Meanwhile….Back at the FCC….

The forces of media consolidation continue to make headway now that the FCC has a full contingent of 3 Republicans and 2 Democrats. At the June 21, 2006 meeting, the FCC, by 3-2 vote, began the process of reexamining the rules on broadcast media ownership. Last week, the proposed order approving the Adelphia transaction began circulating. It has a very narrow outlook and very meager conditions (so far). Procedural moves by Martin could cut off any further public debate or input as early as this Thursday (July 6).

But all is not yet lost. Chairman Kevin Martin had also intended to adopt a rule requiring cable operators to carry the additional digital streams of broadcasters after the DTV transition, the so-called multicast must-carry. The Dems have long refused to go along unless the Commission also resolved the long-pending proceeding to define new public interest obligations for digital broadcasters. Martin had long made it clear that he did not intend to impose any new obligations on broadcasters, and that as soon as he had a third Republican, he would ram through multicast without public interest obligations.

But it didn’t happen. Robert McDowell, the new Republican Commissioner, refused to go along. Either because he didn’t like the idea, or because he didn’t like getting pushed so hard so quickly on a controversial matter, McDowell refused to vote “yes” on the multicast item. As a result, Martin pulled the item from the June meeting.

What will McDowell do on Adelphia? With the Dems dead set against approval without firmer conditions, Martin needs both Rs to toe the line.

More analysis and speculation below . . . .

To review the state of play– in 2002, the FCC began what was then the Bienniel Review of media ownership. A provision of the Telecommunications Act of 1996 (Section 202h) required the FCC to review its media ownership rules every two years, and modify or eliminate those no longer in the public nterest. The DC Cir. read this (as is its want) very aggressively. In a case called Fox Television, it vacated the rule prohibitting cable operators from owning television stations in their areas of cable operation, and strongly hinted that it expected to see the FCC eliminate the rest of the rules. Michael Powell, then Chairman, happily siezed the opportunity. In June 2003, the FCC issued an order significantly relaxaing how many television stations any entity could own (from covering 35% of the country by population to 45%); permitted a single operator to own two television stations in all markets and three in most markets, and permitted television licensees to own newspapers in their coverage areas (the newspaper crossownership rule).

This caused a national uproar, and the effective birth of the media reform movement as a movement. Congress reacted (in the face of strong opposition from the President and the Republican leadership) by fixing the national ownership limit at 40% by law (a number based on the number of stations owned by Fox and Viacom, the largest holders) and expanded the “Bienniel Review” from every two years to every four years. My employer, Media Access Project, challenged the rest of the rule changes in the Third Circuit in a case called Prometheus Radio Project v. FCC.

In June 2004, we won the Prometheus case. The Third Cir. held that although the FCC had the authority to relax the rules, it had failed to justify the rule changes. The Prometheus Court reinstated the old rules and remanded the matter back to the FCC. You can find a much more detailed description at the Media Access Project website here.

So things stood for two years, while the Supreme Court refused to take the case, Powell left, and Kevin Martin became FCC Chair. But Martin and the Dems (who vigorously oppose any further relaxation of the rules) couldn’t come to an agreement on what to issue as a Notice on remand. Martin agreed that, this time around, the FCC would budget money for independent research and would hold some number of public meetings outside Washington DC. But Martin refused to commit to a number of things important to the Dems — all of which flowed from how Powell’s FCC had handled things last time.

For starters, the Dems objected to issuing a general review notice (.i.e. “tell us what we should do”) and then issuing specific rules (e.g., “the newspaper crossownership rule is eliminated”) without giving the public a chance to comment on specific changes. There is all the difference in the world between a general discussion about the state of media consolidation in the abstract and responding to a specific proposal. The Dems maintain that it is a bad form of “bait ‘n switch” to have this very broad, general review and make people guess what specific rules are actually in play. Martin, however, refused to commit to a future notice on specific rules.

The Dems also objected to resolving the rules piecemeal. The accepted political wisdom is that one of the reasons the 2003 FCC rulemaking caused such a ruckus was because it was so sweeping in scope. It promised to fundamentally alter the media ownership landscape in very obvious ways. But in the past, incremental relaxation of individual rules attracted little attention.

So the Dems want to see the ownership rules considered all together. This makes sense not just for political reasons, but for practical reasons. Any individual change may have a modest impact, but the cumulative aspect could be devestating for the flow of news and information. Considering the rules together forces the FCC to justify the cumulative effect and does not allow it to minimize the impacts by focusing on first one rule, than another rule.

Again, Martin refused to make such a commitment. He insisted on having the flexibility to change individual rules one at a time rather than addressing the rules all at once.

So media ownership just sat in “hold” mode for two years. Finally, right before Memorial Day Weekend, the Senate confirmed Robert McDowell, bringing the Commission up to full strength (3 Rs, 2 Ds) for the first time since Michael Powell left in March 2005.

Martin moved quickly to push his highest priority controversial orders: the 2006 Quadrenniel Media Ownership Review/follow up to the Prometheus remand, and requiring cable operators to carry the multiple digital signals of brodcasters (aka “multicast must carry”).

Of great note, while Martin got the Notice he wanted on media ownership review, he did not get multicast must carry. McDowell, the third Republican, refused to go along. What this signifies for the future, particularly on the thorny questions of the Adelphia transaction (more on that below) and the pending question of the AT&T/BellSouth merger, remains to be seen.

But turning back to the media ownership review. Although the FCC has not yet released the text of the Notice, you can find a copy of the press release here, the released “fact sheet” outlining what issues the Notice will examine, and seperate statements by Chairman Martin, Commissioner Copps, Commissioner Adelstien, Commissioner Tate, and Commissioner McDowell.

Briefly, the Notice will cover the rules still at issue from the Prometheus case: how many television and radio stations any entity can own in a market, what to do about newspaper cross-ownership, the “dual network” rule (no one can own more than one major broadcast network, with UPN and WB (now combined into the “CW” network) not counting as a major network), and the “UHF Discount.”

This last, the UHF discount, offers a possibility for a significant roll-back of media concentration, as UHF stations right now only count as “50%” of their DMA population. This discount dates back to a time when UHF stations did not have the same signal reach. We have argued that since most folks get TV from cable or satellite, and therefore get the UHF channel through the entire designated market area, the UHF discount no longer makes sense. If the FCC were to agree, it would require a number of companies to sell off stations. I don’t give us great odds in this administration, but it is an important opportunity.

In addition to committing to review of these rules, the Notice promises to look at minority ownership (how to increase minority ownership given existing Constitutional limitations on affirmative action) and localism (how responsive are local television and radio stations to local communities). The FCC will budget $200,000 for independent studies, and commit to holding six meetings outside of Washington.

This is Martin at his political best. Martin can assert that he has responded to concerns raised last time about public process and independent research. But, as the Dems point out, it is a political gesture only. The FCC has spent the last three years conducting an extensive proceeding on localism — begun in response to the uproar after the 2003 Order relaxing ownership. The extensive record in the already existing localism proceeding (including numerous hearings outside DC) makes a rather strong case the that local consolidated media markets do not serve local communities. So Martin has excluded consideration of this proceeding while promising to examine the issue of “localism” in a proceeding he will control. similarly, while committing to “studies” and “hearings,” Martin retains control over how to structure these studies and hearings.

Has this guy learned from Karl Rove and Dick Chenney or what? Anyone who has attended or watched clips from a Republican “Town Hall” meeting on, say, social security reform understands how to manage this game to create an administrative record that supports relaxation of the media ownership rules while providing the trappings of an open process. I can hardly wait to attend my first “open meeting” on the subject at Potemkin Village.

Next on the agenda is the Adelphia transaction. Martin has begun circulation of an Order approving the merger with a very modest regional sports condition (so modest, in fact, I consider worthless). According to trade press, the Order will require Comcast and Time Warner to make their affiliated sports programming available in those markets where regional concentration will increase. So it excludes situations where Time Warner or Comcast use their market power to demand either exclusive carriage or a more favorable rate than rivals, such as described by the dissenting Democrats at the Federal Trade Commission (FTC) (which approved the transaction January 31). it also excludes situations such as Philadelphia and Boston, where Comcast already has such exclusive or anti-competitive deals in place.

I do not understand why anyone who gives a rat’s patootie about competition would think this sufficient. While the FCC will, according to all reports, focus on regional concentration (a good first step away from ignoring it, as they have done in previous mergers), they will treat regional concentration as if it has no connection to national concentration. Is it so hard for people to understand that markets for things like networked services and video are fundamentally different from markets for toasters or supermarket chains? Whether willful blindness or just ignorance, the idea that this pathetic little RSN condition will make it easier for other video providers to compete makes me throw up my hands in despair.

In addition, the FCC appears intent on ignoring the issue of access to PBS Kids and Sprout programming raised by RCN. I recently blogged on this over at Public Knowledge. Briefly, as documented by RCN’s FCC filings, PBS has signed an exclusive deal with Comcast for distribution of its children’s programming networks PBS Kids and Sprout. Comcast has wasted no time in forcing anticompetitive terms on independents like RCN.

The FCC apparently considers all children’s prorgamming fungible. Yeah right. Ask any child (or any parent that wants to limit his or her kid’s viewing to educational programming) if Sesame Street or Between the Lions is interchangeable with Rugrats or Dora the Explorer.

Martrin has further sharpened his “hardball” approach by stating his intent to put the Adelphia Transaction Order on the July 13 FCC Open Meeting agenda. Under the Government in the Sunshine Act, this will close the acceptable time for public comment at Thursday, July 6, 5 p.m. Given that Martin only began circulating the Order last week, and that this week contains the July 4 holiday (so most interested parties are out of town during the period of circulation), this gives the other Commissioners — particularly the Dems — little time to meet with other stakeholders and consider new inputs on the specifics of the proposed Order before closing.

I suppose I have to admire Martin’s style, even if I loath the apparent outcome. As I say, rather a viscious hardball player of the Rove/Chenny school of politics, but at least an honest one.

But, as we say in regional sports programming, it ain’t over ’til its over. Again, new FCC Commissioner Robert McDowell remains the potential swing vote. He has already caused Martin to delay one open meeting by a week to take more time to study an issue, and refused to go along with a proposal he couldn’t support. Where does he stand this time? As someone who represented competing telephone companies at CompTel, he certainly understands the economic arguments. Will he play ball with Martin? Will he push back for more conditions, or at least for more time?

It’ll certainly be a busy next few days on Adelphia. All I can say for now is —

Stay tuned . . . .