Tales of the Sausage Factory: Goodies for the Broadcasters, Zip for the Public

Only in Washington would the Clear Channels of the world, those great champions of efficiencies and deregulation, declare that their monopoly on local content must be protected with regulation. And only in Washington would the deregulatory anti-big-government Republicans lap it up with a spoon. The National Association of Broadcasters (NAB) has petitioned the FCC and Congress to prohibit the new satellite radio competitors from providing local content (mostly traffic and weather). Of course, this is moving at hyperspeed, while the effort to impose real public interest obligations on the broadcasters moves at one quarter impulse. Still, I can’t help stirring the pot at the FCC and seeing what bubbles up.

So last week, I filed a lengthy motion (lawyers can never say anything short, right?) at the FCC over the efforts of the National Association of Broadcasters (NAB) to preserve their monopoly on local traffic and weather. You can follow the issue at the FCC by doing a search for comments filed in Docket Number 04-160. But since XM has urged all its customers to file, there are now over 26,000 comments. Makes it a little hard to read.

The gist of the issue is this. In 1997, after seven years of pushing, the FCC authorized the creation of a “Satellite Digital Audio Radio Service” (SDARS). The idea is pretty simple: launch a satellite that can cover the continental U.S. and offer a bunch of channels. At the time, the draw was that it would be CD quality music, as opposed to the quality you get on air. The service finally luanched a few years later and is offered by two competitors, XM Radio and Sirius Radio.

Now, however, since local radio has become a homogenized collection of competing national chains offering virtually identical products, people have a different reason to subscribe satellite radio: commercial terrestrial radio sucks. It sucks so badly that thousands of people every month are willing to _pay_ for radio when they could get it free. Sure, a lot of subscribers at this point are the market you’d expect, either very high-end early adopters or those who spend a lot of time on the road and therefore want lots of variety, stations that don’t disappear when you drive out of range, and no static. But the phenomenal growth rate and the the surprising success of home units speaks to a public very unhappy with the choice between five flavors of Clear Channel, five flavors of Viacom, NPR, and the snake handler station.

Happily for the commercial terrestrial broadcasters and their trade association, the NAB, XM and Sirius cannot offer local traffic and weather. Although commercial radio has virtually no local content — using voice tracking technology to make national content appear local — it still retains a monpoly on regular updates on local traffic and local weather. (This is usually homogenized further because companies outsource the local news, weather and traffic to a single company called Metro Networks/Shadow Broadcast Service, so don’t bother switching channels to see if you can get better coverage of the tie up near you.) Listeners really want local traffic and local weather, so they will keep listening, even if they are not entirely happy with the programming.

But now XM has developed technology that will let it insert local traffic and weather, and has already started to do so in some major markets. There is even talk about using their ground-based repeaters to customize content locally. In other words, XM and Sirius could compete directly with commercial terrestrial broadcasters.

The NAB, the perennial foes of regulation when it comes to limiting ownership or imposing public interest obligations, has not the least moral qualm about using the hated, evil, and obsolete FCC when it comes to protecting their market monopoly. So the NAB filed a Petition with the FCC asking the FCC to declare that satelite radio cannot offer local content.

Why? What grounds did the NAB give for this blatant protectionism?

1) Local terrestrial commercial broadcasters are the bastion of localism and provide their local communities with invaluable service.

2) Satelite radio could draw listeners away from commercial broadcasters.

3) Commercial broadcasters are so broke that if they lose listeners, the whole system of free over the air radio will die and everyone will hate you.

You start to see why the definition of “chutzpah” in the American Regulatory Dictionary has the NAB logo next to it. But when you win often enough, you don’t have to be either subtle or consistent.

Now some of you may recall that over a year ago, the FCC held a proceeding to revamp the ownership limits. The FCC received over two million comments, with 99.9% of them telling the FCC that local radio and local television sucked because too few companies own too many outlets. This produced a modest political firestorm and the B plot of an episode of West Wing.

To deal with the politics side, FCC Chairman Michael Powell announced in the summer of 2003 that he was starting a Localism Task Force. This Task Force would do an in depth investigation to see if local broadcasters were not, in fact, serving their local communities.

You would think that the FCC would already have enough information to deal with this. After all, 2 million people filed to show that they think radio sucks. The Future of Music Coalition submitted a study demonstrating that national group owners supply nationalhomgenized programming and that listeners think their local radio sucks. Over 40 famous musicians (such as Billy Joel and Bonny Raitt), submitted a letter to the FCC detailing the abuses in the consolidated radio industry, and the Future of Music Coalition and Don Henley testified about this before congress.

On the other hand, Clear Channel, Viacom and other holding companies have submitted expert economic analysis from totally disinterested experts who happen to be paid by these companies demonstrating that there is no problem and that the radio market is highly competitive.

So clearly further study was necessary, because, unlike deregulation, we hate to rush into enforcement without a lot more process. But here’s the curious thing. The FCC Localism Task Force has yet to issue its public Inquiry or take public comment. It has held three local hearings around teh country. But the Notice of Inquiry Chairman Powell swore would come out in August 2003 has not yet appeared.

But don’t think the FCC is napping. Apparently, they have plenty of time to deal with the NAB Petition to protect the NAB monopoly on local traffic and weather.

So my organization the Media Access Project filed a motion on behalf of Common Cause, Free Press, and a number of other organizations to hold off on the NAB Petition until after the localism task force gets its job done. For one thing, the argument that commercial radio is going to fold over tomorrow if XM and Sirius can offer local news seems pretty specious in light of the record making profits Clear Channel and the like are reporting. For another, why on Earth should the FCC protect commercial terrestrial broadcasters from competition if terrestrial broadcasters aren’t doing their public interest job? Who knows, maybe the Task Force will recommend that competition with satelitte radio is just the thing to force terrestrial broadcasters to refocus on local issues. God knows XM and Sirius can’t do a worse job than Clear Channel and Cumulus.

Stay tuned . . . .


  1. Harold,

    We may disagree a little about gay marriage and so forth, but I LOVE SAUSAGE FACTORY. This is another great piece. I’ll be calling congressman Delahunt tomorrow to make sure he’s up on all this. Thanks again.

  2. You may add that the NAB also got one fo their subsidiaries in Congress to drop a bill on this in the House. I’m told it’s going nowhere, but it never hurts to warn people.

    Frankly, with over 26K comments from subscribers, I don’t think any politician will take on XM for this.

  3. Do you have a feeling that the FCC has gone underground (secretive) since last yr. when Powell was reamed out?

  4. Interestingly, the DOT has weighed in on this too, siding with XM and pushing the FCC, for the benefit of public interest, to allow XM and Sirius to do local traffic and weather. Insiders say the commissioners are lined up 5-0 in favor of satellite radio.

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