Copyright 2001 Federal News Service, Inc. Federal News Service
July 17, 2001, Tuesday
SECTION: CAPITOL HILL HEARING
LENGTH: 22828 words
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,
MEL KARMIZAN, PRESIDENT AND COO,
ALAN FRANK, CEO, POST-NEWSWEEK STATIONS,
JACK FULLER, PRESIDENT, TRIBUNE PUBLISHING
WILLIAM BAKER, PRESIDENT, WNET, NEW
YORK, NEW YORK
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
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.
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.
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 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.
HOLLINGS: It will be included in the record.
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.
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
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.
CLELAND (D-GA): Thank you very much, Mr. Chairman.
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
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
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.
SEN. HOLLINGS: Thank you.
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
Mr. Chairman, thank you for calling these
hearings. They are very important.
SEN. HOLLINGS: Thank
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
Thank you, Mr. Chairman, for holding this
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.
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.
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.
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
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.
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
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
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
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.
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
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
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
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
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.
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.
you, Mr. Chairman.
SEN. HOLLINGS: Thank you, Mr.
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.
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
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.
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 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
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. 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
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.
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.
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
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.
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
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.
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
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.
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?
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.
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
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
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
SEN. MCCAIN: I thank you, Mr. Chairman.
SEN. HOLLINGS: I thank you.
SEN. WYDEN: Thank you, Mr.
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
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.
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
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.
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
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
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.
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,
SEN. HOLLINGS: Very good.
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
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.
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.
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.
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.
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.
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?
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.
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?
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
MR. FRANK: Senator, if I may?
SEN. DORGAN: Mr. Frank.
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
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
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
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
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
SEN. FITZGERALD: None of them have had
their licenses yanked, as far as you know?
None that I know of.
SEN. FITZGERALD: Would you favor
-- does the Tribune favor lifting the cap entirely or relaxing the cap to some
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.
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
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.
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.
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.
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.
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
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?
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.
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.
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
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
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?
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.
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
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.
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.
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.
Thank you, Mr. Chairman. Thank you.
Thank you very much.
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.
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
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.
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.
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
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.
ALLEN: If I may, Mr. Chairman?
SEN. HOLLINGS: Go right
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.
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
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.
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
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.
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
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.
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.
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.
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.
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.
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
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.
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
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.
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
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
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.