FOR IMMEDIATE RELEASE NEWS MEDIA CONTACT:

June 2, 2003 Johanna Mikes: (202) 418-2300

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

**DISSENTING**

*Re: 2002 Biennial Regulatory Review -- Review of the Commission's
Broadcast\
Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996*

This is a sad day for me, and I think for the country. I'm afraid a dark
storm cloud is now looming over the future of the American media. This
is the most sweeping and destructive rollback of consumer protection
rules in the history of American broadcasting.

The public stands little to gain and everything to lose by slashing the
protections that have served them for decades. This plan is likely to
damage the media landscape for generations to come. It threatens to
degrade civil discourse and the quality of our society's intellectual,
cultural and political life. I dissent, finding today's Order poor
public policy, indefensible under the law, and inimical to the public
interest and the health of our democracy.

In the end, this Order simply makes it easier for existing media giants
to gobble up more outlets and fortify their already massive market
power. It capitulates to many of the longstanding demands of the media
companies we oversee.

This approach shatters most of the last vestiges of the consumer
protections that weren't eliminated in the 1980's. This decision pulls
the teeth out of the remaining rules, leaving the FCC a toothless tiger.
As big media companies get bigger, they're likely to broadcast even more
homogenized programming that increasingly appeals to the lowest common
denominator. If this is the toaster with pictures, soon only Wonder
Bread will pop out.

It may take a while for the public to feel the full effects of today's
decision. Consolidation in the media markets could take place over a
number of years, just as it did in radio. But people will notice every
time a new merger goes through that eliminates a voice in a community.
Their anger will flash as they surf through their channels only to find
more sensationalism, commercialism, crassness, violence, homogenization
and noticeably less serious coverage of news and local events, just as
many Americans warned me they expected to happen if we allowed further
consolidation.

It didn't have to turn out this way. Congress and the courts forced a
massive review. They did not force massive deregulation. We had a
choice. The courts required us to justify our rules, not to gut them or
replace them with pale substitutes. Certainly, the media markets have
changed, and our rules must keep pace. But the majority chose to go much
further than Congress or the courts required. They chose to pursue
gratuitous deregulation. This is by far the most dramatic weakening of
our media ownership rules this country has ever seen.

This has turned out to be a painful process. I had hoped for a better
outcome I could support, or at least oppose less strenuously. The
Commission undertook the most comprehensive review of its rules ever. It
was designed as an effort to produce a judicially-sustainable,
intellectually-coherent framework. But those good intentions and good
faith efforts didn't pan out. The comprehensive framework never
materialized. An effort begun with serious intellectual aspirations
descended into an incoherent, outcome-driven political document, the
likes of which the Commission has too often seen and sought to avoid.

A new regime for a new era never materialized. Instead, we're left with
a muddled patchwork of meager protections. The only consistent elements
are market-driven philosophies and deregulatory outcomes. The Order is
rife with references to market efficiencies but virtually devoid of
references to consumers or citizens.

It's been difficult for me to watch a group of colleagues whom I
genuinely respect, like and admire move in a direction with which I so
strongly disagree. I feel compelled to speak out, but take no joy in
taking such strong exception.

The majority implies that Congress and the courts forced this outcome. I
disagree. We had much wider latitude than this suggests. The biennial
review provides a simple directive -- to determine whether the rules
"are necessary in the public interest as the result of competition,"
repealing or modifying them only if we deem them "no longer in the
public interest."

The linchpin of Congress's statutory guidance is two words -- public
interest. The American citizenry should benefit from each decision. All
American citizens must benefit, including minorities, women, and
non-English speaking citizens.

In the context of media ownership, no matter what others think the
Circuit Court may have implied, the FCC still has a special duty to
protect what the Supreme Court referred to as an "uninhibited
marketplace of ideas."

I'm afraid this decision departs dramatically from our statutory
mandate, which is to establish rules in the "public interest,
convenience, and necessity." Let me explain why today I think we fail to
meet even that flexible, broad standard.

Judging from our record, public opposition is nearly unanimous, from
ultra-conservatives to ultra-liberals, and virtually everyone in
between. We have received about three-quarters of a million comments
from the public in opposition to relaxing our ownership rules, a new
record, and only a handful in support. Of the hundreds of citizens I
heard from directly at field hearings across the country, not one stood
up to call for relaxing the rules. Of the thousands of e-mails I
personally received, I saw only one didn't oppose allowing further media
concentration.

The American people appear united in believing that media concentration
has gone too far already and should go no further.

I've heard it said we can't make this decision by polls or by weighing
postcards. Fair enough.

But the statute doesn't let us simply dismiss the public's views with a
passing reference in one paragraph, as this item currently does. The
public apparently has no interest in further media concentration. Does
the majority really know what's better for the public than the three
quarters of a million citizens who are motivated enough to contact the
Commission or attend field hearings? We should not assume that those
people who took the time to alert us to their deep-seated concerns, with
99.9 percent in opposition, are wrong unless there is overwhelming
evidence proving it. Here, just the opposite is true. There is plenty of
evidence the people are right.

The public is joined by bipartisan chorus of caution from over 150
Members of Congress. Organizations from nearly every political stripe,
from the National Rifle Association to the National Organization for
Women, expressed grave doubt about the wisdom of allowing greater
consolidation. We heard from artists, academics, media moguls \--
Republicans, and Democrats.

It has been said that the public comments we received are too simple and
offer no substantive basis from which to make our decision. I beg to
differ. I have read a lot of their comments, and I've listened to
hundreds of people firsthand in city halls, schools churches and meeting
rooms.

Let me tell you, the Americans we heard from know what they're talking
about. This is the media they view every day. They take it very
personally, and they are very articulate and substantive in what they
say.

We have heard from people who have collectively spent billions of hours
watching TV, listening to the radio and reading newspapers. There is no
better expert witness than the American people. There is no more
objective jury.

But today's decision overrides their better judgment. It instead relies
on the reasoning of a handful of powerful media companies who have a
vested financial interest. Those who stand to benefit by buying and
selling the public airwaves won out over the public.

Anyone who questions whether consolidation can cause harm need only look
to the experience of radio. The most constant refrain I heard from coast
to coast was complaints about the homogenization and loss of news
coverage on the radio dial since 1996. People begged us not to let
happen to television what happened to radio. But the majority did not
heed this concern. By ignoring this history, we may be destined to
repeat it. Radio is a very sick canary in the coal mine, and we're about
to infect television with the same disease.

I suggested and would have taken another approach. This Order often
equates the public interest with the economic interests of media
conglomerates. It assumes that efficiencies and cost savings created by
mergers will translate into benefits for the public. But it makes no
effort to ensure that will actually happen.

We could have easily addressed these concerns. I share the view that
given changes in the marketplace, some of these combinations may make
sense. I could have supported greater flexibility to evaluate mergers on
a case-by-case, market-by-market analysis. That is the only true way to
determine if media mergers of this magnitude would actually benefit the
public. But the only way to determine the value of a given merger is for
the Commission to request companies that seek to merge to demonstrate
how, in the case of those particular entities in those particular
markets, any efficiencies gained by the merger would be channeled into
something positive for the viewing public.

The majority rejected such an approach in favor of bright line rules.
They refused even to ask parties that seek to merge to say anything
about how many news staff would be retained, the number of hours of
local programming planned, cross-programming plans for TV duopolies or
the overall impact on news and public affairs programming.

Their stated goal is to achieve more market certainty for entities that
seek to merge. They proudly note that establishing set rules facilitates
transactions, reduces costs and makes deals more attractive to the
capital markets. Another stated goal is to avoid the administrative
burden that a case-by-case approach would impose upon the Commission.

The Order actually makes a special effort to proclaim the Commission has
no interest in the facts of particular cases since the new rules are the
be-all and end-all of what's in the public interest. This implies the
Order divined some sort of higher truth as to what works best in every
case for the American people. It says we don't want to be bothered with
facts that might point in another direction.

In its rigid insistence on fixed rules based on oftentimes arbitrary
numbers, the Order ignores our statutory obligation to serve the public
interest, convenience, and necessity in favor of the convenience of
those who seek to maximize the money they can extract from private sale
of the public airwaves. And it favors the Commission's administrative
"convenience" ahead of the public interest. We are here to carry out the
statute, not subvert it with the excuse that it's too much work to
implement. This just won't do when our very democracy is at stake.

The majority's approach simply assumes that if we let media companies
merge, they will channel the resulting efficiencies into better
programming for the public. Broadcasters have a long and proud tradition
of public service I know many will want to carry on. But in the absence
of some other compulsion, the logic of marketplace competition and the
media companies' fiduciary responsibility to shareholders will require
them to maximize profits rather than serve the public interest. The
record does not support the dangerous assumption that the many mergers
contemplated under these rules will invariably serve the public
interest.

One argument in favor of unleashing the media giants is that free
over-the-air television is threatened. That's a worthy goal, but the
rumors of its demise, widely spread, are greatly exaggerated.

In reality, just last month, broadcast network advertisers spent a
record \$9.4 billion in upfront sales for next season, up 13 percent.
The Wall Street Journal recently reported that some networks make
\$600-\$700 million, though others are less profitable.

It is quite telling that the best case for consolidation is that the
networks need to make still more. It's not the FCC's job to make sure
every big TV network makes money -- that's up to network management. Our
first priority is ensuring the American people get a wide range of
diverse viewpoints.

The day we will know over-the-air TV is in real trouble is when
broadcasters start lining up to turn back their licenses. Today,
instead, the value of television stations continues to skyrocket because
these licenses are so scarce. One station in Los Angeles sold for \$800
million. Why are the networks so interested in increasing the nationwide
cap or acquiring triopolies or duopolies in local markets if this
business is on the way down?

It violates every tenet of a free democratic society to let a handful of
powerful companies control our media. The public has a right to be
informed by a diversity of viewpoints so they can make up their own
minds. Without a diverse, independent media, citizen access to
information crumbles, along with political and social participation. For
the sake of our democracy, we should encourage the widest possible
dissemination of free expression through the public airwaves.

Some argue that the concern about the threat to American democracy is
overblown since it is so strong and resilient. While our democracy is
strong and not about to crumble, does it mean we can afford to weaken
it? Doesn't it matter that only half our citizens vote? The same people
argue there is plenty of diversity already, so we can afford to lose
some. I just don't agree.

Despite the Order's assumption that technological advancements render
broadcasters just another voice in a crowd of ever-expanding and
fungible media channels, a simple fact remains. No technological
advances have made it possible for every person who wants to broadcast
in a local community to do so. Nobody yet has figured out how to
replicate the spectrum for everyone who wants to broadcast a message.
The exclusive right to use the broadcasting spectrum denies it to all
others.

The majority completely ignores the reality that neither cable nor the
Internet has changed the huge market power granted by federal license to
use scarce broadcast spectrum, particularly when that license comes with
the requirement to be carried on cable.

It also ignores that people still get the vast bulk of their local news
and information from the same places they always have: their local
newspaper and local TV stations. And these are the very outlets we are
giving the most new flexibility to merge.

Today's bottom line spells an open season on consolidation. In place of
our once powerful cross-media limits, only 2.3 percent of the American
population will now receive full diversity protection. In contrast, the
markets where all remaining cross-media protections have been entirely
lifted represent 72.58 percent of the population.

While I agree that some consolidation may be warranted in the very top
markets, the leap from protecting 100 percent of the population with
full cross-newspaper/broadcast protections to less than 3 percent is
dramatic. We are moving to a world where in larger markets one owner can
combine the cable system, three television stations, eight radio
stations, the dominant newspaper, and the leading Internet provider, not
to mention cable networks, magazine publishers and programming studios
which could produce the vast bulk of the programming available to those
outlets. In my view, it is no exaggeration to say the rules now permit
the emergence of a 21^st^ Century Citizen Kane on the local level, with
perhaps a handful of Citizen Kanes on the national level.

In smaller markets, say the town of Great Falls, Montana with a
population of 56,690, under our new rules one entity could own the cable
company, the dominant television station, the dominant newspaper, and
multiple radio stations. Is this safe for democracy?

We have heard that relaxing the rules is appropriate because so many
Americans can now access so many channels, the Internet and other media.
But it turns out the same few vertically-integrated global media firms
own the bulk of what people see. Ownership has become more concentrated.
A person can always add more electrical outlets throughout their home,
but that doesn't mean they will get their electricity from new sources.
The same goes for media outlets.

And we cannot ignore that many citizens have no access to these
wonderful new options. Until every American can effectively access these
outlets, this Commission should protect the diversity available in the
outlets that serve their needs.

Our task, therefore, should be to encourage maximum diversity, not
assure a four-voice or six-voice sliver of it. This Order, to the
contrary, concludes that there is plenty of diversity already, so we can
afford to sacrifice some and have enough left over.

The public interest means more than just efficiencies and cost savings.
Every community has local needs, local elections, local news, local
talent, and local culture. While localism reflects a commitment to local
news and public affairs programming, it also means much more. It means
providing opportunities for local self-expression and reaching out to,
developing and promoting local talent. It means making programming
decisions to serve local needs. It means allocating resources to address
the needs of the community. Localism's many virtues are hard to capture,
but may get easier to ignore as companies consolidate.

When this full document is finally made public, I expect it will be torn
apart by media experts, academics, consumer groups, activists, and most
of all, the American people. They will find it riddled with
contradictions, inconsistencies, false assumptions and outcome-driven
thinking.

I would like to recount some of the most glaring inconsistencies and
flawed reasoning behind these new rules. I've got a much longer written
critique I will release soon, but will spare you now by summarizing some
highlights.

In perhaps the Order's most inexplicable inconsistency, the Majority
decides to retain a 50 percent discount for UHF stations in the national
television cap, yet fails to apply comparable treatment to the local
television rule and cross-media limits. To discount some stations for
one rule while failing to do so in others is arbitrary and
unjustifiable. If the purpose of this exercise is to update our rules in
light of technological developments, we can't ignore some just because
we don't like the outcome of more stringent limits.

In perhaps the most blatant evidence of a results-driven process, the
Majority goes out of its way to allow companies to seek waivers of the
new bright line rules to achieve greater concentration, while it
attempts to deny the statutory right of opponents of mergers to petition
to deny a given transaction. It is fundamentally unfair to allow waivers
for corporate interests in extenuating circumstances without the
corresponding protections to the public.

The Diversity Index was a noble effort that tragically degenerated into
an ill-conceived rote formula that even Merlin couldn't decipher. The
index is seemingly nothing more than economic jujitsu, an ornate castle
built upon a foundation of sand at the ocean's edge.

After detailing at length the new formula and its underpinnings, the
Majority stresses that the index is used only as a basis to draw
bright-line rules. But the order specifically denies any person the
right to apply this new magical formula to a particular market. In other
words, no one can use the FCC's own new methodology to show that an
application in a particular market harms the public interest.

Among its many flaws, the index distorts how it calculates the market
shares of relevant providers in each local market, resulting in grossly
understated measurements of the impact of any particular combination.
For example in New York, it treats the Shop At Home TV station the same
as the local NBC station. Similarly, with respect to newspapers, the
index treats the New York Times the same as the Polish Daily News.

Despite the quest for empirical footing, the index is premised on
admittedly incomplete data. Recognizing that the Nielsen study failed to
ask the specific question of the source of local news, the majority
marches ahead, cobbling its own data points on local news sources from
selective answers to muddled questions.

Against all notions of consistency, the majority unwisely decides that
even if a broadcaster is restricted from acquiring a newspaper, the
broadcaster can still buy the paper and hold it until its next renewal
period -- a period of 8 years. This simply underscores the
outcome-driven nature of this Order.

On the radio front, the retention of some local radio rules appears an
acknowledgment by the majority that they couldn't stomach the fallout
from the rapid consolidation of the past seven years. And some actual
improvements were made in the market definitions.

Yet, for all the talk about tightening the radio rules, in several
important respects the Order actually further unleashes the industry. It
eliminates the radio-TV cross ownership rule. And it eliminates the
current limit on the audience or advertising share any one owner can
gain through mergers in a local market. For a rule designed solely to
address competitive effects of mergers, it is mystifying why the
majority would cast aside such a fundamental and economically sound
principle as accounting for the measure of power of combined stations.
The revised rule now clears the way for mergers that previously were
denied or designated for hearing due to the strong likelihood of
negative competitive effects.

The Order includes a helpful provision that allows only small businesses
\--initially \-- to buy grandfathered groups of radio clusters that no
longer comply with the new market definition. While useful, it may not
get used much. Small businesses will encounter great difficulty in
raising the capital necessary to buy expensive, large clusters, if they
ever even come on the market at all. This is especially true given that
the seller could peel off one or two stations and then sell both the
remaining cluster and the spin-off stations with no restrictions to an
unlimited pool of potential buyers, which will limit the exclusivity of
the eligible entity buyer pool.

In my view, adding an admittedly helpful provision that potentially
affects a only a handful of stations, if it ever gets used at all,
doesn't come close to offsetting the sad truth that small businesses,
including those owned by minorities and women, are going to find it even
harder in more concentrated and expensive media markets to raise
capital, own outlets or have their unique voices heard.

Most alarming is that after only three years, the small business can
flip the grandfathered cluster to any large radio or media conglomerate
like Clear Channel. Making this approach so ripe for abuse further
diminishes the likelihood that it will serve much of a useful purpose,
since real disadvantaged businesses will have to bid against companies
that plan to sell to well-capitalized radio giants, raising the price of
clusters. The ultimate beneficiaries of this approach could be companies
like Clear Channel that could add even more grandfathered clusters than
it currently controls.

Today the Commission introduces a new behemoth into our media landscape:
a TV triopoly. Where is the empirical evidence supporting this creation
in our record? As unjustified by evidence as it may be, this leap is in
only nine of top TV markets.

More troubling is the leap in the number of duopolies now permitted.
Duopolies are now restricted to sizable markets. But this Order expands
duopolies to 162 out of 210 markets, or 95.4 percent of the population.
I can't fathom why we would allow such dramatic consolidation across the
board with no analysis as to how this will impact individual markets.
It's a breathtaking assumption that each of these mergers, all of which
will eliminate a local voice, is in the public interest. And I don't
believe the record justifies it.

I do believe the record demonstrates that further concentration of power
in the hands of networks justifies retention of the national network cap
at the 35 percent level set by Congress.

The majority has not adequately justified the selection of a new 45
percent cap. It relies exclusively on evidence showing that the largest
network station owners possess no greater bargaining power, measured by
prime time preemptions, than the smallest network station. This is a
thin reed on which to justify a 10-point increase. Moreover, without
access to more data, this conclusion is unconvincing.

In the end, we have yet another tradeoff between efficiencies and public
interest goals such as localism. Guess who wins. The social benefit of
locally originated and oriented programming and program selection to me
outweighs the efficiencies of further vertical integration.

Finally, let me explain why I cannot join the majority in voting for
retention of the dual network rule. I disagree with the Order's
conclusion that diversity no longer underpins this rule. But more
importantly, a more rigorous examination of this rule must be conducted
in light of the rising tide of Spanish-language broadcasting networks.
Just as the rule is retained for the top-four English-language networks,
so too should Spanish broadcasting be examined separately. The rapid
growth of the Spanish language media in the past several years is having
a significant effect on the landscape in which broadcast networks
operate. I believe that these developments require us to consider
whether to afford Spanish-speakers the same protections available to
English-speaking television audiences.

Looking back on how we got here, I am convinced there is little else I
could have done to change the outcome. In an effort to moderate the
extreme proposals that emerged, I offered suggestions to my colleagues
which unfortunately were not incorporated. The turning point when I
realized I could not likely support this proposal was when a majority
settled on the notion that bright line rules were preferable to making
market-by-market determinations as to whether mergers served the public
interest.

The Supreme Court has said that "promoting the widespread dissemination
of information from a multiplicity of sources" is of the highest order.
So safeguarding diversity should not be subject to abstract diversity
scenarios or arbitrary decisions that reduce the number of voices people
can hear.

I don't mean to suggest that bigness is always bad, or that free
enterprise will always fail the public. There is some truth to the
arguments that my colleagues make today. There's nothing inherently
wrong with earning profits from using public property.

But when it comes to gaining even greater profits at the expense of the
cornerstones of our democracy, we must carefully question the effect on
the public. Today's rules just don't let the big get bigger, they will
effectively prevent smaller entities from breaking in. I would have
relaxed the rules more incrementally and shown the public each time how
it would benefit.

Since my arrival here 5 months ago, I have approached this proceeding
with a constructive frame of mind. I sought to understand the various
proposals and their underpinnings, and offer my views on their efficacy.
Even after others closed in on an approach with which I could not get
comfortable, I made reasonable attempts to moderate the proposals \--
which were refused. In the end, it wasn't the process that precluded me
from participating in drafting and supporting today's Order. It was the
substantive direction the item took and the results-driven imposition of
bottom line, bright line rules ahead of all else. I am disappointed that
a majority of my colleagues could not be persuaded to take a more
reasoned, conservative, case-by-case approach.

This is far from over. Congress may prove more responsive to the
citizens who passionately plea for the independence and diversity of
their media. To paraphrase Winston Churchill, this is not the end, or
even the beginning of the end, but just the end of the beginning.

\- FCC -