Text as Prepared for Delivery

Address to the Media Institute

By Commissioner Kevin J. Martin

Washington, DC

December 11, 2001

## Introduction

Good afternoon, and thank you for inviting me to speak with you today.
It is a particular pleasure to be invited to speak to the Media
Institute, which has had such an impact on my career and my "thinking"
regarding media regulation.

I grew up as the fourth child in a family five, and the First Amendment
was rarely adhered to in my house when I was young; my voice was
definitely stifled by my 4 siblings. So, I truly appreciate every
opportunity to exercise my Constitutional rights.

I did not realize at the time that this would be the most important
preparation for my experience as the fourth of five Commissioners.
Debate about which items will or will not be placed on the Agenda, for
example, can be strikingly similar to who controls what television
channel will be watched or radio station listened to in the car.

But, my experience as a child taught me perhaps the most important
lesson regarding free speech. For even when I was able to garner the
attention of my parents, I quickly learned that unless I had something
unique to say, competing voices would soon drown mine out.

And therein lies the most important premise underlying all of the
government's role in media regulation: while the First Amendment
protects one's right to speak, it does not guarantee that you will be
listened to, and competition among voices is ultimately the best method
of ensuring that the most unique and important information is ultimately
heard.

It is in that vein that I would like to speak to you today regarding our
history of broadcast regulation and how the competitive landscape -- the
increasing number of voices available because of new technologies to
garner people's attention -- should be effecting those rules.

## Historical Perspective 

Since the emergence of radio as a means of communication in the early
20^th^ century, government has regulated the airwaves through the
issuance of licenses in order to preserve "the public interest."
Congress passed the Radio Act of 1927, declaring that the airwaves are
in fact a public resource, and a scarce one at that, and should
therefore be regulated by the government. While the available spectrum
would grow with time and advances in technology, the underlying
presumption has always been that spectrum is a scarce resource, and that
presumption has been used to justify its greater regulation of
broadcasting, including content restrictions, licensing procedures, and
ownership regulations.

The regulating of the public airwaves and the issuing of licenses would
prove to be a weighty responsibility. In order to grant licenses,
regulators would have to create some guidelines by which to do so.
Congress bestowed this obligation on the Federal Radio Commission and
later its successor, the FCC.

By thus empowering the Commission, Congress gave the Commission the
ability to define, and subsequently redetermine again and again, what
the public's interest was to be. This is, in my humble opinion, a very
lofty task for any regulator to undertake.

The Commission's unique role in regulating broadcasters was upheld by
the Courts in 1969 in *Red Lion Broadcasting Co. v. FCC*.[^1] That
decision deemed that inherent differences between modes of media
communication require differences in the First Amendment standards
applied to each. In the broadcasting world, the Court deemed that the
free speech rights of the viewing public outweigh, and essentially are
more important than, the First Amendment rights of the broadcasters
themselves. The Court based its conclusion that certain broadcast
regulation withstands First Amendment scrutiny in part on:

> The scarcity of broadcast frequencies, the Government's role in
> allocating those frequencies, and the legitimate claims of those
> unable without governmental assistance to gain access to those
> frequencies for expression of their views ....[^2]

Times and technology are no doubt significantly different than they were
thirty years ago. In keeping with the Commission responsibility to
protect the public interest, we must reevaluate the FCC's media
regulations in the context of the current marketplace.

## The Changing Marketplace

The vast majority of the Commission's existing ownership regulations
were implemented in the context of a very different era. It was a time
when most Americans relied on three free, over-the-air networks for
television programming. Cable television was in its infancy, and DBS was
a distant dream. The Internet was yet an obscure network-in-progress
within the defense department. Today, by contrast, we have an astounding
array of options from which to get our news and entertainment---hundreds
of television channels, thousands of radio stations, millions of
Internet websites, and movies on demand from our living rooms. Since
1975, for example,

-   Radio

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-   Radio stations have increased from 7,785 to 12,932 stations.

-   Radio programming has diversified from 15 to between 90 and 95
    distinct formats, with Spanish often cited as the fastest growing
    format.

-   Satellite digital radio has been born, proposing to dramatically
    alter the way Americans listen to radio and the programming
    available to them.

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-   TV

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-   Licensed television stations have increased 76%.

-   The "Big Three" networks have become seven, yet their collective
    viewership has declined.

-   Television programming has skyrocketed. In 1999, there were 147
    basic cable networks, 43 premium networks, and nine pay-per-view
    networks. In the last two years these numbers have only increased,
    with digital platforms increasing both capacity and service options,
    such as video-on-demand.

-   The number of households paying for TV increased from 17% to 86.4%,
    with 88.3 million households pay for TV by subscribing to a
    multi-channel video programming distributor.

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-   Newspapers

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-   The number of daily newspapers has declined from 1,756 to 1480 (in
    2000), but circulation has declined only slightly, from 62.1 to 59.4
    million.

-   Meanwhile, the number of weekly newspapers---targeting niche
    audiences and discrete communities---has increased, and their
    circulation has doubled (and 80% of these papers are free!).

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-   Internet

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-   The Internet was born---and quickly grew up.

-   Today, an estimated 166 million Americans have access to the
    Internet, with over 8.75 million sites representing a blinding array
    of diverse content as well as outlet opportunities.

These statistics indicate how much the media marketplace, and thus the
foundation of many of the FCC's content regulations and ownership
restrictions, has changed. Consumers have a much richer diversity today.
They have more voices from which to choose their entertainment,
information and news. And advertisers similarly have many more outlets
through which they can capture the audience's attention.

## Today's Challenges

In light of these dramatic changes in the marketplace today---many of
which are still occurring---how should the Commission treat broadcast
regulation?

First, it is time for the Commission to recognize that the nature of
broadcasting may no longer be so uniquely situated as to be un-deserving
of full First Amendment protections.

Second, we need to reexamine the Commission's ownership restrictions. In
this regard, I commend Chairman Powell for his leadership in initiating
several proceedings that ask, for example, how the Commission should be
examining radio ownership and whether the newspaper/broadcast
cross-ownership restriction should continue.

In the past, the Commission has used prophylactic rules in its
application of media ownership restrictions. The costs and benefits of
such structural rules, however, need to be re-examined to determine
whether prophylactic guidelines ruling media ownership continue to be
the best way to preserve the public interest.

On one hand, structural rules allow for administrative ease both for the
regulators and those whom they regulate. Certainly, bright-line rules
allow us at the Commission to assess applications more easily and in a
more timely fashion than would be possible otherwise. In addition, the
industry also is well served by knowing exactly what the rules are and
what the decisions regarding applications are likely to be.

On the other hand, bright-line rules can be problematic, in that they
are by nature going to be either over- or under-inclusive. Moreover, the
determination of any "magic" number of stations or media outlets that a
certain organization can own will by its very nature be an arbitrary
one.

With this background in mind, I make the following five suggestions as
to how we should approach these pending reviews:

1.  We should define the market more broadly.

For instance, is the relevant product market for considering a radio
license transfer only radio advertising? Don't advertisers today
consider radio stations, newspapers, and television acceptable
substitutes? Do viewers consider cable and DBS substitutes? Should these
products comprise separate markets, or are they more accurately part of
the multi-channel video market?

2.  With respect to competitive analyses, we should be wary of
    duplicating the efforts of the competition experts.

The FCC's responsibility to promote competition is always central to a
finding that a proposed merger is in the public interest. When neither
the DOJ nor the FTC looks at a proposed merger (because, for instance,
the dollar amount is too low to require an HSR filing), perhaps the
FCC's analysis should include a comprehensive competitive assessment of
the proposed merger effects on the market. But when either DOJ or FTC
reviews a merger and declines to proceed, we should give significant
weight to such a determination.

3.  Where we have structural ownership limits in place, we need to
    presume that mergers that meet these limits are in the public
    interest.

Particularly when these limits are not merely the result of our own
determination, but rather expressly mandated by Congress, they should
provide, at a minimum, a guide for any public interest analysis. Such
limits should help make our review easier, not more complicated.

4.  Where we do not have applicable structural ownership rules, we must
    provide guidance regarding how the Commission will conduct
    case-by-case analyses.

I believe it essential to establish certain presumption as to what we
believe the public interest to be, and to specify broadly what factors
the Commission will consider in making its decisions. To interested
parties, this information is essential. I also believe good, efficient
government requires it.

5.  Finally, we need to critically evaluate our traditional thinking on
    how ownership consolidation affects localism and diversity.

For instance, evidence suggests that consolidation actually enhances
program diversity by encouraging owners to create programming that
targets niche markets, rather than producing bland programming that has
the greatest chance of capturing the greatest number of viewers or
listeners. Whether increased consolidation has the same impact on
viewpoint diversity, however, is still an open question. It does appear
that mergers may preserve the ability of media companies to offer local
content---particularly local news---by enabling local broadcasters or
publishers to stay in business rather than selling out to a national
company.

## Conclusion

The media landscape has changed, and it is time that the FCC recognize
these changes and react accordingly. Our rules must be relevant to be
effective. The issues we face in several of our pending proceedings are
no doubt challenging, but we can and must rise to the occasion. I look
forward to working with my colleagues at the Commission, and with you in
the industry, to fashion appropriate rules for the 21^st^ century media
marketplace.

Again, thank you for having me here today.

[^1]: *See Red Lion Broadcasting Co. v. FCC*, 395 U.S. 367 (1969).

[^2]: *Id.*, at 400-401.