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[Senate Hearing 108-979]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 108-979

 
                   MEDIA OWNERSHIP (RADIO CONSOLIDATION)

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 8, 2003

                               __________

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South 
CONRAD BURNS, Montana                    Carolina, Ranking
TRENT LOTT, Mississippi              DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas          JOHN D. ROCKEFELLER IV, West 
OLYMPIA J. SNOWE, Maine                  Virginia
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon              JOHN B. BREAUX, Louisiana
PETER G. FITZGERALD, Illinois        BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada                  RON WYDEN, Oregon
GEORGE ALLEN, Virginia               BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
                                     MARIA CANTWELL, Washington
                                     FRANK R. LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
             Robert W. Chamberlin, Republican Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 8, 2003.....................................     1
Statement of Senator Boxer.......................................    38
Statement of Senator Dorgan......................................    34
Statement of Senator Lautenberg..................................     5
    Article, dated March 25, 2003 from The New York Times 
      entitled ``Channels of Influence'' by Paul Krugman.........    28
Statement of Senator McCain......................................     1
Statement of Senator Smith.......................................    37
Statement of Senator Sununu......................................    31

                               Witnesses

Dickey, Jr., Lewis W., Chief Executive Officer, Cumulus Media 
  Inc............................................................     5
    Prepared statement...........................................     7
Kolobielski, Alex, President And Chief Executive Officer, First 
  Media Radio, LLC...............................................    20
    Prepared statement...........................................    22
Mandel, Jon, Co-Chief Executive Officer, MediaCom, Grey Global 
  Group, Inc.....................................................    11
    Prepared statement...........................................    13
Menendez, Hon. Robert, Member, U.S. House of Representatives from 
  New Jersey.....................................................     2
Renshaw, Simon, Manager, On Behalf of the Recording Artists' 
  Coalition......................................................    14
    Prepared statement...........................................    17

                                Appendix

Hollings, Hon. Ernest F., U.S. Senator from South Carolina, 
  prepared statement.............................................    53
Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared 
  statement......................................................    53

                 MEDIA OWNERSHIP (RADIO CONSOLIDATION)

                              ----------                              

                         TUESDAY, JULY 8, 2003

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:50 a.m. in room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman, presiding.

            OPENING STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    The Chairman. We will now move to the second part of our 
hearing in just a moment, as we allow family members and others 
to depart and congratulate their loved ones.
    [Pause.]
    Today the Committee continues its series of hearings 
examining media by returning to the topic that started it all, 
radio. That first hearing on the increased concentration of 
ownership in the broadcast radio industry was the miner's 
canary to many on this Committee, myself included. It alerted 
us to the growing consolidation and vertical integration in 
media.
    Prior to enactment of the Telecommunications Act of 1996, a 
party was not allowed to own more than 40 radio stations 
nationwide. Since the removal of the national cap, the industry 
has experienced significant consolidation. The 1996 Act also 
increased the number of stations that a party is allowed to own 
in a particular local market. In its recent order, the Federal 
Communications Commission determined numerical limits on local 
radio ownerships are, ``necessary in the public interest to 
protect competition in local radio markets.''
    However, the FCC found its existing methodology of defining 
local markets based on the station owner's signal contour to 
be, ``flawed as a means to protect competition in local radio 
markets.'' As a result, the FCC will now use an advertising 
metric provided by Arbitron, a market research company, as the 
basis for determining market definitions rather than 
engineering data.
    I look forward to hearing our witnesses' opinions as to 
whether this new methodology best reins in excessive 
concentration in local markets or if another approach would be 
better to achieve that goal.
    At a hearing in June, all five FCC Commissioners testified 
that there has been, in at least some local radio markets, too 
much consolidation. Last month the Committee passed an 
amendment that would force parties that exceed the local radio 
ownership cap under the FCC's new market definition to divest 
themselves of any stations that take them above the cap. 
Yesterday the National Association of Black-Owned Broadcasters 
announced its support for this amendment.
    This is the Committee's first hearing on media ownership 
since the FCC's new rules were released last Wednesday. I look 
forward to hearing the witnesses' views regarding these new 
rules, as well as the impact of consolidation in the broadcast 
radio industry on artists and local media buyers. I welcome the 
witnesses and thank them for appearing today.
    Late last night we received word that Congressman Menendez 
would like to make some remarks to the Committee this morning 
and obviously we are glad to accommodate our colleagues from 
the House as well as other members of this body who are not 
members of the Committee. Mr. Menendez, Congressman Menendez, 
you are welcome here today and please proceed.

          STATEMENT OF HON. ROBERT MENENDEZ, MEMBER, 
         U.S. HOUSE OF REPRESENTATIVES FROM NEW JERSEY

    Mr. Menendez. Thank you, Senator. I want to thank you and 
Senator Hollings and all the other distinguished Members of the 
Committee for the invitation, the opportunity to testify on 
consolidation in general, but I would specifically within that 
context like to refer to consolidation of Spanish language 
media and its impact on the Latino community. Highlighted in my 
remarks is the crucially important related issue of the 
proposed merger between Univision and Hispanic Broadcasting 
Corporation, a merger that is presently before the FCC.
    Prior to the Commission's recent loosening of media 
ownership limits, I, along with other, about 90 other members 
of the House Democratic Caucus, sent a letter to Chairman 
Powell opposing the relaxing of ownership rules in a media 
landscape that is already heavily concentrated.
    Perhaps nowhere is the impact of ownership concentration 
more evident than in the radio industry. In 1996, the two 
largest radio companies owned 115 radio stations. Today these 
two companies own 1,451 radio stations. Furthermore, the top 25 
radio ownership groups control 25 percent of the Nation's 
commercial stations and take in 59 percent of all advertising 
revenues.
    Ownership is even more consolidated in the Spanish language 
media market, with three companies currently controlling the 
majority of the Spanish language radio market and only two 
entities controlling the majority of Hispanic TV audience 
shares.
    The proposed merger would unite Univision, the Nation's 
largest Spanish language television company, with a continuing 
and significant interest in the number three Spanish language 
radio company, Entravision, and the Hispanic Broadcasting 
Corporation, the Nation's largest Spanish language radio 
company. If the Commission approves the merger, the new entity 
would control: the largest Spanish language radio in the 
country, with more than 40 percent of the revenue; the largest 
Spanish language TV, with approximately 80 percent of the 
audience and 70 percent of the revenue; the largest Spanish 
language website among U.S. Hispanics; and the largest Spanish 
language cable network.
    These are national statistics, but it is at the local level 
that the full brunt of the monopoly would be felt. For example, 
if the merger is approved Univision will control 69 percent of 
the Spanish broadcasting advertising market in Phoenix. 84 
percent of its holdings in Entravision, the third largest Latin 
radio chain in the country, are included in the merger.
    This deal would create unacceptable market power in Spanish 
language media in this country. Univision's own competitor in 
radio, the Spanish Broadcasting System, the second largest 
Spanish language radio company with only 16 radio stations 
nationally and, notably, the only one owned and operated by 
Hispanics, will find it difficult to compete with the merged 
entity.
    The same would be true for Telemundo, the second largest 
Spanish language TV company, which has never been able to 
obtain more than 15 percent of the national Spanish television 
market share, with Univision currently controlling 80 percent 
of this market.
    Under the tenets of this merger, virtually all Latinos 
would see and hear their news and entertainment from a single 
source, Univision. And perhaps not coincidentally, the single 
source would be owned by a non-Hispanic.
    Now, Mr. Chairman, I know that you know very well from your 
home state and from the U.S. Census Bureau of the incredible 
growth in our community, 38.8 million, the largest minority in 
the country, 10 percent increase in 2 years. Approximately 25 
percent of that audience has little or no ability to speak 
English and receives all of their news and information solely 
through Spanish language sources. Approximately 50 percent of 
that number live in Spanish-dominant households, in which the 
inhabitants need or prefer to speak and receive media messages 
in Spanish.
    Based on these findings, the Congressional Hispanic Caucus 
recently issued its Principles on Broadcast Ownership Rules, 
which states that: ``The commission should establish a clear 
policy on the separation between Spanish language and English 
language media markets. The current lack of specific rules on 
whether these are different markets has created challenges for 
antitrust policy enforcers and curtailed the ability of many 
minority broadcasting outlets to enter the U.S. media market.''
    Additionally, several letters have gone to the FCC from 
Members of Congress, consumer groups, and unions on the 
necessity of conducting a series of public proceedings to 
determine whether or not Spanish language media constitutes a 
separate market. Unfortunately, Chairman Powell has rather 
curtly dismissed them all.
    So despite appeals from leaders in the Hispanic community 
and elected officials from around the country and significant 
evidence to the contrary, the commission appears to be headed 
toward an erroneous finding that Spanish language media does 
not comprise a separate market. Such an erroneous finding would 
create great harm to competition and diversity, precisely the 
values the commission is supposed to protect.
    While Univision proclaims to oppose the separation between 
Spanish language and English language media markets to Federal 
regulators, in its pitches to Wall Street investors and 
advertisers it literally endorses such a separation by bragging 
about Spanish language TV's superior ability to reach Hispanics 
over mainstream outlets. Mario Rodriguez, Univision's President 
of Entertainment, recently told Television Week that, quote: 
``Hispanics choose Spanish language television over general 
market TV every hour of every day of the year.''
    It's also important to note that the threat of stifling 
competition in viewpoints is more onerous in the Hispanic 
markets because it has fewer media outlets. In contrast to the 
thousands of television and radio outlets in English, the 
Spanish market has only about 145 television stations and 630 
radio stations nationwide. However, even multiple media outlets 
mean nothing if they are controlled by the same entity and echo 
the same voice.
    It's also a matter of urgent public concern for all 
Americans that FCC endorsement of this merger would offer a 
precedent for monopoly control over the editorial content in 
the native language of any linguistic minority recognized under 
the Voting Rights Act, whether Latino, Native American, Native 
Alaskan, or Asian, to any person, no matter what his or her 
political persuasion would be.
    Monopolies of any kind are not good for commerce and media 
monopolies are not healthy for our democracy.
    Finally, Mr. Chairman, the FCC has the merger poised, it 
seems to so many of us, for approval right now as a follow up 
to its wildly unpopular media concentration decision. Not 
surprisingly, there are many reports that suggest that Chairman 
Powell wishes to push this decision through as quickly as 
possible.
    To accomplish this under the FCC's public interest standard 
for review of license transfers, this Commission will have to 
make a finding that the Spanish language market is not, is not, 
a separate one from the greater media market.
    [Mr. Menendez then spoke in Spanish.]
    What I said, very simply, is: If you did not quite 
understand what I just finished saying, you understand why the 
Spanish language market is a separate market. It is because, 
unlike NBC, CBS, ABC, Fox, or anyone else, their audience is 
those who are Spanish-dominant or who simply are unilingual 
insofar as they only speak Spanish, and that is the audience 
that is captivated by the smaller number of outlets, by the 
smaller opportunities.
    So it is sociologically, economically, and practically 
ludicrous, and even though the Commission has other 
overwhelming evidence before it that a separate market exists, 
the order has gone down to the Commission's media bureau to 
justify this finding.
    So it is notable that, in spite of the many opposition 
filings made in the last several weeks against the merger, 
Univision has not seen fit to answer a single one. It seems to 
be acting as a boy who, as they say, is assured of his dinner.
    So, Mr. Chairman, Members of the Committee, I appeal to all 
of you for this fastest growing part of our Nation's 
population, who has less media outlets than any other group and 
who clearly has--Univision does a great job. I will admit, it 
does a great job in providing information, but it cannot be the 
only one to provide that information. The Hispanic community, 
as Americans as a whole, needs to have competition, competition 
for their minds, competition for their dollars.
    If we consider the market power that this would bestow in 
the hands of a single source, I think it goes against all that 
is important to us. Finally, it would be unconscionable to 
allow it to do so without substantial and pervasive conditions 
against the threat it poses to competition, diversity, and 
democracy.
    I appreciate the opportunity to address the Committee, Mr. 
Chairman.
    The Chairman. Thank you very much, Congressman Menendez. We 
are always pleased to hear from you and we thank you for your 
advocacy. We thank you again. We know you have a very busy 
schedule. You are always welcome back here.
    Mr. Menendez. Thank you, Senator.
    The Chairman. Thank you. Are there any questions for Mr. 
Menendez?

            STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. Mr. Chairman, before Congressman 
Menendez leaves, I want to say that I regret that I was unable 
to greet you publicly before your departure is upon us. Bob 
Menendez is a good friend of mine, but, more importantly, he is 
a spokesman for his constituents, for Hispanic Americans, and 
in large measure is one of those most responsible for the 
actions taken in the Democratic House membership--a very 
important position, third highest position in the Democratic 
House delegation.
    So I wanted to say that I welcome Bob Menendez. I want to 
tell him something, that I occasionally watch Spanish 
television. It does not do a lot for my language ability, but 
it does do a lot to tell me about what is of interest to an 
important constituency, what is important to my neighbors, many 
of them, who speak Spanish fluently and regularly. So I wanted 
to say that I am pleased to hear your testimony and look 
forward to working with you, Bob, and I am pleased that you are 
here this morning.
    Thank you, Mr. Chairman.
    Mr. Menendez. Thank you, Senator. Thank you, Mr. Chairman.
    The Chairman. Thank you again, Congressman Menendez.
    Now we will move to our panel of witnesses. Mr. Lewis W. 
Dickey, Jr., the Chairman, President, and CEO of Cumulus Media 
Incorporated; Mr. Jon Mandel, Co-Chief Executive Officer, 
MediaCom; Mr. Simon Renshaw, Manager of The Firm; and Mr. Alex 
Kolobielski, President and CEO of First Media Radio, please 
come forward.
    Mr. Dickey, if you will sit on the far--yes, where you are 
is just fine. Please be seated and we will begin with you, Mr. 
Dickey. Welcome.

  STATEMENT OF LEWIS W. DICKEY, JR., CHIEF EXECUTIVE OFFICER, 
                       CUMULUS MEDIA INC.

    Mr. Dickey. Good morning. Mr. Chairman, my name is Lew 
Dickey. I am the Chairman and CEO of Cumulus Media. I 
appreciate the opportunity to appear before the Committee 
today. This morning I would like to base my remarks around the 
following three ideas: first, contrary to much of the self-
serving rhetoric, deregulation and the resultant consolidation 
of the radio industry has revitalized and perhaps saved an 
industry that I and many fellow Americans alike view as a 
national treasure.
    Second, the recent FCC decision to move away from a 
contour-based market definition which has been in effect for 11 
years and guided several thousand individual transactions, all 
approved one by one, in favor of an Arbitron-based market 
definition, will only serve to create more anomalies than it 
will cure. Though it may not be politically expedient, a much 
simpler, consistent, and more effective remedy was proposed and 
should be adopted.
    Third, the inability to transfer existing clusters formed 
in good faith under the existing rules at the time will prevent 
future competitors from emerging that will check and ultimately 
curb the growing power of the unambiguous industry leader, 
Clear Channel. Preserving the status quo simply strengthens and 
entrenches the incumbent, which I believe is the unfortunate 
and unintended consequence of this rulemaking decision.
    Now, as a second generation broadcaster--and my father is 
seated behind me--I grew up in Toledo, Ohio, understanding the 
responsibility that comes with being a licensee. I was taught 
that we as broadcasters had an obligation to serve our 
communities.
    Like most broadcasters, we witnessed firsthand the economic 
difficulties facing our extremely fragmented industry in the 
late eighties and early nineties. There were simply too many 
radio stations competing for a very small amount of the 
advertising dollar spent on all media. The FCC recognized that 
radio broadcasters needed the efficiencies of scale if they 
were to survive and improve program service and gave 
broadcasters a modicum of relief in 1991. Congress completed 
this regulatory relief in 1996 and the market forces were set 
in motion.
    For example, in building our company from scratch I have 
completed over 130 separate acquisitions. Our focus is on 
midsized and smaller markets, and I can tell you firsthand 
about the sad state our industry was in in America's heartland. 
A great many of the stations we acquired were either losing 
money or were only profitable because the owners had severely 
cut back investment in programming and the technical 
facilities.
    For instance, we had to spend tens of millions of dollars 
to bring these facilities up to FCC code to ensure that they 
would provide reliable and full coverage for their communities. 
In addition, many of the stations were either automated or 
received programming via satellite, with skeleton programming 
staffs to save money. And in many cases there was no local news 
staff whatsoever.
    Today things are much different under Cumulus. We have 270 
stations in 55 cities, and of our 2,800 employees 1,455, or 
more than half of them, are in programming. We now have 65 
full-time news people in addition to the local, regional, and 
national news that we carry through the Associated Press in 
addition to other major networks.
    The economies of scale afforded by our clusters enable us 
to offer listeners niche formats, like jazz, blues, black 
gospel, alternative rock, classic country, and all-sports, that 
certainly could not be self-sustainable outside of a cluster of 
multiple stations.
    We also have effectively used our platform of stations to 
benefit their respective communities. For example, last year we 
raised $7.5 million for charity, including $2.5 million alone 
for the Saint Jude's Children's Hospital. In addition to 
fundraising, on June 6 of this year, we opened up 
simultaneously 43 different playgrounds in different cities 
across the country for underprivileged children.
    We take our responsibilities as licensees seriously and 
feel very strongly that we have changed local radio in our 
communities for the better as a result of consolidation. At 
Cumulus we take a great deal of pride in the way we serve our 
communities, treat our 2,800 employees, and provide a return 
for our shareholders. In many ways, Mr. Chairman, we are the 
Jet Blue for the radio industry.
    I am concerned, however, about our continued viability if 
our hands are tied as we do battle each day with the industry's 
dominant force. Their tremendous scale gives them an undeniable 
advantage in the competition for capital, talent, and 
advertising dollars. Any action that impedes our ability to 
grow will only strengthen the industry leader as a greater 
share of advertising dollars increasingly shift toward the 
larger platforms.
    This long-term trend cannot be overestimated and as such I 
do not believe that we should have to compete under a new set 
of ground rules that clearly favor an incumbent whose platform 
is already dominant and becoming stronger every day.
    Thank you.
    [The prepared statement of Mr. Dickey follows:]

 Prepared Statement of Lewis W. Dickey, Jr., Chief Executive Officer, 
                           Cumulus Media Inc.
I. Introduction
    My name is Lew Dickey. I am the CEO of Cumulus Media Inc., a 
publicly-traded company that is the second-largest radio company in 
terms of number of stations with more than 250 located around the 
country.
    The radio industry is now at a critical crossroad, and, as a second 
generation and life-long radio broadcaster, I appreciate the 
opportunity to come before this Committee to discuss the very important 
issues that underlie that crossroad because the resolution of those 
issues will have a profound impact on radio and the service it provides 
to the listening public.
    To a large extent, the crossroad in radio reflects a fundamental 
gap between perception and reality:

   Public spokesmen decry the evils of consolidation but ignore 
        the substantial benefits that consolidation has brought to the 
        listening public.

   Fingers are pointed at the alleged misdeeds of Clear 
        Channel--by far the largest radio company with 1,200 stations--
        and assumptions are incorrectly made that every radio company 
        engages in the same practices.

   Critics point to an FCC rule on market definition that 
        permits some anomalies--such as Clear Channel's ownership of 
        many stations in the relatively small market of Minot, North 
        Dakota--and wrongly assume that the FCC rule allows excessive 
        consolidation in every market.

   Pressed by Congress to do something about the few anomalies 
        that generate almost all of the publicity, the FCC adopts a 
        solution--the use of Arbitron-created markets--that the FCC 
        rejected more than 10 years ago because it would not adequately 
        reflect the actual options available to radio listeners.

   Anxious to protect the public against the alleged dangers of 
        a single large company--Clear Channel--the FCC has shot an 
        arrow that strikes at the heart of smaller broadcasters whose 
        practices have served--and could continue to serve--the 
        listening public well.

    The flaws of the FCC's new market definition can be appreciated 
best by understanding the evolution of the radio industry in the last 
ten years or so.
    Radio historically has been an extremely fragmented industry. Prior 
to 1992, no single operator could own more than 20 of the more than 
10,000 stations in the United States. Following the gulf war in 1991, 
the industry fell on hard times and more than half of the radio 
stations were losing money. There were simply too many stations in each 
market chasing a very small share of the advertising dollars spent on 
all media. There were in fact reports that 90 percent of the industry's 
profit was garnered by about 10 percent of the owners.
    Radio owners--and the listening public they served--needed relief 
if free over-the-air radio was to survive. Responding to this grave 
situation, the FCC permitted broadcasters to own up to 2 FM's and 2 
AM's in each market with a maximum of 20 AM stations and 20 FM stations 
nationwide. It was a bold attempt to provide relief to a seriously 
troubled industry, and it revolved around a simple but critical 
concept--consolidation. The FCC recognized even then that radio 
broadcasters needed the efficiencies of scale if they were to survive 
and hopefully improve program service.
    In order to implement its new ownership rule, the FCC labored long 
and hard to develop a market definition that would provide the most 
uniform and objective method of determining compliance. It considered 
many options--including the use of Arbitron-based market definitions--
and ultimately decided in favor of the contour-based approach. Over the 
next four years, hundreds (if not thousands) of transactions were 
completed and billions of dollars of capital were invested as the radio 
industry completed its first wave of consolidation and produced the 
very efficiencies that the FCC had sought. As the industry attracted 
new capital, stations that had gone dark were revived by entrepreneurs 
who were banking on a new business model that enabled broadcasters to 
leverage fixed costs against multiple stations in a single market. In 
short, the FCC's action in 1992 proved to be a desperately needed 
regulatory relief package for a struggling and still very fragmented 
industry.
    Despite progress, there were many areas--especially in medium and 
smaller markets--where the FCC's expanded ownership rules had little or 
no impact. Then, in1996, Congress passed sweeping reform legislation 
that further relaxed the caps on local ownership and removed the 
national cap on the number of stations a single company could own. 
Radio broadcasters could now own up to eight (8) stations in the 
largest markets and no more than half of the stations in the smallest 
markets.
    The expanded ownership opportunities under the 1996 Act relied on 
the same contour-overlap methodology that the FCC had adopted in 1992. 
And why not? There was no reason to believe that the methodology was 
ill-conceived. And so the Telecommunications Act of 1996 transformed 
radio in the smaller markets from a basically ''mom and pop'' industry 
into a business that could now attract the large amounts of capital and 
investment needed to provide the improved program service that Congress 
no doubt sought.
II. The Results of Industry Consolidation
    Armed with both public and private capital, entrepreneurs have 
invested tens of billions of dollars and completed thousands of 
transactions since 1996 to begin to consolidate one of the country's 
most fragmented industries. Several large companies were created as a 
result of this consolidation, but even today, over seven years later, 
only five companies own more than 100 radio stations out of more than 
12,000 that are now on the air. They are Clear Channel, Cumulus, 
Citadel, Infinity and Entercom.
    Clear Channel was by far the most aggressive of the consolidators, 
acquiring more than 1,200 stations, or almost 1,000 more than my 
company, Cumulus, which owns the second largest number of stations. On 
the revenue front the disparity is equally as great. With over $3.5 
billion of radio revenue, Clear Channel has almost a billion and a half 
dollar lead over the next largest competitor, Infinity, and a $3 
billion lead over the number three player in revenue, which is Cox. In 
short, Clear Channel is in a class by itself in terms of revenue and 
number of stations.
    As the proverbial 800-pound gorilla, Clear Channel has become the 
lighting rod for opponents of radio consolidation. While some of this 
criticism maybe deserved, much of it is not. For example, concerns have 
been raised that ownership of so many radio stations by one company has 
homogenized program fare and turned radio service by all stations--
whether or not owned by Clear Channel--into a McDonald's version of 
broadcasting. The truth is otherwise. There is more format diversity 
today than ever before, and there are more choices on the dial today 
than ever before. Our experience at Cumulus is illustrative. I have 
built our company--which focuses on midsize and smaller markets--from 
scratch through 130 acquisitions which now provides a format diversity 
in most markets that never previously existed.
    Like many other radio companies, Cumulus has been able to utilize 
the expanded ownership caps of the 1996 Act to develop market clusters 
that operate with greater economic efficiency and are able to pour 
much-needed money and resources into developing quality local 
programming with live disc jockeys and upgraded equipment. Critics 
today ignore the achievements of companies like ours and speak of those 
``mom and pop'' operations with great nostalgia on the assumption that 
those small operations provided reliable and responsive local service. 
Again, the truth was often otherwise. Many of the stations we acquired 
were automated juke boxes which had few local programs and instead 
relied on programming from syndicators via satellite or bare-bones 
automation systems. Oftentimes, these stations were operated as little 
more than sales organizations with little or no programming staff and 
with substandard transmission facilities that were in need of 
significant capital investment just to bring them into compliance with 
FCC rules.
    Notwithstanding the benefits achieved under existing rules, the FCC 
voted a month ago to adopt new radio market definition which had the 
unstated objective of tempering the dominance of Clear Channel and the 
stated objective of preventing a repeat of the now famous Minot 
anomaly. I believe that the new rules regarding radio ownership and 
market definition have missed on both counts and should be withdrawn or 
modified.
III. Grandfathering of Current Clusters and Pending Applications
    The FCC's new market definition means that some radio broadcasters 
will have market clusters that exceed the new limitation. The FCC is 
grandfathering everyone's current clusters, but requiring compliance 
upon transfer of radio properties. For Clear Channel, this is a most 
welcome development because it is probably not a seller and is in the 
ninth inning of consolidation. As a result, the presumed primary target 
of the FCC action is relatively unaffected. Clear Channel will, 
therefore, be allowed to continue to dominate an industry with 
unprecedented scale and will inevitably grow stronger with each passing 
day under the new rules as its competitors remain fragmented.
    This is bad news for those of us who have to compete against Clear 
Channel. We cannot hope to compete effectively against Clear Channel's 
mammoth organization unless we can grow. Preserving the status quo 
simply strengthens and emboldens the incumbent and that, in my 
judgment, is the unintended consequence of the FCC's new rulemaking 
decision. The point should not be lost amidst all the hysteria over 
consolidation: Clear Channel will be that much stronger five years from 
today if the ground rules of consolidation are changed in midstream and 
impede further growth by its competitors.
    To a large extent, this result is almost preordained by the FCC's 
refusal to grandfather a noncompliant market cluster if it is sold to 
someone other than a small business (which is unlikely to have the 
resources to buy a cluster in a market of any meaningful size). First 
is the question of fairness--telling Cumulus and other radio companies 
that they cannot buy or sell intact a group of radio stations that were 
acquired in reliance on pre-existing rules. Second, there is the impact 
on needed growth for companies who want to compete with Clear Channel 
and other large radio companies. The inability of smaller companies to 
sell their clusters intact will cause them to hold on to their clusters 
rather than break them up and suffer the financial loss that could 
ensue. There will thus be fewer stations available for sale. The net 
result will be a slower pace of growth for Clear Channel's 
competitors--all of which will help preserve Clear Channel's 
competitive advantage of scale.
    Conversely, the question could logically be asked, why not force 
all clusters to be brought into compliance and thereby level the 
playing field. The answer is obvious. This approach will hurt the 
smaller broadcasters and create hundreds of ``orphan'' stations, many 
of which will inevitably go dark--prompting an ironic reversion to the 
pre-duopoly situation of the early 90s where few radio companies could 
boast of profits. Due to the relative size of the competitors, 
requiring divestitures to bring a group into compliance will have a 
much greater adverse impact on Cumulus, Citadel, Regent, Saga or Next 
Media than it will on Clear Channel,. because we, like many other 
broadcasters, derive the majority of our collective revenue from 
markets outside the top 50, which are the markets most likely to be 
affected.
    There is a similar inequity in the FCC's refusal to grandfather 
applications that were filed before the new rules were adopted. There 
are apparently hundreds of applications that are currently pending 
before the FCC that reflect deals constructed on the basis of the pre-
existing rules. The practical ramifications of the situation should not 
be lost in the FCC's urge to change the definition of a radio market: 
before that change was adopted on June 2, many companies large and 
small invested substantial time and limited resources to fashion deals 
that would comply with the prior rules.
    As a legal matter, the FCC cannot apply the new rules to those 
pending applications, because the new rules are not yet effective and 
probably will not become effective until some time in August at the 
earliest. The FCC has therefore decided to defer action on non-
compliant pending applications until the new rules do become effective. 
Parties to those pending applications can file amendments to show that 
their pre-existing deal complies with the new rules, but, in the 
absence of an amendment which shows compliance, the FCC apparently 
proposes to suspend the processing of the application until the new 
rules do become effective. For Cumulus, this means that many pending 
applications--including some that were filed many months before June 
2--are simply locked away in the FCC's files until the new rules can be 
retroactively applied. The FCC has explained that retroactive approach 
by the need for consistency, but the FCC decision fails to cite any 
harm that will befall the public interest if those pending applications 
were processed under the pre-existing rules--which are still in effect 
today.
IV. Radio Market Definition
    The FCC's decision to use Arbitron to define markets is also 
seriously flawed. At the outset, it is important to remember that the 
FCC rejected this very same approach in 1992 in favor of the contour-
based market definition. Some 8,000 transactions later, the FCC now 
wants to change the rules to prevent a recurrence of the Minot 
anomalies. Instead of using the objective-based contour overlap 
methodology, the FCC is now telling radio broadcasters to rely on 
definitions formulated by a commercial enterprise whose overwhelming 
source of revenue is from the radio broadcasters themselves.
    This approach is inherently rife with conflicts and will be 
susceptible to manipulation similar to gerrymandering. For example, 
Arbitron could reduce the market in Macon, Georgia (where Cumulus 
operates stations) to expand the market in Atlanta because it would 
benefit large Arbitron customers like Clear Channel and Infinity in 
Atlanta. That result would obviously hurt Cumulus and the other 
independents in Macon.
    This hypothetical is not designed to impugn the motives or actions 
of Arbitron. But we should not lose sight of the most critical fact 
here: Arbitron is a private vendor understandably interested in 
maximizing its profit, and that kind of company should not be endowed 
with the power to be the official arbiter of radio market definitions 
and thus the ultimate regulator of industry consolidation.
    The difficulties with the FCC's new approach are compounded by 
Arbitron's failure to include 40 percent of the country's stations in 
rated markets. That means that the FCC now needs to devise yet another 
methodology for defining a market in the smaller markets. That 
situation also creates the potential for manipulation by broadcasters 
who may try to influence Arbitron's decision to rate an unrated market 
or to discontinue the service in a rated market when it suits the radio 
companies' expansion needs. This scenario may actually increase the 
amount of concentration in a market under the new rules--hardly a 
consequence intended by the FCC.
    In an effort to combat manipulation of Arbitron data, the new FCC 
rules state that a broadcaster cannot rely on any changes in Arbitron 
markets until those changes have been in effect for two years. To be 
sure, that reservation will preclude broadcasters from immediately 
exploiting any inappropriate changes in the Arbitron definition; but 
that 2-year reservation will allow the exploitation after two years. 
And beyond that, the 2-year reservation will preclude a broadcaster--
and the FCC itself--from immediately using Arbitron changes that do 
reflect legitimate changes in the radio marketplace. In short, the use 
of Arbitron can produce anomalies in both the short run and the long 
run.
    It is indeed ironic that the FCC was looking for an 
``intellectually honest'' solution to the Minot problem and, in its 
zeal to do something that would mollify the critics, jettisoned a rule 
that had produced relatively few anomalies in exchange for a new 
methodology which is subject to manipulation, draws a distinction 
between rated and unrated markets, and could actually lead to greater 
concentration in some instances, and all while unfairly restricting 
broadcasters ability to compete against the industry's dominant 
powerhouse. In short, the FCC's new market definition will surely 
produce far more anomalies over time than it will cure, and the new 
rules regarding grandfathering and transferability will only serve to 
embolden a company whose market power the FCC presumably wanted to 
curb.
    If the objective is to remedy the anomalous situations like Minot, 
it can be done under the existing contour-overlap methodology with a 
simple qualification based upon the proximity of the transmitters to 
the defined market. The NAB proposed a test that no station could be 
deemed to be in the market under the contour-overlap methodology if the 
station's transmitter was more than fifty-eight (58) miles from the 
``market perimeter.'' We then could have preserved and refined a market 
definition methodology under which over 8,000 transactions have 
occurred and under which local markets have already largely been 
consolidated. This final test would have the added benefits of 
consistency for ALL stations (both rated and unrated) and not being 
subject to manipulation.
V. Conclusion
    In deciding whether to keep the existing rule or in fashioning a 
new rule, it must be remembered that the radio industry is a diverse 
industry with dozens of different companies who each have unique 
cultures and operating strategies. This Committee should not assume 
that all broadcasters behave similarly or that consolidation will only 
produce one way of operating a cluster. For example, at Cumulus, we 
believe in being live and local and have eschewed the practice of 
piping in talent from another market and pretending that they are right 
there in the local studio. That is a tactic that is used against us, 
and sometimes it works and sometimes it doesn't. But that does not 
affect our programming decisions. We believe that, in the long run, we 
will take share from companies who aren't predominately local because 
radio is truly a local medium, and we feel very strongly that a local 
and personal touch is critical to good public service and to our 
financial health.
    Therefore, I caution the Committee not to use some broadcasters' 
programming policies as the sole basis to define beneficial public 
policy for an entire industry. I would also ask the Committee not to 
tie our hands as we work to continue to grow so that we remain viable 
and continue to compete across the street from Clear Channel. Any 
action that impedes that growth will only serve to strengthen the 
industry leader as a greater share of advertising dollars increasingly 
shifts towards larger platforms. That will inevitably enhance Clear 
Channel's ability to lock up the best talent and the biggest 
promotions--all of which will increasingly make it a more formidable 
competitor for audience share as well. That last point cannot be 
emphasized too strongly. Clear Channel will become a more powerful 
market force under the new rules. If the Committee is interested in 
fair competition and better public service, the FCC's new definition 
for rated radio markets should be changed.

    The Chairman. Thank you very much.
    Mr. Mandel.

STATEMENT OF JON MANDEL, CO-CHIEF EXECUTIVE OFFICER, MEDIACOM, 
                    GREY GLOBAL GROUP, INC.

    Mr. Mandel. Good morning. I am here today to try to help 
you through some of the morass of twisted claims made by those 
with vested economic interests in the broadcast industry. Why 
would an advertising agency be willing to do this? Why would we 
have joined with others in filing at the FCC as the Coalition 
for Program Diversity? Some of our agency counterparts have 
told us to just keep quiet because the media companies could 
hurt our business if we aggravate them. And because our clients 
pass on commission basis, we make more money if advertising 
costs skyrocket.
    However, I am concerned about the future of not just the 
advertising industry, but the broadcast industry as well. I am 
shocked that some would have you and others in this town make 
decisions based on half-truths and misconceptions. Let mE clear 
up some facts and misstatements that have been made at the 
Commission and to this Committee. Because we are focusing on 
radio today, I will use radio examples.
    There is a belief that radio consolidation saved the radio 
industry from demise. But as Michael Bergner, a station broker, 
said in Business Week about the years since 1987: ``Even if you 
knew nothing about the business, you would have had to go out 
of your way to lose money.''
    It was stated in this chamber that Clear Channel only owns 
10 percent of the radio stations in this country. True, but 
misleading. The industry source ``Who Owns What,'' which is 
owned by Clear Channel, credits the company with having 32 
percent of the national audience to radio. In the markets that 
Clear Channel is in, the percentage would be much higher.
    Clear Channel has implied that this is because they are 
excellent programmers. Yes, in Washington they improved one 
station from number 35 on its ranking to number 20. In New 
York, they own the top four stations, which is the same rank 
when they bought them in 1999.
    In San Diego, Clear Channel owns the top six stations--no 
improvement since they bought them in 2000. In San Diego, by 
the way, they also own three other stations and sell the 
advertising time at another six, and they also own one of the 
two radio rep firms that also sell the ad time for their 
competitors.
    The same lack of station-building story holds in New 
Orleans and Minneapolis. In Austin and Atlanta, they lost rank. 
Is this good radio management or good banking?
    In the interest of free market, regulators and Congress 
have deregulated, which has instead caused a constrained market 
that has cost advertisers and the economy. The issue is both 
horizontal and vertical in nature. That is because the 
consolidated companies own multiple stations in multiple 
markets and program them in-house. Advertisers and local 
economies suffer.
    As a Clear Channel program director was quoted in Inside 
Radio: ``Clear Channel stations only buy syndicated programming 
from us--keep the money inside the family.'' For instance, the 
Weather Channel had a syndicated radio package that Clear 
Channel would not run because it was, quote unquote, ``note 
appropriate in our markets.'' How many jobs were lost when the 
Gulf Coast or Arizona tourism offices could not be as effective 
in running advertising in Washington saying, it's snowing where 
you are, but it's nice here?
    When Clear Channel decided it was in fact appropriate 
because they took over national ad sales on the show, how much 
more did advertisers pay?
    Mike Savage is cleared on independent stations and is quite 
successful. It has been reported that Clear Channel is trying 
to get him to break his contract by promising upgraded 
clearances. How many advertisers will lose an outlet when those 
independent radio stations are no longer a viable outlet? How 
many advertisers will be blocked on a national basis from 
running product advertising or issue advertising that Clear 
Channel disagrees with?
    The consolidation in radio has caused large cost increases 
over what straight supply and demand would have caused in a 
free market. In Atlanta, costs are 155 percent higher than 
supply and demand, which is a consolidation tax of over $144 
million a year. New York radio is overcharged by 30 percent, 
$156 million a year. San Diego is also 30 percent. Mossy Auto 
Group, which is a San Diego car dealer, overpaid by $600,000, 
that means maybe they do not mind because the prices are so 
high that smaller auto dealers have trouble advertising.
    The people and businesses of Austin are overcharged by 95 
percent. I would sure hate to walk into El Arroyo Restaurant if 
that fact gets out of this room.
    In New Orleans, the consolidation tax is only 7 percent 
because there are 10 non-consolidated stations as an 
alternative to the 3 big owners. Ray Brant and Bone Brothers 
are car dealers in New Orleans. They overpaid by $85,000 last 
year. Did they eat it or charge Louisianans more for their 
cars?
    Minneapolis has a consolidation tax of 78 percent because 
there are only four large consolidated sellers. In Washington, 
the Metro advertises for more riders and, if like New York, is 
probably a little starved for money, but it was overcharged a 
quarter of a million dollars last year because of radio 
consolidation.
    In Las Vegas, 30 percent, $14 million; and in Tulsa, Atomic 
Burrito has to sell a lot more beans or lay a worker off to 
cover the $4,200 per year 12 percent consolidation tax they 
pay.
    Those are the facts. You can look them up. It is clear that 
the effort to create a free market has done anything but. It is 
analogous to letting a private citizen maintain the only public 
free road into the market and looking the other way when he 
puts a private toll up. The cost to the economy created by this 
closed market while winking that it is free is of paramount 
importance to advertisers and the people of the United States 
who have to pay the costs. We believe it should be to you as 
well.
    You asked about radio. We have done the work and can prove 
the same problems in television. I welcome your questions.
    [The prepared statement of Mr. Mandel follows:]

Prepared Statement of Jon Mandel, Co-Chief Executive Officer, MediaCom, 
                        Grey Global Group, Inc.
    Good morning. I am here today to try to help you through some of 
the morass of twisted claims made by those with vested economic 
interests in the broadcast industry. Why would an advertising agency be 
willing to do this? Why would we have joined with others in filing at 
the FCC as the Coalition for Program Diversity? Some of our agency 
counterparts have told us to just keep quiet because the media 
companies could hurt our business if we aggravate them. And, because 
our clients pay us on a commission basis we make more money if 
advertising costs skyrocket.
    However, I am concerned about the future of not just the 
advertising industry but the broadcast industry as well. I am shocked 
that some would have you and others in this town make decisions based 
on half-truths and misconceptions. Let me clear up some facts and 
misstatements that have been made at the Commission and to this 
Committee. Because we are focusing on radio today, I will use radio 
examples.
    There is a belief in Washington that radio consolidation brought on 
by the 1996 Act saved the radio industry from demise. But as Michael 
Bergner, a station broker in Florida said in Business Week about the 
years since 1983, ``Even if you knew nothing about the business, you 
would have had to go out of your way to lose money.''
    It was stated in this chamber that Clear Channel only owns 10 
percent of the radio stations in the country. True but misleading. The 
industry source, Who Owns What (which is owned by Clear Channel) 
credits the company with having 32 percent of the national audience to 
radio. In the markets that Clear Channel is in, the percentage would be 
much higher.
    Clear Channel has implied that this is because they are excellent 
programmers and improved the stations they bought. Yes, in Washington 
they improved one station from #35 on its demo ranking to # 20. But in 
New York they own the top 4 stations, which is the same rank when they 
bought them in 1999.
    In San Diego, Clear Channel owns the top 6 stations, which is no 
improvement since they bought the top 6 in 2000. They also own 3 other 
stations in San Diego and sell the advertising time in another 6. And 
they also own one of the two radio rep firms that also sells ad time 
for competitors.
    The same lack of station building story holds in New Orleans and 
Minneapolis. In Austin and Atlanta they lost rank. Is this good radio 
management or good banking?
    In the interest of ``free market,'' regulators and Congress have 
deregulated which has instead caused a constrained market that has cost 
advertisers and the economy. Further, it has so limited the market that 
no one else can come in. The issue is both horizontal and vertical in 
nature. That is because the consolidated companies own multiple 
stations in multiple markets and program them in-house. Thus, 
advertisers and local economies suffer. Let me give you some examples.
    As a Clear Channel program director was quoted in Inside Radio 
before Clear Channel bought it and fired the editor, Clear Channel 
Stations ``only buy syndicated programming from us . . . keep the money 
inside the family.'' The Weather Channel had a syndicated radio package 
that Clear Channel would not run because it ``was not appropriate for 
our market.'' How many jobs were lost when the Gulf Coast or Arizona 
tourism offices couldn't be as effective in running advertising in 
Washington saying ``It's snowing where you are but it is nice here.''
    When Clear Channel decided it was appropriate in their markets 
because they took over national ad sales in the show, how much more did 
the advertisers pay?
    Mike Savage is cleared on independent stations and is quite 
successful. Clear Channel is trying to get him to break his contract by 
promising upgraded clearances. How many advertisers will lose an outlet 
when those independent radio stations are no longer a viable outlet? 
How much more will those who want Savage's audience have to pay on 
Clear Channel? How many advertisers will be blocked on a national basis 
from running product advertising or issue advertising that Clear 
Channel disagrees with?
    The consolidation in radio has caused large cost increases over 
what supply and demand would have caused in a free market. In Atlanta 
costs are 155 percent higher than free market, which is a consolidation 
tax of $144.5 million per year. New York radio is overcharged by 30 
percent. $156 million per year. San Diego is also 30 percent. That 
means that the Mossy Auto Group overpaid by $600,000. Maybe they didn't 
mind because the prices are so high the smaller auto dealers have 
trouble advertising.
    The people and businesses of Austin are overcharged by 95 percent. 
I would sure hate to walk into El Arroyo Restaurant if that fact gets 
out of this room.
    In New Orleans, the consolidation tax is only 7 percent because 
there are 10 non-consolidated stations as an alternative to the 3 big 
owners. Although that may change even for the worst now that Clear 
Channel traded outdoor assets with Viacom so Clear Channel also now 
owns the only non-broadcast alternative to radio. Ray Brandt and Bohn 
Bros are car dealers in New Orleans. They overpaid by $85,000 last 
year. Did they eat it or charge Louisianans more for their cars?
    Minneapolis pays a consolidation penalty of 78 percent because 
there are only four large consolidated sellers to choose from. In 
Washington, D.C. the Metro advertises for more riders and is probably a 
little starved for money but it was overcharged $250,000 last year 
because of radio consolidation.
    Las Vegas is 30 percent, $14 million per year. And in Tulsa, Atomic 
Burrito has to sell a lot more beans or lay a worker off to cover the 
$4,200 per year, 12 percent consolidation tax on their radio 
advertising.
    Those are the facts. You can look them up. It is clear that the 
effort to create a free market has done anything but. It is analogous 
to letting a private citizen maintain the only public free road into 
the market and looking the other way when he puts a private toll up. 
The costs to the economy created by this closed market while winking 
that it is free is of paramount importance to advertisers and the 
people of the United States who have to pay the costs. We believe it 
should be to you as well.
    You asked about radio, but we have done the work and can prove the 
same problems in television. I welcome your questions.

    The Chairman. Thank you very much, Mr. Mandel.
    Mr. Renshaw, welcome.

STATEMENT OF SIMON RENSHAW, MANAGER, ON BEHALF OF THE RECORDING 
                       ARTISTS' COALITION

    Mr. Renshaw. Good morning, Mr. Chairman and Members of the 
Committee. My name is Simon Renshaw, I wanted to be here, I 
thank you for the opportunity to speak today on behalf of the 
Recording Artists' Coalition. I am a full-time music manager 
and a board member of the Recording Artists' Coalition.
    The Recording Artists' Coalition is a nonprofit recording 
artist advocacy group comprised of numerous well-known, 
featured recording artists, including Tony Bennett, Clint 
Black, Jimmy Buffet, Sheryl Crow, Don Henley, Billy Joel, 
Stevie Nicks, Bonnie Raitt, Bruce Springsteen, and many others.
    The Recording Artists' Coalition was formed in 1999 in 
response to the effort by the Recording Industry Association of 
America in November 1999 to obtain an amendment to the work-
for-hire provisions of the Copyright Act. Since then, the 
Recording Artists' Coalition has been involved in numerous 
legal and political issues affecting recording artists.
    I also want to note that my statements today reflect the 
viewpoints of other pro-artist groups, such as the American 
Federation of Television and Recording Artists, the American 
Federation of Musicians, the Future of Music Coalition, and the 
National Academy of Recording Arts and Sciences.
    I have been in the music business for close to 30 years. I 
started in the business in 1974 and I have been a full-time 
music manager since 1986. Over the last 17 years, I have been 
involved in the careers of musical artists in a wide variety of 
musical styles and genres and of varying levels of success, 
from new artists to international superstars.
    A major part of the work of the manager is liaising with my 
clients' record labels and assisting them with the design and 
implementation of strategies to create awareness and, 
hopefully, success at radio. My clients include, among others, 
the Dixie Chicks.
    As you may recall, Don Henley, another founding member of 
the Recording Artists' Coalition, testified before this 
Committee last January and explained how artists and the public 
have suffered because of radio industry consolidation and the 
Telecommunication Act of 1996. Before the 1996 Act, artists and 
record labels worked well with the radio industry. Each side 
needed the other and, while each exerted much influence and 
leverage over the other in the daily give and take between 
them, a delicate balance did emerge. The artists had a certain 
leverage over radio and radio had a certain leverage over 
artists. The system, while imperfect, still worked.
    All of that has now changed. The mad rush to consolidate 
has dramatically tipped the balance in favor of the radio 
industry. They now have unprecedented influence and control 
over artists and record labels. So while the radio industry 
continues to prosper, the recording artist community, already 
devastated by unchecked music piracy and unprecedented record 
label cutbacks and spiraling operational costs, is bearing an 
even greater financial and creative cost.
    Many in the artist community had hoped that the Internet 
would be able to ameliorate the problem. This has not happened. 
Radio air play is still necessary to introduce new artists to 
the public and to support established artists. Without radio 
air play, a new act has very little chance to succeed. Access 
to radio is absolutely essential.
    With real competition between radio networks and stations, 
there was always opportunity for young acts to emerge. The 
emergence of these young artists is the lifeblood of the music 
industry. But with rampant consolidation, it is becoming 
increasingly difficult for new artists to emerge.
    Unchecked consolidation is at the root of the problem. As 
networks consolidate, they homogenize play lists and engage in 
more centrally located programming. This harms the artist in 
numerous ways. With centralized programming, there are arguably 
fewer spots for new artists. This gives radio networks enormous 
leverage to make ever-increasing demands on the record label 
and the recording artist.
    These demands take various forms, ranging from increased 
financial support of the network, some of which is called 
``payola,'' or independent radio promotion, to increased 
demands on recording artists to perform or take part in radio 
promotions for little or no compensation. The implied penalty 
for not agreeing to paying high tribute or to offer gratis 
services to a radio network is decreased or no radio air play. 
The pressure on artists and the labels to capitulate is real 
and is at times overwhelming.
    Consolidation and the resulting homogenization of play 
lists and centralized programming has also greatly diminished 
the artist's reliance on breakout cities. Before consolidation, 
local DJ's and program directors retained the power to create 
local diversified programming. Sometimes a band's success would 
be solely due to a single DJ or program director compelled to 
play music that is overlooked elsewhere.
    This was one of the beauties of the pre-1996 system. A band 
or artist could receive an inordinate amount of attention from 
a single radio station. The interest in that city would then--
could then have an enormous effect because the attention of the 
lone radio station would oftentimes act as a catalyst for other 
stations in other cities to start adding an artist's song or 
work to their play lists. This would have a cascading effect 
and all of a sudden a new artist would achieve national success 
that would otherwise have been denied it in today's radio 
world.
    One has to wonder whether any of the great musical trends 
in contemporary music would have happened in today's radio 
environment. Would the Motown or Stax sounds have ever been 
heard? Would the Beach Boys have exploded out of southern 
California? Would the Grunge sound of Seattle have ever ignited 
a new generation of music lovers?
    Many of the most important music styles have been the ones 
that developed and matured locally, that were brought to the 
forefront by local radio stations championing their music.
    I am sure many of you are aware of the controversy 
surrounding the Dixie Chicks. This incident received a good 
amount of press coverage. As a result of statements made by 
members of the Dixie Chicks at a concert, two radio networks, 
Cox and Cumulus, banned the Dixie Chicks from their play lists 
at a chain level, while many other stations across the country 
banned them at a local station level and many others did not. 
In Colorado Springs, Colorado, two DJ's were suspended for 
violating that ban when they played the Dixie Chicks' records.
    Whether you agree with my clients' statements or not, I 
know you support the First Amendment. Unfortunately, radio 
consolidation has provided radio networks with an enormous 
opportunity to undermine free speech by boycotting records 
while they wage political wars with artists and labels, be that 
for ratings gains or be that for political favor.
    I appreciate that the networks also enjoy the same First 
Amendment rights as my clients, but we must remember that those 
who crafted the original limitations on ownership feared 
conglomerates exercising this kind of control over political 
speech. Ownership limits were intended in part as a way to 
prevent such a monopoly of thought and discourse. The public 
air waves were to be used to promote a marketplace of ideas. A 
marketplace of ideas, the cornerstone of this democracy, can 
only be nurtured and sustained within a system promoting 
ownership diversity, not ownership consolidation.
    Even the perception of a radio network using power in this 
way clearly demonstrates the potential danger of a system of 
unchecked consolidation that ultimately undermines artistic 
freedom, cultural enlightenment, and political discourse. What 
happened to my clients is perhaps the most compelling evidence 
that radio ownership consolidation has a direct negative impact 
on diversity of programming and political discourse over the 
public air waves.
    Some in the radio industry have suggested that recent FCC 
rule changes actually restrict radio networks from continuing 
their drive toward consolidation. I am not convinced that this 
is the case. Some serious analysts have concluded that the 
intricate market rule changes do not make it harder to acquire 
a new station. I am attaching to my testimony comments from the 
Future of Music Coalition setting forth that conclusion.
    My personal view is that the recent FCC rule changes in 
market definition are relatively insignificant. This is not a 
local market problem. This is a national problem. As such, I 
hope the Committee will consider the implementation of new 
national limits on ownership. Only by placing national limits 
on ownership and perhaps limits that are more reflective of the 
pre-1996 world will the harm caused by radio consolidation tend 
to diminish and hopefully disappear.
    Thank you.
    [The prepared statement of Mr. Renshaw follows:]

    Prepared Statement of Simon Renshaw, Manager, On behalf of the 
                      Recording Artists' Coalition
    Mr. Chairman and Members of the Committee,

    My name is Simon Renshaw. I am honored to be here and I thank you 
for the opportunity to speak today on behalf of the Recording Artists' 
Coalition (RAC). I am a full time music manager and board member of the 
Recording Artists' Coalition. The Recording Artist Coalition is a non-
profit recording artist advocacy group comprised of numerous well-known 
featured recording artists, including Tony Bennett, Clint Black, Jimmy 
Buffet, Sheryl Crow, Don Henley, Billy Joel, Stevie Nicks, Bonnie 
Raitt, Bruce Springsteen, and Trisha Yearwood. RAC was formed in 1999 
in response to the effort by the Recording Industry Association of 
America in November 1999 to obtain an amendment to the work-for-hire 
provisions of the Copyright Act. Since then RAC has been involved in 
numerous legal and political issues affecting recording artists. I also 
want to note that my statements today reflect the viewpoints of other 
pro-artist groups such as AFTRA, AFM, the Future of Music Coalition, 
and NARAS.
    I have been in the music business for close to 30 years. I started 
in the business in 1974 and after initially working in live concert 
production, I have been a full time artist manager since 1986. Over the 
last 17 years I have been involved in the careers of musical artists in 
a wide variety of musical styles and genres, and of varying levels of 
success, from new artists to international superstars. A major par of 
the work of the manager is liaising with my clients record labels and 
assisting them with the design and implementation of strategies to 
create awareness and hopefully success at radio. My clients include, 
among others, the Dixie Chicks.
    As you may recall, Don Henley, another founding member of the 
Recording Artists' Coalition, testified before this Committee last 
January and explained how artists and the public have suffered because 
of radio industry consolidation and the Telecommunications Act of 1996.
    Before the 1996 Telecommunications Act, artists and record labels 
worked well with the radio industry. Each side needed the other, and 
while each exerted as much influence and leverage over the other in the 
daily give and take between them, a delicate balance emerged. The 
artists had certain leverage over radio, and radio had certain leverage 
over the artists. This system, while imperfect, still worked.
    All of that has now changed. The mad rush to consolidate has 
dramatically tipped the balance in favor of the radio industry. They 
now have unprecedented influence and control over the artists and the 
record labels. So while the radio industry continues to prosper, the 
recording artist community, already devastated by unchecked music 
piracy, unprecedented record label cutbacks, and spiraling operational 
costs, is bearing an even greater financial and creative cost.
    Many in the artists' community had hoped that the Internet would be 
able to ameliorate the problem. This has not happened. Radio airplay is 
still necessary to introduce new artists to the public, and to support 
established artists. Without radio airplay a new act has very little 
chance to succeed. Access to radio is absolutely essential. With real 
competition between radio networks and stations, there was always 
opportunity for young acts to emerge. The emergence of these young acts 
is the lifeblood of the music industry. But with rampant consolidation, 
it is becoming increasingly difficult for new acts to emerge.
    Unchecked consolidation is at the root of this problem. As networks 
consolidate, they homogenize playlists and engage in more centrally 
located programming. This harms the artist in numerous ways. With 
centralized programming, there are arguably fewer spots for new 
artists. This gives the radio networks enormous leverage to make ever 
increasing demands on the record label and the recording artist. These 
demands take various forms, ranging from increased financial support of 
the network--some call this payola or independent radio promotion--to 
increased demands on recording artists to perform or take part in radio 
promotions for little or no compensation. The implied penalty for not 
agreeing to pay higher tribute or to offer gratis services to the radio 
network, is decreased or no radio airplay. The pressure on artists and 
the labels to capitulate is real, and at times overwhelming.
    Consolidation, and the resulting homogenization of playlists and 
centralized programming, has also greatly diminished an artist's 
reliance on breakout cities. Before consolidation, local DJs and 
program directors retained the power to create local, diversified 
programming. Sometimes a band's success would be solely due to a single 
DJ or program director compelled to play music that is overlooked 
elsewhere. This was one of the beauties of the pre-1996 system. A band 
or act may receive inordinate attention from a lone radio station. The 
interest in that city in the act may be enormous because of the 
attention of the lone station, and oftentimes this attention would act 
as a catalyst for stations in other cities to add the song to their 
playlist. This would have a cascading effect, and all of a sudden a new 
act would achieve national success that would have otherwise been 
denied it in today's radio world. The possibility of an act ``breaking 
out'' on a singular station or in a singular market has been severely 
diminished because of consolidation. The power to independently 
program--once a staple of the radio industry--has been replaced with 
more centralized programming that works against the dynamic of a 
``breakout city.'' Thus, many new acts will never achieve success due 
in part to this new restrictive atmosphere.
    In addition to the problems that consolidation and centralized 
playlists have brought to individual artists, one should not overlook 
the cultural damage this is inflicted by these practices. One has to 
wonder whether any of the great musical trends in contemporary music 
could have happened in today's radio environment. Would the Motown or 
Stax sounds have ever been heard, would the Beach Boys have exploded 
out of Southern California, would the grunge sounds from Seattle ever 
ignited a new generation of music lovers. Many of the most important 
musical styles have been ones that developed and matured locally and 
were brought to the forefront by local radio stations, championing 
their local music.
    I have always understood that there was to be an element of social 
responsibility between a radio station and the community that licensed 
that station the right to use the public airwaves. Whether that be by 
providing a strong local news service, fostering debate and dialogue of 
issues important to the community or promoting the arts created by and, 
or programmed and produced shows, where the only ``local'' aspect is 
the advertising sales team, are lacking in all of these 
responsibilities.
    I am sure many of you are aware of the controversy surrounding the 
Dixie Chicks. This incident received a good amount of press coverage. 
As a result of statements made by a member of the Dixie Chicks at a 
concert, two radio networks, Cox and Cumulus, banned the Dixie Chicks 
from their playlists at a chain level, while many other stations across 
the country banned them at a local/station level, and many did not. In 
Colorado Springs, Colorado, two DJs were suspended for violating that 
ban when they played Dixie Chicks records.
    Whether you agree with my client's statements or not, I know you 
support the First Amendment. Unfortunately, radio consolidation has 
provided radio networks with enormous opportunity to undermine free 
speech by boycotting records while they wage political wars with 
artists and labels. I appreciate that the networks also enjoy the same 
First Amendment rights as my clients. But we must remember that those 
who crafted the original limitations on ownership feared conglomerates 
exercising this kind of control over political speech. Ownership limits 
were intended, in part, as a way to prevent such a monopoly of thought 
and discourse. The public airwaves were to be used to promote a 
marketplace of ideas. A marketplace of ideas, the cornerstone of this 
democracy, can only be nurtured and sustained within a system promoting 
ownership diversity, not ownership consolidation. Even the perception 
of a radio network using power in this way, clearly demonstrates the 
potential danger of a system of unchecked consolidation that ultimately 
undermines artistic freedom and cultural enlightenment. What happened 
to my clients is perhaps the most compelling evidence that radio 
ownership consolidation has a direct negative impact on diversity of 
programming and political discourse over the public airwaves.
    Some in the radio industry have suggested that the recent FCC rule 
changes actually restrict radio networks from continuing their drive 
toward consolidation. I am not convinced that is the case. Some serious 
analysts have concluded that the intricate market rule changes do not 
make it harder to acquire new stations. I am attaching to my testimony 
comments from the Future of Music Coalition setting forth their 
conclusions.
    My personal view is that the recent FCC rule changes in market 
definition are relatively insignificant. This is not a local market 
problem. This is a national problem. As such, I hope the Committee will 
consider implementation of new ``national'' limits on ownership. Only 
by placing national limits on ownership, and perhaps limits that are 
more reflective of the pre-1996 world, will the harm caused by radio 
consolidation tend to diminish and hopefully disappear.
    I hope the Committee will also explore the harm caused by radio 
networks owning affiliated live promotion companies, venues, agencies, 
public relations companies, and management companies. As my colleague 
Don Henley stated ``This institutionalized conflict of interest places 
the artist in a vastly uncompetitive and weak position. What happens 
when an artist refuses to perform in a venue owned by the radio station 
or network? Will the artist records be played on the station or will 
the company reduce or eliminate radio airplay? Most artists cannot 
afford to find out.''
    The music industry and the radio industry must strive to create a 
healthier and more balanced relationship. Otherwise, the music 
industry, and particularly, the recording artists, will continue to 
suffer. I hope this Committee will help restore that balance. This can 
only be accomplished by stopping and perhaps even reversing the trend 
toward unchecked radio consolidation.
    I thank you again for this opportunity to discuss these important 
issues with the Committee. Thank you for your time.
                               Attachment
FMC's Comments on the Radio Market Definition
    As part of the changes to its media ownership rules announced on 
June 2, the FCC has altered its method for defining radio markets. 
According to a preliminary analysis being conducted by the Future of 
Music Coalition, the effect of the redefinition of radio markets is 
inconclusive. In some markets, the effective local ownership cap will 
be lower, but in other markets the effective local ownership cap will 
increase.
    The FCC claims that by moving from contour to Arbitron measurements 
it is closing a loophole that radio companies have used to sidestep 
market ownership caps. This is true but it is only half the story. 
Based on the FCC's June 2 rulemaking, now commercial and non-commercial 
stations are counted to determine a market's size, whereas before only 
commercial stations were counted. By including non-commercial stations 
in the market count the FCC is measuring the same markets in a way 
that, in many cases, now increases the number of stations in each 
market. Thus in most markets the ceiling for setting ownership caps 
will rise. This will very likely open the door to more ``legal'' 
purchases by those same large radio conglomerates that had previously 
employed the loophole that the FCC just eliminated.
    Another concern is the status of markets where owners have exceeded 
the legal cap according to Arbitron definitions. Unless radio owners 
are forced to divest the stations owned in excess of the current caps, 
the recent policy change will not redress any of the harms of radio 
consolidation in dozens of markets.
    The FCC eliminated the contour measurement to protect citizens from 
corporations that were using this loophole to get around the local 
market caps that were established with the 1996 Telecommunications Act. 
We applaud the FCC for protecting the public in this way and support 
this new standard. We do not, however, support the new market 
calculation that includes non-commercial stations. This second 
adjustment might eliminate the benefits the public would sustain from 
the institution of the first.
    It is clear that more research is required to understand exactly 
what the FCC's policy change for radio will bring. It is the FCC's 
responsibility to bring forth actual numbers to prove that these 
changes reduce media concentration, not increase it.

                      Recording Artists' Coalition
 
 
 
Bryan Adams              Don Henley               No Doubt
Christina Aguilera       The Estate of Woody      The Offspring
                          Herman
Gregg Allman             Hootie & The Blowfish    Ozomatli
Beck                     Bruce Hornsby            Patti Page
Bee Gees                 Janis lan                Pearl Jam
Clint Black              Enrique Iglesias         Michael Penn
Ruben Blades             Jimmie's Chicken Shack   Tom Petty
Michelle Branch          Billy Joel               Puddle of Mudd
Kathleen Brennan         Elton John               Bonnie Raitt
Jonatha Brooke           Tom Jones                REM
Jackson Browne           Wynonna Judd             Kenny Rogers
Lindsey Buckingham       Jurassic 5               Roy Rogers
Jimmy Buffett            Toby Keith               Linda Ronstadt
Solomon Burke            Kenna                    Joe Sample
Mary Chapin Carpenter    Carole King              David Sanborn
Lester Chambers          Denny Laine              Boz Scaggs
Eric Clapton             Frankie Laine            Timothy B. Schmit
Chris Cornell            Linkin Park              Seal
David Crosby             Lisa Loeb                Shea Seger
Crosby Stills & Nash     Jeff Lynne               Social Distortion
Sheryl Crow              Madonna                  Ronnie Spector
Dave Matthews Band       Aimee Mann               Bruce Springsteen
Neil Diamond             Tony Martin              Staind
Dixie Chicks             matchbox twenty          Static-X
Howie Dorough            Brian May                Sting
 (Backstreet Boys)
Fred Durst               Martina McBride          Stone Temple Pilots
John Fogerty             Reba McEntire            Donna Summer
Glenn Frey               Tim McGraw               Matthew Sweet
Godsmack                 John Mellencamp          Steven Tyler
The Estate of Benny      Joni Mitchell            Tom Waits
 Goodman
Robert Goulet            Sam Moore                Joe Walsh
Nanci Griffith           Alanis Morissette        Roger Waters
Hanson                   Randy Newman             Dar Williams
Emmylou Harris           Nickelback               Trisha Yearwood
Sophie B. Hawkins        Stevie Nicks             Dwight Yoakam
 

    The Chairman. Thank you very much, Mr. Renshaw.
    Mr. Kolobielski.

 STATEMENT OF ALEX KOLOBIELSKI, PRESIDENT AND CHIEF EXECUTIVE 
                OFFICER, FIRST MEDIA RADIO, LLC

    Mr. Kolobielski. Thank you, Chairman. Good morning. My name 
is Alex Kolobielski. I am President and CEO of First Media 
Radio----
    The Chairman. I apologize for the mispronunciation of your 
name. I apologize.
    Mr. Kolobielski. I am President and CEO of First Media 
Radio. It is a privately held radio company and I've spent a 
lifetime in small market radio. Since 2000, First Media has 
acquired 13 FM and AM small market radio stations in several 
mid-Atlantic states. We have acquisitions pending in North 
Carolina and Virginia. All but three of our radio stations are 
in unranked, non-Arbitron markets.
    The FCC's decision to change the definition of radio 
markets and its proposal to extend those changes to unranked 
markets will have disastrous effects on small market operators 
such as ourselves. Small market radio is unique. The biggest 
problems we face are attracting good staff and adequate 
capital.
    Experienced employees avoid small markets, seeking more 
lucrative jobs in large cities. We must recruit from other 
fields and then we must offer extensive training. We are 
constantly at risk of having our stars recruited by large 
market stations. Small market operators also have difficulty 
attracting capital. Our sales volume and investor returns are 
usually more modest than those from large chains or markets.
    At the same time, small market radio plays a very important 
role in society. We are truly the voices of our local 
communities and are dedicated to serving local needs. On 
average, 75 percent of our programming is locally originated. 
Over 90 percent of our advertisers are local firms. We go door 
to door, store to store.
    Providing quality, locally originated radio programming is 
expensive. We must employ on-air talent for most shifts, and 
our advertising rates are a fraction of those in larger 
markets. Yet our fixed costs are the same as in large markets.
    A contour-based approach to defining markets is fair for 
all stations, no matter what the market size. It consistently 
measures station signal reach and the confines of advertising 
markets. Moreover, contours are seldom changed and only after 
extensive FCC review. With a contour-based approach, 
competitors can rest assured that changes will occur 
infrequently, as part of an FCC-regulated process.
    The FCC's decision to adopt an Arbitron markets definition 
in all ranked markets will make the legality of existing 
station clusters vulnerable to changes in Arbitron methodology, 
which do not take place in an open public forum. Moreover, 
Arbitron subscribers may designate whether they are to be 
listed in one Arbitron market or another. While the FCC's new 
rule says an owner must wait 2 years before it can rely on the 
benefit of such changes, the FCC proposal does not consider the 
detrimental unintended consequences of such changes on other 
market operators who may unexpectedly find the number of 
stations in their market reduced, throwing them into 
noncompliance.
    For non-Arbitron markets, the FCC has proposed to abandon 
the contour-based approach and substitute definitions based on 
political or cellular market boundaries that bear no 
relationship to radio signal strength or advertising markets, 
putting small market radio operators at risk for unintended 
consequences. In these smaller markets, the FCC has said it 
will temporarily continue to utilize contours to define 
markets, adopting protections to avoid anomalies like those in 
Minot, North Dakota.
    The FCC's new market definition and its proposed change for 
non-Arbitron markets will drastically disrupt the radio 
industry. New entrants must have the opportunity to develop 
efficient clusters of stations under the same rules previously 
used to build mega-companies. Large mega-owners can spread the 
risk of a major change across markets. Small owners cannot.
    We suggest the following: First, at least in small, non-
Arbitron markets, allow radio operators to continue to define 
markets based on contour overlaps. If some change is necessary, 
make permanent the interim policy the FCC has proposed for 
small unranked markets. That approach involves continued use of 
contours, but with adjustments that address alleged problems 
with the contour system. The FCC excludes certain stations a 
buyer proposes to buy from the total number of stations counted 
in defining a market.
    In addition, to address the Minot problem, the FCC excludes 
from the market count any station that has a transmitter site 
more than 58 miles from the area of proposed common ownership, 
more accurately depicting the market.
    Second, do not apply any new modified market definition 
approach to pending deals filed before June 2 that were 
negotiated based on the old rules. Retroactive application is 
particularly tough on small companies.
    Finally, grandfather all nonconforming clusters. For small 
companies, there should be unlimited opportunities to grow and 
transfer their clusters intact. Any other approach would create 
uncertainty, instability, and lower station values.
    Thank you for your time. I am available for any questions 
you may have about small market radio.
    [The prepared statement of Mr. Kolobielski follows:]

 Prepared Statement of Alex Kolobielski, President and Chief Executive 
                    Officer, First Media Radio, LLC
    My name is Alex Kolobielski, and I am the President and CEO of 
First Media Radio, LLC (``First Media''), a privately held radio 
broadcasting company headquartered on Maryland's Eastern Shore. I have 
worked in broadcast programming, news, production, sales, and station 
management in small market radio all my professional life.
    Since January 2000, First Media Radio has acquired 13 FM and AM 
small market radio stations in Maryland, Pennsylvania, West Virginia, 
and North Carolina. In addition, we have radio station acquisitions 
pending in North Carolina and Virginia. With the exception of three of 
our stations, all First Media's radio stations are located in unranked, 
non-Arbitron markets. (A listing of all of First Media Radio, LLC's 
radio stations is attached.)
    Given my small market radio background, I never in a million years 
would have dreamed that I would be called upon to appear before 
Congress to discuss the Federal Communications Commission's (``FCC's'') 
regulation of radio ownership. But I feel so strongly that the FCC's 
recent decision to alter the definition of radio markets and possibly 
extend those changes to very small radio markets will have such 
disastrous effects on small market radio operators like First Media 
that I jumped at this opportunity.
    Small market radio, which is generally the province of smaller 
companies and ignored by the large radio consolidators, is unique. The 
biggest problems faced by small market operators are attracting good 
staff to operate profitably and adequate capital to grow. Experienced 
radio employees usually shy away from small markets, seeking more 
lucrative opportunities in larger cities. We generally have to recruit 
our staff from other fields and then train them extensively in the 
details of radio sales and operations. Once our ``stars'' develop, we 
are constantly at risk of having them recruited by stations in larger 
markets. Small market operators also find it difficult to attract 
capital since the volume of sales and the ultimate pay-offs for 
investors are usually more modest than those available from stations in 
large chains or larger markets.
    At the same time, small market radio plays a very important role in 
our society. Small stations in small markets are truly the voices of 
our local communities. First Media, like many of our counterparts, is 
dedicated to serving local needs. On average, 75 percent of the 
programming we present every day on our stations is locally originated. 
Over 90 percent of our advertising is drawn from businesses in the 
communities we serve. All of our stations have an ``open mike'' policy, 
and we encourage and air viewpoints from our listeners.
    Providing such quality, locally originated radio programming is 
expensive. We must employ on-air talent for all our locally originated 
shifts. On the sales side, we have between four and six local sales 
reps per market cluster. The advertising rates our markets will bear 
are a fraction of those in nearby large markets even though our fixed 
costs for electricity, equipment, and software are the same as those 
faced by stations in the larger markets. For instance, the stations in 
our closest cluster to the Nation's Capitol, Easton, Maryland, find 
that for a:60 spot they can charge no more than 5 percent of the rate 
charged by the Top 20 stations located in Washington, D.C.
    As you know, since 1992, the FCC has been defining radio markets by 
reference to radio station contours. This definition was introduced at 
the time the FCC liberalized its local radio ownership rules to allow 
one entity to own more than one AM and one FM station per market. When 
Congress expanded the local radio caps in 1996, the FCC retained this 
contour-based approach to define which stations constitute a market for 
purposes of applying the new caps.
    A contour-based approach to defining markets is fair for all 
stations, no matter what the market size. It consistently measures the 
strength and reach of a particular station's signal and the confines of 
its advertising market. Moreover, contours may only be changed after an 
extensive FCC process involving the submission, review, and then grant 
of construction permit applications. This process usually takes at 
least six months before a radio owner receives FCC permission to modify 
its facilities. The physical construction usually takes many more 
months. Thus, with a contour-based approach, other competitors in a 
market usually have ample warning before changes occur, and they can 
also rest assured that changes will only take place as part of an FCC 
supervised and regulated process.
    The FCC has now decided to define radio markets in Arbitron ranked 
markets based on Arbitron's market definitions. This approach will make 
the legality of existing station clusters vulnerable to changes in 
Arbitron methodology, which unlike the FCC's construction permit 
process, do not take place in an open public forum. Moreover, stations 
subscribing to Arbitron may designate whether they are to be listed in 
one Arbitron market or another. While the FCC's new proposal says a 
group owner must wait two years before it can rely on the benefit of 
any such change to expand the number of stations it may own, the FCC 
proposal does not consider the detrimental and unintended consequences 
such changes may have on other station clusters in the market. Those 
stations may easily find the number of stations in their market reduced 
and themselves thrown into noncompliance through no fault of their own.
    For smaller communities in non-Arbitron markets, the FCC has also 
proposed to abandon the contour-based approach. Instead, the FCC has 
launched a rulemaking to substitute definitions based on political 
boundaries, or even cellular market boundaries, neither of which bear 
any relationship to radio broadcast signal strength or the advertising 
markets stations' serve. Such a system would put small market radio 
operators at risk for unintended consequences over which they have no 
control. On an interim basis, in these smaller markets, the FCC has 
said it will continue to utilize contours to define markets but has put 
in place several protections to avoid the anomalies that occurred in 
some of the political ``hot potato'' situations, like Minot and Pine 
Bluff that have been discussed extensively in the trade press.
    The FCC's new market definition and its proposed change for non-
Arbitron markets will drastically disrupt the radio industry, 
particularly since the changes are being put in place at a time when, 
unlike 1992, the FCC is not liberalizing the local radio caps. The 
industry has adapted to the current radio market definition, and 
entities such as First Media, that entered the market since 1996, have 
based their competitive strategies on the existing approach. These new 
entrants and other growing companies must have the opportunity to 
develop efficient clusters of stations under the same rules that have 
been used to build the existing mega-companies. Small market and small 
company players, in particular, will be disproportionately harmed by 
any change in market definition. Large, mega-owners can spread the risk 
of a major change across one or more of their markets. Small owners 
seeking to compete with them cannot. The loss of a single station or a 
small company's inability to transfer intact even a single cluster 
could have devastating effects.
    So, if Congress were to send any kind of signal to the FCC or adopt 
legislation in this area, what is it that small market players, like 
First Media, would want?

   First, at least in small markets outside of ranked Arbitron 
        markets, allow radio operators to continue to define markets 
        based on contour overlaps just as we do today. (While I am 
        testifying principally about small market concerns, as a matter 
        of policy, we think the FCC should have kept the contour-based 
        approach in all markets.)

   If Congress disagrees and believes some changes to the 
        contour-based approach are necessary, we think it should make 
        permanent the interim policy the FCC has proposed for small, 
        unranked markets. That approach involves continued use of 
        contours but with adjustments that address what have been seen 
        as some of the more troublesome aspects of the contour-based 
        system. Under these adjustments, the FCC, to address the Pine 
        Bluff problem, will exclude certain stations a buyer proposes 
        to buy from the total number of stations that it counts in 
        defining a market. In addition, to address the large signal 
        anomaly, the Minot problem, the FCC will exclude from the count 
        of stations in a market any station that has a transmitter site 
        more than 92 kilometers or 58 miles from the area of common 
        ownership of the stations being acquired, an approach that 
        accurately depicts stations' true markets.

   Second, do not apply any new modified market definition 
        approach to pending applications that were filed before June 2, 
        2003. Those deals were structured and negotiated based on the 
        rules that applied before June 2. To apply the new standards, 
        as the FCC has decided to do, to pending deals would be unfair 
        to all parties. Such retroactive application of new rules is 
        particularly tough on small companies that cannot spread the 
        disadvantages that may result over numerous properties.

   Finally, grandfather all non-conforming clusters. At least 
        for smaller companies, there should be unlimited opportunities 
        for them to bring in new investors, grow, or go public and at 
        the same time be able to transfer their station clusters 
        intact. Any other approach would create uncertainty and 
        instability and lower station values.

    I appreciate the opportunity to appear before you today, and I am 
available to answer any questions you may have about small market 
radio.
First Media Radio, LLC's Radio Stations \1\
---------------------------------------------------------------------------
    \1\ Unless shown below, the First Media stations are located 
outside of Arbitron markets.

WEMD(AM), Easton, Maryland
WCEI-FM, Easton, Maryland

WZWW(FM), Bellefonte, Pennsylvania (#246 State College, PA)
WLAK(FM), Huntingdon, Pennsylvania
WIEZ(AM), Lewistown, Pennsylvania
WMRF-FM, Lewistown, Pennsylvania
WOWQ(FM), DuBois, Pennsylvania

WJLS(AM), Beckley, West Virginia (#282 Beckley, WV)
WJLS-FM, Beckley, West Virginia (#282 Beckley, WV)

WRMT(AM), Rocky Mount, North Carolina
WSAY-FM, Rocky Mount, North Carolina
WDLZ(FM), Murfreesboro, North Carolina
WWDR(AM), Murfreesboro, North Carolina
First Media Radio, LLC's Proposed Acquisitions

WLGQ(FM), Emporia, Virginia
WSMY-FM, Alberta, Virginia

WPTM(FM), Roanoke Rapids, North Carolina
WCBT(AM), Roanoke Rapids, North Carolina
WSMY(AM), Weldon, North Carolina
WZAX(FM), Nashville, North Carolina
WYTT(FM), Gaston, North Carolina
WKTC(FM), Pinetops, North Carolina

    The Chairman. Thank you, Mr. Kolobielski. Thank you for 
being here today and thank you for representing a very 
important voice in America.
    Mr. Dickey, Mr. Renshaw referred to your banning, your 
network banning the Dixie Chicks after comments made by one of 
the Dixie Chicks concerning the war in Iraq. What do you have 
to say about that?
    Mr. Dickey. Mr. Chairman, first of all, Mr. Renshaw refers 
to radio companies as networks and we are not networks. We are 
a confederation of 270 individual stations in 55 cities. There 
is nothing network about our operation. We own and operate 
individual radio stations.
    Now, with respect to the Dixie Chicks, some time when the 
Dixie Chicks were over in Europe on their tour, and I believe 
it was the London stop--I am not quite sure----
    The Chairman. We are aware of what happened with the Dixie 
Chicks. Please proceed.
    Mr. Dickey. All right. After the remarks were made, there 
was a groundswell of negative reaction by our listeners against 
the band, and we had never seen anything like it before. Calls 
were coming in to Atlanta from our individual program directors 
throughout the country saying that there was--the ``hue and 
cry'' from our listeners regarding those remarks was 
unprecedented and, in their words, ``over the top.''
    So we had to make a decision as to what we were going to do 
about it and, after conferring with our program directors in 
the field--these are the people who make the decisions on a 
local level--we made the decision that it was not in the best 
interests of our country stations at that point in time to be 
playing the Dixie Chicks' records.
    Now, I say that, I say that also realizing that at the same 
time our Top 40 radio stations in the same markets, in the same 
company, continued to play the Dixie Chicks. We did not have 
the hue and cry from our listeners. Much the same way elected 
officials listen to their constituents, we listen to our 
listeners. They did not complain about the Dixie Chicks, so we 
continued to play them.
    The Chairman. But you made a decision from corporate 
headquarters that was binding on your DJ's?
    Mr. Dickey. Well, it was on our program directors. They are 
the ones that make the decisions.
    The Chairman. On your program directors, who set what the 
program is.
    Mr. Dickey. Well, Mr. Chairman----
    The Chairman. And just prior to that, you say that you are 
a group of independent radio stations. That is a total 
contradiction, Mr. Dickey.
    Mr. Dickey. Well, I would respectfully disagree, because 
what we have--the purpose of our corporate headquarters is to 
provide quality control----
    The Chairman. Did you or did you not order from corporate 
headquarters that the program managers not play the Dixie 
Chicks' music?
    Mr. Dickey. After a groundswell of response----
    The Chairman. Why did you not leave it up to the stations 
themselves, if you are just a confederation of stations?
    Mr. Dickey. Well, sir, we did at the end of the day.
    The Chairman. Oh, at the end of the day. But at the 
beginning you ordered the Dixie Chicks' music not to be played.
    Mr. Dickey. Well, if I can respond.
    The Chairman. I am not preventing you from responding, Mr. 
Dickey.
    Mr. Dickey. All right, sir. The program directors on a 
local level came back to us. We did not initiate this. They 
came back to us and said the hue and cry----
    The Chairman. No, but you made the decision.
    Mr. Dickey. Just to give you an example of how volatile 
this was----
    The Chairman. Did you make the decision or not?
    Mr. Dickey. Yes, we did make the decision, based on their 
response.
    The Chairman. Suppose, Mr. Dickey, that I or any member of 
the U.S. Senate said or did something that your program 
managers found incredibly offensive. Would you then make a 
decision that our name--that my name not be mentioned on your 
news programs because there was such a hue and cry?
    Mr. Dickey. No, sir, we would not.
    The Chairman. You would not do that?
    Mr. Dickey. No, that is a different----
    The Chairman. Then why would you do that to a group of 
entertainers?
    Mr. Dickey. This was a group we were playing five or six of 
their records on the air on our country stations at that time. 
As I say, just to give you an example, when the Dixie Chicks 
made their interview--we invited the Dixie Chicks to come on, 
on the air, and talk to our people and give their side of the 
story. They did an interview with Bob Kingsley.
    ABC radio network and their host Bob Kingsley, ABC radio 
network called Cumulus to say: Kingsley would like to do an 
interview with the Dixie Chicks after the 20/20 interview and 
we are not sure that we even want to touch this; is this going 
to hurt Kingsley's reputation in the industry? That is how bad 
it was at that point.
    We recommended that Kingsley do the interview and then 
Cumulus aired the interview, which is the Dixie Chicks' side of 
the story, not once, but twice on all of our 50 country radio 
stations, to get their side of the story out. And after we did, 
Mr. Chairman, the hue and cry was even greater to keep them off 
the air.
    Then when they returned from Europe and started their tour 
in the U.S., we told the program directors it was up to them 
and they could do whatever they wanted.
    The Chairman. Why did you not say that to start with, that 
it is up to the program managers themselves? That is the crux 
of the problem, Mr. Dickey. A decision was made at corporate 
headquarters that was binding on the program managers. That is 
what is wrong here, Mr. Dickey. If the program managers 
themselves had made the decision, it is one thing. But when it 
comes down from corporate headquarters, then that in my view is 
an incredible, incredible act.
    I was more offended or as offended as anyone by the 
statement of the Dixie Chicks, but to restrain their trade, 
restrain their trade because they exercised their right of free 
speech, to me is remarkable. It is remarkable. And it is an 
argument, it is a strong argument, about what media 
concentration has the possibility of doing, because if someone 
else in another format offends you and there is a huge hue and 
cry and you decide to censor those people, my friend, the 
erosion of the First Amendment in the United States of America 
is in progress.
    Mr. Renshaw, do you have anything to say about that?
    Mr. Renshaw. I appreciate your remarks, Senator. One of the 
things that we had always believed was that there is a degree 
of social responsibility between the radio stations and the 
public. The radio station is, after all, as I understand it a 
licensee of a public asset and is utilizing the publicly owned 
air waves to conduct business.
    When all of the uproar was going on, the one thing that we 
had reached out to a number of the stations and to a number of 
the radio groups, some of whom were very, very understanding 
and very cooperative, was we explained to them what was going 
on, we explained to them why they were getting so many phone 
calls, we explained what was happening, which was that there 
was an organized campaign going on to vilify the group in the 
eyes of the media.
    A lot of people, a lot of radio groups, responded very 
responsibly.
    The Chairman. Mr. Renshaw, did you receive threats and e-
mails concerning your artists and the people you represent?
    Mr. Renshaw. Oh, we have had everything from death 
threats----
    The Chairman. What about from the broadcasters themselves?
    Mr. Renshaw. If I may, I will read you an e-mail. This is 
a----
    The Chairman. A broadcaster?
    Mr. Renshaw. This is an e-mail dated April 22, from a 
gentleman by the name of Mr. Jay Michaels, who is a Program 
Director/Music Director with Clear Channel in Tuscaloosa, 
Alabama. I do not actually know Mr. Michaels. I received this 
e-mail out of the blue the day after an artist by the name of 
Bruce Springsteen published a statement on his website in 
support of the Dixie Chicks and their First Amendment rights.
    I turned on my computer that morning and I was greeted by 
the following e-mail from a Clear Channel program director: 
``Maybe Bruce didn't read what they said. Let him say it and 
watch what happens. Jay Michaels, Program Director, Clear 
Channel.''
    This, I could not believe it when I had this. I mean, now I 
have--now I'm being warned by radio as to what will happen if 
certain people speak up about certain things.
    I forwarded that e-mail to Mr. Springsteen and his manager 
and I informed Mr. Michaels that I had received his warning and 
I had passed it on to the people that needed to receive it.
    The Chairman. My time has expired. We will have another 
round. I would note again, the National Association of Black-
Owned Broadcasters support the amendment that was passed here, 
which would force divestiture of those that exceed ownership 
limits. I am sure the National Association of Broadcasters, a 
wholly owned subsidiary of Clear Channel, will not support that 
amendment.
    But we will move to Senator Lautenberg, and I will try and 
adhere to the time and we will have a second round.
    Senator Lautenberg. Thank you, Mr. Chairman. First I ask 
consent, unanimous consent, to insert my opening statement for 
this panel and an article written by Paul Krugman in the New 
York Times dated March 25, 2003.
    The Chairman. Without objection.
    [The information referred to follows:]

             The New York Times--Published: March 25, 2003

                       ``Channels of Influence''

                            By PAUL KRUGMAN

    By and large, recent pro-war rallies haven't drawn nearly as many 
people as antiwar rallies, but they have certainly been vehement. One 
of the most striking took place after Natalie Maines, lead singer for 
the Dixie Chicks, criticized President Bush: a crowd gathered in 
Louisiana to watch a 33,000-pound tractor smash a collection of Dixie 
Chicks CD's, tapes and other paraphernalia. To those familiar with 
20th-century European history it seemed eerily reminiscent of . . . But 
as Sinclair Lewis said, it can't happen here.
    Who has been organizing those pro-war rallies? The answer, it turns 
out, is that they are being promoted by key players in the radio 
industry--with close links to the Bush administration.
    The CD-smashing rally was organized by KRMD, part of Cumulus Media, 
a radio chain that has banned the Dixie Chicks from its playlists. Most 
of the pro-war demonstrations around the country have, however, been 
organized by stations owned by Clear Channel Communications, a behemoth 
based in San Antonio that controls more than 1,200 stations and 
increasingly dominates the airwaves.
    The company claims that the demonstrations, which go under the name 
Rally for America, reflect the initiative of individual stations. But 
this is unlikely: according to Eric Boehlert, who has written 
revelatory articles about Clear Channel in Salon, the company is 
notorious--and widely hated--for its iron-fisted centralized control.
    Until now, complaints about Clear Channel have focused on its 
business practices. Critics say it uses its power to squeeze recording 
companies and artists and contributes to the growing blandness of 
broadcast music. But now the company appears to be using its clout to 
help one side in a political dispute that deeply divides the Nation.
    Why would a media company insert itself into politics this way? It 
could, of course, simply be a matter of personal conviction on the part 
of management. But there are also good reasons for Clear Channel--which 
became a giant only in the last few years, after the Telecommunications 
Act of 1996 removed many restrictions on media ownership--to curry 
favor with the ruling party. On one side, Clear Channel is feeling some 
heat: it is being sued over allegations that it threatens to curtail 
the airplay of artists who don't tour with its concert division, and 
there are even some politicians who want to roll back the deregulation 
that made the company's growth possible. On the other side, the Federal 
Communications Commission is considering further deregulation that 
would allow Clear Channel to expand even further, particularly into 
television.
    Or perhaps the quid pro quo is more narrowly focused. Experienced 
Bushologists let out a collective ``Aha!'' when Clear Channel was 
revealed to be behind the pro-war rallies, because the company's top 
management has a history with George W. Bush. The vice chairman of 
Clear Channel is Tom Hicks, whose name may be familiar to readers of 
this column. When Mr. Bush was governor of Texas, Mr. Hicks was 
chairman of the University of Texas Investment Management Company, 
called Utimco, and Clear Channel's chairman, Lowry Mays, was on its 
board. Under Mr. Hicks, Utimco placed much of the university's 
endowment under the management of companies with strong Republican 
Party or Bush family ties. In 1998 Mr. Hicks purchased the Texas 
Rangers in a deal that made Mr. Bush a multimillionaire.
    There's something happening here. What it is ain't exactly clear, 
but a good guess is that we're now seeing the next stage in the 
evolution of a new American oligarchy. As Jonathan Chait has written in 
The New Republic, in the Bush administration ``government and business 
have melded into one big `us.' '' On almost every aspect of domestic 
policy, business interests rule: ``Scores of midlevel appointees. . 
.now oversee industries for which they once worked.'' We should have 
realized that this is a two-way street: if politicians are busy doing 
favors for businesses that support them, why shouldn't we expect 
businesses to reciprocate by doing favors for those politicians--by, 
for example, organizing ``grass roots'' rallies on their behalf?
    What makes it all possible, of course, is the absence of effective 
watchdogs. In the Clinton years the merest hint of impropriety quickly 
blew up into a huge scandal; these days, the scandalmongers are more 
likely to go after journalists who raise questions. Anyway, don't you 
know there's a war on?

    Senator Lautenberg. I was interested, Mr. Dickey, in your 
earlier, your opening statement about how you were able to 
better bring service to localities with this larger group of--I 
am afraid to use the word ``network'' because you shied away 
from it so strongly. The fact of the matter is that you did 
talk about, and I think kind of proud of the fact, that this 
larger company which you and your family own were able to 
influence the quality of local programming.
    Well, is you or ain't you? I mean, do you have control 
there or are they a bunch of free-floating stations that make 
their own decisions?
    Mr. Dickey. Senator Lautenberg, the way we program on a 
local level is we conduct extensive market research. So we 
constantly poll our listeners to determine what they are 
looking for, what music they like. Similarly, we test music in 
all of our markets. If a song comes back with 20 percent burn, 
which means listeners are tired of hearing it, one-fifth of the 
listeners, we pull that off the playlist.
    That is not censorship. It is just that we try to deliver 
to our listeners what they want to hear. And that is conducted 
on a local level. So all of our play lists reflect the local 
tastes of our local listeners.
    Senator Lautenberg. But you did not object to the banning 
of the Dixie Chicks by KRMD, one of your stations. Did you, 
pursuant to the Chairman's question, did you, your station, 
help organize the smashing by a 33,000 pound tractor, smash a 
collection of Dixie Chicks CDs, tapes, and other paraphernalia, 
which is alleged in the article written by Paul Krugman, that 
that is the way it was done? Did that also come with your 
knowledge? It was obviously a promotional stunt of sorts.
    Mr. Dickey. That is correct. No, sir, that did not come 
with our knowledge. That was done--here is the perfect example. 
That was done on a local level by our crew at KRMD in 
Shreveport, Louisiana, where the hue and cry seemed to be 
particularly greater than in a lot of other of our markets, 
where the listeners were showing up at remote broadcasts where 
we were selling cars, helping car dealers to sell cars, and 
throwing the CDs away in front of us.
    So one of our program directors in that market came up with 
the clever idea, if this is what our listeners are doing, let 
us allow them to do it all together en masse. So it was a radio 
promotion to enable them to do that.
    But that was not sanctioned nor was that developed or 
strategized by corporate. It is another example of how these 
individual markets behave and act on their own.
    Senator Lautenberg. Well, since they are under our 
ownership and guidance, I would have thought that you had 
advance knowledge, A; and B, that somebody at headquarters kind 
of thought this was a good idea. Did it pass muster at the home 
office?
    Mr. Dickey. No, sir, that particular one did not, Senator. 
As I say, they did that on their own volition and then we heard 
about it.
    You know, one of the things, the nice things about having 
55 cities and 270 radio stations is the ability to share ideas 
and communicate and provide our people with a chance to move 
from one market to another and give them upward mobility in the 
industry. The level of communication, because we have all of 
our country PD's, for instance, program directors, on the air--
excuse me--on a conference call on a regular basis, they share 
the ideas and they talk about what is going on in their markets 
and how the listeners are responding to these remarks.
    As I say, this was no censorship by Cumulus or something 
that top management felt, because we played them on our Top 40 
stations in the very same markets. So we did not censor this 
group nor this band. This was driven by the listeners and we 
were responding to their hue and cry.
    To Chairman McCain's question, why did it happen at that 
time, this was unprecedented that we ever did anything like 
this from Atlanta and asked that we put this ban on the group 
for a short time, and it was 30 days. The crisis was so great 
that ABC was even calling us saying: Should we even interview 
this group? Is that going to hurt Bob Kingsley, who is the 
country commentator? Should we even talk to them?
    We asked them to do so and then we aired it on our stations 
to give their side of the story, and our listeners still did 
not buy it and were still very upset.
    Senator Lautenberg. At what point do we in this society of 
ours, this free speech, freely speaking society, run the risk 
of curbing that free speech if we cave in to one group or 
another group? Because the cardinal principle here is do people 
have a right to express themselves, to express differences?
    We know very well that lots of our people were on the 
ground fighting, the country thought it was the thing to do, 
and people like John McCain did whatever they did bravely, even 
if they disagreed with the policy. The fact of the matter is 
that our policy is to permit free speech whenever it occurs, 
and if you cannot stand the heat then, as they say, you know, 
you have got to get out of the kitchen.
    I understand the objection of the other members of the 
panel very clearly. I am worried about this amassing of power, 
and what I did not quite get in your commentary was you were 
concerned about Clear Channel and that is kind of the pot 
calling the kettle black. I mean, you want more opportunity, 
but you do not want them to have more opportunity, if I 
understood it.
    Mr. Dickey. ``Them'' meaning Clear Channel?
    Senator Lautenberg. Yes.
    Mr. Dickey. Well, Clear Channel has 1,000 more radio 
stations roughly than we do and about $3.2 billion more revenue 
than we do. So we are a very, very small potato compared to 
that company.
    What we were saying is that the new FCC rules changed the 
ground rules that have enabled them to assemble that great 
platform that they operate and we would like to be able to 
continue to do so to compete against that scale, in order to 
compete for capital and talent.
    Senator Lautenberg. Well, what do you think Mr. 
Kolobielski's view is relative to Cumulus? You think they are a 
pretty good-sized company?
    Mr. Kolobielski. Yes, Cumulus is a good-sized company, 
Senator.
    The Chairman. Very good-sized. If you had a chance to buy 
Clear Channel, I bet you would do it.
    Thank you very much, Mr. Chairman.
    The Chairman. Senator Sununu.

                STATEMENT OF HON. JOHN SUNUNU, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Sununu. Thank you, Mr. Chairman.
    I would like to pick up on that point because as I listened 
to the testimony of both Mr. Kolobielski, who has the best 
voice of any witness we have ever had testify, and Mr. Dickey, 
both talked about unintended consequences. I think that is a 
very important phenomenon here, that as the FCC looks to change 
its regulations, any time we look to change regulations, we 
must be mindful of what we are attempting to achieve and what 
the unintended consequences may be.
    In trying to address that, you listed a number of 
recommendations: allowing those smaller markets to use the 
contour as opposed to Arbitron. I think you pointed out one of 
the weaknesses that I see, what little I know about the 
Arbitron methodology, is one of the subscribers can actually 
petition to move from one area to another. That is obviously 
somewhat arbitrary and driven by people with a vested interest. 
That is a concern to me.
    You listed a number of recommendations. My question is 
really for Mr. Dickey regarding those recommendations or those 
ideas or recommendations that you would support and that you 
feel would limit the unintended consequences of this new 
regulation.
    Mr. Dickey. Well, Senator Sununu, what we are advocating is 
that there are no changes. We are advocating, with the 
exception of that 58-mile contour that cures the anomalies, the 
infamous Minot and the Pine Bluff--so in other words, 8,000 or 
so transactions have been consummated under the old rules that 
date back to 1991 to consolidate the industry, with only a few 
anomalies to show for it.
    So we think the industry has consolidated pretty 
efficiently, save a few anomalies, and that would cure it.
    Senator Sununu. So your preference would be to maintain the 
market definitions using contour?
    Mr. Dickey. Yes, sir, with that filter, with the 58 miles.
    Senator Sununu. And would that be your preference as well, 
Mr. Kolobielski?
    Mr. Kolobielski. Yes, with contours and with the 58-mile 
exclusion.
    Mr. Dickey. We are in agreement on that.
    Senator Sununu. I never thought I would hear quite so much 
about Minot, North Dakota. I never thought that it would be 
such a power in the world of media. It absolutely is.
    But barring that reversion to contours, you would support 
the recommendations that you made?
    Mr. Kolobielski. Yes, Senator.
    Senator Sununu. Do you have any objections to the 
recommendations that he made?
    Mr. Dickey. No, sir. We are on board with it exactly.
    Senator Sununu. Thank you.
    Mr. Dickey, do you view the decision that was made by 
Cumulus and by the program directors in your country stations 
not to air the Dixie Chicks' music as a political decision or a 
business decision?
    Mr. Dickey. Purely as a business decision.
    Senator Sununu. And at the end of the day, how many 
stations kept their music off the air?
    Mr. Dickey. Well, we have about 50 country radio stations 
and they were all off the air for about a month, and then when 
the tour resumed, I think it came back into South Carolina----
    Senator Sununu. All 50 country stations participated at 
some level?
    Mr. Dickey. At some level they did. And then when they had 
the option of going back on, in other words when there was no 
restriction on it, about a third of them elected to stay off of 
it because they continued to poll their listeners with websites 
and telephone calls and the listeners were vehemently opposed 
to them.
    Senator Sununu. Mr. Renshaw, do you think that program 
directors ever have the right to select the music that they 
play or to select their programming based on the quality of the 
songs, the actions, activities, or public statements of the 
entertainers?
    Mr. Renshaw. Absolutely, I do, yes. I mean, I think a 
program director has, obviously has the right to listen to 
music and to look at an artist and to establish whether the 
music and the artist and what is going on with that is 
appropriate.
    Senator Sununu. I guess, to what degree was that not 
exactly what was done? Whether this was a bad business 
decision, a dumb move, bad PR, that may or may not be the case, 
but to what extent is that not what these program directors or 
this company, big or small, was doing?
    Mr. Renshaw. What happened, what happened I think with the 
Dixie Chicks was a little bit different from that. This was, 
this clearly entered into the realm of an issue of politics and 
free speech. This was not a situation where it was, you know, a 
group of people behaving badly, getting into trouble. No. This 
was they had unwittingly entered into the world of politics.
    What was happening at the local radio station level was the 
radio stations were targeted by a group of right wing political 
Internet lobbies who--and we showed this to the radio 
stations--who went out and manipulated the polls and the 
websites.
    Senator Sununu. Let me just be clear. I do not care what 
their ideology was, right, left. It makes no difference to me. 
I am just trying to get at the issue of whether or not it is or 
is not right for any program director to make this decision 
based on someone's actions or public statements or, obviously, 
the political content of their music.
    Now, originally you said yes, but then you seemed to say 
but not in this case. Which is it?
    Mr. Renshaw. Personally, I do not believe that radio 
programmers should be in the business of political censorship. 
I do believe that they should be in the business of encouraging 
and promoting political discourse, but I do not think that is 
the same as political censorship. I think in this case there 
was a great deal of political censorship occurring.
    Senator Sununu. So you do not think that program directors 
should have the right to limit the play based on the activities 
or public statements or political message of the music that the 
entertainer has created?
    Mr. Renshaw. I do not believe that they should be in the 
political censorship business.
    Senator Sununu. I do not think--I am belaboring this point 
because it is an important one. Either they have the right to 
make that decision or they do not. And obviously, if they do 
not then we are arguing about a First Amendment right to have 
your new record played, whether you are the Dixie Chicks or 
Marilyn Manson or any other group.
    Mr. Renshaw. Right. As I said, I believe that they have the 
right to make the decisions about whether they do play 
something or they do not play something. But I think that what 
we were seeing that was going on at the time was people were 
making decisions in a politically censuring mode. It did not 
have anything to do with the music.
    At the time what they were doing was they were banning a 
record that was a song about a soldier who had gone off and 
lost his life in Vietnam. It was the number one record in the 
country at the time, that could not be more pro-troops, more 
supportive of the American military, and that song was pulled 
overnight. It was not pulled for any other reason than as an 
act of political censorship.
    Senator Sununu. Mr. Dickey, did you pull a specific song or 
did you pull all the music?
    Mr. Dickey. No, we pulled the Dixie Chicks from our country 
stations only, as I said. They still remained on the air on our 
Top 40 stations.
    Senator Sununu. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. You know what is remarkable. In all due 
respect, Senator Sununu, it was not the programmers that made 
the decision. The decision was made by Mr. Dickey at their 
headquarters. If the programmers or program managers themselves 
had made the decision, that in itself is one thing. But for a 
30-day moratorium to be imposed at corporate headquarters, I do 
not think there has ever been anything quite like that, at 
least not in the years that I have been a Member of this 
Committee.
    Mr. Dickey. Mr. Chairman.
    The Chairman. Go ahead, please, Senator Dorgan.
    Senator Sununu. I think that was Mr. Dickey.
    Mr. Dickey. I think that mischaracterizes it. As I 
mentioned, this was a collaborative decisionmaking process from 
all of our program directors.
    The Chairman. A collaborative decision process? Was the 
decision made at corporate headquarters for a 30-day moratorium 
or not?
    Mr. Dickey. Yes, sir, after the vote from the program 
directors to do so. Everybody fell in line. This was a 
unanimous, overwhelming decision.
    Senator Boxer. ``Everybody fell in line.''
    The Chairman. ``Fell in line,'' I understand.
    Senator Dorgan.

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman----
    The Chairman. I am sure we are belaboring this issue. There 
are a lot broader issues here. But this is really quite 
something. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, having worked for a fairly 
large corporation at one point in my life, I can tell you that 
once a decision is made everyone falls in line. That is the 
point of working for the company.
    But let me ask this question, and it is a hypothetical 
question. Assume for a moment, unlikely as it would seem, that 
my friend Senator Sununu said something that was 
incomprehensibly offensive, just incomprehensibly offensive. 
Could you, could you, as a corporate entity decide, say we do 
not want Mr. Sununu on our stations for the next 30 days? We 
find what he said incomprehensibly offensive and we have 
decided he is not going to be on our stations in the next 30 
days; could you make that decision?
    Mr. Dickey. Senator, I think you just saw that happen with 
the Opie and Anthony Show in New York City when they made the 
reference to something very vulgar in St. Patrick's Cathedral. 
So I think that----
    Senator Dorgan. The answer is yes?
    Mr. Dickey. No, sir. You asked me a question about Cumulus. 
The answer would be no. As I said to Mr. Chairman McCain that 
this had never happened before, this was a groundswell based on 
our listeners.
    Senator Dorgan. I understand that.
    Mr. Dickey. It is important to take that on board.
    Senator Dorgan. Let us assume there is a groundswell, let 
us assume there is a groundswell of your listeners. And you 
have used the word ``hue and cry'' five times this morning. Let 
us say there is a hue and cry as well, that what my friend 
Senator Sununu did was incomprehensibly offensive, and you, by 
God, just do not want him on our stations for the next 30 days. 
What would prevent you from making those decisions?
    Mr. Dickey. As a recording artist? I am not sure I 
understand the analogy. As a recording artist, if he was----
    Senator Dorgan. No, I am just saying that you do not want 
him interviewed on your stations for the next 30 days. You 
found what he did offensive. What would prevent you from making 
that decision?
    Mr. Dickey. We would not make that decision. If we found 
him offensive we would have him on the air because it would 
create controversy, discourse, and dialogue, and it would be 
healthy.
    Senator Dorgan. And why was the same not true, for example, 
of a singing group that you found offensive?
    Mr. Dickey. Because our listeners asked us to pull the 
group.
    Senator Dorgan. And if your listeners asked you to pull 
references and interviews for Senator Sununu, would you at that 
point decide that your listeners were correct and you as the 
company are going to make that decision?
    Mr. Dickey. I do not think the analogy holds.
    Senator Dorgan. Why do you not think that?
    Mr. Dickey. Because he is not a recording star.
    Senator Dorgan. So then I understand it. Your corporate 
policy applies only to recording stars; is that correct?
    Mr. Dickey. No, we do not have a corporate policy on this 
issue.
    Senator Dorgan. All right, let me ask it a different way. 
You support localism, I assume, because one of the basis for 
owning a radio station is you have to support localism, 
competition, and diversity. Let me ask how this squares with 
the issue of localism when in fact, instead of letting your 
local program directors at the stations make the decision, you 
had apparently a vote and then you made a corporate decision 
that, we are going to keep these artists off the air for 30 
days.
    I ask this question, not because it has anything to do with 
the artists; it has to do with the company and why you might do 
in the future, not with respect just to entertainers, but 
others. So why, if you believe in localism, why would you not 
have simply let the local stations make the judgment?
    Mr. Dickey. Well, in essence we did, Senator Dorgan. There 
was not a--there was not a decision to keep them off the air 
for 30 days. We monitored this situation on a daily basis with 
all of our program directors.
    This is where I think everybody is misunderstanding. This 
was a collaborative effort that went on every day with all of 
our program directors across the country as they got feedback 
in various polls via telephone, websites, and in talking with 
their listeners on the request lines, to ask, and so we can 
serve our communities and deliver what they are looking for.
    They did not want to hear the Dixie Chicks and we simply 
responded to their needs on a local level. It just so happened 
that this was a unanimous feeling across the country. However, 
in our Top 40 stations we did not have that unanimous backlash 
against the group and we never took them off the air. So there 
was no censorship and there was no corporate edict to try and 
silence or hush a group or their political position. It simply 
is not true.
    Senator Dorgan. Mr. Dickey, you should be in politics. Did 
you listen to that answer you just gave me? You essentially 
said that, we did not make a decision, but then we polled the 
program directors and did make a decision. Now I do not 
understand what you are saying to me.
    Again, this goes to the question of what if you decide or 
what if Clear Channel or what if someone else decides that this 
advertising is offensive, this statement by a political person 
is offensive, this entertainer is offensive, and all of a 
sudden we have decided just by corporate fiat, by a corporate 
decision, that this group or that group or this body of thought 
is no longer welcome on 600 stations, 200 stations, or 2,000 
stations if someone acquires them.
    That is the reason you are being asked these questions. I 
do not know Cumulus from anything, but, you know, I think----
    The Chairman. Cox also did the same thing.
    Senator Dorgan. And the reason you are being asked the 
questions this morning is concern that we have about 
substantial accumulation of corporate power in broadcasting and 
then the decisionmaking based on that to decide what people 
will hear or see.
    I think my colleague Senator Sununu asked a very important 
question: Do you have the right to decide someone is a bad 
artist, you do not want to play? Of course you have that right, 
absolutely. You have substantial opportunity to make these 
judgments. But the Chairman asked the question originally, and 
I was interested in asking the same question: When you make a 
corporate decision that someone said something offensive, an 
entertainer in this case, and you are going to keep them off 
the air for 30 days as a corporate decision, I will tell you, 
that sends some ominous signals to people, at least in 
decisionmaking capabilities, and around the country, I would 
think.
    You say you are almost a mom and pop, you have a couple 
hundred stations. You are right, Clear Channel has over 1,200 
stations. They want more, you want more, Mr. Kolobielski wants 
more.
    Did I get that right?
    Mr. Kolobielski. Yes, sir.
    Senator Dorgan. Good. And so we are grappling with this 
question about concentration in the media. One piece of 
concentration in the media has to do with what the American 
people will see, hear, and read in the future and how that will 
be transmitted to them. I will tell you, it just sends a chill 
down my spine to hear. It could have been an offensive remark 
by somebody with whom I have substantial disagreement or with 
someone whom I disagree, or with whom I agree, but I am worried 
about a corporate decision that says, let us do this, let us 
sanction, censor, this person.
    Let me ask you one final question if I may. I know my time 
is up. Because I want to talk about Minot and one company 
owning six stations in a market where there are only six 
commercial stations with the exception of one religious 
station. I have raised that issue many times. It has now become 
a description of what was wrong with the FCC rule.
    But let me ask this question: Mr. Dickey, if you had it to 
do over again, would you decide to let all of your local radio 
stations make judgments about what they want to make judgments 
about about a controversial entertainer, or would you still 
make a corporate decision? In other words, do you think it was 
a mistake?
    Mr. Dickey. If we had it to do over again, we would have 
allowed that decision to be made by each of the individual 
program directors and the result would have been exactly the 
same. But if we had it to do over again, to avoid this we would 
have done that.
    The Chairman. Mr. Mandel, you wanted to make a comment.
    Mr. Mandel. I know it is not nearly as glamorous because it 
is commercial speech, but I will point out that we have had 
many examples where we have had some of these giant companies 
refuse to sell us advertising for a given product category on a 
nationwide basis, irregardless of the local community interest.
    We have a major consolidated media company that charges by 
definition a 50 percent premium for anything that they feel 
competes in any way with any of their divisions, whether they 
are competitive or not, and in fact has extended that reach 
down into the Comcast Cable that they are not associated with. 
On networks that they run on Comcast Cable, this media company 
has the right to refuse advertising on a local basis, even 
though it is not their system.
    It is not hard to imagine that, with a billion dollars 
spent on issue advertising, that it is not a far leap to see 
something coming down corporately.
    Senator Dorgan. Mr. Chairman, that is the reason----
    The Chairman. For example, Comcast refused to run Quest 
advertising.
    Go ahead.
    Senator Dorgan. Mr. Chairman, that is the reason I raised 
the point, not just about entertainment, but about political 
discourse, about advertising, about a range of information that 
would reach the American people through broadcasting, and the 
question of who controls that and who makes those decisions. I 
think it is a very important issue for the Committee.
    The Chairman. Senator Smith.

              STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman.
    It just seems to me that when people get into politics, 
even if they are entertainers, it has consequences. Any 
statement you make can irritate half the people any time you 
make them. I think of Dr. Laura Schlesinger. She is an Orthodox 
Jewish woman who made comments about homosexual lifestyles and 
she lost her television program over that. She made a decision 
politically to speak and it had a business consequence to her. 
I think that is what Mr. Dickey is saying. I know it has a 
consequence.
    But I think it would be wrong to characterize this as just 
coming from the right. It happens from the left all the time. 
And I think entertainers increasingly after this Iraq conflict 
are now recognizing that their involvement in politics does 
have a political fallout in terms of business to them.
    So I just wanted to make that point. This has been going on 
for a long time, and it is called freedom. Freedom is a two-way 
street, and I think that that is what we saw in the case of Dr. 
Schlesinger, that is what we see now in the case of the Dixie 
Chicks, and that will continue.
    But that was not the line of questioning I wanted to make. 
I wanted to ask, Mr. Kolobielski, because I missed your 
testimony, I believe it is your contention that small market 
stations should be treated differently than large market 
stations under the FCC ownership rules. Is that correct?
    Mr. Kolobielski. Yes, Senator. A perfect example has been 
the last half-hour of discussion. As you have been discussing 
the Dixie Chicks, it is our major concern in small market radio 
that we are getting the Dixie Laundromat in Rocky Mount, North 
Carolina, on the air right now, and that the Dixie Girl Scouts 
are getting their announcement on, and that we are telling 
people about the Dixie Bypass when that is going to be closed. 
That is our lifeblood.
    Senator Smith. Is it your contention that the FCC should do 
more to protect small radio stations than they are doing now?
    Mr. Kolobielski. I do not know if the word ``protection'' 
is correct, but in my opinion the FCC, what is necessary for 
small market broadcasters is to come to some finality on the 
rules issue, and that right now we are in flux because we 
believe that the interim rules that the FCC proposed on June 2, 
are absolutely fine with First Media Radio. I went over that 
with Senator Sununu and we certainly believe in the contour 
measurement, we believe in the 58-mile exclusivity perimeter, 
and we feel that some finality in the rules will enable us to 
go forward as small market radio broadcasters, continue to grow 
our companies and let our employees flourish.
    Senator Smith. Do you believe it is unfair, that the FCC's 
decision not to allow unlimited grandfathering of noncompliant 
clusters hurts small market radio operators? Is that what you 
are saying?
    Mr. Kolobielski. It is unfair. These broadcasters built 
their companies by the rules, many of them legendary small 
market radio broadcasters. They built their companies by the 
rules in the nineties and to have them divested because of a 
regulation that might come on later is absolutely unfair to the 
hard work they did over the past decade.
    Senator Smith. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Senator Boxer.

               STATEMENT OF HON. BARBARA BOXER, 
                  U.S. SENATOR FROM CALIFORNIA

    Senator Boxer. Thank you, Mr. Chairman.
    I am going to continue the line of questioning about 
punishing Americans who perhaps disagree with corporate 
headquarters or the listeners as expressed in a moment, because 
I think it is so important and is very much related to how much 
power an individual network has to reach Americans. I am sure 
that it has come out, but again I think it is worthy of more 
probing.
    Americans were punished in the fifties and in Hollywood it 
was called ``blacklisting.'' That may seem to be the way we do 
things in America, but I would hope not. I would hope not. I 
think it was one of the darkest chapters, because when people 
are blacklisted they are finished, they are through.
    When I heard about what had happened to the Dixie Chicks, I 
was literally stunned. Now, you said you were stunned, too. You 
said: My goodness, there was this hue and this cry over what 
had happened. Well, in this country every single day there is a 
hue and cry over something, because this is America and there 
is a hue and cry every day. I mean, you should hear the hue and 
cry every time I give a speech about pro-choice. You should 
hear the hue and cry every time I give a speech about why I do 
not think Americans should have the right to carry Uzis or 
assault weapons. There is a hue and a cry.
    That is what this country is about, a hue and a cry. It is 
a beautiful sound of freedom. And of all the places that should 
not be crushing it, it is the radio business, for God sakes.
    You know, I just wonder about, Mr. Dickey, your sense of 
history. I am sure you know, because you are obviously a very 
bright man, a very articulate man, that one of the first things 
communist dictators do when they take over is strip out all the 
works of art that they do not agree with, take the books out of 
the libraries, get rid of them. Recording artists that talk 
about freedom in their music, they are out. And the Nazis, what 
is the first thing they did? Mr. Chairman, they burned books. 
And guess what, the people loved it. They were whipped up.
    When I heard that albums--there are no more albums; I am 
dating myself--CDs of the Dixie Chicks were destroyed, that is 
what I thought of. Do you not think, make that connection at 
all, Mr. Dickey?
    Mr. Dickey. Senator Boxer, I think it was unfortunate, what 
happened and what the listeners, how they chose to vent their 
frustrations with that group. But Cumulus has no political 
agenda, as evidenced by the fact that we continued to play 
their music on our Top 40 stations. We are merely responding to 
our local constituents and what their feelings are toward a 
particular group.
    I would not expect or ask you to ask us to play, as we test 
our music on a local level, to find the records that are the 
most offensive to our audience and play them.
    Senator Boxer. OK, OK. I think that you are not 
understanding the bigger picture, so let me try another way, 
because I am going to pick up on what Senator Dorgan said, 
using Senator Sununu as an example. I will use as example a 
Presidential candidate. Let us take it out of this election. 
Let us take a future election. There is a war going on, it is a 
hot war, and a Presidential candidate is running on a peace 
platform: I want to end this war.
    And your listeners in your country stations just really 
disagree, and they say: Do not put--I do not want to hear them 
on the news, I do not want to hear anything about it. Listeners 
demand it. What would you do?
    Mr. Dickey. That would be unprecedented. We would obviously 
cover the news stories. We owe that to our local constituents, 
to cover the news, both sides of it, and that is what we would 
do.
    Senator Boxer. Even if they said, we do not want to hear 
this candidate because we think he or she is quite offensive? 
It is unprecedented.
    Mr. Dickey. It is unprecedented. From a business 
standpoint, controversy, as you may or may not know, actually 
sells well. So it would actually be good business to put 
somebody like that on the air, to cover those issues.
    Senator Boxer. But it was not good business for you to play 
the Dixie Chicks, right? And it was good business for you to 
allow one of your stations to join in and lead the fight of 
rolling over CDs, destroying, destroying something of value?
    You know something, Mr. Dickey? I do not think you get it, 
and I do not think you make the connection. What you have done, 
you motivated a lot of us to take a look at this consolidation 
issue. So you have hurt yourself in terms of what you want, 
because it is a frightening thought. And for you to say 
everyone fell in line, that is a dead giveaway. And Senator 
Dorgan is right because--I will not go with an expression I 
know about, but the fact of the matter is the one at the top 
sets how people feel, because you are going to be much happier 
with your folks if they agree with you or they don't.
    Well, I assume you agree with freedom of speech; is that 
correct?
    Mr. Dickey. Yes, Senator Boxer, we do.
    Senator Boxer. I assume you agree that individuals should 
have the right to express their views?
    Mr. Dickey. Absolutely.
    Senator Boxer. Good. Even if you disagree with them?
    Mr. Dickey. Absolutely.
    Senator Boxer. Even if your listeners disagree with them, 
they have a right to say what they want, right?
    Mr. Dickey. And our listeners have the right to vote, just 
as they do for an elected official.
    Senator Boxer. They do not have to buy their CDs, right?
    Mr. Dickey. Obviously.
    Senator Boxer. Clearly.
    Mr. Dickey. And they do not have to listen to their music. 
And where country stations--remember, most of our markets where 
we have country stations, we generally have another country 
station across the street competing with us.
    Senator Boxer. Do you think what you did sent any type of a 
chilling message to people, that they ought to shut up and not 
express their views one way or the other?
    Mr. Dickey. I would hope not.
    Senator Boxer. Let me conclude on this. I think it does 
send a chilling message, and I think you are fooling yourself 
or you are not looking at what you did.
    So let me say this. Every single day in this country there 
is a hue and a cry. I am telling you this because I am trying 
to get you to think about the future. When Rush Limbaugh calls 
women members of the Senate ``femi-Nazis,'' it is a hue and cry 
among certain people who take great offense at that. But you 
know what, it is part of the--he has a right to say it.
    And--who wrote that book, ``Rush Limbaugh Is a Big Fat'' 
whatever? He has a right to say that.
    Senator Dorgan. Al Franken.
    Senator Boxer. Thank you. Al Franken. He said ``Rush 
Limbaugh Is a Big Fat Idiot.'' He has a right to say that, and 
people have a hue and cry: How could you call this man such a 
thing? And how could you call women Senators ``femi-Nazis''? 
Hey, that is America.
    I think it would have been far better if you used this as 
an opportunity to have people just talk it out, talk it out, 
talk it out. Think about that for the future, because I will 
tell you what you have done now is given me tremendous pause 
about radio consolidation and media consolidation.
    Mr. Dickey. Senator Boxer, to your point, what we did do 
during that 30 days was we, as I say, we aired the Bob Kingsley 
interview with the Dixie Chicks twice. We promoted it very 
heavily, and we had the request lines and the listener lines 
open. We had a great deal of dialogue and discourse on our 
radio stations throughout that 30 days. We did not push this 
into a corner and simply ignore it. So we were all over this.
    They did not want to hear the music, so we pulled the 
music, similar to what we would do in a music test when it does 
not test well. But we talked about it, we talked about it 
aggressively, and there was a great deal of dialogue and 
discourse throughout that time period, and there still is today 
on our radio stations regarding this band.
    Senator Boxer. And that CDs were rolled over by a tractor 
is not a good message about America when our soldiers are out 
there right now fighting for the right for the people of Iraq 
to say what they want to say about whomever they want to say 
it. I hope you will think about it. I think what is anti-
American here is sometimes confused.
    Mr. Renshaw. Senator, to your point, one of the most 
chilling episodes of this whole affair was shortly after we 
were in London we were in Germany doing a couple of concerts 
and some television shows. We were in Munich and I was at a 
venue with the group and all of a sudden the German promoter 
came up to me and he said, listen, he said: Thomas Gottschalk's 
here; he wants to see the girls; it is really important.
    Thomas Gottschalk is a German television personality 
somewhat akin to a Johnny Carson. I mean, the guy is larger 
than life, a very, very important media personality in Germany. 
He spends a lot of time in America. The Dixie Chicks are by no 
means as popular in Germany as they are in the states, so I was 
a little amazed that out of the blue we would have this huge 
television personality arrive at a concert, demand to meet the 
Dixie Chicks. Being I had seen his show a few times, I 
absolutely knew who he was, so I took him back and introduced 
him to the girls. And he had literally just got off a plane 
from America. He had been in the states for a couple of weeks. 
He got off a plane from America, he picked up a local 
newspaper, he saw the Dixie Chicks were playing in Munich, and 
he had to come over to talk to them.
    He came over and wanted to meet with them and spent half an 
hour and sat with them and talked to them to express his 
support for them and for their rights of freedom of speech. He 
said something that put a chill in the room. He said, you know, 
I have just come back from America and I have just seen what 
they are doing to you in America, and I am reading about these 
people are throwing CDs away and they are crushing CDs.
    He said, let me tell you something. He said, you know, in 
Germany our media would never allow that to happen again. He 
said, the last time we did that was 70 years ago. He said, we 
have never forgotten it and we will never forget it, and it 
will never happen in this country again.
    That was a truly chilling moment in all of this. There was 
someone who speaks to your historical references and it struck 
a very large note.
    The Chairman. Let me just be clear about my concern about 
this. If a local station, an independent station or a local 
station, made a decision as to what should be aired, who it 
should be, what it is, that is something that I think is what 
localism is all about, which is what we are trying to get.
    When a corporate decision is made concerning a large number 
of stations, not only including yours, Mr. Dickey, but also 
Cox, that they will not play a performer's record because of 
their political expression, then that is something, it is very, 
very serious and brings us back to this issue of media 
concentration, because if there had been a thousand stations, 
Mr. Dickey, or 200 individual stations and those individual 
stations had made that decision on their own, it would have 
been one thing. But when the corporate headquarters got 
involved, then it was entirely something else, because then it 
was not a local decision, it was a corporate and national 
decision.
    Mr. Mandel, your statement about Clear Channel owning one 
of the radio rep firms that sells ad time to competitors 
concerns me. Let me just--and I would like you to elaborate, 
but let me just mention. In our hearing with Clear Channel it 
was clear that they promote concerts, they sell tickets, they 
had a form of payola going, which they then abandoned when 
there was going to be a hearing about it in another Committee, 
and also repeated allegations as to the playing of artists on 
Clear Channel being related to them taking part in concerts and 
the promotion for those concerts.
    So would you comment a little bit about that, including 
your statement that one of the radio rep firms sells ad time to 
competitors?
    Mr. Mandel. What they do is, they sell ad time for 
competitors. So they have--they know their own pricing. The way 
Clear Channel is set up, historically at radio companies, 
television companies, the sales manager reports to the program 
director because he needs higher ratings to sell more. The 
sales managers at Clear Channel report to a sales manager for 
the entire market, so they can what is politely referred to as 
``jam the stations'' into media buys that are not appropriate.
    In addition to that, they rep through joint sales 
agreements several other stations in the markets they own radio 
stations. To be honest with you, we had a hard time going back 
to the information that we found in June because--I am sorry, 
in May--because some time in the mid-May to end of June period, 
their website, somehow all the JSA's they had disappeared from 
their website.
    The Chairman. What is a ``JSA''?
    Mr. Mandel. Joint sales agreement. You are my competitor, 
you have a radio station; I sell my time and I sell your time 
together.
    Further, the rep firm is--there are two major rep firms. A 
rep firm is, for instance, if First Media wanted to get some 
national advertising, they cannot afford to have somebody in 
New York to come call on me or my counterparts, so they have 
advertising sales rep firms. There are two big ones. Clear 
Channel owns one of the big ones. So if you wanted to go, if 
First Media wanted to go and sell to me, they have to--50 
percent of their choice is to have essentially a competitor 
sell their media time.
    So they know everybody's pricing. They essentially set the 
pricing where they want it, not where the market will bear, and 
the smaller guys do not have a choice in that, the 
independents.
    The Chairman. Mr. Renshaw, can you comment on the 
allegations that were made concerning the concerts, promotions, 
playing of artists on Clear Channel, etcetera?
    Mr. Renshaw. I work on a daily basis with Clear Channel. A 
number of my clients are promoted by Clear Channel in their 
concert division. We have a close working relationship with a 
number of the Clear Channel radio formats in terms of 
soliciting and obtaining air play.
    I personally have never been put in a position by Clear 
Channel where I have been threatened or cajoled into: you 
either provide an artist to do this or you are not going to get 
that. That has never happened. There has never been anything as 
overt as that.
    However, it is clear that if you have a strong working 
relationship with them and if you scratch their back, they will 
scratch your back. I mean, these are unwritten rules. These are 
understood.
    I think the interesting thing that I have seen now that is 
coming out of all of these discussions is, earlier on there 
were some things being talked about with payola and independent 
promotion, and all of a sudden everyone said, well, that has 
got to stop and that is going to come to an end right now. Yet, 
I have recently concluded recording agreements for three 
artists, two established artists and one new artist, where we 
have been doing their recording agreements, and in all three 
recording agreements the provisions still exist for the record 
companies to recoup independent promotion money. So the 
independent promotion money is still out there, it is still 
getting paid to radio stations in some shape, size, fashion, or 
form.
    With respect to Clear Channel----
    The Chairman. It is a form of payola.
    Mr. Renshaw. Which is a form of payola, absolutely. I mean, 
it is absolutely still continuing. Despite what everyone says, 
it is still going on.
    People are now taking greater efforts and are going to 
greater pains to disguise it. I am no longer involved in 
conversations with people about how much money is going to who, 
that is going to where, to get what. Those conversations are 
now very much handled within the record companies and are kept 
very privy within those circles.
    I think that, with all due respect, I feel that Clear 
Channel sometimes gets a bad rap. They are the biggest without 
a doubt, you know, but I have a very good working relationship 
with them. In the case of the Dixie Chicks, there was a 
situation where it would have been--one would have thought when 
one reads and hears everything about Clear Channel that they 
would have been the very first people to turn around and issue 
some sort of ban.
    In fact, exactly the opposite was true. They went out and 
were very proactive at a local level with all of their stations 
in trying to make sure that people did act on a local basis and 
did take into consideration what the local market was 
demanding. But there was nothing done at a corporate level with 
them.
    Do they exert pressure? Yes, they do exert pressure. And 
they have a lot of leverage on the artists that they did not 
use to have. It is not a healthy situation. As I said, our 
belief is that the best thing that could happen is if the radio 
consolidation process could in fact be rolled back as opposed 
to rolled forward, to pre-1996 levels.
    I spent the last weekend, because I knew I was coming here, 
I spent some time over the weekend and called friends of mine 
at radio stations and at record companies, guys that are music 
directors and program directors and radio executives that are 
in charge of radio promotion strategies and relations with 
radio chains and with individual radio stations.
    I called about ten people over the weekend, all of whom 
have been in this business a very long time, and I asked them 
all the same two questions. I said, since 1996, is it a better 
world in radio now than it was then or is it worse? Without a 
single exception, every single person said: No, it is worse.
    I asked the guys at the record companies, I said, would you 
say that it is harder now than it ever was to expose a new 
artist's music on the air, and would you say that it is more 
expensive now than it ever was to expose a new artist's music 
on the air? And to both of those, both of those questions, the 
answer was absolutely yes with every single person I asked.
    So in my business, in the music industry, in the business 
of representing artists and trying to promote new and young 
talent, consolidation has not been--forget the controversy of 
the Dixie Chicks, but consolidation in terms of building and 
developing new careers, consolidation has been very bad for our 
business and continues to be bad and is getting worse.
    The Chairman. Recently, the Chicago Tribune wrote, ``Play 
lists around the country continue to shrink, with only about 20 
songs a week played with any regularity, most from the best-
funded major labels. Some of the same records are being played 
in the same formats from Miami to Seattle.''
    Senator Sununu.
    Senator Sununu. Thank you very much, Mr. Chairman, and 
thank you for putting together this hearing. It has been a very 
impressive hearing, and I want to thank the witnesses for their 
testimony.
    These are tough issues. They do affect the question of free 
speech and political speech, changes in the media industry that 
have an enormous impact on your own livelihoods, but of course 
also on the people you represent, Mr. Renshaw. I appreciate in 
particular what I think has been a substantive, balanced 
perspective of how this consolidation has affected, for good or 
for bad, an important industry and one that I think the 
American people have a very personal feel for. We all love 
these entertainers. We all have our favorite artists. We all 
have our particular memories that are driven by our perceptions 
of the entertainment industry or those entertainers that we 
have enjoyed for years.
    I think it is important that the Members of this Committee 
have an understanding of how these changes in both technology 
and regulations affect all of these different players. So I 
want to thank the witnesses for their substantive testimony.
    Mr. Chairman, you have I think highlighted one of the big 
concerns for me in talking about the way that this decision was 
made. In a way, whether it is made at the local level or at the 
corporate level, the question in my mind is whether it is being 
done to intimidate or discourage people from speaking out or 
whether it is being done because it is a business decision.
    The problem that I see when these choices are made in a 
consolidated way or at a corporate level, as, Mr. Chairman, you 
have described, it becomes very, very difficult to tell the 
difference.
    I think that that is when we run the risk as businessmen or 
entertainers or politicians, that is when we run the risk of 
sending the wrong signal and the wrong message, is when it is 
not clear whether this is being done to stifle an individual's 
ability or to stifle the choices that they might make to speak 
their mind, or whether it is simply being done because it is 
good, thoughtful business. We would want that line to be clear 
in all cases.
    Thank you again.
    The Chairman. Thank you, Senator Sununu.
    Senator Dorgan.
    Senator Dorgan. Mr. Chairman, I should say that my 
hypothetical was unthinkable when I talked about Mr. Sununu, 
Senator Sununu, saying something that was incomprehensibly 
offensive.
    Senator Sununu. I was anxiously awaiting a specific 
statement that might be ascribed to me.
    Senator Dorgan. No. I just wanted to make the disclaimer. 
It was totally hypothetical and almost unthinkable.
    Let me go to the other issues, because I think they are 
also important. There are circumstances--for example, Clear 
Channel has a station in North Dakota that I am very familiar 
with. They have a vibrant newsroom, they by and large run that 
station locally. There are circumstances where I think that 
someone from the outside has purchased a local station and has 
kept localism intact.
    So I do not think in every circumstance big is bad or small 
is beautiful. But I do think that we need to continue to pursue 
the question Senator Sununu and I have talked about from time 
to time, the issue of localism, diversity, and competition. The 
question is how is localism served? Because the air waves 
belong to the American people and we license their use for 
free, with some caveats, and one of those caveats is that it 
serves local interests.
    I would like to ask, I think, Mr. Dickey. You have--I mean, 
you are quite correct that you are much smaller than Cumulus--
than Clear Channel, rather. You have 200 stations roughly and 
they have 1,200 stations. Mr. Kolobielski, you have how many 
stations?
    Mr. Kolobielski. 13, sir.
    Senator Dorgan. 13. I want to know, at what point is there 
a limit on consolidation, if there is a limit in your judgment, 
and how does one retain the requirement and actually practice 
the requirement of localism and diversity when you purchase 
more and more stations? And perhaps I will give you a shot at 
it first, Mr. Dickey.
    Mr. Dickey. Senator Dorgan, I think it starts with the 
philosophy at the top. I think that it is incorrect to perhaps 
use one broadcaster as a proxy for all others. I do not think 
everybody approaches it the same way, any more than they do in 
this business as well. So I think that from our perspective we 
are a live and local organization. We have, as I mentioned, 
over half of our personnel is on the program side.
    I can tell you that, as I mentioned in my opening remarks, 
what we inherited, what we acquired, because this company is 
the byproduct of 130 acquisitions--we basically bought them two 
at a time. What we acquired were stations that were in 
tremendous disrepair, stations that did not invest the money, 
because the industry structure prior to deregulation--we talk 
about rolling it back to the good old days and the program 
director might like it because they only have to program one 
station instead of two or three or four now and everybody's 
multitasking now.
    But the problem is the industry was not profitable back 
then. You had 60 percent of the broadcasters that were losing 
money and it was really headed for very, very tough times. 
Investment in the infrastructure was lacking. As I mentioned, 
we had to spend tens of millions of dollars just to bring these 
facilities up to FCC code so we could cover our service areas 
and do so in a reliable manner.
    So I think it all emanates from the top and what your 
philosophy is when you are running an organization like this. 
We believe it is good business to be local. We believe it is 
good business to listen to our listeners and we believe it is 
good business to respond to their needs and to service them, as 
well as our advertisers, and that is what we work very hard to 
do in this company.
    Whether we have 55 business units or 155 business units, 
that does not prevent us from doing that effectively and doing 
that in the right manner. That is what this company is built on 
and what we are trying to achieve.
    Senator Dorgan. Let me ask both of the broadcasters here 
about voice-tracking. Voice-tracking seems to me to be 
antithetical to localism, because voice-tracking is having 
someone in a basement in Baltimore or their office in their 
home in Baltimore on the radio in Salt Lake City or somewhere 
implying that they are in Salt Lake City, and they are reading 
off the Internet what the weather is and saying: It is sunny 
outside here in Salt Lake.
    That kind of voice-tracking that I know goes on--I do not 
know who does it. I have seen some articles about it. Is voice-
tracking antithetical to localism in your judgment, and do 
either of you do voice-tracking?
    Mr. Dickey. I believe it is antithetical to localism, and I 
believe that if it is done in a deceptive way, where you have 
somebody that is clearly 2, 4, 6, 800 miles away acting like 
they were in the restaurant last night talking to some patrons, 
I think that is deceptive and we wholeheartedly disagree with 
that and we feel that that is not within the manner in the 
spirit with which we are charged as licensees. We do not 
participate in that, Senator.
    Senator Dorgan. Some do, is that accurate? At least I have 
read reports of it.
    Mr. Dickey. I cannot comment on what my competitors do. I 
know that that is not what we do at Cumulus.
    Senator Dorgan. But you think it is antithetical to 
localism?
    Mr. Dickey. Yes, sir.
    Senator Dorgan. Mr. Kolobielski?
    Mr. Kolobielski. I agree, Senator. At our company and I 
think our small broadcasters, small market broadcast 
competitors, any voice-tracking that is done is done inside 
that particular market. For example, in Beckley, West Virginia, 
where we are, one of the smallest Arbitron markets in the 
United States, number 282 out of 289, any voice-tracking done 
by our or our competitors is done right there in Beckley. It is 
talking about Beckley.
    Senator Dorgan. Is it conceivable, with the growth and the 
concentration of ownership, that a company, for example, could 
grow to 4,000 or 2,000 radio stations, let us say, 4,000 radio 
stations, and decide voice-tracking is by far the most 
efficient way to handle these stations and you have a 
circumstance where localism is largely destroyed over a large 
part of the country?
    Is that conceivable that could happen under the current 
ownership rules that have been announced by the FCC?
    Mr. Dickey. It is possible, Senator Dorgan, but I do not 
think it is practical and I do not think it would happen, for 
the simple reason the incremental acquisitions for some of the 
largest platforms, a Clear Channel or an Infinity at this 
point, really are de minimis. They are not material. So for 
them to go out--and they would have to acquire deeply into the 
unrated markets in order to buildup that much more mass. It 
would not add the revenue nor the cash-flow to make it 
worthwhile and it would just be a lot more management-
intensive.
    So, though it is possible, I do not think that it is 
remotely in the cards.
    Mr. Renshaw. I have actually had some conversations with 
some people in radio recently with a group that has done some 
voice-tracking, and they found that actually it worked against 
them. When they were doing voice-tracking on music programs, 
the ratings started to go down. The lack of the local edge--it 
did not work. So I know in this one particular instance this 
group has now turned away from voice-tracking, is going back to 
local on-air talent and far more localism, because they found 
that they were actually losing to the local competitor that was 
staying local in the market. They could not compete with that 
with voice-tracking.
    I think you are always going to have the big satellite 
syndicated shows, you know, the Howard Stern that goes 
everywhere, the Rush Limbaugh that goes everywhere, and those 
kind of national personalities. But I think that from what I 
have seen anyway is that there is a sense that for radio to 
work and for radio to really be competitive in a market there 
has to be localism. I think a lot of the big broadcasting 
groups are finding that now.
    Senator Dorgan. Mr. Chairman, I think these oversight 
hearings, of this type especially, are very important. I agree 
with my colleague and I appreciate your having them. I think 
the witnesses have been really interesting witnesses with a 
different set of offerings to the Committee. So thank you very 
much.
    I thank the witnesses.
    The Chairman. Thank you.
    Senator Boxer.
    Senator Boxer. Thanks so much, Mr. Chairman, for this 
hearing and for your leadership of this Committee. Once again I 
have a chance to say that.
    These issues are hard, but very important. I think 
everything we have talked about today really gets us to the 
question of whether it is in the best interests of our fellow 
citizens to have larger and larger networks out there.
    Mr. Renshaw, you I think have been extremely candid with us 
today and you said you have good relations with Clear Channel, 
but there are unwritten----
    The Chairman. At least for now.
    Mr. Renshaw. Yes. Who knows about this afternoon?
    [Laughter.]
    Senator Boxer. Let us hope they continue. But that you had 
discussed--which we really appreciated, the fact that you spoke 
to others just to sort of get a sense of what is happening, and 
people are saying it is harder and harder to get new artists 
out there.
    Coming from a state where there is so much of that talent, 
you know, I think that America really loses out when the new 
voices are not heard. Even though a lot of us might not get it, 
might not understand it, it is important. It is the voice of 
the next generation. So I worry. Lots of times--and we have 
heard this from Rupert Murdoch and others in talking about TV 
in particular: Well, it is no problem now because there are so 
many outlets, and they always say, Internet.
    So I want to ask you a question for the record: Do you see 
the Internet at this time in any way being comparable, as a 
comparable mechanism to break in a new artist? Do you think in 
the future it might be? What is your take on that?
    Mr. Renshaw. Currently it is not, and in the future I have 
great doubts about it. I think that, you know, one of the ways 
that I have always thought that radio works is that most people 
listen to radio when they are doing other things. They are in 
the car, they are driving to work, they are driving home; they 
are in the kitchen, they are making dinner.
    The act of the radio listener is a passive thing. The 
Internet is an interactive thing. That is not something that is 
passive. If you want to go and find music on the Internet, you 
cannot just turn it on and hit scan and it starts finding music 
channels for you and you tell it to stop when you find a music 
channel that you like.
    So no, right now the Internet is, much as people would like 
to say it is, right now it is certainly not a vehicle for 
introducing new talent to a wide mass audience. That is 
something that really is the sole domain of radio.
    Senator Boxer. Thank you.
    Did you want to answer?
    Mr. Mandel. Yes, I would just like to add to that. We 
decided in the last week of January, the Superbowl week, we did 
a national survey on line on the Internet about people's usage. 
It was a statistically correct sample, a couple of thousand 
people. Now, these are the people that have the Internet, they 
are highly used to the Internet. They are people that the FCC 
would be talking about as we will all be like that in 5, 10 
years.
    Only 25 percent of those people felt it was easier than 
ever to find news they trust. There was a larger number of 
people, to bring it back to radio, 29 percent felt the quality 
of radio was decreasing and only 10 percent felt it was 
increasing. We could go--we do not have time here to go through 
all of it, but it was, quite frankly, a bit of a damning thing 
on how effective the Internet is, particularly when you 
consider we are only polling people that had great facility 
with it.
    I will also point out to you that when MSNBC finally did 
cover the FCC and this Committee's hearings, they ran an on 
line poll, again people that are very Internet-friendly. When I 
last checked it on June 9, 87 percent of the people had said 
that the FCC was wrong in loosening the rule. So what does that 
say about the Internet?
    Senator Boxer. I think it is important, Mr. Chairman, as we 
go along to recognize that.
    Just in closing, again thanking everyone for your 
statements, including Mr. Dickey, who has been obviously having 
to defend something that he did, which I think it has been 
useful for us to have this conversation. I hope you find it so. 
I have found it so.
    I think when Senator Sununu says the important thing is are 
you doing something because it is good business versus because 
you want to stop free speech is the question, now, that is a 
very interesting way to put it, but I would argue that when 
people were blacklisted in the fifties the movie industry will 
tell you that it was for business purposes. So it is very 
tricky.
    I would also argue that when you lead a rally, encourage 
people to bring CDs of a particular group because of what they 
said, and stand there and roll over these CDs, that I would 
argue on its face that seems way over the line to me. And I 
think that your company ought to take a look at what it did and 
talk about what you felt in a very candid way, what you think 
fostered American values and what you think maybe did not.
    And maybe you can come up with a policy, because you keep 
saying it was unprecedented. Well, that is our lives. Every day 
here we are hit with unprecedented issues, and you need to 
think ahead as to how you are going to deal with them.
    So I just again want to say thank you so much, and we want 
to really make sure that the American people are not--we always 
get back to this--deprived of a diversity of voices, be it 
political voices, music voices, all voices.
    Thank you.
    The Chairman. Senator Sununu, do you have any closing 
comment?
    Senator Sununu. No.
    The Chairman. I want to thank you for your participation in 
these hearings. There is another issue for another day that is 
a part of this problem and that is with this consolidation we 
have an increased--or a decreased participation on the part of 
minority ownership in the media and we are going to have to 
start looking at that aspect of it as well.
    Usually when we have a hearing of this nature which has 
aroused a lot of interest or, shall I say, conversation, I like 
to let the witnesses make a final statement because I know you 
have thought of something during this process. So I would like 
to begin with you, Mr. Dickey, and allow the witnesses to make 
a closing comment along with their opening statement.
    Mr. Dickey.
    Mr. Dickey. Thank you, Mr. Chairman. I think, to piggyback 
off of what Senator Boxer just said, it really was a very new 
experience, something that was unprecedented, and I think that 
a lot of our relatively inexperienced troops in the field were 
certainly caught off guard and by surprise, something of this 
magnitude, and they had never seen anything like it before.
    I think as much as anything they were looking for guidance. 
Their gut told them what they should do based on the way they 
program their stations on a daily basis, but I think they were 
looking for guidance. I think that is where naturally it fell 
to corporate to make that decision.
    As I mentioned, after the fact, when they came back into 
this country, we obviously allowed the PD's, when things 
stabilized, to make their own decisions, and that is certainly 
the way we would conduct our business going forward.
    With respect to radio and consolidation, as I mentioned in 
my opening statement, Mr. Chairman, I think that consolidation 
has been by and large very good for this industry from our 
vantage point because of the stations that we have acquired and 
the condition that they were in and what we have been able to 
bring to the table. So I think that it has been on balance very 
much of a positive for our industry to be able to consolidate, 
take advantage of the efficiencies of scale, to provide more 
diversity, more localism, more programming investment, more 
technical investment in these facilities, and be able to 
provide a service that all Americans can be proud of over the 
next 10, 20, 30 years.
    Thank you.
    The Chairman. Thank you, and thank you for being here 
today.
    Mr. Mandel.
    Mr. Mandel. I know it is not as glamorous, the numbers 
part, but I would like you all to at some point focus on the 
extreme costs to advertisers and to the local economies, jobs. 
P.C. Richard, the little local appliance store in New York, 
what happens to them with this consolidation? What happens to 
national advertisers? It is a tremendous drag on our economy. 
The way the FCC has dealt with it will only make it worse.
    Thank you.
    The Chairman. Mr. Renshaw.
    Mr. Renshaw. In closing, I would just like to say that one 
thing that all of these things have kind of led me to really 
look at and to think about is the whole concept of radio is 
entrusted with a public asset. It seems to me that what we 
should all be focusing on is the responsibility that goes along 
with the utilization of that asset.
    It seems that sometimes when you--and I am not talking 
about present company or anyone that we are talking of today, 
but just listening to radio and when you hear what is on there, 
sometimes you have to wonder whether the public is being truly 
well served by the state of radio. I mean, just how much 
serious discourse is there? How much attention is there to 
issues of public importance, and how much is discussion being 
promoted on radio stations?
    Most of the time, to me it seems like in a lot of cases it 
is fairly bland music separated by a lot of really bland 
advertising.
    The Chairman. As a father of teenage children, I find it 
more than bland.
    Mr. Renshaw. And that to me, that to me is shocking.
    In closing, I would just make one observation and that is 
that in everything that I have seen, and including having 
looked at some of the previous televised hearings on this 
subject, the only group of people that I can see that are in 
favor of more consolidation are radio station owners. I do not 
know. It tells me something.
    Thank you very much.
    The Chairman. That is a good opening for you, Mr. 
Kolobielski.
    Mr. Kolobielski. Thank you, Chairman. I am here to carry 
the plight of the small market broadcasters and to remind you 
that the small market radio business model is different from 
the large market model. In the large market there is the pie 
and those radio stations are going after that, quote, 
``advertising pie.'' In the small market, we are in the back of 
the radio station cooking the pie, hoping to sell it door to 
door. It is a completely different business.
    Mr. Renshaw has talked about access to large markets and 
large market radio stations. In the small markets, we have an 
open door. We have access. We want to keep that open door.
    The FCC, if they decide in small markets to define small 
markets by using political boundaries or by cellular area 
boundaries, is going to do a tremendous disservice to small 
market broadcasters. As the FCC proposed in their interim 
rules, those rules using the contour signals and an exclusion 
that takes care of the anomaly of Minot, North Dakota, I find 
them to be fair, they are clear, they are easy to understand, 
and they are definite. And I encourage you to encourage the 
Federal Communications Commission to adopt those interim rules.
    Thank you.
    The Chairman. Thank you. I want to thank the witnesses.
    This hearing is adjourned.
    [Whereupon, at 11:51 a.m., the hearing was adjourned.]
                            A P P E N D I X

            Prepared Statement of Hon. Ernest F. Hollings, 
                    U.S. Senator from South Carolina
    Thank you, Mr. Chairman. I appreciate your leadership in scheduling 
this hearing to revisit issues concerning radio ownership. This hearing 
is particularly timely given the FCC's release of its media ownership 
order last week. As many have said previously, the radio industry is 
the coal miner's canary--a warning against further consolidation in the 
media marketplace. At our hearing on June 4, all five commissioners 
agreed that there has been too much concentration allowed in the radio 
market. Today, we will look at the FCC's decision on media ownership 
and specifically its determination to change the radio market 
definition from one based on signal contours to a privately-created 
definition based on geographic markets known as ``Arbitron Metros''.
    Since 1996, there has been massive consolidation in the radio 
market. The number of radio owners has dropped 34 percent and the 
average revenue share of the top two owners in a local market is 74 
percent. The result has been downsized local staff, elimination of 
local news and homogenized playlists. Opportunities for local and 
regional artists have been limited and even some popular artists have 
found themselves at odds with powerful radio owner groups.
    In selecting Arbitron Metros for the new radio market definition, 
the FCC has chosen to throw out the contour rule in its entirety in 
favor of a market definition created for the purpose of determining 
advertising metrics, not radio ownership. Moreover, Arbitron generates 
its revenues from the very radio broadcasters the FCC seeks to 
regulate. While the contour market definition was admittedly flawed, 
replacing it with a new definition with unknown and potentially 
unintended consequences may create more problems than it solves.
    In June, Chairman Powell testified that the overall rule changes 
were ``modest'' and that the radio rules were actually ``tightened.'' 
The new rule, however, fails to eliminate the existing clusters that 
were permitted under the old rule, and by counting non-commercial 
stations in determining the total number of stations in a market, may 
actually allow further consolidation in some markets.
    Because the FCC determined not to require divestiture of stations 
that would exceed the ownership limits under the new rule, it may 
prevent owners from creating future anomalies such as the Minot, South 
Dakota situation--where Clear Channel acquired 6 of the 7 commercial 
stations in Minot, North Dakota, but it will not undo any of the 
excessive consolidation already permitted in local markets. Thus, the 
FCC's new rule gives little solace to those living in communities where 
too much concentration has occurred with the blessing of the FCC's 
ownership rules and its merger review process.
    Thankfully, this committee recently sought to correct this 
injustice through the adoption of an amendment offered by Chairman 
McCain that would require orderly divestiture where a single owner 
would exceed the local ownership limits.
    I look forward to the testimony of the witnesses before us, which I 
hope will further enlighten the Committee on the propriety of the FCC's 
rule changes regarding radio and the need for further action to combat 
the harmful effects of consolidation in the radio marketplace.
                                 ______
                                 
 Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
    I want to commend Chairman McCain for continuing the Committee's 
series of hearings on the critically important issue of media 
consolidation. Of all media markets, the radio market has seen the 
greatest consolidation since the passage of the Telecommunications Act 
of 1996. Despite the fact that all five Commissioners agreed before 
this Committee that too much consolidation has been allowed in radio, 
the FCC has done little to stem the tide. As a result, it now falls to 
Congress to ensure that the goals of localism, diversity and 
competition are preserved.
    Over the last several years, station owners have extended their 
market dominance by acquiring more and more local stations. While there 
has been a 5 percent rise in the number of commercial radio stations 
between March 1996 and March 2002, the number of commercial radio 
station owners has declined by 34 percent over that same period. At the 
same time, the diversity and the quality of radio content has continued 
to deteriorate. Since the local rules were relaxed and the national 
ownership cap was eliminated in 1996, the commitment to community 
based, local news has declined; local artists have lost their ability 
to get air time; and programming has become nationalized and generic.
    This rampant consolidation in the radio market has transformed 
locally based stations, and in many cases have put the commercial 
interests of a few large corporations in front of the public's interest 
in maximizing diverse viewpoints. The pace of such consolidation has 
been staggering. In 1996, the two largest radio station groups owned 
less than 65 stations; in January 2003, the two largest radio station 
groups--Clear Channel and Cumulus--owned 1,469 stations (Clear Channel 
over 1,211 and Cumulus with 258).
    On June 2 of this year the FCC adopted new rules regulating the 
media marketplace. Among the various changes is a change in how radio 
markets are defined. But while the purpose of this rule change was to 
prevent further consolidation in radio markets, the FCC's new rule 
grandfathers existing station group owners that fail to comply with 
local ownership limits, and thus, locks in the undesirable effects of 
market concentration. While this Committee has already taken important 
strides to reverse action taken by the FCC, further discussion of these 
issues is warranted.
    With that before us, I look forward to the testimony of the 
witnesses.
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