Look what the FCC Found in the Basement!

In response to a Freedom of Information Act Request filed by the Georgetown Institute for Public Representation Communications Law Projects and my employer Media Access Project, the FCC has now posted a collection of 42 final and draft reports relating to media ownership (no Hitchker’s Guide jokes please. Anyone who thinks these studies are definitive answers to anything needs to find their towel and get a life).

A very preliminary bit of analysis below….

As readers may recall, Barbara Boxer (D-CA) surprised FCC Chairman Kevin Martin his confirmation hearing for a second term with a report the Powell FCC had done showing that consolidation hurts local news. Later, Boxer asked Martin to explain a second report, also apparently suppressed by the FCC, showing more problems caused by media consolidation.

Martin pledged to investigate and make any more such reports public. But, ya know, “trust, but verify.” So we submitted a FOIA request to keep things honest.

To Martin’s credit, he has facilitated matters by trying to get the review done in a timely fashion (federal agencies can drag FIOA request responses out for years, despite the aggressive deadlines set forth in the FIOA statute) and taking steps to make the material easily available. I know some of my colleagues have faulted Martin for burying this by releasing it at the end of the year, but that doesn’t bug me. It’s not like this was a huge media item or that time sensative.

I have not had a chance to go through the released material in any detail. On a preliminary scan, the paper by Duvall & Wise on video price competition looks very interesting. Wise, working with a different co-author (Duwnadi), did a good bit of work on DBS v Cable price competition with an emphasis on switching costs that I translated into simpler language in my cable market power for dummies white paper last year.

The Duvall & Wise paper appears to suggest that duopoly competition in video will never create price competition due to the nature of the video market. Although the authors do not (as far as I can tell at this point) extend their argument to broadband networks generally, I do not see why the same logic does not apply unless we postulate that the cost of entry for broadband is significantly less than the cost of entry for video.

On the other hand, John Berresford’s critique of the “scarcity rationale” appears to be basically a synthesis of the quadrillion other articles by academics predicting the imminent demise of the “scarcity rationale” and adds little to the overall debate on the subject. For those not familiar with the idea, the “scarcity rationale” was advanced by the Supreme Court in the 1943 case NBC v. U.S., although it is more commonly associated with the 1969 Red Lion Broadcasting v. FCC. Briefly, because more people wish to use the electromagnetic spectrum than can be accomodated productively, it is constitutional for the federal government to require those wishing to use the spectrum to get a federal license. It follows that it is also constitutional for the FCC to create regulations (such as ownership restrictions) under which it will distribute these licenses in order to ensure that use of the electromagnetic spectrum best serves the public interest.

Opposition to scarcity comes in two forms. (a) Those who have no problem with the FCC setting limits on the number of licenses or determining other technical issues that have a de facto regulation of speech, but who hate ownership limits or other forms of regulation that explicitly regulate licensee conduct outside the technical context. These folks believe in “scarcity” in that only a limited number of people can use spectrum at a time. They just don’t think the government has a role besides locking everyone bu the lucky few out. (b) Those who believe that technology has now eliminated the underlying basis of scarcity altogether because we can use spectrum without interfering with each other. While I’m more ideologically sympathetic to this group, I do not believe that happy day has yet arrived when we can all broadcast each according to his desire without fear of interference (although I will cheerfully believe that the current crop of regulations is holding us back.)

Anyway, to get back to the main point, the FCC has now provided a rather dense and potentially significant data dump. If your idea of fun reading is a stack of economic papers with never-before-seen empircal analysis of media indusry structure, then don’t hestiate to click here and download the lot of them. Otherwise

Stay tuned . . . .