in the business that would prompt them to look at that differently now?

MR. FULLER: Well, at the time of the cross ownership rule -- and I think we have some leave-behind statistics on this -- most metropolitan areas, including Chicago, had three of four VHF stations, a UHF station or two and that was it. Newspaper had no competition for its want ads. The newspaper had no competition for retail business, with the exception of the over-the-air television, which does a different kind of advertising. And it was a very stable situation.

Today, it's a very unstable situation. We have huge organizations going after our classified advertising business. Microsoft is in the automotive classified business. Monster.com is the biggest provider of recruitment classified in the country. It's not a -- it provides no public service journalism for anybody.

Those changes have been enormous. And I, for one, have spent much of the last 10, 15 years trying to figure out -- and to the chairman's point -- how to make our organization a synergistic one. Because I didn't want to leave behind an organization that was the journalistic equivalent of the railroads because they didn't change and adapt to a new environment and new competitive situation and ended up coming to you to rescue them financially. That would not have been a good outcome, from my standpoint. And so, we're doing what we can to continue to build the economic model for doing great journalism.

SEN. BURNS: Well, I appreciate that answer very much because I think journalism with a great deal of credibility is very, very important right now. And what I see happening in the journalistic end of the world -- Mr. Baker would probably agree with some of this and Mr. Karmizan would too -- that we seem like we have people who are in the reporting business that they want to be the story instead of report the story. And we have to put up with that every day. Everybody wants to get their name on a byline above the fold, front page. And that's very, very competitive, as anybody knows. And so sometimes, we embellish. We want to be the story instead of report the story. And I have fought that.

There is one -- I want to say before this committee -- on any poll that you take in the broadcast industry, and I'm very proud of that organization that I used to be and I'm still a member of it, I think, but they always have, they always carry a great deal of credibility, and that was the National Association of Farm Broadcasters. And because we are a specific, little market, niche market out there, but those people who we serve depend on that news and information, almost on an hourly basis anymore. We carry a great deal of credibility in our business. And we take it very, very serious. And we also take the business side very serious also because that's what enables us to get the news out.

So I want to ask you one question while we're in the yellow zone. Given the choice -- given the choice -- would you rather have the ownership caps lifted or cross ownership allowed? And I'll let any of you just take a shot at that.

MR. KARMIZAN: This will be, obviously, a self-serving thing because I'm not in the newspaper business, so clearly I would like to have the ownership rules lifted. But, you know, I think the competition, as the '96 they found out, was on the local level, right? In other words, you know, the Washington Post may be very important here in Washington, but it's less important in Milwaukee. So the issue is, on a national level, there isn't the same degree of concentration as there is in the local level. So I think there is a greater argument for the national caps to be lifted.

But I would also support the cross ownership being gone, too.

MR. FULLER: And you won't be surprised, senator -- oh, I'm sorry. You won't be surprised, senator, that I'm focused on the newspaper-broadcast cross ownership. And if I could get one done, it would be that, in the interest of future health of the newspaper business.

MR. FRANK: And senator, NASA, which I represent, deals with network-affiliate relations and has no purview at all into the newspaper cross ownership. And so, we're here to talk about the holding the cap on station ownership and retaining the cap at 35 percent.

MR. BAKER: And senator, I don't have a dog in either of these fights, except I'd be delighted to take a job in the farm broadcasting business. I'm sure it pays better than public television. But it is my feeling that neither should be lifted.

SEN. BURNS: Thank you, Mr. Chairman.

SEN. HOLLINGS: I've got to correct the record. We didn't swear the witnesses because we know the witnesses and they'll all tell the truth. (Laughter.) And otherwise, the government didn't ask the radio to go on the air. Wasn't it -- Mel, wasn't it David Sarnoff on the top of that Wannamaker building that picked up the signal from the sinking Lusitania? I think it was. I get him mixed up sometimes with Peter.

But in any event, from 1912 to about 1924, when Herbert Hoover was the secretary of commerce, all the radio stations' wireless came on, jammed each other and the radio industry came to the government and said, "Please, for Lord's sakes, regulate us. Otherwise, nobody is going to be heard." The government didn't ask the radio to go on the air. The radio asked the government to please get us on the air because we were jamming each other.

Senator Dorgan.

SEN. DORGAN: I don't remember it. (Laughter.)

SEN. HOLLINGS: Strom told me. (Laughter.)

SEN. DORGAN: Mr. Chairman, thank you. And I might add also, the government instituted something called the public interest of convenience and necessity test, along with --

SEN. HOLLINGS: Well, that's the big difference. I was going to get to that with Mr. Karmizan with respect to -- you all don't run around now with the Department of Justice. This committee has already confronted the Department of Justice on the test of the Sherman Antitrust; whereas, in the airline business, predatory placing ordinarily is not predatory because the last seat has a de minimis cost. The Antitrust Division has nothing to do with diversity. The Antitrust Division of the Justice Department has nothing to do with the public interest. We have the public interest charge and we have the diversity charge and have had it, unless we do away with it. Excuse me.

SEN. DORGAN: Mr. Karmizan, I was thinking if someone had walked in the door when you said that you have only 3.5 percent of the television stations, they would have thought you a bit player in this debate. An interesting way to describe your position, I might say. I want to ask you about where you think all of this would move in about five years, if we had unrestrained ability to buy and sell in these industries.

Let me preface it by saying that I think the antitrust law enforcement in this country has been a nearly constant and pathetic failure. A decade or so ago, I threatened to put pictures of antitrust lawyers on the sides of milk cartons because I knew we were paying them, but there was no evidence they were showing up for work. I've not changed my mind much about that. I think antitrust law enforcement has been a pathetic failure.

But let me ask you. Assuming that there are no limits, where do you think we end up five years from now?

MR. KARMIZAN: Well, I think we have a better chance of preserving free, over-the-air broadcasting than if there are no choices -- no changes -- and that we're now forced to deal with the fact that the consolidation has totally taken place all around us in this nonregulated area. So there is nobody that's regulating whether or not -- because to your point of the Justice Department about these airlines consolidating and we're losing advertisers and the banks consolidating and the advertising agencies are consolidating. So how does a small -- relatively to these other companies that are consolidating -- how do you sit at the table?

So now, let's assume for a moment that somebody acquires AT&T. And let's assume, hypothetically, it's one of the existing MSOs. We now have to sit with them and get our channel carried because we have 80 percent of our viewers choose to get their programming that way. The chance of the American public being better served exists for us to be able to sit at the playing field -- sitting at the table with having it be a level playing field. So I believe that there is so much competition out there. There are so many choices for the American public. I think sports rights, I think good programs. I don't want to take our most desirable programming and put it on cable because I have two streams of revenue. Because we could do that. I mean, there's nothing that really would stop us on radio, taking it and putting it on satellite radio or taking it and putting it on Yahoo or taking it and putting it on AOL.

But the reason that you put it on free, over-the-air broadcasting is that you can make some money that way. And the way you're going to make money in this world of more choices, there's still 24 hours of the day. So if we now accept that there's 24 hours of the day; there's more choices that people have; they're spending less time with everything; advertisers are spending less money. Well, how do you grow your business? Well, one of the ways you do it is through efficiency. And one of the things that consolidation allows, it allows you to be more efficient.

SEN. DORGAN: I must say, I watch the television in the morning while I shave and brush my teeth. And it's hard for me to really relate to the notion that there are more choices. It doesn't matter which knob on the dial you turn, you're hearing exactly the same thing.

Mr. Baker, Mr. Karmizan, in some ways, makes my point about lack of antitrust enforcement, I think. He says, you know, there has been this robust merger activity in banks, enormous merger activity in airlines and therefore, we must do it. My point is that antitrust enforcement has been pretty pathetic in all of these areas. But Mr. Karmizan says look, just take all the limits off. Or if you didn't have limits, the market system would work just fine. And have the Justice be the referee over here. What do you think happens in five years if all ownership limits are removed at this point?

MR. BAKER: Well, I think that we already have seen incredible, massive consolidation. And earlier, we were talking about the differences between a local broadcaster of the kind of Post-Newsweek stations -- Alan Frank's stations are -- and more powerful, vertically integrated companies like television networks and larger broadcasting entities. I think that being scrupulous in looking at these regulations and in watching how companies can utilize their massive power across multiple distribution systems is one that we have to have great concern about in the American public.

When I was a producer back in my hometown in Cleveland, Ohio, 30 years ago, there were 16 radio stations. There still are today. This is kind of like Senator Hollings' story. When it rained in Cleveland, almost all of the owners of the stations got wet. There were 10 owners and nine newsrooms. Now, those 16 stations have five owners and three newsrooms. So this consolidation is a serious, serious business right now.

MR. FRANK: Senator, if I may?

SEN. DORGAN: Mr. Frank.

MR. FRANK: Currently, as to what folks can own, what individual companies can own, the networks can own, is an interesting list. Here's what can be owned today under the current rules: enough TV stations to cover 35 percent of the nation's households; all the radio stations they can afford, limited only by the local radio-television cross ownership rules; all the cable systems they can afford, limited only by the local cable-television cross ownership rules; all the satellite systems they can afford; all the wireless cable systems they can afford; all the cable network channels they can afford; all the satellite program channels they can afford; all the movie and television production studios and facilities they can afford; all the television syndicated program companies they can afford; all the Internet program production and distribution facilities they can afford; all the newspapers they can afford, limited only the local television-newspaper cross ownership rules; all the magazines they can afford.

It seems to us, under that, what is available now under the current rules, you know, to try and lift the cap on local television stations and putting localism and diversity at risk. It may be more efficient to have bigger companies, but it's not the democratic way. It's not the American system of broadcasting where the local licensee is the heart and soul of what the American system is built on. It just doesn't fit. And a network president said to me, at one point -- not from Mr. Karmizan's network, I would state -- said to me that his vision of an affiliate, network affiliate, was to be a McDonald's franchisee. And I will tell you that's not our vision. Our vision is that we are broadcasters. We are there to serve the local communities. And we think that the cap is the minimum protection we need in this environment.

SEN. DORGAN: Mr. Chairman, if I might just ask one additional question? I thank you for your responses.

Mr. Fuller, you raised the issue of -- quote -- "serious journalism" -- unquote. And Thomas Jefferson described the role of a free press in the sustaining of a democracy and how important it is. In your judgment, has -- quote -- "serious journalism" -- unquote -- suffered in the last five years?

MR. FULLER: It's a very mixed picture. In some ways -- in fact, we were just talking about this when we were coming over to the hearing. In some ways, the great newspapers, many of the great newspapers of the country, at the time when I started, did things that would make us blush today.

SEN. DORGAN: I'm talking about the last five years, however. I'm talking about since the '96 Act, since all of this merger activity.

MR. FULLER: Well, I don't think that, in the newspaper business, there has been any significant change in the quality of journalism over the last five years. There has been cost pressure in some places. But I think, you know, the standards have been upheld pretty much.

SEN. DORGAN: Just make an observation -- in Grand Forks, North Dakota, I believe it was last week or the week before, there was a picket line, including reporters, outside of a newspaper that is owned 1,500 miles or 2,000 miles from Grand Forks, which is the case with most newspapers in my state that are owned by out-of-state interests. And they were constantly cutting and cutting and cutting. And finally, we had the spectacle, which you very rarely see in North Dakota, of a group of people holding pickets outside of a Grand Forks, North Dakota newspaper.

Mr. Baker, would you just answer the same question, with respect to serious journalism?

MR. BAKER: Well, I don't know. I think, senator, that's a fair question, but a tough one to answer. So I don't really have an answer to that. All I can say is that, certainly, pressure on the bottom line, at every level -- in journalism, in electronic journalism, in newspaper journalism -- I think it has been widely reported that this is a serious matter. People just don't have the time. There are fewer people doing more work. My brother, who has been a TV news cameraman, like these fellows here, for the last 35 years in Ohio, said that he is now doing the news for two television stations. And he says that he just doesn't have enough time to get the job done the way he'd like to get it done.

SEN. DORGAN: I thank the panel very much.

SEN. HOLLINGS: Senator Fitzgerald.

SEN. FITZGERALD: Thank you, Mr. Chairman. I wonder if any of the panel, speaking with respect to the cross ownership rule, would know whether there was some industry or group of individuals that was lobbying the FCC to impose that cross ownership rule back in 1975. Would anybody know the answer to that?

MR. FULLER: I really don't.

SEN. FITZGERALD: Nobody knows. Because just from my experiences around here, most of these ideas for these regulations or restrictions don't just pop into some regulator's head. There is normally somebody advocating them. I'm struck, I guess, by the fact that at one time, back in the '40s or late '40s, the FCC was actually encouraging publishers to buy broadcast stations or invest in broadcast stations. And that's how the old Colonel McCormick, I guess, at the Chicago Tribune, started WGN. Is that correct?

MR. FULLER: That's exactly right. He was a pioneer and bought an experimental radio station in WGN Radio, which wasn't requested by the government. But later, in the television -- at the beginning of the television era, the government did encourage publishers to start experimental stations and the colonel did start WGN Television. I suspect that those early enterprises were like Internet enterprises are today. They weren't very profitable. They were probably big losers for a long time. And what the government was attempting to do was get people with some financial resources to give it a jump start.

SEN. FITZGERALD: And so there were no restrictions then until 1975 when that cross ownership rule. Are you aware, Mr. Fuller, has there been any finding of abuse or domination or monopolization in a market by any of the existing companies that have cross ownership that were grandfathered from the original rule?

MR. FULLER: To my knowledge, there has not been any significant complaint from the few markets that have had cross ownership. Typically, those markets have produced -- or those television stations have been pretty good ones and serve the communities well. And there has just not been a lot of complaints.

SEN. FITZGERALD: None of them have had their licenses yanked, as far as you know?

MR. FULLER: None that I know of.

SEN. FITZGERALD: Would you favor -- does the Tribune favor lifting the cap entirely or relaxing the cap to some extent?

MR. FULLER: You know, the fact is, I only really know for sure the kinds of markets that we are in. We typically are in pretty big, major metro markets. That's pretty much where our focus is. And I know for sure, in those markets, there is really no justification that I can see for the cap. My inclination is that, in everywhere, there has been a proliferation of means of people getting information. And even in my, you know, grandparents' old home in Central Illinois, where we were -- we practically had to listen to WGN for anything in those days. Now everybody's got computers operating and they're getting farm information and so forth from hundreds of different places. I suspect that, by analogy, it's probably the same in most places. In the big metro markets, it's kind of a foolish rule anymore.

SEN. FITZGERALD: Mr. Baker.

MR. BAKER: Yes, senator. I just -- I don't know what the answer is to this. But I would just like to add this thought and that is tied to this concept of the Supreme Court of diverse and antagonistic voices in a market. It just strikes me -- and I just ask this committee to think about this. It just strikes me that if reporters are from two different companies or from the same company -- a television station and a newspaper -- and they both get compensation with stock options or bonuses at the end of the year and they attend the corporate Christmas party.

Is it possible? Certainly, it's possible, I suppose, to be antagonistic to one another and to show totally separate points of view. But it might be a bit harder. And I just ask you to think about that issue.

MR. FULLER: I can give a couple of examples. In Chicago, WGN Television, our great partner, took considerable glee -- at least by the lights of the editorial department of the Chicago Tribune -- when one of the editors of the Tribune was arrested in a humiliating way. The story led the newscast of WGN Television at 9:00 at night. I don't think you'd find WGN believing that our television critics are overly kind of WB programming. And I know that if you ask most Cubs fans whether the Tribune is slanting it toward the Cubs, you would hear very few people saying they thought it was doing that. In fact, most people think we're more antagonistic toward the Cubs because we own them.

SEN. FITZGERALD: Mr. Karmizan, with respect to the ownership caps nationwide, the caps right now are 35 percent. And that 35 percent means that you cannot be available to more than 35 percent of the nation's market. But at any one time, what percent of the market -- of the whole country -- is actually watching one of the stations that you own?

MR. KARMIZAN: Unlike the rule as it applied to cable, which the court just set down, you can own 30 percent. In that particular case, the cable system is reaching fully to 30 percent of the households because every market, there is 80 percent of the people in that market that are subscribers to the cable system or 70 percent. We would typically have an audience that might be 10 or 12 percent. So within the market, if in fact New York City accounts for six percent of the population, we may be reaching 15 percent of that six percent. So realistically, we're not reaching 35 percent of the country with our local programs.

SEN. FITZGERALD: And that would be less than 30 years ago, too, wouldn't it, that you're actually reaching?

MR. KARMIZAN: It's far less today than it was when I first started in the business. Absolutely.

SEN. FITZGERALD: I guess, if I think about an analogous situation in banking, I have a background in the banking profession, there is a Justice Department rule that no bank may have more than 10 percent of the deposits in a given area. But that's how they phrase it. You can't have the actual deposits. But as far as being available to people in the area, I would think there are companies like Citibank that would be available to almost everybody in Chicago -- available probably almost to everybody in a major metropolitan area, anywhere in this country. Would it make more sense to structure the rule, instead of who your stations are available to, to look at who is actually watching it? Because you're going to be available to lots of people who aren't actually watching it.

MR. KARMIZAN: Senator, we truly believe that the argument is there for the cap to be just eliminated and that there should be no national restriction.

SEN. FITZGERALD: Have you done a First Amendment challenge like the cable owners did and successfully?

MR. KARMIZAN: Well, I can't tell you successfully, but the court has stayed the enforcement of the 35 percent cap. And we --

SEN. FITZGERALD: That's why you have 41 percent.

MR. KARMIZAN: That's why we have 41 percent currently. And we believe that we have oral arguments, I believe, in September on it. So, you know, we're optimistic. But we would like to see there be no cap. But, you know, if what you're talking about -- the proposal, as it related to the similar to the Citibank -- is certainly more workable than the 35 percent cap because it's just a misnomer. You know, we're not reaching 35 percent of the people. I mean, there's no television station that reaches 100 percent of its market.

SEN. FITZGERALD: Right. That would seem to make more sense if the cap were not lifted entirely.

MR. KARMIZAN: I see that viewpoint, sir.

SEN. FITZGERALD: Thank you, Mr. Chairman.

MR. FULLER: If I may rebut, sir, for just a second? You know, the way the measurements work, a show like "Survivor" comes along and the ratings of CBS -- thankfully for the CBS affiliates that we have -- goes significantly up. The system that we operate on has been in place for many years. And in fact, if you do reach, the networks reach almost 100 percent of all the available audience every week. And that's good for the country.

The problem with raising the cap or eliminating the cap is that you're talking about a different subject here. You're not talking about reach because CBS is into 100 percent; NBC, ABC, they're into basically 100 percent of the homes now with their affiliates. What you're talking about is changing the balance of the local American system -- of the American system of broadcasting, which is based on strong networks and healthy, strong affiliates as well. And if you don't have a balance of power between them, if you raise that cap at all, then the local affiliates have no way to participate in that. In fact, if the cap went to 45 percent, just as a for instance, that would mean that a network could own stations in the top 20 markets, every one of those markets. And that would mean then that, in fact, the affiliates would have no say at all at the table, no moderating influence, no discussion at all about things like a baseball game versus the --

SEN. FITZGERALD: Could I follow up? I know my time has expired.

SEN. HOLLINGS: Go right ahead.

SEN. FITZGERALD: The networks have always had a dominant share of, say, national news -- the NBC, ABC and CBS nightly news. They basically had a monopoly on that 30 years ago, as far as television broadcast national news. The local news is balkanized because there are local media markets. In my state, there's nine of them, I think, television markets. You seem to be concerned not with any kind of a domination at the national level because, as you pointed out, the networks reach into virtually 100 percent of the homes. Are you not concerned about them controlling national news, but you are concerned about them controlling local news?

MR. FULLER: Well, the fewer owners that you have of local stations, you lose the ability of making independent decisions. You have fewer people at the table.

SEN. FITZGERALD: Why are you concerned about the local news and not the national news?

MR. FULLER: Nationally, it is what it is at the moment. And the cap has no effect on how that operates at this moment. What you're talking about the cap, the ownership cap, is the percentage of stations that one company can own throughout the country.

SEN. FITZGERALD: But shouldn't you, to take your logic, to be perfectly consistent, you should not only want to continue the ownership restriction so that there is not a domination around the country in the small markets, but you should want to do something to address the monopoly on national news that I think the networks really have and certainly had, to a far greater extent, many years ago.

MR. FULLER: Again, sir, we believe that the ownership cap issue has to do with diversity and localism and the ability of having many owners participate in the choices made by people around the country, and not a few.

SEN. FITZGERALD: Thank you, Mr. Chairman.

SEN. HOLLINGS: Senator Breaux.

SEN. JOHN BREAUX (D-LA): Thank you very much, Mr. Chairman. Thank the panel. Sorry I missed your oral presentations. I have two points I want to get into. First, I think the argument on localism is a smokescreen because in my state of Louisiana, I've got about 30 stations. The vast majority of them are owned by people in New York and California and Texas, whether it's a CBS affiliate in New York or whether it's Hearst-Argyle conglomeration of affiliates around the country. I think the real issue here is the bargaining power between the affiliates and the networks.

If we want to get down to it, I think that you can always talk about localism.

We have more local news now on stations in my state and here and everywhere else. And that's good. It's good because the stations -- whether it's an affiliate-owned or a network-owned station -- that's good broadcasting. It's good business. People buy ads when you see local news being covered and community affairs being covered. And that's true whether it's a CBS-owned station or NBC station or Hearst- Argyle station or Post-Newsweek station. They're going to put local stuff on because it's good business.

And I cannot fathom the argument that somehow, some large affiliate group in New York owns stations in Louisiana, that somehow Louisiana is being better covered from a local standpoint because someone in New York owns them, versus CBS in New York. They're both in New York. And they both carry local stuff because it's good business. It's good policy. It's good business. You sell ads. People want to see what's on the local news. They love the local newscasters. They love seeing local community affairs covered.

So I think this whole argument on localism is a smokescreen, as far as the real issue being the bargaining power between the networks and the affiliates. And I understand that. But I don't think that localism is any better served by a group in New York that owns my stations in Louisiana versus a network in New York that owns my stations.

Mr. Frank, can you comment on that?

MR. FRANK: Thank you, senator. I've said all along during the hearing that, you know, this is not anti-network. We appreciate people like Mr. Karmizan. They're good broadcasters. The question is, how many people, how many owners are you going to have? Who's going to make the programming decisions in America? It just seems to us that it's clear that the fewer owners you have, the fewer people make the decisions, it's simply not good policy.

Affiliates are good moderating influences with the network. They're disciplining influences. And this happens every day between the affiliate boards and the network. Every week, we talk about different things. Networks make decisions.

For instance, NBC fed the XFL games this year. And in spite of network -- in spite of affiliate protest, there was one feed, an 8:00 game, every night for 13 or 15 weeks, whatever the season was. That meant that, on the West Coast, those games started at 5:00. And in spite of heavy affiliate protest, that meant that every week, throughout the whole season, there was no local news on any of those stations, any NBC station, because they were carrying the XFL.

SEN. BREAUX: Mr. Karmizan, could you comment on that?

MR. KARMIZAN: Sure. I guess it proves that this has nothing to do with the ownership cap because right now, NBC is under 25 percent of the country. And obviously, if the existing relationship is -- between the network and the affiliates -- is so strong this way today, then why did they not have the influence against NBC? I think it has to do with some group owners don't want us to compete to buy TV stations because if we're not at the table competing, maybe they can get it smaller. Because, I guess, it's possible for one group owner, under 25 percent of the cap, to own maybe televisions -- 100 television stations in the smallest markets in the country. So, you know, there you'd have one person have 100 stations. And that, I guess, would be okay because it's not the ones that are the ones that the major group operators are interested in.

I think the localism, you know, is absolutely not accurate. I would argue that when we look at a Post-Newsweek station -- we have a great TV station in Jacksonville and we have a great TV station in Baltimore -- you know, you couldn't tell which one is a Post-Newsweek station and which one is a CBS station. Both are local. Both preempt the network when it's appropriate. And both are serving, you know, their respective community.

SEN. BREAUX: Let me ask the second point, is the question of the cap -- and I think Senator Fitzgerald had talked about this -- it used to be and again it was that you could only own three stations. Then we moved it up, I think, to seven stations. Then we moved away from this concept of how many stations you can own to what percent of the audience in the market versus the country that you could potentially influence. We're now at 35 percent. But it seems to me that the 35 percent is a number that has no meaning.

Mr. Karmizan, you had talked about CBS having 10 percent of the actual viewership. The Nielsen ratings that we've seen say it's -- wouldn't want to tell your advertisers that, but it's a lot less than that. And I mean, all the networks, I mean, around three percent of the actual audience watches that station and that feed from that network, as opposed to -- you may be in a market that, you know, you're covering 35 percent of potential audience. But if you've got a cable in that area, which you would, with 125 different channels at any one time, you probably average out maybe three percent of the actual viewing market. So, I mean, I think the 35 percent, if you're going to have a standard, it ought to be, I think, based on something that's realistic -- i.e., what percent of the market actually looks at the broadcasters or the affiliates in this area.

Is there any way it can be, if we're going to have a cap or whatever the number might be, that would be more accurate a reflection of the market influence and potential, other than just a number that only relates to potential audience?

MR. KARMIZAN: Well, taking a look at the radio as an example and taking a look at what was thought about in 1996, the belief was that the area of concern was not the absolute number. You know, so what if somebody owns a station in every single market in the United States?

SEN. BREAUX: Nobody listens to it.

MR. KARMIZAN: Yeah. I mean, there's so much other competition. There are so many other choices. That didn't seem to be a problem. So, you know, again our viewpoint is that, you know, if in fact we owned a television station in every market in the United States -- something that we would not have a business interest ever of doing; we like to be in big cities and big markets -- you know, if we owned 212 television stations, you know, that would not present in any given market any concern to anybody locally in that market because there would be so many other competitive choices. You know, our position would be that there should be no cap. If there were a cap, it should be more related to what we reach, not the hypothetical number of how many people live within that market who conceivably could get that station.

SEN. BREAUX: Thank you, Mr. Chairman. Thank you.

SEN. HOLLINGS: Thank you very much.

Senator Allen.

SEN. ALLEN: Thank you, Mr. Chairman. And let me commend you on holding this hearing on these important issues. Let me say at the outset, I very much value local broadcasters. As governor -- and I know Senator Hollings, when he was governor, understood the value of local broadcasting for the local events, the news, natural disasters, local causes and so forth. And I think that's very important. And I come from that point of view.

I also think it's just great for consumers these days, all the competition there is, with satellites and cables. And it's not just the three networks. There's now Fox and CNN's done a great job. I think people love contentiousness. That's why "Crossfire" does so very well and "Capital Gangs (sp)" and "Hannity and Colmes" and so forth. And then people like diversity. In fact, it all started on PBS with the "McNeil/Lehrer Report." They liked having people, you know, give each point of view.

And there's plenty of things for the family channels and Nick, which my children thrive on, as well as the nature channels. And then, of course, with sports -- and I do watch the networks mainly for local news and sports. So it's smart of you to get the NCAAs and the NFL, as far as I'm concerned. And I do watch WGN because I like the White Sox and the Cubs. And there's a variety of others.

At any rate, the issues here is the broadcast cap. The other issue is the newspaper cross ownership issue. And a third issue, while listening to all of you all talking about wanting to get into the big markets, is an issue that has arisen in broadcasters from our Commonwealth of Virginia in smaller markets that have to do with the small market ownership restriction rules. They call them duopolies.

And I'd like to hear your views on that.

Senator McCain and Senator Breaux and Senator Fitzgerald went through all the litany of how things have changed. And things have changed. And we need to be realistic on it, as far as the smaller, smaller market share for national broadcasters. And I'll not reiterate it, other than to say there's more competition. There's more choice for viewers.

On the issue of the newspaper cross ownership, newspapers have faced some challenges with all this competition. There's fewer newspapers. And yes, they are more consolidated. But nevertheless, I see no logic in restricting a broadcaster from -- ownership of a broadcasting station to be owned by a newspaper. I see absolutely no logic whatsoever. I know there is efficiencies. But just as a matter of philosophy and principle, what does it matter, with all this choice and competition?

And so, I see nothing -- I don't know what the legislation will come up with. But certainly, on cross ownership of newspapers and broadcasting, I see no reason why that outmoded approach would stand. And I think it actually would benefit consumers where broadcasters and newspaper owners face financially challenging conditions, in the newspaper business and also in the local broadcasting area.

So that brings me to the issue that I'm personally interested in -- and if legislation is going forward in this area, I think it's closely related -- and that is folks that were talking to me, broadcasters from generally the Southwest Virginia or Upper East Tennessee area, the Bristol/Johnson City/Kingsport/ Elizabethton area, where they'd like -- or the Tidewater area or the Roanoke/Lynchburg area, where there are specific restrictions on these small market owners that, if you have fewer than eight stations, then you cannot have cross ownership. Now their concern is that it prevents them -- the restrictions that are put on small markets, it restricts them on producing quality programming for that community; whereas, the big city areas, the larger markets, don't have these same restrictions. And I think that these local television managers confirmed, in some cases, with limited facilities, but also getting revenue sharing. That would help keep struggling stations alive, with better programming and more diversity, as well as quality available to the viewers in some of these small markets. And so, I'd like to see if we can seek some redress to that to treat smaller areas, smaller market ownership, the same that all the big areas or larger markets.

So in sum, I very much agree with some of the comments of Senator McCain and Breaux and Fitzgerald. And we have some of these matters are addressed by the must-carry rules on cable. There's pending litigation on the issues of the 35 percent cap. I'm going to continue listening to that. I haven't made a decision one way or the other on that particular issue, but been listening to all the arguments.

On the issue of newspaper cross ownership, boy, that's an archaic rule. And I think that ought to be removed if it takes legislation. And I do think we need to relax the restrictions on smaller market ownership. And I look forward to working with members of the committee on a variety of issues here. And I commend again the chairman for having this hearing.

I would just like to ask, since you all have given your views on the caps and the cross ownership issue, and in listening to you, Mr. Fuller, carrying on very persuasively, expressing your views on restrictions, and I'd ask Mr. Frank and Mr. Karmizan as well, what would your views be on relaxing these restrictions on small markets, so-called duopolies? Would you all support addressing that?

MR. FULLER: The Tribune has supported relaxation of the duopoly rules.

MR. KARMIZAN: Again, we don't have any stations in the small markets, but we fully support it. I think there may be a situation where, if there is five stations in a market and they can't take advantage of duopoly and consolidation and they had five newsrooms in those stations, there's a risk there will be zero newsrooms, as compared to there being one or two. So I think that small market television, small market radio -- my son owns five radio stations outside of Madison, Wisconsin. And his total revenue for his five stations is like about $2 million. And believe me, he needs consolidation in order to be successful. So I would definitely support it.

SEN. ALLEN: Mr. Frank.

MR. FRANK: Senator, we -- NASA has not taken a position on duopoly. It is a matter of a lot of debate. Personally, I testified against duopoly some years ago in front of the FCC. But once the rule was passed, obviously, it's the rule that we have. And many broadcasters participate in it. And people are looking into ways to make it work.

SEN. ALLEN: If I may, Mr. Chairman?

SEN. HOLLINGS: Go right ahead.

SEN. ALLEN: So your position personally is that you personally don't like that restriction, but your association has not taken any position in favor or in opposition of any changes to it?

MR. FRANK: Yes, sir. That's correct. Our association deals with network affiliate relations and concerns. And duopoly is not on our list.

SEN. ALLEN: Thank you, Mr. Chairman.

SEN. HOLLINGS: Very good. Let me, on behalf of the committee, thank you very much. You have made a valuable contribution. We appreciate your appearance, and we'll keep the record open for any further questions by other members who could not attend, and very, very much thank you.

We have a very important second panel -- Gene Kimmelman of the Consumer's Union and Mr. Eli M. Noam -- Dr. Eli M. Noam, Professor of Finance and Economics of the Columbia Institute of Tele-Information.

Dr. Noam, Mr. Kimmelman, it's sort of unfair with these large committees, we used to have six and seven, thirteen -- now we've got 23 members. And with the questions and the answers from the complete panel, we never can get really past one panel. But, we are grateful for your patience, and we'll have a little order now and be glad to hear.

Mr. Kimmelman, if you can start us off, or Dr. Noam. And the reason I'm hastening along too is because I understand they may have a roll call at 12:00.

MR. GENE KIMMELMAN: Thank you, Mr. Chairman. On behalf of Consumer's Union, publisher of Consumer Reports, we once again appreciate the invitation to testify, and support your efforts to make sure that --

SEN. HOLLINGS: Move that microphone a little closer there. Thank you.

MR. KIMMELMAN: We want to, on behalf of Consumer's Union, support your efforts to ensure that before any of these very important media ownership rules are adjusted, modified or eliminated, that the expert agency, the Federal Communications Commission, has truly done its homework and evaluated the market realities that pertain in media markets. All the witnesses, and I believe all the members of the committee, have endorsed the very principles that consumers believe are at stake here: promoting competition, diversity of ownership, and meeting local community needs. And these media ownership rules have been absolutely critical to meet those goals in the past.

But the market has changed, as many of you have pointed out today, but not quite in the way that some would have you believe. To understand how these markets work, you can't just through everything together and say everything is equal. Mr. Karmizan spoke quite a bit about outlets. But it's interesting, when his boss, Mr. Redstone, comes before Congress or files an antitrust lawsuit, he talks about market share and influence. That's what Viacom looks at, and that's what we should look at here. That's what the committee should look at. That's what the FCC should look at.

Nightly broadcast network news has 25 million viewers every night. All of the other cable news channels all put together -- 3 million. Add the Internet, hardly anything more. Newspapers are monopolies -- monopoly outlets in 98 percent of communities in this country. All statistics still show that the two most important means by which consumers receive news and information is television and newspaper. So this isn't an issue of whether a lot of broadcasters should own a whole lot of newspapers in the community. There's only one newspaper. And if that newspaper owns a broadcast outlet, that's the issue.

And whether you support giving away the airwaves or auctioning them off, it's not the broadcasters who talk about that. It's not the broadcasters who want to have public debate and discourse about that. It's been in the newspapers where that debate has occurred, and that's the danger of lifting that restriction right now. We've heard a lot of talk about variety. There's enormous variety out there. That's not the important issue when you're promoting diversity in policy at the FCC. The issue is who owns it. You can have all the variety you want from a monopoly, and unless you have a benevolent dictatorship, you don't necessarily meet community needs.

We have a lot of variety on the Internet, but AOL Time Warner now controls a third of the hits on the Internet. You look at primetime television. That's what people watch. That is predominantly owned now by the national broadcast television networks -- that programming, since we eliminated the financial interest and syndication rules. And you add together the top cable companies and the top broadcast networks, and almost all of the most popular 10, 20, 30, 50 channels, are controlled by those national networks and the largest cable companies.

And when we hear talk about the first amendment, it's not just the corporate free speech rights, but the public's rights, as you pointed out, Mr. Chairman, to an open marketplace of ideas. The corporate rights are given through privilege by this Congress -- the rights to the airwaves, rights of way. You know how to restrict them. The courts have supported you in doing so. You could've made any one of them common carriers. Telephone companies are. They can't control what goes over their networks, and the courts have said that is within the purview of first amendment commerce clause rights of Congress to regulate for the public's interest. You could do that here to, and that's what's at stake, the public's right to freedom of speech.

And let me give you an example that explains why all this variety out there -- all these outlets don't solve consumers' problems. Everyone recalls the dispute last year between Time Warner Cable and ABC about carriage of programming. Well, just think about it from the consumer's perspective. These are two big giants. These are the ones Mr. Karmizan is talking about competing out there. If Time Warner were to win, consumers would have lost programming, but Time Warner could have still raised their cable rates. If ABC won, which it sort of indirectly finally did and had it's programming on, good for consumers, but Time Warner could just keep on raising rates.

What we have in these markets is not direct competition. We have separate market segments adjacent to each other. And what we're seeing more and more, without competition in transmission or distribution, is that the giants in the media business are not competing for consumer's interest. They're not competing to drive down prices and to offer consumers more of what they want. It's a competition of sorts. It's a fight. It's a fight over who divides monopoly profits, and that's the problem here. We need to go back and look at market structure.

Now, it's our view that it's absolutely critical for the Federal Communications Commission to go back and do a careful analysis. It has not done so in the past. It is now time to do that. But before the FCC considers changing these media ownership rules, we want to make sure that any alteration, any modification or elimination, still meets those public interest goals of competition, diversity of ownership, and meeting local community needs. Chairman Powell has indicated that the marketplace is good enough. As you point out, Mr. Chairman, I'm not sure that's consistent with the law.

But I know one thing, the empirical research does not support the view that the marketplace itself, and it certainly never has in the past, provides diversity of ownership automatically, meets local needs automatically. And in this case, we don't even have anywhere near a competitive market. We've got massive consolidation within each communications and media sector that wants to gain a larger segment, but not compete head on. So, Consumer's Union very much supports your effort to make sure that before the FCC modifies these rules, it gets the facts, gets the facts right, and makes sure that we're still preserving these important public interest principles. Thank you.

SEN. HOLLINGS: Very good.

Dr. Noam.

MR. ELI NOAM: Thank you very much, Senator. Thank you for dealing with this important issue. Yes, there have been a lot of mergers. Some are troubling and some are not. But going beyond the specific deal, the more important question, I think, is in the aggregate, have American media become more concentrated. Because if we deal with that question, maybe we can relax a little bit about the issues before us. Despite the conventional wisdom, the answer is not an obvious yes to the question of media concentration, because while the fish in the pond have grown in size, the pond did grow too and faster. The growth of the information industry has been eight percent, compound annual faster than inflation since 1987.

Now, second, there have been a lot of new fish. Some of today's giant companies, such as AOL, or Microsoft, or Viacom, or Qwest, hardly existed 20 years ago or didn't exist at all. And at the same time, some of the old media giants, the empires, have imploded -- such companies such as RCA, or the original CBS, or Hearst, AT&T. And I wouldn't be surprised if, in the future, we'll say the same thing about Fox, or Disney, or Time Warner, or Viacom. Maybe, Senator, you would call this an anachronistic synergy that is taking place. Companies growing more than they can manage -- kind of growing around some kind of charismatic founder-type individual who puts it all together. But when he steps off the scene, companies cannot manage the way they did before.

So, when it comes to concentration, there are lots of strong opinions. But the numbers are scarce. And, therefore, at one study at Columbia, we collected market share numbers, industry-by-industry, company-by-company, for 60 media and information sub-industries from book publishing to film production, to Internet service provision and consumer electronics, in order to trace the concentration trends since the early 1980s, after the AT&T divestiture. It's probably the most detailed study of media concentration in America.

It was confirmed by another empirical study from Penn State and Harvard. Unfortunately, we did the study three years ago, and I was invited here only three days ago, so it's not quite up to date. But what we did find was that the overall concentration of the entire information sector, which is more than mass media, including for the moment -- and I will get to the other details -- including the telecommunications and the IT sector, did not increase, but declined somewhat over the past two decades. Or rather, first it went down, and then it rose again, but not to the level that existed before. Now if that surprises you, just remember that 20 years ago, in that supposedly golden age we seem to have lost, there were three major television companies, there was one computer company, and there was one telephone company.

And today, while nobody would argue that the industry is greatly fragmented, there certainly is more than there used to be before, although a bit less than there was two or three years ago. Now, for mass media -- the classic mass media -- television, cable television, and so on, concentration has increased. I don't have the time now to go through the details. In some industries it went up. In some industries it went down. Take, for example, radio, which is the classic example everybody gives for explosion of ownership. Yes, it is true. It kind of more than doubled in the last five or six years, and that should be disturbing. But at the same time, the largest of the companies owns only 11 percent of all stations, and it accounts for 15 percent of all revenue, which is only 15 percent of all revenue, according to a Deutsche Bank, L.X. Brown (ph) study.

And, furthermore, there are these other technologies, and here I agree with Mr. Karmizan. I, for example, kind of listen to radio more and the Internet than over the air. And the reason is party because I like country music, and in New York City, despite 35 stations, you cannot get country music. At least you couldn't a while ago. Mr. Karmizan doesn't give it to me, but Yahoo! does. Now, obviously, I can't do this in the car yet, although that's also clearly going to come. But there are alternatives. There's satellite. There's cable, and there will be more. So, I think the real issue of radio ownership actually is not so much the national ownership issue, but it's the local issue. It's whether company should have eight stations in the same market. But the national concentration issue is kind of largely secondary.

Now, does this mean that there is no concentration problems? No. As I said, it's probably more local -- in newspapers, in telecommunications, in cable television, which is why a cap on cable ownership can be more easily justified than for broadcasting, when no local market power exists in the aggregate that could exclude channels in the way that the largest of the cable companies could. But when it comes to the broadcast industry, I really don't see why the national cap is going to do very much. Today, the four major networks have barely 50 percent of the audience -- keep shrinking. They're a shadow of their former dominant and domineering self. They're getting paler all the time.

Most of the audience is watching not over the air anymore. And if one additional Supreme Court justice changes his view and votes against broadcast TV must carry rights, the industry -- the broadcast industry would be going into a tailspin. Cable operators will do separate deals with the major networks and syndicators for direct program feeds, bypassing local broadcasting system -- will gradually create or contract with local providers, such as newspapers, for news programs. And as that happens, broadcast stations' spectrum rights will be its most important asset, not its broadcast operations.

So, let me just, for interest of time, drop a lot of what I had to say. But to conclude, it seems to me that if you want very badly to achieve local content, there are approaches that are more direct than working through ownership, such as -- if you really want to do that -- a certain amount of local program production as a requirement of licensing, or an open time slot for local access to television, or the licensing of additional broadcasters such as low-powered television, or the right to reply. Now, those might not be things that we want to do, but the fact that most industry proponents of localism do not advocate such direct policies, such localism, tells me that this fight isn't really about localism.

And if that's the case, then government officials should not become the arbiter between several media industries on how to split the pie between the Viacom and the Post-Newsweek group, et cetera, et cetera. And, similarly, I think that media industries that cherish their independence should not call for the government to regulate them. It's really asking for trouble. So, I would not perpetuate the old rules of national broadcasting ownership caps in an environment of new media. Thank you very much for your kind attention.

SEN. HOLLINGS: Thank you very much.

Senator Breaux.

SEN. BREAUX: Thank you very much, Mr. Chairman. I did want to hear both of these gentlemen, because neither one of them have an economic stake at this. I mean, everybody else at the previous table, you know, represented millions of dollars and legitimately of interest in what we do here. And both of you sort of can stand back and give us a perspective that's not influenced by the bottom line of what happens with regard to the ownership issue.

Mr. Noam -- is it Dr. Noam? I want to pronounce it correctly. You have your statement something that I had said, and I didn't notice it before. But I said that this local ownership really is a fight not so much on local content, but really on the bargaining power between the affiliates and the networks. What do you mean by that? I mean, I agree with it. It's what I said and it's in your testimony. Explain and elaborate what you mean by that statement.

MR. NOAM: Well, there are several industries that are involved here. One is the providers of syndicated programs that would like to deal with kind of a large number of local stations rather than a smaller number of buyers. There are the local station groups that I think, as some of the witnesses already mentioned, do not want to necessarily -- to compete for other stations with the largest of the buyers, and the affiliates more generally, who want to have more power or more bargaining power relative to the networks. And I understand all these motivations. From their perspective, it's a perfectly logical behavior. I just don't think that there's a great deal of public interest in terms of content that is attached to that.

I think that, and in fact I kind of agreed with your point earlier that you made, namely that if a station, whoever owns it -- a large station group, a small station group, or a national network -- if it's well run, then it should more or less follow some very similar principles of what the audience wants to see, because they're kind of fighting nightly and every afternoon for the audiences, and every morning. And so there shouldn't be any difference. If the networks somehow don't serve local markets well, presumably they don't -- kind of doing a good business, and eventually they will go out of business, which in fact has happened to some of the networks. So, there are real self-correcting market forces here.

SEN. BREAUX: Mr. Kimmelman, I used an analogy whether a station in Louisiana is owned by CBS in New York, or owned by Hearst-Argyle, for instance, in New York. It seems to me that it's a New York owned station and what they're going to do is try and serve the needs of the local market in Louisiana in the most profitable manner that they can, and obviously that means having a lot of local content. Do you have any problems with that as a principle? I mean, it just seems to me it doesn't matter whether it's Hearst-Argyle or whether it's CBS owning it. They're both going to have to do what's best to be successful in running that station.

MR. KIMMELMAN: Well, Senator Breaux, I think it's a good point, but I think there's one fundamental economic factor that's missing from the equation, and that is a national broadcast network, and they have lost 50 percent market share, but they still are the biggest player in primetime -- the big bucks, the big advertising dollars. They need to get their programming on locally, period. And they don't have limitations on what they can own and syndicate, so their programming is preeminent. Even a New York owned set of stations that's trying to local needs, has slightly different economic incentives. They want maximum eyeballs, maximum viewership in that particular community, or five, or six, or eight, but not nationwide. And that can have a very significant impact on the programming you select during primetime, when most people are watching.

SEN. HOLLINGS: Will the Senator yield? On this important point, isn't it a fact, Senator Breaux and panel, is whether or not you own content? Now, you mentioned CBS and they've got content. They've got production facilities. The FIN/SYN rules have been abolished, so they're pushing content. Whereas Hearst, you said -- they're both in New York -- but these group ownerships, they don't have content, so they're not pushing it. And I find, from the local folks and everything else of that kind, if they can adhere to the localism, which we both agree is of tremendous value -- it's been put in. You used to have to come up and justify your relicensing and show how many public interest shows you had and everything else.

But where they've got just affiliates, the affiliate is being harassed by the network owner because they've got content. It's just like the morning programs and the evening, they're advertising movies all over the place. I couldn't go on to "Want to Be a Millionaire." I think I could do pretty good on the answers, but I just don't get to the movies, and they'd get rid of me about the third or fourth question up about who played the leading part in such and such a movie. I mean, they're promoting them regularly. More people are going to them, and it's a money making promotion proposition of content, which is taken away. It's not that both of them come from New York and it's an affiliate thing.

But, John, isn't it the affiliate's fight because they do have content where Hearst doesn't, and they just want to see the station succeed? And as you and I both agreed, localism counts.

SEN. BREAUX: Well, the Senator makes a good point. But the fact is, what we got now, I mean, if you don't like what the network is programming, you've got 125 channels you can go to on your cable and look at something else. I know in New Orleans, for instance, I think I'm correct on the ownership here -- but I think WWL Channel Four is a Hearst-Argyle station -- anybody in the audience out there know it? Anyway, it's a CBS affiliate. They don't like the CBS morning show, so they just don't carry it. And they carry their local news for the whole entire two-hour block in the morning, because they think that that's a local -- and I mean, network can't make them do it.

So, they have some -- you know, they have to appeal to the local audience, and if the local audience doesn't like the national programming, they're just not going to carry it. I mean, nobody wants to do that. The final point is on this 35 percent limitation.

It seems to me that it was spelled out at a time when you just looked at the potential market. But now with 125 stations on the cable, the actually numbers of people watching the networks probably average out from the Nielsen ratings about three percent. I mean, you could have a station in Los Angeles, which has a huge potential market -- maybe, I don't know, 20 percent of the whole country -- but if nobody watches your station, your penetration may be almost zero or three percent, which is the average.

So the question is: Is there a better way of gauging the media dominance in an area, other than just selecting the total number of people that live in the area? Shouldn't it be based on the number of people that watch a particular network or affiliate?

MR. KIMMELMAN: Senator Breaux, I think it's a very good point. The difficulty here is it changes all the time. Every one of these stations has different ratings on different days, different weeks, different months. And we do measure differently in different areas. I think this is something that's absolutely critical to look at. I think you should ask the Federal Communications Commission to look at -- it's easy to challenge a number -- why 35, why don't 36 or 40. The issue is how does some other number provide for promotion of localism, competition and diversity of ownership, and that's what we haven't seen from the leadership at the FCC so far.

They can raise concerns about a number. It's easy to nitpick, but no one has come up with a better alternative. So, I think it's a very good point. It's just very hard to measure. Mr. Karmizan talked about his low numbers. I mean, some programming gets a 20 percent, 25 percent market share, and that is the big advertising dollars. But it won't necessarily get it every day or every week.

SEN. BREAUX: Dr. Noam, do you have any comments on that thought?

MR. NOAM: I'd like to comment also on the question of the content and the national content and the local content. I think in some ways, as we have 200 and so cable television channels being offered and so on, you have this fragmentation. Localism is really in trouble. I think we kind of truly recognize this. So I have no problems with recognizing that. Because as you fragment national audiences, the local audiences, you have to aggregate them, and you have to aggregate them nationally, and it's very expensive to produce programs. It's expensive to produce, but cheap to reproduce. And so, therefore, national distribution takes place. That's been the way from the beginnings of radio.

Now, in New York, we have -- so in the end everybody, to some extent, has the same options. That, I think, is the future of media. I give you one final example. In New York, we have a rule that says that you cannot have large supermarkets. That is, the stores are limited in size, and that has certain background to protection of smaller stores and so on -- social policy reasons, what have you. But the fact is, even though you have a lot of inefficient small stores, they still sell virtually the same Campbell soups and Coke and diet soda and so on. But it's just kind of a lot of outlets, same product. People pay more, and it does not increase diversity in any meaningful way.

And I think on some level, and I don't want to make a comparison of television and Coke, because it is obviously much more important, but the economic forces -- the economic items are really kind of working -- in a sense work very much the same way here.

SEN. HOLLINGS: Well, thank you very much. The roll call is about to go on, so the committee is indebted to both of you. Mr. Kimmelman, Dr. Noam, we appreciate your appearance. The record will stay open for questions. The committee will be in recess.

END

LOAD-DATE: July 19, 2001