CHAIRMAN REED E. HUNDT
                     FEDERAL COMMUNICATIONS COMMISSION
                              NAB RADIO SHOW
                          New Orleans, Louisiana
                             September 8, 1995
 
                        (As Prepared for Delivery)


          RADIO MERGERMANIA AND THE PRICE OF OVERCONCENTRATION



 I am pleased and honored to be with you on this 75th anniversary of radio
broadcasting.  

 I love radio.  I grew up on AM, listening to the Washington Senators losing to
everybody, the Washington Redskins losing to everybody, the Baltimore Bullets losing to
everybody.  So with all this experience in losing,  I was well prepared to be a life-long
Democrat.

 But I'm delighted to be at a convention where everyone seems to be a winner. 
Revenues are up.  Sale prices are soaring.  Formats are getting more varied and successful
every year. Advertisers like the new ways stations are finding to attract desirable audiences. 

 And mergermania is sweeping the industry.  Many acquisitions reflect the necessities
of the marketplace.  But some, the way I hear it, reflect not market necessities but the
opportunities presented by the possibility that Congress will lift all ownership limits as part of
the telecommunications reform legislation.  

 I am far from sure that the President will sign such a bill.  But if the Communications
Act is rewritten to eliminate all radio ownership limits, I don't believe that's good for this
industry or for this country.  

 Let me explain.
 
 Under the Communications Act, radio licensees must serve the public interest,
convenience and necessity.  The FCC can't grant licenses without making that determination. 
It must deny the renewal applications of licensees who fail to serve the public interest.  And
it must deny license transfers if they are not in the public interest.

 For 61 years the FCC has struggled with the statutory public interest standard.  But
there have always been just three basic ways to implement it:  Do nothing -- on the theory
that it doesn't really matter how broadcasters use the spectrum.   Do nothing -- on the theory
that competition will generate public interest deliverables like educational television for
children or educational PSAs on radio.  Or impose specific, concrete and meaningful duties
on users of the public property of the airwaves.

 Too often the FCC has elected the first option, by adopting vague requirements that
have no real-world effect on the programming of broadcasters.  That is essentially the
explanation for the fact that in the last 15 years the Commission has not pulled a single TV
license for failure to serve the public interest.  For the FCC, this has been sort of a reverse
Cal Ripken record: we've showed up every day and not done our job.

     With respect to radio, until 1981 the Commission tried, at least to a degree,  option
three.  It imposed a number of duties on radio licensees. These were frustratingly inexact and,
in the view of many, did not generate positive results for listeners.  These Commission rules
were in great need of rewriting.

 Instead, in 1981 the FCC abandoned option three with respect to radio.

 It launched a large scale experiment in option number two.  The Commission removed
virtually all substantive public-interest requirements for radio licensees while implementing a
policy of very vigorous competition  in an extremely deconcentrated industry.  As many of
you know from painful personal experience, this led directly to the era of hundreds of new
FM licenses granted in Docket 80-90.

 The idea of this experiment was that competition among many independent voices
would inevitably produce diverse programming that would satisfy the information, education
and entertainment needs of everyone in the audience.

 This experiment in interpreting the public interest standard has certainly produced
vigorous competition for radio listeners and advertising dollars, both locally and nationally.  It
has generated many new programming formats.  It has encouraged many radio licensees to
strengthen their community activities, in part because they are good corporate citizens, and in
part because it's important to have community visibility when you are selling an invisible
product.

 On the other hand, it is far from clear that vigorous competition has led to a better
performance by radio in terms of informing adults, increasing participation in the political
process, or educating children.  The market failure seems particularly acute with kids.  More
than 98% of children ages 2-11 listen to the radio each week; yet there is virtually nothing
appropriate for kids that age.  And teenagers listen to music as often as they always have; yet
how many of those stations make serious efforts to educate and inform teens in the crucial 
years before they begin exercising their right to vote?

 In any event, the premise of the FCC's ongoing experiment in applying the public
interest standard in radio has been vigorous deconcentration and competition.  The
congressional reform threatens the premise of the experiment, and the experiment itself

 I am sure that the House and Senate bills propose to lift radio ownership because of
the view that radio competes with other media for advertising dollars and, therefore, that the
current national radio ownership limits are too strict to permit radio groups to compete
effectively for those dollars.  I agree with that.  Even if no reform emerges from the
legislative process,  I would raise the current national cap of  20 AM and 20 FM stations.  I
also think there is room to raise the local cap of 2 AM and 2 FM stations, certainly in
medium and large markets. 

 But the House and Senate would allow a few companies to buy all the radio licenses
in the country.  And if you think that's far-fetched in practice, it is just as disturbing -- and
more at odds with the theory underlying the FCC's 1981 programming deregulation -- to see
that in a local market Congress may allow a single company to buy all the radio licenses. 

 No doubt most of you think that can't happen.  But I'm reminded of what the Harvard
Law School dean used to tell first-year students at orientation:  Look to your left, and look to
your right; in two years only one of you will still be here.

 I see some of you looking around.

 The fact is that the incredible upsurge in duopolies and LMAs in the last few years
demonstrates how rapidly the radio industry can be restructured.  And consider cable.  That
industry started with 16,000 separate franchisees -- half again the number of radio licensees in
the country -- and today just two companies serve more than 50% of  the nation's cable
subscribers.

 But don't rely on my crystal ball.  I'm just echoing the experts.   One investment
banker was recently quoted as saying that independent ratio stations will become "road kill" 
if ownership restrictions are completely eliminated.

 Now, it may be an exaggeration to say that if the Senate bill or, especially, the House
bill becomes law this year you could soon hold this convention in a phone booth.  But it is no
exaggeration to say that the enactment of such a law would strip away the premise of the
FCC 1981 programming deregulation order.

 Without vigorous competition among many independent voices throughout the country,
how could the FCC honestly justify its current rules -- or lack of rules -- as a legitimate
application of the public interest standard to radio?

      Certainly, in the event of major consolidation in the radio industry, there would be
calls to reinstate the fairness doctrine as a way to offset media concentration.  Certainly we
would be asked to return to specific programming requirements, to provide for citizen access,
and to adopt other concrete measures to ensure diversity of viewpoints over the air.  And
what would be our justification for saying no? 

  Some people think that a counterbalance to overconcentration in local radio will be
new competition from digital audio radio service -- DARS.  This satellite technology was
long delayed by the FCC primarily in order to let in-band digital radio develop in a similar
time frame.  But now its time has come.  

     As you know, we are in the middle of a rulemaking on DARS, and I haven't
prejudged the matter.  But I tentatively think that DARS spectrum should be auctioned.  The
spectrum should be used for whatever purposes the auction winners want.  Anyone who wants
to participate in the auctions should be allowed in.  No one should be able to monopolize the
spectrum.  And DARS licensees should have meaningful public interest obligations.

 On the subject of digital radio, I should let you know that I am as excited as anyone
about the prospect of terrestrial broadcasters taking advantage of digital technology.  I
understand that recent tests have been successful, and I look forward to working with you to
ensure that our rules allow existing radio operators to pursue the revenue generating
possibilities digital technology offers.

 But I don't think that the introduction of national radio from the sky in any way
justifies allowing a handful of firms to buy all or even almost all of the radio licenses on the 
ground.  We should let DARS compete with terrestrial.  Every instinct tells me that the
results of that competition will be better radio service for the American public.  And there is
no reason to assume that terrestrial will do poorly in this competition.

 I don't think there was ever a chairman of the FCC who was more committed to
vigorous competition in communications markets than I am.  I'm proud to have presided over
the funerals of fin/syn and PTAR, two rules that mindlessly meddled in the strictly
commercial aspects of the TV business.  When the issue is competition in delivering
entertainment over the mass media of TV and radio, I say let the market not the government
pick the winners.

 And no one feels more strongly than I do that the rules we retain should be clear and 
speedily enforced.   As many of you know, over the past few months we have reduced to
zero the unconscionable backlog of radio and TV license transfer applications that we
inherited, and we have taken steps to maintain speedy service and to prevent a new backlog
from developing.   Roy Stewart and the Mass Media Bureau should be congratulated for these
achievements, and I am happy to thank the NAB for adopting a resolution earlier this year
praising them.

 Another set of rules that I know are of importance to you are our EEO rules.   I am
firmly committed to our EEO program, which is about providing equal opportunity, not
imposing quotas or set asides.  Many of you have told me that you fully support the goals of 
our EEO program but believe that our rules can be modified to ease their paperwork burden
on small broadcasters without reducing their effectiveness.  I agree.  And I hope that the
Commission will take steps in that direction in the near future.  
 
 Incidentally, you should know that our backlog reduction accomplishments were the
result of the extra resources that the last Congress gave us.  But yesterday the Senate
Appropriations Subcommittee voted to cut our budget 1/3 below what I requested.   This
would require hundreds and hundreds of layoffs.  Yet at the same time Congress has not
eliminated any of our tasks or functions and indeed the telecommunications reform bills
would give us much more to do.  If we have continued legal duties and inadequate resources,
the result will be delay and frustration for all of you and all of the other industries subject to
the laws that Congress has passed and that implement.  

 In any event, I also want to raise with you this question: Will the coming
concentration in radio do anything to address the occasional failings of radio?  For example,
we know that radio occasionally but seriously fails to inform accurately our citizens.  I am
talking, of course, about talk radio.

      Millions of  people rely on talk show hosts for entertainment and information.  The
name Rush comes to mind.  I am sure many listeners think Rush Limbaugh is entertaining.
But I am also sure that many trust him to provide accurate information about history, current
events, and political issues.

 I think it is a disservice to our democracy for a talk show host to misinform an
audience that relies on him for information and trusts him to tell the truth.  And from time to
time that's what Rush Limbaugh does.  As Ring Lardner wrote, you can look it up.  Two
entire books already have been written compiling various bizarrely wrong, flatly false
assertions of Mr. Limbaugh.  

 But as long as I am the chairman of the Federal Communications Commission I will
defend to the death Rush Limbaugh's right to say just what he wants.  And I think radio
broadcasters have a First Amendment right to allow him to attract an audience.  I don't
believe that the FCC should in any respect whatsoever punish a radio station for broadcasting
Rush's inaccuracies, even though as a citizen I believe this sort of disinformation damages
our democracy, dumbs down our civic discourse, and destroys confidence in our institutions
of public trust.

 So when I talk about the public interest that radio must serve I do not mean that the
FCC should monitor or punish untruths or inaccuracies that radio licensees may broadcast.

 In asserting this view I am confident that the American experiment in democracy will 
survive even the widespread dissemination of untruth and distortion  by popular figures like
Rush Limbaugh and his imitators, whether of the right or the left.
 
 But the premise of my confidence is that there are many other ways for the public to
learn the truth about history, to hear different opinions about important public issues.  And
the danger of the telecommunications reform legislation working its way through Congress is
that it undermines the basis of that confidence.

 This, I think, is why the issue of media concentration, ignored during the early public 
discussions about telecommunications reform, is now seen by many to be the principal flaw
in the House and Senate bills.  In a real sense, Rush Limbaugh's freedom to inform -- and to
misinform -- the public depends on our government's commitment to ensuring a diversity of
voices over the public airwaves in both local and national markets.  

 I believe strongly that Rush Limbaugh should have that freedom, and that's why I
hope it's not too late for Congress to take another look at the concentration issues the
legislation raises.