Items relating to media ownership
Two developments happened since I posted my Insanely Long Field Guide to the Fox29 license renewal challenge that potentially bear on the challenge. The first is Rupert Murdoch’s retirement announcement. The second is the Administrative Law Judge Decision in the other pending Character Policy case. As discussed below, neither really impacts the challenge to Fox29 — at least not at the hearing determination stage.
I explain why below.
In July, the Media and Democracy Project filed a Petition to Deny the license renewal of Fox29 (WTFX-TV) in Philadelphia. The Petition rests on a particular feature of Federal Communications Commission (FCC) broadcast licensing law. Every 8 years, a broadcast station must apply to the FCC to renew its broadcast license, which requires a showing that the licensee has — among other things — the requisite character to hold a broadcast license. The scope of behavior the FCC will consider under its 1986 Character Policy and subsequent amendments is fairly narrow — it does not, for example, include littering or making a nuisance of oneself. But it is not entirely limited to behavior involving the broadcast license itself. It includes any conduct that calls into question whether you can be trusted to run a broadcast station under the FCC’s rules and as a “trustee of the community of service.” In other words, the FCC can send you to the Group W Bench (here, a hearing) where, to paraphrase Arlo Guthrie, they decide if you are moral enough to hold an FCC broadcast license.
MAD challenges renewal of Fox29 on the grounds that Fox Corp, the ultimate owner of Fox Television Broadcast Stations (FTBS) and Rupert Murdoch and son Lachlan (principle shareholders who have previously been found to have de facto influence or control over FTBS as well as Fox Corp.) lack the requisite character to hold a Commission broadcast license. They point to the settlement in the Dominion defamation case, where Fox Corp. and Murdoch as the named defendants acknowledged (but did not formally admit to the truth of) the earlier findings of the district court that they had made false statements about the outcome of the 2020 election on Fox News Cable Network and the role of Dominion Voting System machines in supposedly “stealing” the election. (They attach the relevant decision and press statement to the Petition). This conduct, they argue, violates the Commission’s Character Policy — making Fox Corp and Murdoch inherently unfit to act as a broadcast licensee. FTBS responds in opposition that this is all irrelevant because none of the behavior involved Fox29 and that refusing to renew the license would violate the First Amendment. MAD replies that actions that violate the Character Policy do not need to involve the licensee, and that holding licensees accountable under the Character Policy does not violate the First Amendment, as it is long settled that there is no First Amendment right to a broadcast license and that the Commission has an obligation to ensure that all license grants serve the public interest. (See NBC v. United States and Red Lion Broadcasting Co. generally).
Most people who have paid attention to this have dismissed the Petition as frivolous and a waste of time. But the Petition raises some interesting, novel questions under the law. It also has attracted support from a number of folks involved in the formation of Fox as the fourth TV network, including Preston Padden (Fox’s main lobbyist in the 1980s and 90s), Ervin Duggan (former FCC Commissioner) and William Kristol (conservative pundit and former frequent guest on Fox), Jamie Kellner (first President of Fox Television) and former FCC Chair Al Sikes. I also note that the FCC has taken the highly unusual step of opening this license renewal hearing to public comment. To be clear, this step by the FCC does not indicate that the FCC has made any determination about the merits, but is a recognition that there is a public interest in allowing people to file in favor and against.
My point is that while getting the FCC to hold a hearing — let alone deny Fox29’s application for renewal — is certainly a long shot given how the FCC works, this is not a frivolous claim. To the contrary, it raises some very interesting questions from an FCC law perspective. So it is worth actually walking through the process here and what questions the FCC would need to resolve either to dismiss the Petition to Deny or to Designate for a Hearing. Because ultimately, unless the FCC finds a procedural deficiency, the FCC is going to have to actually write up a real and binding decision with real consequences and real precedential value.
Full disclosure, I’ve known and been friends with Preston Padden for a long time, and I rather hope this gets to the hearing phase if for no other reason than It Would Be Fun. But I will also say up front (and for reasons I will elaborate in below), I find it extremely unlikely the FCC will grant on the Petition. Still, it cannot get out of addressing the interesting questions raised by this case.
More below . . . .
Back at the end of June, Canada passed C-18, aka “The Online News Act,” a law designed to make Google and Facebook negotiate with news providers for linking to news. In theory, C-18 is based on the Australia News Media Bargaining Code, which Australia adopted in 2021. It also follows the EU adoption of Article 15 as part of its 2019 Copyright Directive — although supporters of this approach don’t seem to want to talk about Article 15 much. Supporters of the “free market” approach adopted by C-18, which requires Google and Facebook to enter into negotiations with news providers (defined in various ways) argue that the NMBC has been a huge success, forcing Goog and FB to pay $200 million AU and that this money has been spent on reporters and other news-producing stuff not just gone into the pockets of big news conglomerates as critics such as my employer Public Knowledge keep warning will happen. There is a fair amount of evidence to refute this rosy tale of success, but let us set that aside for the moment.
The supposed success of the AU NMBC is one of the biggest arguments in support of the Journalism Competition and Preservation Act and the California version. It was a major reason why supporters of Canada’s C-18 assured everyone that FB and Goog were bluffing when they said they would simply stop linking to news if Canada passed C-18. After all, they made the same threat in Australia and, other than a brief weekend when FB stopped linking to news in Australia, they ultimately went along with the AU NMBC. So hang in there, supporters of this approach keep telling Canada! Trust us, they’ll cave, because the AU NMBC is a huge success!
My employer Public Knowledge has an entire resource page devoted to what’s wrong with this approach in general and JCPA in particular. I’ve written about this a couple of times as well. So I won’t rehash the problems with JCPA too much below. Instead, I want to focus on one this argument that C-18 (and JCPA) are just like the amazingly awesomely successful Australia approach. After a bit of digging, I found two things:
So if your definition of success was “Goog and FB pay off the major outlets like they were basically doing, but with bigger buckets of loot going to Rupert Murdoch & friends,” then this worked totally great! In fact, this scheme works so much like the way the cable cartel and the broadcaster cartel negotiate with each other (including providing things like C-Span so they can threaten to take it away and squeezing out independent minority-owned networks in favor of vertically integrated ones) that it makes me want to weep tears of Cassandrafreude. Heck, it even includes an official report with unverified industry posting that only true believers can take seriously — just like the old FCC cable competition report!
As a result, as reported by Michael Geist, the Canadian government is now apparently trying to use its rulemaking to implement the act to bring this inline with what the AU NMBC actually does, make it possible for Goog and FB to make private payments to the politically powerful media to make this issue go away. Whether that will end up being enough at this point remains to be seen. I would hope that this serves as a valuable lesson in life for those trying to replicate the “success” of NMBC (like, maybe read the source material with a jaundiced eye that comes from 20+ years of reading similar FCC reports). More importantly, the idea that you can pass a law that actually fixes the problems with the NMBC and not have Goog and FB flip out is a delusion because it fails to understand the economics of any of this. Yes, there is a real problem with how online advertising works, but that requires real solutions that identify the real problems and addresses them. (There are some already out there, you can see Public Knowledge’s “Superfund for the Internet” here, FAQ here).
I will pick apart the claim that the Australia NMBC worked– if by “worked” we mean actually fed money to small news organizations that dedicated the money to news production rather than simply funneled money to the biggest news media — in my next blog post. For now, I will focus on why Google and Facebook are reacting in such a radically different way to C-18 and why this isn’t just a bargaining tactic. Unlike the NMBC, the law actually designates Google and FB as entities subject to the law and therefore obligated to participate in the government supervised arbitration process. The NMBC — as explained below — does not designate Goog or FB to actually do anything, as long as they keep the big news producers happy.
More below . . .
(The original version of this appeared on the blog of my employer, Public Knowledge.)
At Public Knowledge, we’ve talked a lot about the Journalism Competition and Preservation Act (JCPA) and why we think it’s a very bad idea. But the most recent version made public raises a new twist. For a statute supposedly designed to save journalism and avert the “newspaperpocalypse,” it drastically favors broadcasters over newspapers and gives the biggest rewards to massive media conglomerates rather than local newspapers. Given the role media consolidation has played in destroying local news, and the fact that local TV broadcasting remains quite profitable, this outcome gets a rare 5 out of 5 Morissettes on the irony scale.
To make this even more annoying, Public Knowledge has a much better proposal for using big tech to support local media. Or Congress could go with this Free Press proposal (echoed by econ Nobel winner Paul Roemer in this op ed) to tax targeted advertising to fund local journalism. There are lots of better ways to tax big tech to fund local journalism that have the advantage of actually funding local journalism rather than media conglomerates. But no, Congress would rather create a new exception to the antitrust laws and bring cable must carry to the internet than expressly tax targeted advertising to fund local journalism. Le sigh.
Details on why the current JCPA favors big media below.
A substantially similar version of this appeared on the blog of my employer, Public Knowledge.
Focusing blame Google and Facebook for the decline of in-depth news reporting and print journalism ignores the real and long-standing problems that lie at the heart of our troubled relationship with corporate media. Insisting that these companies should fund existing corporate media, or that we should solve the problem by allowing even more consolidation, would be a disaster for democracy.
Almost 20 years ago, I left private practice to work for a nonprofit law firm called Media Access Project (MAP). MAP focused on promoting policies designed to encourage the production of diverse news and views in the electronic media. When I joined MAP in July of 1999, we were facing a crisis of consolidation in the news industry, the rise of polarization, and the dissemination of “fake news” for both commercial and political purposes. Academics and pundits lamented the death of serious journalism, the tyranny of the ever faster news cycle, and the poisoning public discourse with increasingly coarse, angry, and vile commentary that pandered to people’s worst instincts. A new class of wildly popular and increasingly influential pundits sowed distrust for the “MSM” (“mainstream media”) and denounced anyone who disagreed with them as enemies of freedom. Meanwhile, the increasingly vertically and horizontally concentrated news industry cut costs by dramatically cutting reporting staff and reporting resources, and chased “synergies” by using the news to shamelessly cross-promote their entertainment and publishing products. News coverage was increasingly turning into “infotainment” (or, more politely, “soft news”). To the extent political coverage existed outside the polarized world of political punditry, it was reduced from genuine analysis to “horse race” coverage. No one in the news, it seemed, wanted to discuss actual substance – only which political party or politician was “winning” or “losing.” Even worse, a new cottage industry emerged to create and promote “fake news” in the form of Video News Releases and national syndicated broadcasts designed to appear both local and live.
Small wonder that audiences for news increasingly declined, and distrust of the media reached historic levels. To make matters even worse, the “cure” proposed by the Federal Communications Commission (FCC) was to relax the remaining broadcast ownership rules, inviting further consolidation. Only by increasing consolidation, the industry argued, could the news industry survive in the face of fragmenting audiences, emerging competition from the internet, and declining newspaper revenues.
That was back in the late 1990s and early 00s. To quote Yogi Berra, “it’s déjà vu all over again.” Except this time, instead of blaming “the internet” and the public’s supposed lack of interest in real news, people now blame Google and Facebook. Why? Because they are big. Because they derive their revenue from digital advertising at a time when print journalism has seen revenue from classified advertising drop precipitously low. Because “Google and Facebook, we hates it precious!,” and one should never miss an opportunity to link a problem to Google and Facebook and proclaim “delenda est!” Likewise, the proposed remedies have a very familiar feel. Allow the news media to consolidate further by relaxing the FCC ownership rules and creating exemptions to existing antitrust law, and/or preserve their historic revenue stream from classified ads (either by destroying Google and Facebook or making them pay tribute to existing media companies). These solutions have particular appeal to incumbent publishers, as they simultaneously absolve the existing media of any responsibility for the current state of journalism and cement the dominance of the existing corporate media giants.
It is precisely because the stakes are so high, however, that we need to look with extreme skepticism at proposals primarily designed to prop up the current consolidated and dysfunctional media landscape. If we want to address the very real problems created by a dysfunctional media, we need to separate which of these problems can properly be attributed to dominant platforms and which to structural problems in the traditional news industry. Additionally, legitimate fears of the ability of dominant platforms to act as gatekeepers, or concerns about their outsized influence on the economics of news production and dissemination, should not justify solutions that destroy the extremely important role these platforms have played – and continue to play – in civic engagement and enhancing the creation of new and independent outlets for news.
Starting this week, AT&T and Time Warner get their day in court to prove that their proposed merger does not violate the anti-trust laws. I outlined the basic line of reasoning in the government’s case back shortly after it became clear the government intended to oppose. Since then, the parties have engaged in discovery, lined up their experts, and now filed their pre-trial briefs outlining their arguments on the relevant issues and standards. You can read the AT&T pre-trial brief here, and the DoJ pre-trial brief here.
It’s a lot easier to outline what the parties will try to show, and their differing strategies for trying to show it, than it is to guess how Judge Leon will decide at this point. But while the outcome alone makes this pretty important, it has the potential to massively shape antitrust going forward (assuming antitrust law survives the Supreme Court’s upcoming decision in Ohio v. American Express). Below, I unpack what makes this case so potentially important from a law perspective.
I want to start by applauding Randal Stephenson for coming out quickly and denying the rumors that DoJ asked them to sell CNN as the price of getting the merger done. At the same time, however, he acknowledged that negotiations were “complicated,” and that he and recently confirmed Asst A.G. for Antitrust Makan Delrahim were still “getting to know each other” and “figure out the ask on the other side of the table.” He also made it clear that, if DoJ does challenge, AT&T is prepared to go to court and are confident they will win.
AT&T is generally pretty good at persuading everyone that DoJ doesn’t really have a case against them. As folks may recall, despite the fact that the proposed AT&T/T-Mo transaction violated just about every basic tenant of existing antitrust law, AT&T managed to convince everyone for the longest time that DoJ was just playing hardball with them and didn’t really mean it because DoJ didn’t really have a case. While Stephenson refused to discuss what was negotiated, the rumors suggest it was a demand to divest either DIRECTV or the Turner Broadcasting cable channels (which include CNN, as well as TNT, HBO and a bunch of other real popular programming.) Once again, you have antitrust experts who do not have any particular experience with cable mergers shaking their heads and predicting that DoJ has no case.
In fact, demanding divestiture of either the must have content or the DIRECTV distribution platform is precisely the remedy you would expect if you believe the deal presents significant harm because of the vertical integration issues. That’s been the position of my employer, Public Knowledge, which has opposed the transaction since AT&T announced the deal. (That predates Trump’s election, for those of you wondering.) If you want a more detailed understanding of the theory of the harms, you can find it in my boss Gene Kimmelman’s testimony to Congress here. While generally true that vertical deals are hard to challenge, the cable industry has long been something of an exception, and the remedy here is similar to what the FTC imposed on the AT&T/Turner deal in 1996, where the FTC imposed stock divestitures and restructuring to eliminate the voting interest of John Malone and Liberty Media because of Malone/Liberty’s ownership TCI, which was then the largest cable operator in the United States (25% national market share). Given the massive criticism of “behavioral” remedies and a call to return to “structural” remedies from the right and the left, it’s unsurprising that DoJ would want actual divestiture rather than go the Comcast/NBCU consent decree route.
But as Stephenson noted, negotiations have only just begun in earnest, so we may end up with behavioral remedies after all. We’ll see.
I dig into details below . . . .
We’ve seen a bunch of news reports recently that the Department of Justice Anti-Trust Division (DOJ) staff and the staff at the Federal Communications Commission (FCC) appear ready to recommend that the proposed Comcast acquisition of Time Warner Cable does not pass statutory muster and their respective agencies should take appropriate action. You can review what that means in these two lengthier blog posts I wrote about how DoJ merger review works and how FCC merger review works.
Critically, however, as this CNN piece notes, we only have rumors and speculation. Obviously, as an opponent of the deal, I would not be surprised of staff at DoJ and the FCC, after reviewing the record, concluded that this deal caused serious anti-competitive harm and offered no offsetting benefits. But, as someone who has played regulatory poker with Comcast for 15 years now, I can say from personal experience that no one counts Comcast out until the game is well and truly over. Even if the rumors are true (and I have no way of knowing), these would only be staff recommendations. Comcast still has plenty of opportunities to plead, cajole and bully DoJ and FCC into submission.
Which is why it’s important to remember my advice from last February with regard to Title II reclassification: DON’T BE THE SEA HAWKS! We need to continue to keep the pressure on to get this over the goal line. You can start at my employer, Public Knowledge, which has this action page up over here.
At the same time, while not getting ahead of ourselves, it is important to understand how this deal went from “sure thing, no antitrust issues, these aren’t the drioids you’re looking for, move along, move along” to “on the ropes and sinking fast.” While I’m not going to fall into the trap of thinking we have already won, we have a lot of good reasons to believe that this fight is winnable. I elaborate a bit below . . . .
There is a style of article I find online occasionally that takes a classic work of film or literature and tries to flip your idea about who are the good guys and who are the bad guys, or vice versa. For example, this piece explaining why Glinda the Good Witch is really the villain of the Wizard of Oz and the Wicked Witch of the West is just an innocent woman wronged.
I thought of that when I saw recent pieces by Randolph May and Geoffrey Manne explaining how the Federal Communications Commission (FCC), by complying with its rules and doing its job soliciting input on the Comcast/Time Warner Cable from stakeholders scared to come forward for fear of reprisals, makes the FCC the bad guy and Comcast the innocent victim. Some of this concern seems to flow from a misunderstanding of the law. The FCC can’t act on anything outside the public record, so the concern that Comcast won’t get to make its case because of some body of secret evidence is groundless.
In addition – and this is why I’m particularly bitter here – Comcast set the precedent more than ten years ago for having the FCC look at stuff outside the public record as part of a merger review, and the D.C. Circuit affirmed it when I challenged it as a due process violation. So even if it did make a practical difference, the D.C. Circuit says it’s totally OK (at least when exclusion of evidence from the record favors Comcast).
Nor is this process so unusual as my Opposite Numbers (as I call my colleagues on the Libertarian side) believe. True, this is the first time the FCC actually listened to me (and others) and publicized the relevant FCC rules (although, as I explain below, I don’t think I actually had much to do with this). But this is also a rather exceptional merger. As for use of the relevant procedures, my experience is rather contrary to that of Randy May. I’ve not only urged the FCC to use (and publicize) the relevant procedures, I’ve invoked them. Nor is it unusual for the FCC to solicit input from stakeholders.
Below, I offer an alternate perspective and deal with the various objections my Opposite Numbers raise for why they think the FCC shouldn’t be telling stakeholders afraid of retaliation to come in and speak off the record.
More below . . .
The last few months have brought us a spate of Comcast horror stories and Comcast-hate. As captured by this totally not safe for work “Comcast — We Don’t Give a F—“ video from Funny or Die, the announcement that Comcast would acquire Time Warner Cable (TWC) has brought to boil a great deal of simmering resentment. Most recently, a recording of a subscriber spending 20 minutes trying to disconnect his Comcast service has prompted some investigating into Comcast’s service and employment practices. In particular, Adrianne Jefferies at The Verge has been running an excellent series called “Comcast Confessions” based on hundreds of interviews with current and former Comcast employees showing that these long-standing customer service problems are not a blip but the result of systemic problems and deliberate business and strategy decisions pursued by the company (first three articles published so far here, here and here). I want to highlight this article in particular that puts together the pieces and shows how the TWC acquisition makes things worse.
From an academic standpoint, the wealth of data coming to light provides a great study on how conflicting economic incentives and difficulties in melding together a giant company by merger create awful customer service despite the persistent efforts of Comcast top management to improve customer service. But this blog isn’t about industrial organization and business practices for the fun of it. For me at the moment, the hot question is: does Comcast’s awful customer actually provide legal grounds for the FCC to block the Comcast/TWC merger?
Actually, yes. And I don’t just mean in the political “so many people hate Comcast the FCC can designate for hearing and survive Comcast’s political pushback.” I mean in the legal “the FCC has jurisdiction over this and should designate, as an issue for hearing, whether Comcast’s proposed acquisition of Time Warner Cable is contrary to the public interest and in violation of various provisions of the Communications Act” sense. And yes, I get that customers are pretty much equally dissatisfied with TWC, which would prompt one to think this should be a wash as “not merger specific” (i.e., service is crappy before merger and crappy after merger, so who cares — other than customers?) However, as I shall elaborate below, the unique nature of Comcast’s pervasive problems — combined with several other factors — makes this a rare (but not unprecedented) case where the nature of the problems is both merger specific and subject to FCC review.
And while I would not normally suggest that such problems alone could block a merger, it becomes one more factor in a deal that already has a lot of problems. At a minimum, it becomes one more set of potentially pervasive behavioral conditions that would prompt Comcast to walk away whether or not the FCC actually designates for hearing, especially if lots of consumers write to the FCC about it (hint, hint).
More below . . .
