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S. HRG. 108–934 

MEDIA OWNERSHIP 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED EIGHTH CONGRESS 

FIRST SESSION 

MAY 13, 2003 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED EIGHTH CONGRESS 

FIRST SESSION 

JOHN MCCAIN, Arizona, Chairman 

TED STEVENS, Alaska 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

SAM BROWNBACK, Kansas 

GORDON H. SMITH, Oregon 

PETER G. FITZGERALD, Illinois 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

ERNEST F. HOLLINGS, South Carolina, 

Ranking 

DANIEL K. INOUYE, Hawaii 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

JOHN B. BREAUX, Louisiana 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

BARBARA BOXER, California 

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 

(III) 

C O N T E N T S 

Page 

Hearing held on May 13, 2003 ............................................................................... 1 

Statement of Senator Allen ..................................................................................... 7 

Statement of Senator Burns ................................................................................... 4 

Prepared statement .......................................................................................... 4 

Statement of Senator Cantwell .............................................................................. 14 

Prepared statement .......................................................................................... 14 

Statement of Senator Dorgan ................................................................................. 2 

Statement of Senator Lautenberg .......................................................................... 8 

Prepared statement .......................................................................................... 8 

Article, dated March 25, 2003, by Paul Krugaman, entitled, ‘‘Channels 

of Influence’’ .................................................................................................. 9 

Statement of Senator Lott ...................................................................................... 15 

Prepared statement .......................................................................................... 15 

Statement of Senator McCain ................................................................................. 1 

Statement of Senator Nelson .................................................................................. 16 

Statement of Senator Snowe ................................................................................... 11 

Statement of Senator Stevens ................................................................................ 2 

Statement of Senator Sununu ................................................................................ 13 

Statement of Senator Wyden .................................................................................. 5 

WITNESSES

Blethen, Frank A., Publisher, Seattle Times ......................................................... 25 

Prepared statement .......................................................................................... 27 

Goodmon, James F., President and Chief Executive Officer, Capitol Broadcasting Company, Inc. .......................................................................................... 20 

Prepared statement .......................................................................................... 23 

Karmazin, Mel, President and Chief Operating Officer, Viacom, Inc. ................ 16 

Prepared statement .......................................................................................... 18 

Singleton, William Dean, Vice Chairman and Chief Executive Officer, 

Medianews Group, Inc.; Immediate Past Chairman of the Board of Directors, Newspaper Association of America ............................................................ 28 

Prepared statement .......................................................................................... 30 

APPENDIX

Bryan III, J. Stewart, Chairman and Chief Executive Officer, Media General, 

Inc., prepared statement ..................................................................................... 64 

Hollings, Hon. Ernest F., U.S. Senator from South Carolina, prepared statement ...................................................................................................................... 63 

Riskin, Victoria, President, Writers Guild of America, west, prepared statement ...................................................................................................................... 70 

(1) 

MEDIA OWNERSHIP 

TUESDAY, MAY 13, 2003 

U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Committee met, pursuant to notice, at 9:33 a.m. in room SR– 

253, Russell Senate Office Building, Hon. John McCain, Chairman 

of the Committee, presiding. 

OPENING STATEMENT OF HON. JOHN MCCAIN, 

U.S. SENATOR FROM ARIZONA 

The CHAIRMAN. I have been on this committee for 17 years. This 

is the first time that the sound system has been disabled before we 

have a hearing on the media. I am sure there is some plot there. 

Today, the Committee continues its series of hearings examining 

media ownership. This hearing will focus on the rules currently 

being reviewed by the Federal Communications Commission, particularly those affecting television broadcasters and newspaper 

publishers. 

In the early 1940s and 1950s, the FCC adopted rules placing limits on the number of broadcast stations one company could own or 

control in each market, as well as the number of stations one company could own throughout the country. In 1975, the Commission 

adopted a rule prohibiting one company from owning a broadcast 

station and a newspaper in the same market. Several of these rules 

were relaxed by the 1996 Telecommunications Act, where Congress 

set in motion a process intended to deregulate the structure of the 

broadcast television industry. To further this deregulatory trend, 

Congress mandated the Commission review its media ownership 

rules every 2 years to determine whether they remain necessary in 

the public interest. Several recent court cases have chastised the 

FCC for failing to justify retention of its ownership restrictions. I 

have spoken frequently in the past about the merits of deregulation 

in media markets. 

Today’s media landscape is wholly different from the 1940s or, 

for that matter, the 1970s. The average American consumer can 

get news and entertainment from one of the 200 cable television 

networks or innumerable Internet sites in addition to a broadcast 

television station or daily newspaper. So it is important for the 

FCC to review its rules to ensure that they reflect competitive and 

technological changes, and repeal or modify them as appropriate. 

I recognize, however, that media can have a tremendous impact 

in the day-to-day lives of Americans. As a result, we must approach 

these issues thoughtfully. Earlier this year, this committee held a 

2 

hearing on media ownership in the radio industry, where serious 

concerns were raised about vertical integration. Likewise, the Committee heard testimony last week about the negative attacks of 

vertical integration in the cable industry. 

In light of these experiences, the FCC must not approach these 

important issues lightly. More than half the members of this committee have written FCC Chairman Michael Powell to weigh in on 

the proceeding. Many have expressed the belief that the Commission should allow more time for public comment. Yet some of these 

issues have been tied up at the FCC for years, and the Commission 

has received thousands of comments in this review. 

I have confidence that Chairman Powell will ensure that the permission fulfills the court’s dictates and statutory mandate in a 

manner that is thoughtful and consistent with all applicable laws 

and the best interest of the American public. 

Given the amount of attention these issues have received, I believe it is important for the Committee to hear from leaders in the 

media industry most directly affected by potential changes to these 

rules. I look forward to hearing the panelists explain their views 

on why the rules should be retained, relaxed, or eliminated. 

I thank the witnesses for being here today. I would also like to 

tell members of the Committee that following the ruling of the 

FCC, we will have all five members of the FCC before the Committee so that we can review the process they went through in that 

decision. 

Senator Stevens? 

STATEMENT OF HON. TED STEVENS, 

U.S. SENATOR FROM ALASKA 

Senator STEVENS. Mr. Chairman, thank you. I will be very short, 

because I have to leave. 

I strongly believe that broadcast/newspaper cross-ownership bans 

should be eased. If the FCC arrives upon a compromise when reviewing the cross-ownership ban, I urge the Commission to make 

sure that any compromise will reach down to the smaller communities, such as Anchorage and Fairbanks in my State, communities 

that now need the economies of scale that the ban now prohibits. 

However, I really do not think the 35 percent cap should be lifted 

at this time. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Dorgan? 

STATEMENT OF HON. BYRON L. DORGAN, 

U.S. SENATOR FROM NORTH DAKOTA 

Senator DORGAN. Mr. Chairman, thank you for holding—— 

The CHAIRMAN. We are losing the sound again. 

Senator DORGAN. Mr. Chairman, I think mine is on, so perhaps 

I can continue. 

Mr. Chairman, I think it is unbelievable we are here at this moment with the FCC poised to move once again to relax ownership 

limits, deal with cross-ownership. I have a chart I want to put up 

that shows some concentration. As you know, since we passed the 

1996 Act, there has been galloping concentration in virtually every 

area of the media in this country. I spoke recently about some of 

3 

the consequences of that, but it seems to me that it is really hard 

to make the case that what we need is more concentration, more 

opportunity for concentration, given what has happened in recent 

years. And yet here we are, with an FCC poised to march to the 

rear on this issue, and I just do not understand it. 

Let me also say that I think it will be too late to call the Federal 

Communication commissioners to this committee after they have 

made their judgment. I would much prefer we do so beforehand. 

And I do want to raise an issue that was raised in an article this 

weekend, ‘‘Give and Take, FCC Aims to Redraw Media Map,’’ by 

Stephen Labaton in the New York Times. And I do not know what 

the facts are, but I think the portion of this article begs for us to 

ask the question about the facts. And let me quote from it. ‘‘In one 

disputed episode,’’ I am quoting, ‘‘on April 7, a group of broadcast 

executives met with Mr. Powell at a Las Vegas hotel near the NAB 

convention. The executives have tried successfully for more than a 

year to meet with him to discuss a petition they had filed against 

the networks. According to participants in that meeting, Mr. Powell 

listened to the group’s opposition to changing national ownership 

cap and then posed what he called a hypothetical question, Would 

the group support an increase in the ownership cap to 45 percent 

if the FCC ruled favorably on some aspects of their petition?’’ 

Now, there follows from that disputes of who was in the meeting 

and what was said in the meeting. One of the witnesses today is 

quoted—Mr. James Goodmon, who is before us today, is quoted as 

saying or deriding what he calls a climate of, ‘‘Let’s Make a Deal.’’ 

The story says there is evidence of Mr. Powell’s hypothetical and 

other comments from his aides to executives were read differently 

by at least one company that had an impact on the debate. 

My point is this. First of all, we should not be—in my judgment, 

the FCC should not be relaxing ownership rules at this point, or 

ownership caps. And, second, I do not know what the facts are with 

respect to this kind of an issue, but I really think it will be too late 

to call the Commissioners down after they have made a decision. 

I would hope that we might, based on this, call them down beforehand. 

But you, Mr. Chairman, have had a previous hearing and a hearing today for which I am very appreciative. I think you are focusing 

this committee on a significant issue. I mentioned, the last time we 

had this discussion, the issue of Minot, North Dakota, a town of 

about 50,000 people, has six commercial radio stations in the City 

of Minot. They are all owned by the same owner, all purchased by 

the same owner. Every commercial radio station in that town is 

owned by the same owner. Does anybody here think that that represents competition, progress, forward movement in the sake of 

open markets? I do not think so. Well, that is just one example, 

and there are many more. 

But, Mr. Chairman, I really hope that we can find a way to derail what is clearly an effort by the FCC to relax ownership limits. 

They talk about there is more variety and more voices. I made the 

point a while back that those voices all come from the same ventriloquist in most cases, and I really hope that we can convince the 

FCC to back away, and I hope that we can have the Commissioners 

down to talk about it. 

4 

The CHAIRMAN. Thank you. 

Senator Burns? 

STATEMENT OF HON. CONRAD BURNS, 

U.S. SENATOR FROM MONTANA 

Senator BURNS. Thank you, Mr. Chairman. 

And I just want to say that the last two hearings on media and 

what is going on in the media is most enlightening. I congratulate 

the Chairman, because we are doing more oversight now than I can 

remember this committee doing for a long, long time, Mr. Chairman, and I think that is a step in the right direction. 

This hearing will be particularly interesting, I think, in its impact on the media. I am deeply concerned about the impending relaxation of the 35 percent national cap on ownership. I have been 

a strong supporter of the broadcast industry, but I am also a supporter of the current restrictions that were developed in the 1996 

Telecommunications Act. And I do not think, at this time, it serves 

the best of public interest to raise those caps. I think the Chairman 

had it right; the majority of this committee has written to the FCC 

saying to be very cautious as they approach this, and I am also a 

cosponsor of Senator Stevens’ bill that would reinforce that feeling. 

We tend to look at the big media markets, but then, you know, 

we find that we have still got problems in rural areas with a host 

of local broadcasters that has really put a lot of pressure on the 

local industry. So we witnessed a remarkable evolution in the 

media landscape. We know that, and are also going to consider 

cross-ownership one of these days and the creation of some duopolies and this type of thing, and I think it gives all of us in Congress 

a little pause now to think and rethink of some of the things that 

are happening in the industry. 

So, Mr. Chairman, I would just put my statement in the record, 

and I look forward to hearing from the witnesses and also their answers to some of the questions that will be posed to them by this 

committee. But, again, thank you for having these oversight hearings. I think they have been very timely, and this is what this committee should be doing, is bringing to light some areas in our industry for public awareness. 

So thank you very much. 

[The prepared statement of Senator Burns follows:] 

PREPARED STATEMENT OF HON. CONRAD BURNS, U.S. SENATOR FROM MONTANA

I thank the Chairman for convening this important hearing. The changing landscape in the media industry requires that we re-examine the regulatory framework 

from time to time, and the subject of media ownership, particularly with respect to 

the broadcast television industry, deserves our full and complete attention. 

This hearing is particularly timely given the impact that potential action at the 

Commission could have on the future of local broadcasting. I am deeply concerned 

about reports of an impending relaxation of the 35 percent national cap on television 

broadcast ownership. As a strong supporter of current restrictions that were developed in the 1996 Telecommunications Act, I do not believe that a relaxation of the 

cap is in the public interest. Many of my colleagues on the Committee share my 

concern. For this reason, I am cosponsoring Sen. Stevens’ bill which would maintain 

the national caps at the current, reasonable 35 percent standard. I believe that any 

further movement from this level of ownership would tip the balance and risk giving 

excessive leverage to the networks, turning local broadcast affiliates into mere passive distribution outlets for national programming. 

5 

In recent years we have witnessed a remarkable evolution in the media landscape—technological advances have changed the way in which we access information and services. This transformation has also brought about an undeniable increase in video programming choices available to the consumer—direct satellite, 

cable services, on-demand video programs over the cable or Internet, are all options 

that have contributed to this tremendous growth. 

It is important to remember, however, that the vast majority of these services are 

produced and marketed at a national level. There is little room, if any, to cater to 

programming of local interest. Local broadcast television has filled this important 

niche, and we must ensure that any change in policy not jeopardize this valuable 

programming content for our citizens. The situation is even more critical in rural 

communities, where the absence of local broadcast television would mean only a 

choice between different national distribution networks. 

Those in favor of relaxing the national broadcast ownership caps yet again argue 

that nearly all consumers have access to local programming over cable or DBS. The 

situation in rural America could not be more different, however. While consumers 

in Manhattan have a wide variety of local programming alternatives, my state of 

Montana has a cable penetration rate of barely over 50 percent, which is among the 

lowest in the Nation. Furthermore, unfortunately the average income in Montana 

is among the lowest in the Nation and a lot of Montanans simply can’t afford cable 

even if they have access to it. As for other alternatives, the majority of Americans 

in rural areas still don’t have access to their local stations over direct broadcast satellite services. Large numbers of citizens across rural America rely on free, overtheair broadcast television to receive important local, weather, and community information. 

Networks strive to increase their share of the national viewing audience. They 

must recognize, however, both the need for local programming as well as the sensitivities of viewing audiences in different parts of the country. Some degree of local 

ownership is the key that strikes the balance between such competing demands. 

Whatever changes are contemplated, we must ensure that affiliates continue to 

have flexibility in providing local programming without fear of retribution from the 

networks. Some have argued in favor of fewer regulations on ownership coupled to 

a greater oversight of network behavior. However, the task of developing benchmarks that measure network behavior is not easy and would prove even more difficult to regulate. 

Thank you, Mr. Chairman. I look forward to the testimony of today’s witnesses. 

The CHAIRMAN. I thank you, Senator Burns. 

Senator Wyden? 

STATEMENT OF HON. RON WYDEN, 

U.S. SENATOR FROM OREGON 

Senator WYDEN.Thank you, Mr. Chairman. And I want to commend you for holding these hearings and also commend Senator 

Stevens for really leading this committee on these concentration 

questions with respect to the 35 percent ownership rule. 

I believe, Mr. Chairman and colleagues, that if what has been reported today is correct and it goes forward unchanged, I believe 

that this policy is going to serve as a glide path for the big media 

conglomerates to gobble up scores of small, independent stations, 

and our country is going to be the worse for it. And I think I want 

to talk just for a moment about some of the implications of this. 

The cover story of this week’s Time magazine is about the new 

Matrix movie that is coming out. Now, some may just say this is 

a coincidence that the movie and the magazine are owned by the 

same company. And suffice it to say we are talking here just about 

a movie review and, I would be willing to acknowledge, not the 

most serious question. But supposing we are talking about breaking a story about accounting irregularities, which obviously is a big 

deal for our country and our economy, but somebody in the news 

side is reluctant to blow the whistle with respect to accounting 

6 

irregularities because they know it may have some implications for 

the big media conglomerate they are a part of. So I am very troubled about the idea that a local newspaper and a local TV station 

are going to speak with one voice, sort of two branches of the same 

company and speaking together. 

And I want to associate myself with the last comment made by 

Senator Dorgan. I think it is critical that we have Michael Powell 

up here before this decision is made, because I want to hear somebody make the case, Mr. Chairman, that the Federal Communications Commission has been holding the reins too tightly. Concentration is already on the rise in TV and radio, cable, and newspapers. And, sure, some of the big interests in this country are 

going to chafe from time to time, but it seems to me that we ought 

to be having Government, from time to time, tighten these reins, 

and we ought to make sure that there is more to this than just the 

efficiency argument that is made by these media conglomerates, 

and I hope we will have Michael Powell up here before the decision 

is made. 

The CHAIRMAN. Could I say to my friend from Oregon, I understand his desires and his frustration, along with that of the Senator from North Dakota, and the importance of this issue, and that 

is why we continue to have these hearings. 

I would remind my friend from Oregon that the FCC is an independent agency. They are an independent agency and were set up 

to be so, and I always want to be very careful in our relations with 

the Federal Communications Commission as to how we treat them, 

under what circumstances, and the appearance of trying to interfere unwarrantedly and our oversight responsibilities is a very 

careful balance. And I hope that the Senator from Oregon understands that, because I think that there are quasi-judicial agents, 

and my friend points out—— 

Senator WYDEN. Would the Chairman just yield very briefly on 

that point? 

The CHAIRMAN. Yes, I appreciate the patience of the witnesses. 

I do not want to get too much—— 

Senator WYDEN. I will be very brief. 

The CHAIRMAN. Go ahead. 

Senator WYDEN. I share the Chairman’s concerns. But suffice it 

to say when the Chairman of the Commission is talking at length 

today in the newspaper about the policy issues, I think we ought 

to try to find a way, in a generalized kind of fashion so as to be 

sensitive to the point that you are making, and correctly so, that 

we do have a discussion about these issues. And I would just like 

to work with the Chairman so as to be sensitive to the point the 

Chairman is making, but at the same time continue the dialogue 

that the Chairman of the Commission is plenty willing to do on the 

front pages of our papers. 

The CHAIRMAN. I think your point is well made, Senator Wyden. 

We have Senator Allen, Senator Lautenberg, and Senator Snowe. 

Senator Allen? 

7 

STATEMENT OF HON. GEORGE ALLEN, 

U.S. SENATOR FROM VIRGINIA 

Senator ALLEN. Thank you, Mr. Chairman. I also want to thank 

all our witnesses for appearing today and offering testimony on the 

important media-ownership issues. The current analysis of mediaownership regulations, I think, is one of the more important proceedings in recent memory for the FCC. 

The key goals of all of this is public interest, but the specific proposals or guiding principles are localism, competition, and diversity. Those have been the core principles since the 1930s, and 

today, with cable and satellite and Internet, there are more consumer-driven options, there is more diversity, and there is more 

competition, in my view, than ever before. 

I would just incorporate, by reference, Chairman McCain’s facts, 

insofar as the number of stations and opportunities currently available. This committee has, I would say to my friends, Senator 

Wyden and Senator Dorgan, certainly communicated with the FCC 

and Chairman Powell on their need to follow the law in their 2- 

year review, and they are going forward with that 2-year review. 

The witnesses here, some are going to focus on the 35 percent 

limit, two others are going to be talking about the cross-ownership 

issue, and I think that is an important matter for consideration for 

deregulation. The markets that are smaller or mid-sized markets, 

their costs are increasing, but their resources are scarce, and they 

have less than the—for mid-sized markets or the larger markets. 

Now, these rules, as far as cross-ownership, were put in 1970s, 

and I think they are largely unnecessary and they are outdated, 

given the increasing number of media outlets, as we talked about, 

in satellite, TV, newspapers, cable, the Internet, and so forth. In 

my opinion, newspaper cross-ownership can actually benefit consumers in certain markets where broadcasters and newspaper owners face financially challenging conditions. In Virginia, there are 

some examples of where this has occurred, where some stations 

have received waivers or were grandfathered under the previous 

rules. And in those areas, the Roanoke, Lynchburg area, the TriCities, which is Southwest Virginia and Upper East Tennessee and 

the Danville area, have expanded local news coverage and increased program offerings and better ratings due to this capability. 

Now, I think that these are successful examples, and I would like 

to see that available not only in all communities in Virginia, but 

I think it would help the principles of localism, diversity, and competition across the country. 

The final issue that none of our witnesses, unfortunately, Mr. 

Chairman, are going to be really testifying about has to do with duopoly rules. And I think it is alluded to somewhat by Senator 

Burns and Senator Stevens, and I think that the duopoly rules that 

we currently have are unfair, that the larger markets can have 

combined efficiencies of facilities and marketing and so forth, 

whereas the smaller markets that generally have the same costs, 

whether it is for the digital broadcasting and all these costs but 

have a smaller market, they are not allowed to combine in that effort. And I am one who thinks that these duopoly rules should not, 

should not, discriminate against smaller markets. And for those 

where they do have small markets, I think they ought to be abolVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000011 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
8 

ished. And I think it will help keep some of the struggling television stations afloat in small markets and would actually improve 

the quality and diversity of programming currently available to 

viewers within those smaller markets. 

So I look forward to listening to our witnesses and hearing about 

their opinions on the duopoly idea, as well as cross-ownership, and 

I think that this hearing is very appropriate, but it is more appropriate that we update and upgrade our laws to reflect the realities, 

the costs, and the opportunities there are to improve broadcasting 

for our consumers in all markets. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Lautenberg? 

STATEMENT OF HON. FRANK R. LAUTENBERG, 

U.S. SENATOR FROM NEW JERSEY 

Senator LAUTENBERG. Yes, thanks, Mr. Chairman. 

I will be brief. First of all, I want to ask consent that my full 

statement be a part of the record—— 

The CHAIRMAN. Without objection. 

Senator LAUTENBERG.—accompanied by an article written by 

Paul Krugman that was in the New York Times, March 25, 2003. 

[The information referred to follows:] 

PREPARED STATEMENT OF HON. FRANK R. LAUTENBERG, 

U.S. SENATOR FROM NEW JERSEY

Mr. Chairman, 

Today’s hearing brings to mind Ernie Kovacs’ remark that TV is called a ‘‘medium’’ because it is neither rare nor well done. 

All joking aside, this hearing is on one of the most important subjects the Commerce Committee will consider: broadcast media ownership. 

Over the years, Congress established media ownership rules to ensure that the 

public would have access to a wide range of news, information, programming, and 

political perspectives. The courts have repeatedly recognized the public interest 

goals of diversity, competition, and localism. 

Repeal or significant modification of the rules will lead to mergers that reduce diversity, competition, and local control in the media. 

We have seen that happen with the Telecommunications Act of 1996, which relaxed the media ownership rules significantly. With regard to broadcast television 

the number of companies owning stations has dropped 40 percent since 1995. With 

regard to radio, in 1995, the top radio station group owned 39 stations. Today, Clear 

Channel owns over 1200 stations. 

It’s important to remember that the airwaves belong to the public, and are to be 

managed in the public interest. 

We will hear testimony today about the ‘‘efficiencies of consolidation’’ and the like. 

With all due respect, efficiencies of consolidation may benefit Viacom or News Corp 

and their shareholders, but they don’t necessarily benefit the public interest. 

On September 13, 2002, the Federal Communications Commission (FCC) began 

a review of the current rules that limit television, radio, and newspaper cross-ownership. FCC Chairman Powell has announced that the Commission will conclude its 

review and vote on proposed changes on June 2, 2003. 

Last month, 15 Senators—including 12 members of this Committee—appealed to 

Chairman Powell to give Congress and the public the opportunity to review the 

changes beforehand. 

Chairman Powell dismissed our appeal, noting that this review is late and that 

Congress rebuked the FCC for failing to finish its first biennial review on time. 

I think this is more of an argument for having Congress revise the biennial review 

mandated by Section 202(h) of the Telecommunications Act of 1996 than it is an 

argument for denying our request. As the Chairman himself noted, ‘‘getting it right 

is more important than just getting it done.’’ 

9 

I think Congress also needs to revisit Section 202(h) because of the D.C. Circuit 

Court’s ruling that ‘‘Section 202(h) carries with it a presumption in favor of repealing or modifying the ownership rules.’’ 

There has been revolutionary change in the industry as a result of the 1996 Act 

and I think it is very premature to determine whether that change is in the public 

interest. 

I would submit that the media consolidations and mergers we have already seen are not in the public interest in at least one crucial realm, and that’s the public’s 

access to fair and balanced news coverage that reflects a variety of viewpoints. 

One of our witnesses, Mr. Karmazin, will argue that ‘‘Americans are bombarded 

with media choices via technology never dreamed of even a decade ago, much less 

60 years ago.’’ 

That’s true, but misleading. Who owns these media? Viacom, for instance, owns 

CBS and UPN; 35 television stations that reach 40 percent of the national viewing 

audience; Universal Studios; cable channels such as VH1, MTV, Nickelodeon, Comedy Central, Showtime, and BET; and—through Infinity Broadcasting—185 radio 

stations. Viacom also has substantial ownership interests in several Internet properties, including CBS.com and CBSMarketwatch.com. 

The media empire News Corp. Chairman Rupert Murdoch has put together is already quite extensive. In the New York metropolitan area, for instance, it includes 

two VHF broadcast stations, a daily newspaper, a broadcast network, a movie studio, a satellite service, and four cable networks. And now he wants to gain access 

to the DirecTV platform. 

Consolidating media ownership means that a few large corporations can exercise 

considerable control over the news. And as the distinguished Supreme Court Justice 

Learned Hand remarked in 1942, ‘‘The hand that rules the press, the radio, the 

screen, and the far-spread magazine rules the country.’’ 

Let’s look at what has happened in radio. Clear Channel, as I mentioned, has over 

1,200 radio stations, which reach 110 million listeners in every State and the District of Columbia. 

New York Times columnist Paul Krugman wrote an eye-opening column on March 

25, 2003, entitled ‘‘Channel of Influence.’’ I ask unanimous consent that his column 

appear in the hearing record after my statement. 

In his column, Krugman notes that many pro-war demonstrations called ‘‘Rally 

for America’’ were organized by stations owned by Clear Channel, a company ‘‘notorious and widely hated—for its iron-fisted centralized control.’’ 

Krugman further notes that Clear Channel’s top management has a long—and 

mutually profitable—history with President Bush. According to Krugman, 

‘‘The Vice Chairman of Clear Channel is Tom Hicks . . . 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.’’ 

Is there a quid pro quo going on here? One that involves a company whose radio 

stations already reach 110 million Americans? Is it really in the public interest to 

make it easier for this company—and a few others like it—to dominate the airwaves 

and determine what news the American people will—or won’t hear? 

I don’t think so. So I urge my colleagues to review the broadcast ownership rules 

very carefully. We made substantial changes in 1996 that may not be in the public 

interest. The jury is still out. I don’t think we should be in any hurry to deregulate 

the industry even more. I repeat what Chairman Powell said: ‘‘getting it right is 

more important than just getting it done.’’ Getting it right means serving the public 

interest, not boosting profitability. Thank you, Mr. Chairman. 

Copyright 2003 The New York Times Company—The New York Times—March 25, 2003—Editorial Desk 

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 

10 

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 prowar 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. Mr. Chairman, I think the question that 

has to be answered is, What was the purpose of the law change 

that was made in 1996? What is the mission of the FCC? Is it not 

for the public good? And I do not understand what good it does the 

public to have these consolidations that are taking place. And I will 

not run through the review of how many stations were owned by 

Clear Channel and others in those earlier years and how many 

they have now. 

It is a question, to me, of the principle of, What do we want to 

accomplish? And what I see is, we want to accomplish a delivery 

to the public of information that is as balanced, as objective, as you 

11 

can get. And it is very apparent in some of these cases that consolidation has resulted in getting a tilt one way, through lots of stations, lots of channels, and that is the dominant view that you hear 

constantly. And I wonder whether, with the Chairman of the FCC, 

Chairman Powell’s, earlier announcement, whether there is an interest in responding to the public through those of us who are here 

to serve the public interest. I think it is unfortunate, and I agree 

with colleagues who ask for Mr. Powell’s review once again. And 

I heard the Chairman very clearly about the question of interference. But it is my understanding, Mr. Chairman, that the law, 

the result of the legislation, was a court opinion that may not have 

so clearly defined what we wanted to have come out of that legislation. 

So I raise the question about, What good does it do the public? 

And I, frankly, do not see this concentration, expansion of stations 

and outlets, doing the public any good. I see it doing the owners, 

I see it doing the companies, lots of good. It is more revenues, there 

are more profits, there is more control, and, in some ways, I think, 

is more threatening to the public good. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Snowe? 

STATEMENT OF HON. OLYMPIA J. SNOWE, 

U.S. SENATOR FROM MAINE 

Senator SNOWE. Thank you, Mr. Chairman. And I thank you, as 

well, for conducting what is three of three hearings on this issue 

regarding media ownership rules, and I certainly think that this 

hearing is at a pivotal juncture, obviously, with the FCC prepared 

to either eliminate or ease some of the ownership and cross-ownership within the media industry without having the benefits of 

being informed, in terms of the impact of these significant issues 

that will have, obviously, profound implications in the future. 

And, obviously, it is of great consequence to the public and could 

result in an irreversible course of action resulting in a lessening of 

the diversity of opinion and voices in the public, lessening local and 

community input, reducing community involvement. So, obviously, 

this all has significant implications for the future. 

As the New York Times put it the other day, ‘‘In a few weeks the 

FCC is going to be voting on what could be the most significant 

change in media ownership rules, expanding the reach of the Nation’s largest broadcast and newspaper companies.’’ And here we 

are 3 weeks out, Mr. Chairman, and we have no foreknowledge of 

what types of rules will be proposed by the FCC. 

Now, the biennial review is no secret. It was incorporated in the 

1996 Telecommunications Act. So that was no secret, obviously, to 

the FCC, that they are required to meet those responsibilities and 

obligations. We understand about the D.C. District Court action. 

Again, it does not rationalize and justify the fact that we are not 

being informed, at least in terms of the intent of the FCC, because 

it does have major public implications. 

We have seen a lot discussed in the media. We have seen articles 

after articles talking about diversity index and what might happen 

in the 35 percent cap and so on, but we have not been informed. 

12 

And that is why I joined the majority on this committee back in 

April asking for the Commission at least to give us a preview of 

these rules so that we could at least have an opportunity to weigh 

the implications and the ramifications. 

I think it would be appropriate before these significant changes 

that could have a sweeping impact on our society and how we engage in public debate. We are not talking about a cursory review. 

We are talking about a review process that potentially could open 

the door to the last barrier of restrictions to unfettered ownership 

within the industry. And when we look at the rate of consolidation—there is a recent report that was conducted that said five 

companies or fewer could control almost 60 percent of the television 

households. And, you know, these concerns are well grounded. 

They certainly have precedent. I mean, in 1945, Justice Black, in 

an opinion that was rendered by the Supreme Court, he stated that 

the widest possible dissemination of information from diverse and 

antagonistic sources is essential to the welfare of the public. So 

what happens, Mr. Chairman, with the diverse and antagonistic 

sources if those voices are silenced? 

So those have, I think, wide-ranging consequences that have no 

benefit, without a public airing of understanding. And that is why, 

Mr. Chairman, I do think it is essential that the Commission justify how any changes in media rules will promote diversity, will 

promote localism, will promote competition. And I would hope that 

before any final rules are made, that we have the opportunity at 

least to have a chance to respond and to explore those issues. They 

have obviously been explored in the media. They ought to be able 

to be explored before the U.S. Congress. More than 20,000 filings 

have been submitted to the FCC, so obviously there is considerable 

public interest. 

I am not saying that the FCC has not done their job, has not conducted a thorough review or analysis. The question is, Do we have 

an opportunity to have input before these rules are made final? In 

3 weeks, on June 2, they will be made final. And I think that is 

the issue before us today. 

And I want to also say, Mr. Chairman, that I am very pleased 

that you have invited Mr. Frank Blethen, who is the Publisher and 

the CEO of the Seattle Times, that is owned by the Blethen newspapers, which Frank has continued the longstanding tradition of 

family media newspaper ownership. These newspapers serve communities for more than 100 years, and we, in Maine, came to know 

Mr. Blethen when the Blethen Maine newspapers purchased the 

Portland newspapers that were once owned by another great family, the Guy Gannett Communications that owned newspapers for 

more than 100 years in the State of Maine. So we were fortunate 

to have one family owned institution buying another. And under 

Frank’s leadership, the Blethen newspapers are continuing longstanding community involvement, independence, and high standards of journalistic integrity. 

So, Mr. Chairman, I appreciate the opportunity to express my 

views. 

The CHAIRMAN. Senator Sununu? 

13 

STATEMENT OF HON. JOHN E. SUNUNU, 

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator SUNUNU. Thank you, Mr. Chairman. And welcome to the 

witnesses. 

Mr. Chairman, I think as we go through this hearing process, it 

is important that we do keep in front of us what the objectives of 

this regulation is under this statute. Senator Allen mentioned, and 

Senator Snowe, as well, that diversity and competition, those are 

important to keep in front of us at all times. 

It was suggested, maybe not intentionally, that one of the jobs 

of these regulations was to make sure that the information the 

public is getting is fair and balanced. Now, that sounds like a pretty noble goal. But I do not want the FCC in charge of deciding 

what is fair and balanced. I do not want legislators deciding what 

is fair and balanced. What is important is that we have diversity, 

diversity of ideas and opinions, whether it is coming from newspapers or radios or television, and not that we look to somehow 

shape what is or is not fair or balanced in the eyes of legislators 

somehow controlling what information does or does not get out 

there. Concerns were raised about, you know, The Matrix being on 

the front of a magazine and having a company that owns the magazine also having rights in the movie. Now, that is not something 

I lie awake at night worrying about. 

And if you go out to any newsstand right now, The Matrix is on 

the front of every magazine. And the week before, SARS was on 

the front of every magazine. And why would that be? It is because 

magazine owners want to sell magazines, and I think nothing more 

and nothing less. I think we have to be careful about seeing, sort 

of conspiracies where none exist, because if we focus on, sort of, the 

emotionalism of the issue, we are not going to do a good job in supporting or helping to shape a good policy or good regulation. 

Two final points. First, I think it is important that the FCC act 

on these issues in a timely way. There have been a lot of efforts 

to slow the process down, to delay the process, to say, ‘‘Well, you 

know, there are 3 weeks to go. That cannot possibly be enough 

time to really do a proper job here.’’ These regulations have been 

on the books for decades, and the media industry, the telecommunications industry, and the broadband industry are changing at a 

very, very fast pace, and I think it is fair to say that these regulations deserve a hard look, if nothing else. 

Second, we have had months, if not years, to collect information, 

to review information. And I think to suggest that the FCC does 

not have enough information to make an intelligent decision is simply wrong. They may not make a decision that every Member in 

this room will agree with or that every industry representative will 

agree with, but I think they have had ample time to collect information and make a good decision. 

And, to that end, I think it is also important that they have a 

sound basis for this decision. If, ultimately, these ownership criteria are arbitrary, we are going to go to court, and if recent cases 

are any precedent, they are going to be struck down. You need a 

sound basis for maintaining these regulations that are rooted in 

the principles of diversity and competition and locality. And if 

there is any message that the FCC should take from these hearings 

14 

and these discussions, it is that you have got different opinions, but 

if you do not have a sound basis for the regulation, it opens itself 

up to litigation, and the public is not well served, the markets are 

not well served, and I think that would be a mistake. 

I look forward to the testimony and appreciate the time of the 

witnesses. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I, too, look forward to the testimony, and I would 

ask my remaining colleagues to make their opening remarks brief. 

Senator Cantwell? 

STATEMENT OF HON. MARIA CANTWELL, 

U.S. SENATOR FROM WASHINGTON 

Senator CANTWELL. Thank you, Mr. Chairman. I will make mine 

brief. I will submit them for the record and just say that I also welcome one of the panelists, Frank Blethen, from the Seattle Times. 

As far as localism and diversity, it is kind of interesting that Mr. 

Blethen has newspapers in two states, Washington and Maine, and 

that both those states are represented by two women Senators. So 

something is working well on the diversity side. 

With that, Mr. Chairman, I will submit my remarks. 

[The prepared statement of Senator Cantwell follows:] 

PREPARED STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON

Thank you, Mr. Chairman. 

Ownership of the broadcast and print media touches some of our most core American values: freedom of speech, open and diverse viewpoints, vibrant economic competition, and local diversity. I am pleased to welcome our witnesses today to talk 

on such important matters, and I want to welcome in particular Washington State’s 

own Frank Blethen, whose family owns the Seattle Times. 

Washington State has a long and rich history of quality local news and broadcasting, and a strong commitment to highlighting the local angle. 

A similar attention to diversity and localism has served America well by expanding economic opportunities and energizing civic discourse. Diversity and localism 

promote competition and choices for advertisers. They create opportunities for small 

companies, minorities, and women. They allow innovative programming to find an 

outlet. They ensure the flow of information necessary to inform the democratic process. They guarantee that the interests of each community are served. 

If we are to continue to benefit from this freedom of the press, the Federal Communications Commission will need to answer some tough questions about the balance between the public interest and the economic efficiencies that result from consolidation. Since 1934, when Congress first charged the FCC with regulation of the 

public airwaves, its directions have been to regulate ‘‘consistent with the public interest, convenience, and necessity.’’ 

Because the airwaves are a public resource, Congress required that the Commission go beyond mere economic analysis and above the bounds of traditional antitrust 

analysis. For most of the past sixty years, the FCC has worked to promote the diversity of owners and viewpoints, to ensure public access to multiple sources of information, and to meet the needs of local communities. Indeed, in this pending media 

ownership rules docket, the FCC has specifically recognized its mission as ‘‘promoting diversity, competition, and localism in the media.’’ 

While economic efficiencies may be available from relaxation of these media rules, 

any benefits must be measured against, and held up to, the standard of the ‘‘public 

interest.’’ As a Senator who cares about the citizens of my state, I am concerned 

that these rules benefit the radio listener in Cowlitz, the newspaper reader in 

Burien, and the television viewer in Methow, not just allow achieving a certain market share. Economic efficiencies may promote the public interest, but these efficiencies must be tested against the public interest standard. 

These rules must consider the ability of a local public to get urgent information, 

and they should not restrict the ability of new artists to reach listeners. They should 

not allow one provider to be the owner of every media source a viewer sees. They 

15 

should not cause local advertising rates to skyrocket. If this is the result, it comes 

time to question whether relaxation is in fact in the best interests of the American 

people. 

Broadcast media in all its forms, print, electronic, over-the-air, have continuing 

and real obligations to inform and serve Americans. 

These media are often licensees of a public good, and are the ‘‘voice’’ of news and 

ideas for many Americans. The FCC must ensure that these media are responsive 

to, and representative of, the political, educational, and entertainment needs of 

Americans. I hope that the witnesses today can enlighten us on the ways the FCC 

can structure its rules to meet those obligations. 

The CHAIRMAN. Senator Lott? 

STATEMENT OF HON. TRENT LOTT, 

U.S. SENATOR FROM MISSISSIPPI 

Senator LOTT. Thank you, Mr. Chairman. I also would like to ask 

consent that my statement be put in the record and just make this 

one comment. 

I think our media-ownership rules are working well. It makes 

good sense to review them, but basically I think we should leave 

them as they are. 

With that, I would like to hear the witnesses. 

[The prepared statement of Senator Lott follows:] 

PREPARED STATEMENT OF HON. TRENT LOTT, U.S. SENATOR FROM MISSISSIPPI

Mr. Chairman, thank you for holding this important hearing today on the media 

ownership rules which are currently under review by the Federal Communications 

Commission. Media ownership is a topic which has always been of great interest to 

me, and I have been following the status of the biennial review at the FCC very 

carefully. I am particularly interested in those rules which apply to the broadcast 

television industry. Since the public airwaves belong to the American people, I believe that the Federal Government has an appropriate and proper role to play in 

overseeing the ownership arrangements which are permitted for the broadcasting 

companies which operate over our public airwaves. 

I am especially interested in the 35 percent National TV Ownership Cap which 

protects the careful balance of interests in programming between national and local 

interests. I am concerned about permitting a single company to own more local affiliate stations, so that such a company could control the programming to a share of 

the national audience which is greater than 35 percent. I believe that the Nation 

is in danger of losing the localism and diversity of viewpoints that are offered under 

the current ownership cap structure if the current cap is raised. 

I also believe strongly that network affiliates should have great freedom to preempt programming when the station management deems it to be offensive under 

community standards, and preemption should also be allowed when local station 

managers decide that a program of local interest such as an important ball game 

would be better programming for that particular community in that time slot. I am 

concerned that such decisions regarding preemption would be curtailed if these decisions are made even more often in national headquarters offices rather than by 

those who work in the local stations. Some participants in this debate argue that 

the tremendous growth in the media marketplace in recent years through options 

such as cable, DBS, and the Internet supports a relaxation of broadcast ownership 

rules. As refreshing as it is to have more media options for American consumers 

in the marketplace, for the most part these options are national in scope, rather 

than local. 

The Newspaper/Broadcast Cross-Ownership Ban is also of interest to me. I have 

heard strong arguments that the ban should be repealed across-the-board—thus allowing one company to freely pursue the acquisition of a daily newspaper or broadcast television station, depending on which of the two the company already owns 

in that market. Despite the strong arguments for repealing this ban, I am worried 

about the effect that lifting the ban would have in smaller markets, such as the 

ones in my home State of Mississippi. If one company were allowed to own both a 

newspaper and a TV station in one of the small markets in my state, and that company proves not to be fair, accurate, and balanced in it’s coverage of local news, the 

detrimental impact of such news coverage would be multiplied significantly. 

16 

I regret that the FCC has not provided more information to Congress regarding 

the biennial review that is taking place on media ownership rules, since major 

changes in our media marketplace—especially the change of a number of rules at 

once—could have a far-reaching impact on the careful balance of the diversity of 

voices in our country. It would be helpful to know more about the diversity index 

which is being created by the FCC in order to better assess the effect that various 

possible rule changes could have on the media marketplace, and I wish that we had 

this information to weigh along with the testimony which is being provided today. 

Mr. Chairman, I do look forward to hearing the testimony of the witnesses who have 

joined us as this Committee exercises its oversight responsibilities regarding media 

ownership rules. 

The CHAIRMAN. Thank you. 

Senator Nelson? 

STATEMENT OF HON. BILL NELSON, 

U.S. SENATOR FROM FLORIDA 

Senator NELSON. And I, will just say that I think we all know 

common sense tells us that local content helps bring communities 

together, that diverse perspectives makes our democracy work, and 

that competition ensures that consumers will get a fair shake. 

Thank you. 

The CHAIRMAN. Thank you, Senator Nelson. I thank my colleagues. 

Our first witnesses are Mr. Mel Karmazin, President and Chief 

Operating Officer of Viacom; Mr. Jim Goodmon, President and 

CEO, Capitol Broadcasting Company; Mr. Frank Blethen, the Publisher of the Seattle Times; and Mr. William Dean Singleton, Vice 

Chairman and CEO of the Media News Group and Publisher of the 

Denver Post and Salt Lake Tribune. Welcome to the witnesses. 

Thank you for your patience. 

We will begin with you, Mr. Karmazin. 

STATEMENT OF MEL KARMAZIN, PRESIDENT AND CHIEF 

OPERATING OFFICER, VIACOM, INC. 

Mr. KARMAZIN. Thank you, Mr. Chairman. My voice is gone, so 

I will try to do the best I can. 

I assume I have about an hour for my opening comments, so I 

was going to deliver this testimony. But based on what I heard, 

there is no chance I will deliver that. I would rather address some 

of the issues that I have heard. 

First of all, I was here 2 years ago when the process started for 

us to review the biennial, which the 1996 Act required. It is now 

2 years later, and I am still hearing that we ought to be delaying 

it because we have not had enough time. Trust me, we have had 

enough time to review it. And I agree with what the Senator said; 

I may not like everything that comes out, but clearly June 2 has 

been too far into the future for where this issue has been dealt. 

I saw an extraordinary chart of a company that showed that five 

companies appear to be controlling the world based on that chart. 

Viacom is the largest company in the advertising business. 

Viacom’s revenues in advertising are $12.5 billion. The advertising 

pie is $300 billion. We are not Microsoft as far as what we have. 

The media business is a very extraordinarily fragmented business 

with so much competition out there that if you take a look at these 

17 

charts, it has no semblance of the reality that is taking place in 

the marketplace. 

Then I heard a story about how one radio operator owns all of 

the radio stations in a market. I do not think that is the way it 

should be. I would absolutely not endorse that. I certainly think 

that diversity and localism and all of those things are important. 

I have been a broadcaster for 30 years. I loved the days when there 

were only three broadcast networks, when there was no FM radio, 

when there was no satellite, when there was no cable. 

In New York City, Senator, there are over 100 radio stations. 

Why is it right and what makes anyone believe that the courts are 

going to be able to say that eight is the number that you could 

have in New York? If you could have six in a small market, like 

you described, then in a big market like New York there really 

ought to be room for a whole lot more. 

Decide how many different owners you believe is appropriate. Do 

you believe that in radio in New York you want five owners, six 

owners, seven owners? Whatever you feel, the FCC feels, the courts 

support, then that would mean maybe one company should be able 

to own 10 percent, 15 percent of the stations in a market, not 100 

percent? 15 percent? That would mean, in New York City, one company would be able to own 15 radio stations, not the eight that is 

currently mandated. 

We agree on the subject of duopoly. We think that local ownership rules should be expanded. We believe that in some markets, 

smaller markets, there should be less expansion than in bigger 

markets where there are far more choices. So I think it is a local 

issue based on the number of voices, based on the amount of competition. That should be determined. But this should be, even 

though we do not have a horse in that race, we think in smaller 

markets there really ought to be expanded local ownerships so the 

industry can compete. 

We have heard an extraordinary amount of talk about the 35 

percent cap. As I understand, the reason, in part, the Commission 

is looking at it is the courts determined that the 35 percent cap 

would not pass muster. We report to the FCC, at Viacom, CBS, and 

we report one segment, the network and the stations. We do not 

break out our network, we do not break it separately; it is one segment. And the reason for that is the network television business 

is not a very good business. Proof of it is if you take a look at who 

is in the broadcast-network business, the only people who are in it 

are people who also own television stations because the televisionstation business is a great business, which is why, in part, a lot 

of the station operators are against the expansion of the 35 percent 

cap. In order for us to preserve. 

So why is the Commission looking at this? Because someone 

should have an interest in preserving free, over-the-air broadcasting, because if somebody does not have an interest, then what 

would happen is content, sports content first and then other content, would find its way migrating onto cable, where you can 

charge the consumer $2 for a cable channel. 

So if the premise behind not giving relief on the 35 percent cap 

is so that you do not want to encourage free, over-the-air broadcasting by the networks, then what you will do is you will encourVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000021 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
18 

age the networks, us, to put more of our content on cable and 

charge the consumer for that; whereas, today all they need to do 

is watch our commercials. 

So I have about another hour, but you are looking at me like I 

should stop, so I am going to stop. 

[Laughter.] 

The CHAIRMAN. I was not doing that, Mr. Karmazin. Really. If 

you want to continue, go ahead. 

Mr. KARMAZIN. That is OK. Hopefully I will get a few questions. 

The CHAIRMAN. I am sure you will. 

[Laughter.] 

[The prepared statement of Mr. Karmazin follows:] 

PREPARED STATEMENT OF MEL KARMAZIN, PRESIDENT AND CHIEF OPERATING OFFICER, VIACOM

Good morning, Chairman McCain, Senator Hollings, and members of the Committee. I am Mel Karmazin, President and Chief Operating Officer of Viacom. 

Thank you for the opportunity to testify today about the FCC’s ownership proceeding and the important review that agency has undertaken pursuant to Congressional and judicial directives. 

Viacom has a well-known position of asserting that fulsome deregulation of the 

Commission’s outmoded broadcast restrictions is not only warranted but long overdue. It is utterly unsupportable and unrealistic that broadcasters should be handcuffed in their attempts to compete for consumers at a time when Americans are 

bombarded with media choices via technologies never dreamed of even a decade ago, 

much less 60 years ago when some of these rules were first adopted. 

The current proceeding has had more focus and public attention than almost any 

review in the agency’s history. There have been thousands of comments filed; an official FCC hearing took place in Richmond; and countless ad hoc hearings have been 

held in San Francisco, Chicago, Los Angeles, Seattle, Phoenix, New York and Burlington, Vermont, to name but a few venues. Letters also have poured into the FCC 

from both sides of the aisles in the U.S. Senate and House of Representatives. Little 

new can be said on this topic. Any hard evidence to be had is already on the record 

and, as many in Congress and the Administration have said, it is time for the Commission to do its job and complete this biennial review. The public interest is not 

served by delay. 

Anyone who has read the vast number of submissions in the FCC ownership proceeding will see that Viacom argues for deregulation of broadcasting rules across the 

board—even the ones that have no effect on us. Conversely, some big and powerful 

companies, along with their trade associations, have been arguing that the networks 

should receive no relief from the national ownership rules—particularly, the television cap. At the same time, these companies have been zealously advocating for 

relief on all of the local rules so that they can enjoy the efficiencies of consolidation. 

At Viacom, there is no talking out of both sides of our mouth when it comes to arguing for deregulation. We do not own newspapers, and despite the fact that newspapers are formidable competitors for ad dollars in local markets, we favor elimination of the newspaper-broadcast cross-ownership ban. We do not own television 

stations in small markets, where unhealthy consolidation is more likely to occur, but 

we support relaxation of the local television ownership rule across all market sizes. 

For there to be a robust broadcasting industry, all broadcasters need deregulation 

of all broadcast ownership rules. 

In the 1996 Telecommunications Act, Congress mandated that those wishing to 

preserve the broadcast ownership rules must prove that the rules are still necessary 

in light of competition. Viacom has joined with FOX and NBC in submitting substantial and compelling economic and factual evidence that cannot be ignored or refuted by proponents of the status quo. Those who favor maintaining the regulations 

have failed to carry their burden. The Commission, therefore, must repeal or modify 

the broadcast ownership rules—that’s what the statute says. 

Let’s focus on the national television station cap, the most vigorously debated rule 

under consideration. This rule, which limits ownership to TV stations serving 35 

percent of the nation, is supported most ardently by network affiliates, the Network 

Affiliated Station Alliance, and their trade association, the National Association of 

Broadcasters. The arguments they have come up with against deregulating this rule 

are woefully lacking. 

19 

First, NASA/NAB argue that affiliates, as opposed to stations owned and operated 

by the networks—known as O&Os—are ‘‘local’’ and, therefore, better understand 

and know their viewers. This is simply not true. Most television stations in this 

country are held by multi-station groups owned by large corporations headquartered 

in cities located far from their stations’ communities of license—Hearst-Argyle and 

the New York Times in New York, Tribune in Chicago, Cox in Atlanta, Belo in Dallas, Post-Newsweek in Detroit. What does it matter that Viacom’s main offices are 

in New York? The corporate group owners are no more ‘‘local’’ in the cities where 

they own TV stations than is Viacom. Yet, like Viacom and all good broadcasters, 

group owners work hard to know what viewers want in each market where it has 

a media outlet. Localism is just good business. 

Networks invest billions of dollars in that programming, but most of the return 

on their investment is realized at the station level. Only two of the so-called ‘‘Big 

Four’’ networks are profitable in any year, operating on low, single-digit margins. 

Compare the networks to television stations—run by networks and affiliates alike— 

which operate on margins anywhere from 20–50 percent. If networks are precluded 

from realizing more of the revenue generated by stations, networks’ ability to continue their multi-billion dollar programming investments will diminish, and more 

and more programming will migrate from broadcasting to cable and satellite TV, 

where regulation is less onerous. More Americans then will have to pay for what 

they now get for free. 

NASA/NAB’s second argument, that affiliates provide more local news than do 

network-owned and-operated stations is, again, false. In a study commissioned by 

Viacom, FOX and NBC, Economists Incorporated found that the average TV station 

owned by a network provides more local news per week—37 percent more—than 

does the average affiliate—a finding consistent with the FCC’s own independently 

conducted study. 

Third, NASA/NAB contend that affiliates preempt network programming substantially more often than do O&Os in order to substitute programming more closely 

attuned to the interests of local viewers. Wrong again. In another study, Economists 

Incorporated found that preemption rates for both O&Os and affiliates in 2001 

amounted to less than one percent of prime time programming, with affiliates a bit 

higher than network-owned stations. But the difference in preemption time cannot 

be attributed to affiliates caring more about their local viewers than their own bottom lines. Rather, as the study found, any difference between the preemption levels 

of O&Os and affiliates is largely due to higher rates of economic preemptions by affiliates (that is, for paid programming and telethons), not local public affairs programs and high school football, as they would have you believe. Nor is it true that 

affiliates stand as the bulwark against allegedly inappropriate network programming. The fact of the matter is that preemptions based on content are rare. But in 

the handful of cases over the past years when an affiliate has determined that a 

program’s subject may be too sensitive for its market—as was the case last week 

with our Providence affiliate with respect to the ‘‘CSI: Miami’’ episode dealing with 

fire hazards at nightclubs—we understand and accommodate. Our own stations 

would do the same thing for their market’s viewers. 

Finally, NASA/NAB argue that raising the cap will leave affiliates in need of protection in their network relationship. Companies like Cox, Hearst-Argyle, Gannett, 

the New York Times, and the Washington Post hardly need protection. Instead, networks and their affiliates need each other. Broadcast networks rely almost exclusively on advertising revenues for their survival, and a prominent feature of the 

pricing that broadcast networks can still charge despite declining audience levels is 

that they provide advertisers access to all U.S. households in 212 television markets 

virtually simultaneously. If a network cannot maintain affiliations in all of those 

markets, it loses its uniqueness in the advertising sales marketplace. Despite the 

inevitable tensions in the network-affiliate relationship, no network can afford to 

risk losing affiliations in even one market, much less 10 or 20 or 50. 

Through this proceeding, the networks are seeking the opportunity to invest even 

further in the broadcasting industry. Doing so is a vote of confidence for all broadcasters: It will only serve to increase the value of television stations, and it ensures 

that free, over-the-air, quality programming will continue to be available to American households. 

I’d like also to address radio ownership, because in the last few months, radio consolidation has become the poster child against deregulation, the so-called ‘‘canary’’ 

signaling trouble in the mines of ownership rules relaxation. It’s time for a reality 

check. It’s true that the 1996 Telecom Act eliminated the limit for ownership of 

radio stations nationwide. But that doesn’t mean the radio market is concentrated. 

There are 3,800 separate owners of commercial radio stations across the country. 

While the largest radio owner nationwide owns about 1,200 stations, that number 

20 

constitutes only about 11 percent of the nearly 11,000 commercial radio stations in 

this country. Viacom does not even rank among the top three radio owners. After 

Clear Channel, the second largest radio owner is Cumulus Broadcasting, with 258 

stations. Third largest is Citadel Communications, with 210 stations. 

Through its Infinity Broadcasting, Viacom is the fourth largest radio station 

owner, with 185 stations nationwide, a mere 1.7 percent of all commercial stations. 

Further, our stations are located in only 42 of the 286 radio markets in the United 

States. That means that Infinity has no radio station in 85 percent of the Nation’s 

markets. Even in the smallest market where we operate—Palm Springs, California, 

ranked 162—Infinity owns a single radio station out of a total of 21 commercial 

radio stations operating there. Yet, despite the fact that Infinity lags behind the 

largest group owner by more than 1,000 radio stations, we rank second to it in 

terms of revenues. This attests to the fact that competition is, indeed, alive and well 

in the radio industry. In 1992, 60 percent of all radio stations were losing money. 

Thanks to Congress and its wisdom, the radio industry is healthier today. 

The single biggest complaint of those opposing radio deregulation is that diversity 

has been lost and that the same songs are played on every radio station across the 

country. Just not true. The FCC’s study found that song diversity has remained 

largely unchanged since 1996. And format diversity has also increased since that 

time, according to studies by Bear Stearns, Katz Media Group and others. Most importantly, listeners are happy. An Arbitron study released earlier this year found 

that radio listeners are ‘‘very pleased’’ with the programming choices available to 

them. More than two-thirds, or 69 percent of those surveyed, said their local stations do a ‘‘very good’’ or ‘‘good’’ job of providing a wide variety of programming. And 

nearly 75 percent of listeners think that their local radio stations do a ‘‘very good’’ 

or ‘‘good’’ job of playing the music they like. 

Deregulation at the national and local levels has not changed the fact that Infinity, like any serious broadcaster, continues to operate the old fashioned way—by 

managing and programming all of its radio stations at the local level. Excellence in 

service to our customers—that is, the local listeners—is critical to our stations’ financial success. In order to attract advertisers, who are the sole source of revenue 

for radio, we must lure listeners with programming they want. Moreover, our station managers live where their radio stations are located, and they care about their 

communities. 

Once you look at the radio facts, you will see that deregulation has made the canary a happy fellow. 

In conclusion, the FCC must move forward now and complete its review based on 

the realities of today’s competitive media marketplace. That’s what the public interest demands. 

Thank you. 

The CHAIRMAN. Mr. Goodmon? 

STATEMENT OF JAMES F. GOODMON, 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, 

CAPITOL BROADCASTING COMPANY, INC. 

Mr. GOODMON. Well, good morning, Mr. Chairman. 

My name is Jim Goodmon. I am President of Capitol Broadcasting Company in Raleigh. It is a family-owned company. We 

own television stations in the Carolinas, and some radio. I am the 

third-generation president of my company. The fourth is now the 

program director of one of our stations, and the fifth would be 

working there, my grandson, if it did not violate the child labor 

laws. We are a family business. 

I also consider myself the best CBS affiliate in America. I hope 

Mr. Karmazin thinks that. We have worked very closely. 

[Laughter.] 

Mr. GOODMON. We were the first digital television station in the 

United States, the first high-definition, and all that was through 

our work with—— 

The CHAIRMAN. Let us not get into that one. 

Mr. GOODMON.—CBS. 

21 

[Laughter.] 

Mr. GOODMON. No, I am going to mention that. And then I am 

very proud of the progress that CBS has made. We are a proud 

CBS affiliate. 

Having said that, I need to suggest that I basically do not agree 

with anything that Mr. Karmazin said. 

[Laughter.] 

Mr. GOODMON. And let me go through that. I am here to talk 

about, specifically, the 35 percent cap. 

Now, the law says that when the Commission considers ownership, it should consider the public interest. And in the Commission’s rulings, they consistently say, ‘‘OK, what is that public interest?’’ It is localism, diversity, and competition. Now, I would suggest that there is not any way you can say that allowing these 

large companies to own more television stations improves localism, 

improves diversity, or improves competition. I mean, it is intuitive. 

It does not happen. 

If you go by the law and if you look at the rules the Commission 

wrote, localism, diversity, and competition, there is no way you 

could say we should have fewer owners, we should have these large 

companies owning more TV stations. Well, now how do they get to 

it? Because that is what the Commission has said they are going 

to—how do they get to this localism, diversity, and competition is 

not important? 

Well, the first way they get there is they say, ‘‘Wait a minute. 

These rules are old-fashioned. What are you talking about? We 

have got all these cable channels, we have got all this satellite 

stuff, we have got the Internet, we have got TiVo, we have got 

wireless. These rules do not make a difference anymore.’’ Senator 

Allen, your point is that we have got all this diversity. OK? My 

suggestion is that when you look at that, you need to consider that 

in all those things I talked about, the only industry, the only group, 

the only organizations that are specifically charged with local service are local broadcasters. 

I would suggest to you, you could have 500 cable channels and 

you will never hear the name of your town mentioned. Those are 

national services—national cable, national satellite. There is no 

local requirement on the Internet. 

So I do not think there is a substitute. I would not agree with 

you that can substitute cable, satellite, the Internet for local broadcasting stations. Now, remember, there is a fixed number of these 

things, that there is a fixed number of these stations. It is very 

dangerous, when you have a fixed number of things, to let large 

groups own more and more of a very fixed—it is fixed—this is not 

open market, free market. This is a fixed number of stations. 

So the first thing they say is, ‘‘Well, diversity—these rules do not 

make any difference because we have got all this other stuff.’’ 

The second issue is that the broadcasting industry somehow 

needs economic assistance. I would suggest that any study you do 

would show that broadcast television stations are the most profitable business in the history of the United States. The head of Fox 

just announced a 54 percent cash-flow margin for his O&Os. I 

mean, these are the most profitable things you can have. Now, I 

am having trouble with—we are going to change this localism-diVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000025 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
22 

versity-competition notion for an economic reason. I mean, this is 

a very profitable industry. 

Now, and then the last is, ‘‘Wait a minute, the R-word has left 

Washington. The R-word is gone. There is going to be—we are 

going to get rid of regulation.’’ Deregulation. Let the free market 

decide here. I would just point—it is not a free market. There are 

a limited number of television stations. And anytime you study 

that kind of market, you fight very hard against concentration because you and I cannot start a TV station. You cannot. I mean, 

there is a limited number of them. You cannot do that. 

So the reason that the Commission is giving for avoiding localism 

and diversity and competition are not right. I mean, they do not— 

I cannot make it compute. 

Two other things. What you are going to do when you allow the 

networks to own more and more local affiliates is, you are basically 

saying, OK, we are going to let you program those local stations. 

I want to give you two examples quickly. 

Fox announced they want to do ‘‘Marry a Millionaire.’’ They paraded 25 or 30 women across the stage in bikinis. There was a guy 

behind the microphone. He picked the one he liked, and they got 

married. I mean, a legal marriage. 

OK, now, we said, at our Fox affiliate, ‘‘We are not going to do 

that.’’ You know, we are taking all this reality stuff. It is really 

tough to take all that. But we said we are going to stop a demeaning marriage and the family. We did not take it. Fox got upset with 

us about it, but we got through it. 

Now, the point I am making, and this is a very important point, 

it is—I am not saying I did the right thing. People were mad we 

did not take it; people, you know, wanted to congratulate us for 

doing it, but I said I did something. I tried to make a local decision. 

I tried to make a decision that had something to do with where I 

lived and what my community—there is no manager of a Fox station that would not clear that program. As a matter of fact, if you 

look at the record, in history there has never been a networkowned station that preempted a network program for content reasons. That has never happened. 

So what you are doing now when you raise these caps is you are 

saying, ‘‘OK, this is fine. We are going to let them decide what the 

program is in L.A. We are going to let them put it on their network, and then we are going to let them put it on the local station.’’ 

Now, that does not have anything to do with the way local broadcasting is supposed to work, in my view. 

One other—we can talk about—there are two or three other programs, but I do not have the time to do that. Let me suggest this. 

What you all are saying, Senator Allen and Senator Sununu, you 

all are saying we have got all this diversity; and, therefore, these 

rules are not important. I would take it a step further. I would say 

that because the networks have the most popular cable channels, 

because the networks have the most popular Internet sites, these 

other mediums we were talking about, they also dominate those 

mediums, that we have less diversity. We have got a whole lot 

more channels, but we do not have a whole lot more voices. I mean, 

it is not even—well, you can tell what I am working on. I mean, 

I just do not buy this diversity business. 

23 

And, finally, I am having the worst time getting people to talk 

to me about this. We have a 35 percent rule, which says stations 

can own 35 percent of the country. We do not have a 35 percent 

rule. We have a 70 percent rule, because a UHF station only counts 

half. So you can own 70 percent of the country under the current 

rule. We raise it to 45, then you would be able to own 90. So the 

suggestion—I do not get this. It is not a 35 percent rule; it is a 70 

percent rule. And the notion that we are supposed to raise a 70 

percent rule, I cannot get them interested in this at the Commission. 

And one final factor. We are now in the middle of—I am getting 

back to what you told me to not talk about—we are now in the 

middle of an enormous transformation in broadcasting from analog 

to digital. We are right in the middle of this. Right? Why in the 

world would we change ownership rules? Because we do not know 

what in the world the digital future is. On one station, I can run 

five channels, or I could run HD. Why are we doing this now? I 

mean, it does not make sense to consider ownership changes right 

here in the middle of the digital transition. 

And if you are interested in the future economics of the broadcasting industry, please make some rules for digital. Listen, I have 

been on the air 7 years, and I still do not have the rules for the 

digital transition. That is the economic help that we need in broadcasting. 

So I want to thank—it looks like it is lost in FCC, the position 

that we are taking. I wanted to thank Congressmen Burr, Dingell, 

Deal, Markey, and Price, for H.R. 2052, which will codify the national cap. My understanding is that there will be a—the same bill 

will be introduced in the Senate, and I really urge you all to take 

a look at that. I really urge you to take a look at codifying the 35 

percent cap. 

And, by the way, the recent poll that was published says 72 percent of your constituents do not even know we are talking about 

this. This is sort of inside baseball to 75 percent of the country. 

And you are not going to find anybody—I have not seen anybody 

who says it is a good idea to let the big companies own more stations. It just does not fit. 

I will say, again, that I am the best CBS affiliate in America, 

and I love CBS, and it was very hard for me to oppose my Chairman. 

And thank you very much. 

Mr. KARMAZIN. He should have been sworn in. 

[Laughter.] 

[The prepared statement of Mr. Goodmon follows:] 

PREPARED STATEMENT OF JAMES F. GOODMON, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, CAPITOL BROADCASTING COMPANY, INC. 

Chairman McCain, Senator Hollings and members of the Committee, I appreciate 

the opportunity to appear before you in support of the public interest and its core 

values—localism, diversity and competition. I am Jim Goodmon, President and 

Chief Executive Officer of Capitol Broadcasting Co., Inc., which launched the Nation’s first digital broadcast station 7 years ago. Capitol owns and operates five television stations and one radio station—all in the Carolinas. Although we own the facilities and equipment, the airwaves are valuable public property—property that deserves our respect. As a third generation broadcaster, I am concerned that we are 

no longer adequately guarding the airwaves. That is why I believe that it is imperaVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000027 Fmt 06633 Sfmt 06621 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
24 

tive that we retain the national television ownership cap at 35 percent. I want to 

quickly address four issues and concerns: the uniqueness of broadcasting as a medium; the attack on localism; the myth of marketplace changes creating more diversity; and the reality of today’s 35 percent rule being a 70 percent rule. 

The Uniqueness of Broadcasting as a Medium 

First, broadcasting is a unique medium—distinct from all other media. Our licenses are granted by the Commission to serve ‘‘the public interest, convenience, 

and necessity’’ of a local community. It does not matter if you own a station in New 

York City or Glendive, Montana. It does not matter if you own one station or 50. 

Our duty is the same. We must serve the public interest and reflect local community 

standards. No other medium is charged with this responsibility. 

Due to spectrum scarcity creating a significant barrier to entry, a free market 

analysis simply does not apply to the broadcasting industry. 

And there is no substitute for local broadcast television. It is free and available 

to all the Nation’s economic levels. It is the primary source for local news, weather, 

public affairs programming, and emergency information. Two hundred national 

cable and satellite channels cannot replace a single local news and information signal. 

The Attack on Localism 

Broadcasting’s uniqueness begins with localism, which is the second issue I would 

like to address. Your predecessors wisely made localism the bedrock upon which 

broadcasting in the United States was built, but today large media giants are trying 

to replace localism and community standards with financial opportunity and corporate objectives. Since the national television cap was increased from 25 percent 

to 35 percent, we have seen significant consequences, including a shift in the delicate balance of power between the networks and local affiliates resulting in many 

local programming decisions being made in New York and Los Angeles, not Phoenix 

or Columbia or Juneau or Baton Rouge or Topeka. 

At Capitol, we made the decision not to air several FOX reality programs, including ‘‘Temptation Island,’’ ‘‘Who Wants to Marry a Millionaire’’ and ‘‘Married By 

America’’ because we thought they demeaned marriage and family. Managers at stations owned by the Fox network could not have made those decisions. The record 

at the Commission does not include a single example of a network owned and operated station pre-empting a program based upon community standards. I am not saying we made a right or wrong decision—I am simply saying we made a local decision 

reflecting our view of local community standards in Raleigh-Durham, North Carolina. Promos are also an issue of concern. During last year’s World Series, we ran 

alternate network promos due to the violent and explicit promos FOX planned to 

air to promote its new line-up of network shows. Why? Because we believe the 

World Series should be family-friendly programming. The right to reject or preempt 

network programming must remain at the local level for stations to discharge their 

duty to reflect what they believe is right for their individual communities, whether 

it is to reject network programming based on community standards or whether it 

is to preempt national network programming in order to air a Billy Graham special, 

the Muscular Dystrophy Telethon or local sports. 

I can’t imagine that anyone in this room really wants to take away local control 

over television programming. The Parents TV Council says that American families 

are ‘‘disgusted’’ by the ‘‘raw sewage . . . that is flooding into their living rooms day 

and night through the television screen, and poisoning the minds of an entire generation of youngsters.’’ The Christian Coalition, Family Research Council, and others joined in a call to reinstate the family hour. And in my own state, the North 

Carolina Family Policy Council recently spoke out in favor of the 35 percent cap to 

maintain local control. 

In the early days of broadcasting, there were three checks and balances—the content providers as producers, the networks as wholesalers and aggregators of programming, and the local affiliates as the distributors. Independent producers no 

longer provide checks and balances because the networks now produce much of their 

own programming thanks to vertical integration, and as the networks are allowed 

to buy more local stations, they are becoming the distributors as well—dissipating 

the final check and balance. Can you imagine only having one branch of government? In effect, that is what is happening to broadcasting. 

The Myth of Marketplace Changes Creating More Diversity 

Third, proponents of media deregulation claim that the marketplace has 

changed—that there are now 100s of cable and satellite channels and thousands of 

Internet sites. Yes, it is true that there are more outlets, but the voices are the 

same. The bottom line is that five companies—four of whom are the broadcast netVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000028 Fmt 06633 Sfmt 06621 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
25 

works—control most of the so-called new voices in the marketplace. Those five companies own most of the top-rated cable channels, as well as the most-viewed 

websites. I contend that it is a myth that marketplace changes have created more 

diversity. 

The 35% Rule is Actually a 70% Rule 

Fourth, today’s 35 percent rule is actually a 70 percent rule due to the UHF discount, which allows owners to only count 50 percent of the TV households in markets in which they own UHF stations. This rule is outdated with over 85 percent 

of all viewers receiving their local signals via cable or satellite. And when the digital 

transition is complete, the rule will be obsolete with 94 percent of all digital stations 

being located in the UHF band. 

Conclusion 

Three final thoughts in conclusion, the economic arguments offered by those proposing increasing the cap are ludicrous. Free over-the-air and network television is 

a very profitable business with tremendous margins that other industries envy. 

With deregulation comes a flood of investment bankers, the people that stand to 

gain the most from the Commission’s proposed action. And with the digital transition, now is not the time to make major ownership changes. The technology and its 

multiplicity of uses are changing daily. With digital it is technically possible to 

broadcast four or five channels on a single station. My point is that after 7 years 

of operating a digital television station, and experimenting with a number of ideas, 

we still don’t know where the transition will lead. To open the gates at this point 

is dangerous. We need to know more before making decisions that could have dramatic impact on a communication future still to be determined. Finally, I am concerned, as we all should be, that deals are going on between certain members of 

the Commission and a few large media groups. A letter from a major broadcast 

group to Chairman Powell offers to ‘‘trade’’ increasing the ownership cap for other 

concessions. Deal making should not be taking place between a few media giants 

and a government agency with appointed, not elected, officials. 

Let’s honor the system that has served our democracy so well in the past and require that the airwaves be used for the ‘‘public interest, convenience, and necessity’’ 

on a local basis, like your predecessors envisioned. We must retain the national television ownership cap to preserve localism that reflects local community standards. 

I am grateful to Congressmen Burr, Dingell, Deal, Markey and Price for introducing 

H.R. 2052 on Friday to codify the national cap at 35 percent. I urge the Senate to 

introduce a companion bill. One poll shows that 72 percent of your constituents are 

not aware that media ownership restrictions may be relaxed, so I am grateful this 

committee is giving this issue attention. Thank you for allowing me to testify. 

The CHAIRMAN. Mr. Blethen, welcome. 

STATEMENT OF FRANK A. BLETHEN, PUBLISHER, 

THE SEATTLE TIMES 

Mr. BLETHEN. Good morning. Thank you for having me. 

I am Frank Blethen, the fourth, family publisher of the fourthand-fifth generation private family-owned Seattle Times. I appreciate the comments from the Washington Senator, where my family 

has 107-year connection, six generations. 

The CHAIRMAN. Pull the microphone just a little bit closer, 

please, Mr. Blethen. 

Mr. BLETHEN. Is that OK? 

And from the Senator from Maine, where my family has a 12- 

generation connection. But, Chairman, I think only you know that 

I am probably the only Sun Devil that is testifying today. 

[Laughter.] 

The CHAIRMAN. Thank you. 

Mr. BLETHEN. There is, in freedom, a variety of voices. There is, 

I believe, a fundamental reason why the American press is strong 

enough to stay free. That reason is that the American newspaper, 

large and small and without exception, belongs to a town, a city, 

at the most to a region. 

26 

‘‘The secret of a free press is that it should consist of many newspapers, decentralized in their ownership and management, and dependent for their support on the communities where they are written, where they are edited, and where they are read.’’ These eloquent words were from noted journalist Walter Lippman, more 

than 50 years ago. Today, we live in the America of Mr. Lippman’s 

worst nightmare, an America whose very democracy is at risk because we are on the verge of losing our free press. 

When I began my career, American democracy appeared secure. 

Its foundation was the 1,700-some newspaper voices deeply connected to the communities that they served. Today, there are fewer 

than 280 of us independents left, and most in small communities. 

Recently, we saw the L.A. Times fall to a Wall-Street-driven conglomerate. We are about to witness the same fate for the Orange 

County Register. Imagine that by the end of the year, L.A. will no 

longer have a newspaper owned and managed by people who care 

about or are a part of the city. This is our future if you permit repeal of the cross-ownership ban and other FCC restrictions on monopolization. 

This committee gave us a peek into this bleak future with your 

recent hearings on the abuses of radio concentration and cable 

rates. Less localism, fewer voices, less access, less original information, and higher advertising rates and consumer subscription rates. 

If cable rates and Clear Channel made you nervous, just wait for 

the monopolization feeding frenzy if cross-ownership is repealed. 

More than 200 years ago, Thomas Jefferson said he foresaw battles, ‘‘between rapacious capitalism and democracy.’’ Jefferson understood that power and size, left unchecked, would invite abuse 

and would crowd out civic values and overwhelm the public interest. 

It is instructive that the only entities that want these rules repealed are large, Wall-Street-driven conglomerates. They claim 

they need less competition and more monopolization to compete, 

yet these are very lucrative businesses. They brag about newspaper 

profit margins of 30 percent or greater, and up to 50 percent on 

their broadcast houses. These are hardly businesses that need to 

worry about new competition. 

Ownership matters. Lippman’s variety of independent voices 

gave us the structure for the press’ critical watchdog function. 

Media concentration and Wall Street ownership has turned the 

watchdog into a lap dog. It has always been that the most serious 

problem in American journalism is not what we cover, but what we 

do not cover. When the watchdog stops barking, we are all in trouble. 

The FCC rules discussion has been a big business, special-interest discussion conducted in dark behind closed doors without the 

light of media scrutiny and the enlightenment of robust public debate. Why? Because the corporate entities that financially gain 

from monopolization now control most of what we read, see, and 

hear, and how we receive it. 

The arguments made for less regulation are false. Yes, we have 

the Internet, and we have hundreds of cable channels. But we all 

know most reliable news and information on the Internet or cable 

is generated from already existing newsrooms almost always from 

27 

newspapers. Simply repackaging and repeating someone else’s content is hardly new news. And, besides, the very corporations who 

claim this is a new competition have already monopolized the most 

visited Internet sites and cable ownership. There may be more access points, but there are fewer voices and less competition. 

This committee has become the first line of defense in Jefferson’s 

battle to save our democracy from rapacious capitalism. There is no 

business justification that I am aware of, other than monopolization, for lifting any of the current rules or allowing any entity to 

engage in any cross-media ownership. 

As a businessman journalist, as a local independent, my family 

knows how to make a profit to survive. We have no problems with 

profits. They are essential. But in our family, we have a saying 

that we make money so we can practice fiercely independent journalism. We represent and are beholden only to the citizens of the 

handful of communities we are privileged to serve. We are not beholden to Wall Street or any other powerful local sources. We are 

our community’s watchdogs. But we are a fast-dying breed. America needs your leadership to take freedom of the press off the endangered species list. 

Thank you. 

[The prepared statement of Mr. Blethen follows:] 

PREPARED STATEMENT OF FRANK A. BLETHEN, PUBLISHER, The Seattle Times 

Freedom Is a Variety of Voices 

‘‘There is freedom in a variety of voices.’’ 

‘‘There is, I believe, a fundamental reason why the American press is strong 

enough to remain free. That reason is, that, the American newspaper, large and 

small, and without exception, belongs to a town, a city, at the most to a region.’’ 

The secret of a free press is, ‘‘that it should consist of many newspapers decentralized in their ownership and management, and dependent for their support—- upon 

the communities where they are written, where they are edited, and where they are 

read.’’ 

These eloquent words were from noted journalist Walter Lippman more than 50 

years ago. 

Today, we live in the America of Mr. Lippman’s worst nightmare. 

An America whose very democracy is at risk because we are on the verge of losing 

our free press. 

When I began my career, American democracy appeared secure. It’s foundation 

was the 1,700 newspaper voices deeply connected to the communities they served. 

Today, there are fewer than 280 of us independents left. 

Most in small communities. 

Concentration and Monopolization Feeding Frenzy 

Recently we saw the L.A. Times fall to a Wall Street-driven conglomerate. We are 

about to witness the same fate for the Orange County Register. Imagine, by the end 

of the year L.A. will no longer have a newspaper owned and managed by people who 

care about or are part of the city. 

This is our future if you permit repeal of the cross ownership ban and other FCC 

restrictions or monopolization. 

This Committee gave us a peek into this bleak future with your recent hearings 

on the abuses of radio concentration and cable rates. 

Less localism, fewer voices, less access, less—information and higher advertising 

and subscription rates. 

If cable rates and Clear Channel make you nervous, just wait for the monopolization feeding frenzy if cross ownership is repealed. 

Bigness and Power Corrupt 

More than 200 years ago, Thomas Jefferson said he foresaw battles between ‘‘rapacious capitalism and democracy.’’ 

28 

Jefferson understood that power and size, left unchecked, would invite abuse and 

would crowd out civic values and overwhelm the public’s interests. 

It is instructive that the only entities that want the rules repealed are the large 

Wall Street-driven conglomerates. 

They claim they need less competition and more monopolization to compete. 

Yet, these are very lucrative businesses. 

Monopoly Profit Margins 

They brag about newspaper profit margins of 30 percent, and up to 50 percent 

on broadcast houses. 

These are hardly businesses that need to worry about new competition. 

Ownership Matters 

Ownership matters. 

Lippman’s variety of independent voices gave us the structure for the press’ critical watchdog responsibility. 

Media concentration and Wall Street ownership has turned the watchdog into a 

lapdog. 

It has always been that the most serious problem in American journalism is not 

what we cover, but what we don’t cover. When the watchdog stops barking we are 

in trouble. 

The FCC rules discussion has been a big business, special interests discussion. 

Conducted in the dark, behind closed doors. Without the light of media scrutiny and 

the enlightenment of robust public debate. 

Why? 

Because the corporate entities that financially gain from monopolization now control most of what we read, see and hear. 

False Arguments 

The arguments made for less regulation are false. 

Yes, we have the Internet and we have hundreds of cable channels. 

But we all know most reliable news or information on the Internet or cable is generated from already existing newsrooms, almost always from newspapers. 

Simply repackaging and repeating someone else’s content is hardly new news. 

And besides, the very corporations who claim this is a new competition have already monopolized the most visited Internet sites and cable ownership. 

There may be more access points, but there are fewer voices, and less competition. 

Action 

This committee has become the first line of defense in Jefferson’s battle to save 

our democracy from rapacious capitalism. 

There is no business justification that I’m aware of—other than monopolization— 

for lifting any of the current rules or for allowing any entity to engage in crossmedia ownership. 

I am a businessman/journalist. As a local independent, I know how to make a 

profit to survive. I have no problem with profits. They are essential. 

But in our family, we make money so we can practice fiercely independent journalism. We represent and are beholden only to the citizens of the handful of communities we are privileged to serve. We are not beholden to Wall Street or any other 

powerful local forces. 

We are watchdogs. 

We are a fast-dying breed. 

America needs your leadership to take freedom of the press of the endangered 

species list. 

Thank you. 

The CHAIRMAN. Thank you. 

Mr. Singleton? 

STATEMENT OF WILLIAM DEAN SINGLETON, VICE CHAIRMAN 

AND CHIEF EXECUTIVE OFFICER, MEDIANEWS GROUP, INC.; 

IMMEDIATE PAST CHAIRMAN OF THE BOARD OF 

DIRECTORS, NEWSPAPER ASSOCIATION OF AMERICA 

Mr. SINGLETON. Good morning. 

I am Dean Singleton, Vice Chairman and Chief Executive Officer 

of Media News Group, a private, family-owned company that pubVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000032 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
29 

lishes 50 daily newspapers, from the Denver Post, in Colorado, to 

the Humboldt Sun, in Winnemucca, Nevada, as well as 121 nondaily newspapers. I am also immediate past-Chairman of the Board 

of the Newspaper Association of America. 

I cannot talk very much today about the bikini-clad women on 

TV. We just print news, and we would like to be able to broadcast 

it. 

I am very pleased to appear before the Committee today to discuss the compelling reasons for eliminating the FCC’s long outdated and counterproductive ban on newspaper/broadcast crossownership. The newspaper ban is the last vestige of a series of oneoutlet-per-customer local media-ownership restrictions adopted by 

the FCC in the 1960s and 1970s. Of those limitations, only the 

newspaper/broadcast cross-ownership rule has remained completely 

unchanged over the past three decades. All of the Commission’s 

other restrictions on broadcast ownership have been either eliminated or significantly relaxed over the years. Only newspapers 

have been completely barred from participating in the broadcast 

markets of their local communities. 

This inaction on the part of the Commission is not for a lack of 

evidence. To the contrary, in four exhaustive proceedings over the 

past 6 years the agency has accumulated a mountain of evidence 

supporting the repeal of the newspaper/broadcast cross-ownership 

ban. 

In 1975, when the FCC adopted the ban, hundreds of newspapers 

were allowed to keep their broadcast stations. Forty of so of those 

grandfathered communities still exist today. These communities 

have essentially taken the guesswork out of eliminating the ban. 

They have provided the Commission with illustrative case studies 

of the substantial public-interest benefits that will result from repeal of this rule. Representing the full gamut of market sizes, the 

record shows that they have consistently provided their communities with unmatched levels of service. 

At the same time, there is simply no evidence that the existing 

grandfathered situations have threatened competition in their local 

markets. To the contrary, there is substantial evidence before the 

FCC showing that even the smallest markets containing newspaper/broadcast combinations remain vibrantly diverse and competitive. 

The evidence offered by grandfathered communities further 

shows that co-owned outlets generally present diverse perspectives 

on news and informational issues. Jointly owned newspapers and 

broadcast stations have strong economic and professional incentives to avoid coordinating their viewpoints. Local autonomy and 

editorial freedom is the tradition of newspapers, and the same 

principles apply to the operation of local stations owned by newspapers. 

The evidence presented by newspaper publishers and other parties has been confirmed by several recent studies. A study commissioned by the FCC specifically found that, and I quote, ‘‘Affiliates 

co-owned with newspapers experience noticeably greater success 

over our measures of quality and quantity of local news programming than other network affiliates.’’ 

30 

The results of a 5-year study released by the Project for Excellence in Journalism at Columbia University echoes these findings. 

That study concluded that, ‘‘Stations in cross-ownership situations 

were more than twice as likely to receive an A grade than were 

other stations,’’ and that, on the whole, ‘‘these stations were more 

likely to do stories that focused on important community issues and 

more likely to provide a wide mix of opinions.’’ 

Let me offer what I believe would happen close to home in my 

newspaper markets. Fairbanks, Alaska, is perhaps the most remote, isolated community in America. There are six commercial television stations in the market. All struggle financially. Under today’s rules, my newspaper thrives with an award-winning news 

presentation while the television stations struggle to broadcast 

even a small amount of local news. There are no commercial news 

radio stations. In Central and Northern Alaska, many communities 

cannot get my newspaper delivered because they are so isolated, 

but they can get radio and television. They deserve more. 

In Eureka, California, in another remote section of the country, 

there are four commercial television stations. The strongest station 

has a news staff of 11, and the other 3 do not produce substantive 

newscasts at all. Imagine the community service we could provide 

by putting our newspaper resources behind television and radio 

news, especially if we purchase a station that produces no news 

today. 

I own a newspaper in Pittsfield, Massachusetts, which covers the 

western quadrant of Massachusetts. There is no television station 

there and there never has been. If this rule is changed, we could 

put a TV station on the air that provides local television news for 

the first time ever in that community. 

Newspapers will add new resources to struggling television and 

radio enterprises, and those broadcast outlets will strengthen 

newspapers as the number of media choices continue to explode in 

a changing media environment. If the FCC’s decision is based solely on the record evidence and not on political emotion, the Commission will be compelled to eliminate the archaic and wholly unnecessary cross-ownership prohibition. 

Thank you. I will be happy to answer questions. 

[The prepared statement of Mr. Singleton follows:] 

PREPARED STATEMENT OF WILLIAM DEAN SINGLETON, VICE CHAIRMAN AND CHIEF

EXECUTIVE OFFICER, MEDIANEWS GROUP, INC.; IMMEDIATE PAST CHAIRMAN OF THE

BOARD OF DIRECTORS, NEWSPAPER ASSOCIATION OF AMERICA

Good morning. I am Dean Singleton, Vice Chairman and Chief Executive Officer 

of MediaNews Group Inc., a private company that publishes 50 daily newspapers— 

including The Denver Post, the Los Angeles Daily News and The Salt Lake Tribune—as well as 121 non-daily newspapers. 

I am also the immediate past-Chairman of the Board of the Newspaper Association of America. I am very pleased to have this opportunity to appear before the 

Committee today to discuss the compelling reasons for eliminating the FCC’s long 

outdated and counterproductive ban on newspaper/broadcast cross-ownership. 

The newspaper ban is the last vestige of a series of ‘‘one outlet per customer’’ local 

media ownership restrictions adopted by the FCC in the 1960s and 1970s. Of these 

limitations, only the newspaper/broadcast cross-ownership rule has remained completely unchanged over the past three decades, with only four permanent waivers 

of the rule granted by the FCC over the last 28 years. All of the Commission’s other 

restrictions on broadcast ownership have been either eliminated or significantly relaxed over the years. Aside from these four situations and the newspaper/broadcast 

31 

combinations that were ‘‘grandfathered’’ when the rule was originally adopted, 

newspaper publishers—alone among local media outlets—have been completely 

barred from participating in the broadcast markets of their local communities. 

This inaction on the part of the Commission is not for a lack of evidence. To the 

contrary, over the past few years, the agency has accumulated a mountain of evidence supporting the repeal of the newspaper/broadcast cross-ownership ban. Recognizing the need to review the cross-ownership restriction in light of the explosive 

growth among media outlets that has occurred in the years since the ban was first 

adopted, the FCC has initiated no fewer than four proceedings over the past 7 years 

to reconsider the ban. In a scaled-back version of the promise it made to the Court 

of Appeals to review the rule in its entirety during its consideration of the ABC/ 

Cap Cities merger, the FCC in 1996 launched an inquiry regarding its waiver policy 

for newspaper/radio combinations. Two years later, the Commission sought public 

comment on the rule as well as other media ownership regulations in its first biennial review proceeding. In 2001, the agency again gathered evidence by initiating 

a broad notice and comment rulemaking proceeding specifically on newspaper/broadcast cross-ownership. Just over a year later, that rulemaking proceeding was rolled 

into the FCC’s current omnibus proceeding on media ownership, giving interested 

parties a third opportunity in 4 years to submit evidence on the rule. Each of these 

proceedings has produced a wealth of record evidence regarding the extensive public 

interest benefits—as well as the lack of public interest harms—that would result 

from repealing the ban. There is no substantial evidence or data in the record supporting the ban. 

In particular, the evidence concerning the operations of the 40 or so grandfathered 

newspaper/broadcast combinations has essentially taken the guesswork out of eliminating the ban. These combinations have provided the Commission with illustrative 

case studies of the substantial public interest benefits that will result from repeal. 

Indeed, the extensive record before the FCC is replete with evidence of the clear 

public interest benefits offered by newspaper-affiliated broadcast stations. Representing the full gamut of market sizes, these co-owned facilities consistently have 

provided their home communities with unmatched levels of service. 

At the same time, there is simply no evidence that the existing combinations have 

threatened competition in their local markets. To the contrary, there is substantial 

record evidence before the FCC showing that even the smallest markets containing 

newspaper/broadcast combinations remain vibrantly diverse and competitive. The 

evidence offered by existing combinations further shows that co-owned outlets generally present diverse perspectives on news and informational issues. Jointly-owned 

newspapers and broadcast stations have strong economic and professional incentives 

to, and do in practice, avoid coordinating their viewpoints. It is important to note 

that, especially with newspaper ownership of broadcast stations, viewpoint diversity 

does not require ownership diversity. Local autonomy and editorial freedom is the 

tradition of newspapers, and the same principles apply to the operation of local stations by newspapers. 

The evidence presented by newspaper publishers and other parties has been confirmed by several recent studies on newspaper/broadcast cross-ownership. A study 

commissioned by the FCC in connection with its omnibus media ownership proceeding specifically found that ‘‘[a]ffiliates co-owned with newspapers experience noticeably greater success under our measures of quality and quantity of local news 

programming than other network affiliates.’’ That conclusion was true even where 

the newspaper and TV station were located in different markets, and the results 

were even greater for combinations in the same markets. The results of a five-year 

study recently released by the Project for Excellence in Journalism at Columbia 

University echoes these findings. That study concluded that ‘‘stations in cross-ownership situations were more than twice as likely to receive an ‘A’ grade than were 

other stations’’ and that, on the whole, these stations ‘‘were more likely to do stories 

that focused on important community issues, more likely to provide a wide mix of 

opinions, and less likely to do celebrity human-interest features.’’ In addition, dispelling any concern that newspaper/broadcast combinations will simply represent single, monolithic viewpoints, the FCC-commissioned studies also confirmed the extensive evidence already on the record that existing newspaper/broadcast combinations 

do not demonstrate a pattern of coordinating viewpoints on important political 

issues. 

Those who oppose relaxation of the antiquated newspaper/broadcast cross-ownership rule usually predict that mass, national consolidation of the newspaper and 

broadcast industries will happen if the rule is changed. I believe those predictions 

are unfounded. Instead, relaxation of the rules will result in dramatically improved 

information flow in each local market—market by market. 

Let me give you some examples close to home in my newspaper markets. 

32 

Fairbanks, Alaska, is perhaps the most remote, isolated community in America. 

There are four commercial television stations in the market. All struggle financially. One station covers news with a staff of eight, another has six, the third 

has two and the fourth has no local news gathering capacity. My newspaper employs 31 in the news department. Under today’s rules, my newspaper thrives 

with an award-winning news presentation, while the television stations struggle 

to broadcast even a small amount of local news. There are no commercial news 

radio stations. In central and northern Alaska, many communities cannot get 

my newspaper delivered, but they can get television. Imagine how their lives 

could be improved if I could put my 31 newsroom personnel behind television 

coverage. 

In Eureka, California, in another remote section of the country on the North 

Coast of California, there are four commercial television stations. The strongest 

station has a news staff of 11, and the other three don’t produce substantive 

local news. My newspaper devotes 23 people to local news coverage. Imagine the 

community service we could provide by putting these news resources behind television and radio news, especially if we purchase a station that produces no 

news today. 

I own a newspaper in Pittsfield, Massachusetts, which covers the western quadrant of Massachusetts. There is no television station there and never has been. 

But there is a license allocated to the market. But with 51 newsroom employees 

at my newspaper, I could serve this community with television news for the 

first time ever. The current restraints, however, do not allow that to happen. 

And let me talk about a larger market . . . Denver, Colorado. There are at least 

three radio stations that call themselves news stations, but they’re really not 

news stations at all. They are talk stations. The largest two have news-gathering staffs of about six, and the other has five. Not much news-gathering resources. But the two newspapers managed by the Denver Newspaper Agency 

have combined news resources of almost 500. Imagine the public service we 

could provide by putting our news assets behind a real, full-time news station. 

There are similar stories to be told in almost every American market. Newspapers 

will add new resources to struggling television and radio enterprises, and those 

broadcast outlets will strengthen newspapers as the number of media choices continue to explode in a changing media environment. 

The fact is that the communications world—and the media alternatives available 

to our citizens—has undergone a vast transformation since the newspaper/broadcast 

cross-ownership ban was adopted over a quarter of a century ago. Back in 1975, the 

FCC was concerned that daily newspapers might dominate the still-fledging television broadcast industry. Whatever merits that concern may have had nearly three 

decades ago, it simply has no place in today’s media environment. For example, 

there are now 70 percent more radio outlets and 50 percent more television stations 

than there were in the 1970s. Now omnipresent cable and satellite television services were still in their infancy in 1975, and the Internet—with its vast potential for 

delivering news and information—was non-existent when the newspaper/broadcast 

rule was adopted. Traditional media thus have been bombarded with a host of new, 

multi-media rivals in recent years. 

In this vastly diverse, competitive, and ever-growing environment, the ban on 

cross-ownership of daily newspapers and broadcast outlets plainly is not needed. 

Quite to the contrary, the extensive record before the agency demonstrates beyond 

question that the prohibition frustrates the achievement of significant and vitally 

needed operating efficiencies and, most importantly, deprives the public of enhanced 

local news and other new and innovative informational services. 

Based on that record evidence, the FCC is required by the terms of Congress’ Biennial Review mandate to eliminate the archaic and wholly unnecessary cross-ownership prohibition. 

Thank you. I would be pleased to attempt to answer your questions. 

The CHAIRMAN. Well, thank you, Mr. Singleton, and thank all 

the witnesses already. It has been very interesting. 

Mr. Singleton, in your testimony you state that local autonomy 

and editorial freedom is the tradition of newspapers and the same 

principles apply to the operation of local stations by newspapers. 

Mr. Kimmelman, however, provides an example where this is not 

the case. ‘‘One thing that has not changed over time,’’ he says, ‘‘is 

that owners have a bias. For example, of all the newspapers that 

33 

have editorialized on the issue of whether the Government should 

give digital spectrum to the broadcasters during the debate in the 

1996 Telecommunications Act, every newspaper that did not have 

an ownership stake in a broadcast property editorialized against 

giving away the spectrum for free, and every newspaper that did 

have such an ownership stake editorialized in favor of the spectrum giveaway.’’ Not a small issue either, Mr. Singleton. About $70 

billion worth of an issue. One of the great giveaways in American 

history. Do you think that is an anomaly, or do you think that Mr. 

Kimmelman has a point? 

Mr. SINGLETON. Well, I cannot speak for other newspaper owners. I can speak for my newspapers. All of our editorial—comments 

on our editorial pages are made by an independent editorial board 

of people who live in the local community and vote their own beliefs on that editorial board. I, as the owner, do not participate in 

their editorial decisions. 

The CHAIRMAN. Well, then, in all due respect, your comments, 

‘‘local autonomy and editorial freedom is a tradition of newspapers, 

and the same principles apply to the operation of local stations by 

newspapers,’’ applies only to your newspaper. 

Mr. SINGLETON. No, I think that is true of most newspaper companies. 

The CHAIRMAN. That is why I go back to my previous question. 

If you are talking about your newspaper, if you are here to testify 

about your newspaper, fine. But if you are here to testify as a witness on the larger issue, then it seems to me you could address this 

issue, that every newspaper that was owned by a broadcaster editorialized in favor of a $70 billion giveaway, every newspaper that 

was not associated editorialized the other way. Do you think that 

is an anomaly? 

Mr. SINGLETON. I do. It is my experience that most newspaper 

companies leave editorial comment to their local editorial boards. 

The CHAIRMAN. So it was a coincidence. 

Mr. Blethen, we have examples of newspapers and television stations cross-ownership, right? And we have them, in the case of New 

York, New York Post and WWR and WNYW, the Tribune, and the 

Los Angeles Times, and KTLA Tribune, Chicago Tribune, and WG 

and Cox Atlanta Journal, Constitution, and WSV, Gannett, Arizona 

Republic, and KPNX, et cetera. Have you seen any stifling of localism, diversity, or in competition as a result of these major—and 

there are many others, but these are major markets in America? 

Mr. BLETHEN. Well, absolutely, and I would take issue with my 

friend, Dean Singleton, that I think ownership does matter. And if 

you have Wall-Street-controlled ownership, ultimately there is a 

chill over what you comment on and what you do not. To my 

knowledge, there has been only one conglomerate newspaper that 

has editorialized against a repeal of the cross-ownership rule, and 

that is by the Philadelphia Inquirer, who is owned by a newspaper 

company that is public but is pure newspaper. I think if you look 

at what all the other chain and conglomerate newspaper editorials 

have said, you would find the same result you did in spectrum, 

that, uniformly, they have been editorializing for cross-ownership 

repeal—— 

The CHAIRMAN. But have you seen—— 

34 

Mr. BLETHEN.—and relaxing any of the rules. 

The CHAIRMAN.—any examples of a lack or reduction in localism, 

diversity, and competition as a result of this cross-ownership? 

Mr. BLETHEN. Absolutely. I think any city you go to where you 

have this cross-ownership, you have reduced voices. Our industry, 

the newspaper industry, has gone through some of the most massive disinvestment and layoff in the last half-dozen years that it 

has ever experienced. Chain-owned newspapers are smaller, there 

is less original news. And what they talk about is not synergism 

anymore, but how they are going to reduce expenses by doing 

cross-ownership. 

The CHAIRMAN. Mr. Goodmon, a Chicago Tribune article dated 

August 14, 2002, discusses local Fox affiliates’ discontent with the 

network’s airing of an episode of action show 24, commercial free. 

The affiliates wished to preempt the program; however Fox Networks Group president and CEO stated in the article, quote, ‘‘Any 

station that does that is in violation of their contract and is in danger of losing their affiliation.’’ Have any of the national broadcast 

networks ever threatened to pull your or other affiliation due to 

your decision to preempt network programming? 

Mr. GOODMON. Let me buildup to that. In our Fox agreement, 

there is what is called the ‘‘three-strikes rule.’’ And that is if you 

preempt the network and they do not approve it, after the third 

time you do that they have the right to pull your affiliation agreement. 

Now, the preemption that we did for ‘‘Marry a Millionaire,’’ 

‘‘Temptation Island,’’ and ‘‘Married by America,’’ it took us a little 

while, but we made those preemptions under our community-standards part of the contract. Now, in getting through that, it took Fox 

a little while to get to that. I mean, there was some suggestion, and 

one of the station reps suggested to us if we did not like their programming, why did we not sell the station to them? My notion 

about that is, ‘‘I didn’t say I didn’t like Fox or didn’t want to be 

a Fox affiliate. I’m trying to decide what programming I think 

should be in our market.’’ 

But there is, clearly in the contract, if you have three preemptions that they do not approve that are not community standards— 

oh, there was one case where we had the chance to get the DukeMaryland game. They were number one and number two in America. And Fox said, no, it will be the third strike, because they did 

not want us to preempt their—that would be, sort of, what I would 

call a ‘‘business preemption.’’ 

So I would not say that we have been threatened. I would say 

it is in the agreement. I mean, it is part of the network agreement. 

If I may add one thing, Senator, we have, in Raleigh, a newssharing agreement with the local paper. We are just getting into 

this. They use our weather. We have their reporter on our 11 

o’clock news. My point is, there are a lot of news-sharing agreements that can come about without joint ownership. 

The CHAIRMAN. Mr. Karmazin, you should have the ability to respond. Go ahead. 

Mr. KARMAZIN. First of all, the idea of a fixed number of stations. 

We own 35. There are 1,100 commercial television stations. So 

35 

what we are talking about is approximately 3.5 percent of this 

fixed number of stations. 

I do not have a horse in the race on newspapers, that we have 

no plans that if the broadcast/newspaper—— 

The CHAIRMAN. Mr. Goodmon raised the point that five companies control 60 percent of news and entertainment programming. 

Mr. KARMAZIN. Yes, I have no idea where that statistic came 

from. I certainly know that there are unlimited number of choices 

out there. It sounds to me like not a real number. It depends upon 

how you count things. But I think that there is just—if you include 

the Internet—the last time I testified, there wasn’t even here a Fox 

news network. You know, when I started coming here there was 

CNN. There are far more choices. For the first time this year, the 

cable audiences have exceeded the broadcast audiences. 

The other thing that I agree on is that television stations are 

very profitable businesses. So the idea of when Mr. Goodmon says 

that it is a very good business, it is. The idea of a broadcast network is a less-good business. We are not crying poverty, we are not 

asking for a collection. What we are saying is that if there is an 

interest—if there is an interest—to keep the NFL on free, over-theair broadcast television, because we have seen that there is now a 

Sunday-night package that is on cable, how long before we see another package when the broadcasters are not going to pay for the 

NFL? We have seen the NBA migrating more to a cable model. 

You know, companies like ours that are involved in a bunch of 

different businesses, we have a choice as to where we allocate resources. We are very committed to this free market. We believe in 

localism. Our general managers are in the market. It is no different than these newspaper companies that own television stations. They are not sitting all in their local market. They have got 

the same local managers that we have sitting in our local managers. 

If you are going to be a good television station, you are going to 

do all the things that Mr. Goodmon says. You are going to serve 

your community, you are going to serve your advertisers, you are 

going to serve the public interest. Localism is all about that. 

We have stations—our affiliate in New York, which is an owned 

and operated station, Channel 2, preempts the network to run the 

Yankees. They preempt our network to run the Yankees. Someone 

has got to pay for the people we are sending into Iraq to cover the 

news. Somebody has got to pay for the NCAA tournament, because 

the affiliates are not paying. The network is paying and giving it 

to them. 

And, by the way, including our good affiliate here, we are paying 

them. So the fact that Fox might expect them to run their programming is, in part, because Fox is also paying them to do that in the 

form of comp. 

The CHAIRMAN. Senator Dorgan? 

Senator DORGAN. Mr. Karmazin, you are very good. I followed, 

almost for the last year, all of the discussions about the leadership 

issues in your corporation and the stakes that were involved for 

your continued leadership, and I understand why. You are very 

good. 

36 

You, in response to the chart I put up, seemed to suggest, ‘‘You 

know, gosh, we are just kind of a mom-and-pop operation, and 

mom ain’t doing so well, and there are so many voices and there’s 

so much opportunity out there that—do not worry about concentration.’’ And yet 90 percent of the top–50 cable channels are owned 

by the top four television and cable networks. You know what has 

happened with respect to both radio and television concentration. 

And you talked just a moment ago about free market and localism. 

And it seems to me that concentration and the words ‘‘free market’’ 

and ‘‘localism’’ travel in opposite directions, inevitably. Is there a 

point at which you think that there are appropriate limits to be 

placed on ownership with respect to broadcast stations? If so, what 

is that? 

Mr. KARMAZIN. Well, let me give you an example, Senator. We 

own, in New York City, a TV station, Channel 2, which has its own 

independent local news operation. We also own CBS network. And, 

by the way, I love all this stuff about publicly traded companies. 

I believe the assumption is that as a publicly traded company, I am 

calling Mike Wallace and I am calling Don Hewitt, and I am telling 

them what companies to do stories on on 60 Minutes. Anyone who 

has ever watched 60 Minutes or got that famous phone call from 

Mike Wallace, OK, will know that that is not the case. There is as 

much news integrity at publicly traded companies as anywhere 

else. 

I believe, in the area where we are dealing with today, I believe 

there are antitrust laws, I think that there is a role for Government. All that has happened is—— 

Senator DORGAN. Do you think there should be limits? 

Mr. KARMAZIN. Ithink that there should be limits when those 

limits are justified for good reason. 

Senator DORGAN. Can you—— 

Mr. KARMAZIN. So, absolutely. 

Senator DORGAN.—tell us when they are justified? 

Mr. KARMAZIN. I am sorry? 

Senator DORGAN. Can you tell us when they are justified? 

Mr. KARMAZIN. They are justified when one company has six 

radio stations out of six in that market. But it is not justified when 

one company can only have eight out of 100 in New York. That is 

not justified, and I believe the courts will see our side of that argument more than the argument, if that rule stayed, that says that. 

There is also—the courts have said there is no argument for the 

35 percent cap. So that is why we are here. So if there is an argument—— 

Senator DORGAN. Well—— 

Mr. KARMAZIN.—make it—— 

Senator DORGAN. Yes. Let me just say, on the 35 percent cap, 

you know, in 1996, when we had the bill on the floor of the Senate, 

I am the one that offered the amendment that would have struck 

the cap and reverted back to the 25 percent. And I actually won 

that vote about 4:30 in the afternoon. And I thought, this is a pretty big deal, winning a vote on the floor of the Senate. And then dinner intervened, and several Senators had an epiphany over dinner, 

and we came back and had a re-vote and I lost. So I won—— 

Mr. KARMAZIN. Senator—— 

37 

Senator DORGAN.—for about 4 hours. 

Mr. KARMAZIN.—if, in fact, it went the way it was supposed to, 

had you had a drink after dinner we would have the cap totally 

eliminated. 

Senator DORGAN. Yes, we do not drink up here. 

Mr. KARMAZIN. OK. 

[Laughter.] 

Senator DORGAN. You are thinking of New York. We do not drink 

here. 

[Laughter.] 

Senator DORGAN. But let me ask Mr. Goodmon—Mr. Goodmon, 

this issue that Mr. Karmazin discusses, we are just bit players in 

New York. It is a giant market. We are just bit players. And, therefore, using that extrapolation, let us relax the ownership rules. 

How do you respond to that? He has made that point twice. 

Mr. GOODMON. Right, I would have the—I actually got these 

from Fox—of the top 200 channels in New York, program channels, 

189 of them are broadcast channels. I mean, broadcast is clearly 

the dominant media. When Bush did one of his speeches about the 

war, the broadcast networks had 50 million viewers, and all the 

cable networks put together had ten or eleven. I mean, the horsepower is with the broadcast stations. 

And Mr. Karmazin wants to talk about 1,300 and put a number 

to that. You have got to see where the stations are. You know, 5 

percent of the country is in New York. I mean, the way we do this 

is what percentage of the total country do you cover in people, not 

in numbers of markets. 

And I do want to say this about the court. My reading, which is 

just my reading, is the court said, ‘‘Look, this 35 percent rule, you 

guys did not give us a reason.’’ They did not say, ‘‘You have got a 

bad reason.’’ They said, ‘‘You have to give us a reason.’’ And they 

further said, and they double-negatived, it was really hard to understand, ‘‘We do not think that you cannot establish a cap and 

make it stick.’’ I mean, the court believes that there should be a 

cap, and they believe that the Commission should establish it, and 

they want the Commission to defend it. They never said, ‘‘You cannot have a cap.’’ I mean, that is—— 

Senator DORGAN. All right. 

Mr. Karmazin, in order to retain some shred of credibility, I had 

better amend my statement when I said there is no drinking in 

Washington. Clearly I must have been jesting. 

[Laughter.] 

Senator DORGAN. But let me ask Mr. Blethen, on this issue of 

concentration, you heard the comments about localism and competition and diversity. I thought your statement and Mr. 

Goodmon’s statement were particularly effective dealing with these 

issues. 

What do you think will happen if the FCC takes full measure of 

its opportunity and does a kind of a ‘‘Katie, bar the door’’ ruling 

here and we substantially relax the limits and move ahead? What 

is the future look like to you in that circumstance? 

Mr. BLETHEN. Well, you know, one hates to be accused of being 

overly dramatic, but I think we see the beginning and the end of 

our democracy. All you have to do is look at the decrease in a variVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000041 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
38 

ety of voices, an investment in news and editorial, and the increase 

in concentration in the last 20 years and project that forward another 10 to 20 years, we have got no watchdog, we have got no free 

press left. 

For the last 2 years, most of the trade media, at least the newspaper trade media, has been speculating on all of the rumored 

deals that the large companies have been talking about. They have 

been planning deals to start swapping newspapers and TV stations 

and start having big chains take over small chains. They have been 

planning this for 2 years. They have been buying cross-ownerships 

in places like Phoenix and L.A. in anticipation of the rule being repealed, they are so sure it is going to be repealed. 

It is going to be a sad day for America if this happens. 

Mr. SINGLETON. Senator, may I comment on that? 

Senator DORGAN. Yes. 

Mr. SINGLETON. Frank, who is a dear friend of mine, likes to 

make it look like the world is going to come to an end because 

groups own newspapers. In fact, he is a group who owns many 

newspapers himself, and the reason he is in Maine and I am not 

is he bid more money to buy the newspaper than I did. 

But there is not a big concentration in the newspaper industry. 

There are 13 public companies that own newspapers in America, 

and they account for 22 percent of the daily newspapers published 

in the country, which means there are 78 percent of the daily 

newspapers published in America that are owned by independent 

privately owned family companies, like mine. And this woe that is 

going to happen because of some relaxation of the rules belies the 

fact that 78 percent of the daily newspapers in the country are 

owned by independents, like us and like Frank’s family. 

Mr. BLETHEN. I could respond, but I do not think that is what 

you want me to do. 

Senator DORGAN. Mr. Chairman, I think I am out of time, but 

if I could ask just one additional question of Mr. Goodmon, and ask 

for a very short answer. 

Mr. Goodmon, I asked, when I began my opening statement, I 

rhetorically asked about the meeting that I referred to with Chairman Powell, in which news reports had you quoted as saying, 

‘‘Let’s Make a Deal,’’ atmosphere. Can you amplify on that and 

what you know or what you think you know happened at these 

meetings? 

Mr. GOODMON. Well, as you know, we have—it is not just the cap 

which I am talking about; it is newspapers duopolies, there are several proceedings in here. 

Senator DORGAN. That is correct. 

Mr. GOODMON. And what it looks like, what it has been looking 

like for some time, is the idea is, you know, I will support—you 

know, if you want me to do the ownership, then you have got to 

support the newspapers, or I will do the duopolies—I mean, there 

is sort of a very bad way—each one of these things needs to be separate—so they looked to be like there was some trading. I did not 

say anything about that until a letter was released by Belo suggesting that they would change their position on the cap—they 

would have been against the cap for 100 years—in return for the 

Commission acting—those are his words—in return for the ComVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000042 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
39 

mission acting favorably on the NASA petition, which is not even 

part of the ownership. 

Senator DORGAN. Right. 

Mr. GOODMON. So then I had something to bring this up and say, 

‘‘Do we really want to do these ownership rules, you know, with 

newspaper duopolies and everybody sort of trading around?’’ And 

I think there has been some maneuvering in order to get the votes. 

Senator DORGAN. Mr. Chairman, you have put together a really 

excellent panel. I think this panel, more than most any I have 

seen, shows the contrast in views on these issues. Thank you for 

bringing the panel to us. 

The CHAIRMAN. Thank you. Senator Burns? 

Senator BURNS. Thank you very much, Mr. Chairman. 

Mr. Goodmon, I have more than a passing interest in Raleigh—— 

Mr. GOODMON. Yes, sir. 

Senator BURNS.—North Carolina. 

Mr. GOODMON. Yes, sir. 

Senator BURNS. And you know what that connection is. 

Mr. GOODMON. Yes, sir. He told me to tell you hello. 

[Laughter.] 

Senator BURNS. But I am interested in these preemptions. 

Mr. GOODMON. Right. 

Senator BURNS. Even though it may be in the contract that you 

have with your network, if you view something that clearly that 

your community does not want and finds it runs counter-culture to 

their community. Do you mean to tell me that Fox, that is a onetime—if you exempt them, that is a strike one? 

Mr. GOODMON. No. If we invoke the community-standards 

clause—that has been done very seldom—then it is not a strike. A 

strike is if we decide to run a basketball game instead of the network or we decide to preempt for some business or programming 

reason. That is a strike. A community-standards is not a strike 

and—now we had to work on that, but I think the network now understands that point of view. 

Senator BURNS. Well, that sort of concerns me. And does Viacom, 

with their affiliates, do they have the same kind of a contract, Mr. 

Karmazin, as—with their non-owned stations, with their O&Os— 

not with their O&Os? 

Mr. KARMAZIN. I understand the question. What we negotiate 

when we negotiate an affiliation agreement includes an amount of 

preemptions. So in Mr. Goodmon’s contract with CBS, he has an 

amount of opportunity to preempt for whatever reasons he chooses 

to preempt our network. OK? We like it as little as possible, because we need to have Raleigh covered in our market. But there 

is a negotiation by the broadcaster and our affiliate-relations department on the amount of preemptions one can do, because you 

cannot have a network unless you have an affiliate system. So if 

the affiliates are not going to run it, you are not going to have a 

network. 

So I will also tell you that this whole right-to-reject argument is 

so bogus as it applies to us—I cannot tell about Fox, and I doubt 

it is an issue with Fox—is that the existing preemption level that 

exists in the contracts today have not been approached. The affiliVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000043 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
40 

ates have the right, but do not, of preempt. Those facts are available, they are quantifiable, and we have them. 

Senator BURNS. Now, you say you own 35 stations in Viacom, 

and now is there a difference between the preemption rates with 

the O&Os and the independents? 

Mr. KARMAZIN. They are both negligible. My guess would be that 

the CBS owned-and-operated stations would be more inclined to 

deal with the programs. We do not take our programming recommendations from our affiliates. That would be chaotic, because 

there would be no way to have 212 people in the room in deciding 

what programs go on the air. But the CBS owned-and-operated stations are in the room. So when the decision is made to air programming and what programming is appropriate, the person who runs 

our owned-and-operated stations would participate in that decision 

and more inclined—— 

And, by the way, if you go down the list of who is preempting, 

the other networks—so let us forget the fact that there would be 

nothing anybody would ever want to preempt on CBS, but let us 

assume the other networks. The amount of preemptions are de 

minimus. It is a non-issue. 

Senator BURNS. OK, now, we learned from this business of concentration, and my good friend from North Dakota, we have suffered in our States from concentration, and we understand what it 

does and what it is going to do to the industry that is number one 

in each one of our States. We are seeing three packers kill 85 percent of the fat cattle in this country. Now, I know we are not in 

an Ag Committee meeting here, and maybe most of you do not 

know much about that, but some of you do, or some have got a 

grain or two. We know that—and also in our market for our grains. 

We see this happening, because there is—and from the testimony 

that was offered to this committee in the hearing that the Chairman on radio concentration, we heard about outdoor advertising, 

we heard about venues, we heard about a lot of—for entertainment—the control; other words, the horizontal and vertical integration that happens. 

Because basically, folks, market power, we are talking about advertising dollars. Now, we might want to talk about this great 

thing about diversity and news and is it balanced and are they 

going to endorse me or the other guy or this idea or are they limiting voices. Basically, we are talking about advertising dollars, because that is what drives our industry. That is what keeps us on 

the air. That is what keeps our printing presses running. But 

whenever you get the integration thing going, then that is market 

power, and then it is very difficult for a little independent in Bismarck, North Dakota, to go against a big conglomerate that comes 

in and owns maybe seven stations out of the eight, because that 

is pretty tough. 

So I think what we are talking about here is we have to be very 

careful on the impact of especially vertical integration, because of 

the market power it gives in a local market, even though they may 

be managed from Wall Street. And that is what we have to worry 

about more than anything else, especially in rural areas, and that 

is why we are concerned about this, and we will continue to monitor that. 

41 

And I thank the Chairman. 

The CHAIRMAN. Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. 

Mr. Karmazin, let me tell you what happened in Eugene, Oregon, 

so we walk through sort of a specific case. 

The community very much wants a 10 p.m. news broadcast, and 

the network said, ‘‘No, we are not going to do it. It is going to get 

in the way of national programming.’’ The network sent to the local 

affiliate a letter saying, and I will quote here, what their interest 

was, was ‘‘to have a consistent national pattern of distribution.’’ 

Those were their words from the network to the local affiliate talking about a newscast at 10 p.m. in the evening. Are you telling me 

that kind of thing is rare, that we do not see much of that? Because 

I think, to my colleagues, what you said was, ‘‘Hey, this business 

about, you know, preempting, you know, local coverage hardly ever 

happens.’’ Well, that is not what the network affiliates, the local 

people, tell me in Oregon. And this is a specific, concrete case of 

something that is important to the community, news. 

Mr. KARMAZIN. OK, so I cannot speak for Eugene, Oregon. But 

let us assume that in America there is nobody requiring the owner 

of that station to be a network affiliate, that if that station thinks 

that they can serve that community better by doing a 10 o’clock 

news and a 9 o’clock news and an 8 o’clock news, they do not have 

to carry the network. So I do not think it is quite that simple that 

there is the issue that—in Eugene, Oregon. 

On the other hand, there is still the ability of the people in Eugene, Oregon, to decide if, in fact, they want a 10 o’clock news. I 

do not know. I am, unfortunately, a little naive about the number 

of TV stations that are licensed or available in Eugene, Oregon. If 

you gave me some help—— 

Senator WYDEN. Mr. Karmazin, you are saying that this particular station could have exercised their constitutional right to go 

broke. I understand that. 

Mr. KARMAZIN. I do not believe that that is the—— 

Senator WYDEN. I understand that. They wanted some news, and 

I do not think it is rare. 

Mr. KARMAZIN. If you are saying that it is the networks that are 

making these stations rich so that they do not go broke, that is 

part of the reason that—what we are saying; it is the network, OK, 

that is bearing the cost so that the stations do not have the costs. 

So, yes, you are getting right to my point, which is the fact that 

being an affiliate—when I die and come back, I want to come back 

as an affiliate. 

[Laughter.] 

Senator WYDEN. All right. 

Mr. Blethen, when the companies talk about efficiencies and 

economies of scale as justification for consolidation, I think we need 

to look at what that really means in practice. There was an article 

in the Columbia Journalism Review that recently noted that when 

TV stations in the same market combine, and I will quote here, ‘‘it 

often means combining news staffs and resources, reducing the 

richness of the community’s news diet.’’ What is your sense? Is that 

as prevalent as this particular journalism review seems to suggest? 

42 

Mr. BLETHEN. Well, even the people advocating cross-ownership 

repeal no longer talk very much about convergence or synergism, 

which they used to, because it has been proven not to be there. 

When you look at newspapers and you look at TV, you are talking about two very different kinds of enterprises, and there have 

been these attempts to try to turn reporters and editors into technicians, carrying cameras and carrying microphones, and they have 

not worked. They have distracted from the journalism that they 

did, and they have not worked in terms of enhancing anything. 

And even the people advocating this will now admit that there are 

really two things they can—three things—they are able to cut 

costs, because they can cut the news and public-service presentations because they no longer have a competitor; they gain market 

power and eliminate a competitor; and they can raise rates. 

Senator WYDEN. All right. One last question for you, Mr. 

Karmazin, with respect to this question of conflicts of interest, because I think, as much as anything, what I am concerned about is 

the prospect that it is going to be harder for people to blow the 

whistle. I looked, for example, I mentioned in my opening statement the question of reporters, for example, being willing to dig 

into accounting irregularities at a parent corporation. And you all 

now own 15 broadcast stations and—excuse me, in 1996 you owned 

15 broadcast stations; today, you are at 35. In 1996, you owned one 

cable station; today, you own 25. You own Paramount, UPN Network, Simon & Schuster. The subsidiary, Infinity Broadcasting, 

owns 180 stations, not to mention the Internet interests, CBS.com, 

PBD.com, MTV.com, CBSSportsline.com, and you have got the 50 

percent interest in Comedy Central. 

Now, I think you have made the argument with respect to the 

fact that you do not call people up and say, ‘‘Hey, you know, bag 

that story.’’ I understand that, and nobody thinks that kind of 

thing goes on. But are not you a little bit troubled about the potential for conflicts of interest that are going to make it a little less 

likely for people, in areas such as the question of accounting fraud, 

to be willing to spend the time knowing that it is going to be hard 

to justify to somebody at the top, at the parent? 

Mr. KARMAZIN. Not the least. And I will point to Fortune Magazine, which is owned by AOL/Time Warner. And if you ever wanted 

to take a look at a magazine who was critical of a merger, it is Fortune Magazine being critical of its own parent company. So, no, I 

have seen countless examples of where that does not work. 

And thank you for the commercial on our assets, but I would go 

back to our revenues. So all of those things you have added together come to $12–1/2 billion in advertising out of $300 billion. 

What percentage do you feel is so concentrated? Because we are 

certainly nowhere there. 

Senator WYDEN. My time is just about up, and I guess I am not 

willing today to pluck a percentage out of the air, but I do think 

that the policies that we have today, which have put basically a 

tremendous number of eggs in the basket of five powerful interests, 

is producing the kind of thing we are seeing right now in Eugene, 

Oregon, which you have basically said, ‘‘Hey, look, if you want a 

newscast, then, you know, so be it, and I guess you are going to 

go broke in the process.’’ I think the country deserves better, and 

43 

I think it is possible for people to make money and to be profitable, 

at the same time be sensitive to local interests. And my concern is 

we are draining the lifeblood out of what a lot of communities in 

this country want, particularly in my home State, which is 3,000 

miles from a lot of these major markets, and that is why you are 

hearing a bipartisan point. 

Senator DORGAN. Would the Senator yield for just a quick point? 

Senator WYDEN. Of course. 

Senator DORGAN. Mr. Karmazin’s response to you, that if that 

station in Eugene, Oregon, says, ‘‘No, we are going to do this newscast,’’ that they would yank the CBS affiliate status, I mean, that 

is exactly the opposite of localism, is it not? I mean, localism would 

be giving people at home the opportunity to make local decisions. 

But saying, ‘‘You go ahead and make your local decision. We will 

yank your affiliation with CBS,’’ is that not exactly moving in the 

opposite direction? 

Mr. KARMAZIN. No, I totally disagree. That is not it at all. The 

idea is that—and, by the way, I have lived in this country longer 

than you, because I am older, so I believe in the same rights of the 

people in this country as you do. What I am saying about a network is when a station—usually the network relationship has a 

term, there is a term, and two people sit down and they decide, ‘‘Do 

you want to be a network affiliate, or don’t you?’’ And if, in fact, 

you do, then you are expected to run the network. It means if 

something local happens, you want to preempt it, you get a certain 

amount of preemptions you are entitled to, but if you decide that 

instead of watching 60 Minutes, instead of watching—a local affiliate says, ‘‘You know what? I do not want it to air 60 Minutes because it is too controversial, you know, to my community or something.’’ If that is the reason, so be it. But if what they are saying 

is they can make more money by preempting 60 Minutes and running an info-commercial or they can make more money running 

something else, that is not what makes a network exist. You have 

to have a national coverage. You cannot not have Eugene, Oregon. 

So if we cannot clear our program in Eugene, Oregon, then the advertisers in that program, the performer in that program—so let us 

assume it was one of our lower rated shows, one of our news magazines. Our feeling is the people in Eugene, Oregon, have a right to 

see that news magazine, so we will have to go to another station 

to find somebody willing to carry that program. It is not like we 

want to deprive it from Eugene, Oregon. 

Senator WYDEN. Mr. Chairman, my time is up. I just want to acknowledge that I think there will be tensions between the desire 

for national coverage and localism. But what has happened is all 

the trends now are against localism, and that is why we have got 

a significant community in my state without a 10 o’clock newscast. 

And that is the bottom line. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Mr. Goodmon, you were eager to comment. 

Mr. GOODMON. Yes, sir. 

You know, I want to point out that there is not anything in localism or diversity or competition that has to do with percentage of 

advertising. We keep talking about these business terms. What we 

are talking about is voices. We are talking about control. 

44 

But, now, there is an obvious conflict between the affiliate and 

the network. I mean, it goes on at—CBS pays me because of the 

situation I am in. Because I am in another situation, I have to pay 

Fox. I mean, everything—there are all these different situations. 

Now, if, if, you allow the networks to own the local affiliates, 

then there is no balance. We do not have a chance. There will be 

no negotiation. Mr. Karmazin buys a station in Raleigh, he can 

own more stations. I am not a CBS affiliate anymore. I mean, there 

is a—we have got this very important national network programming, and we have got this very important local programming, and 

we have a great system. And the deal is to keep it in balance. And 

what I am afraid is going to happen is we are going to get out of 

balance. The affiliates need to have some—I will point out this— 

when the rule changed from 25 to 35, since that happened, preemptions have gone way down. I mean, we are scared. We are scared. 

The balance is in favor of the network, and getting more so that 

way. And as they own more stations, it is more in their favor. 

Now, I think that this is—it is not one or the other. We need the 

networks. We need the local stations. So where is the balance? And 

I am suggesting that if you let the networks own more and more 

stations, then those stations are going to be programmed nationally. They are going to make the decision nationally as to what is 

on that station. And the local operators will not get an affiliation. 

We just need a balance here. And my suggestion is we have got 

a pretty good one. 

The CHAIRMAN. Senator Sununu? I apologize. I had misplaced 

him in the order in the opening statements. 

Senator SUNUNU. And I am enraged. 

[Laughter.] 

Senator SUNUNU. And I want you to know that, Mr. Chairman. 

Well, Mr. Blethen, how many newspapers do you own? 

Mr. BLETHEN. We own six. 

Senator SUNUNU. Six? 

And, Mr. Singleton, how many do you own? 

Mr. SINGLETON. We own 50. 

Senator SUNUNU. Fifty. 

Mr. Blethen, how long have you been in the newspaper business? 

Mr. BLETHEN. My entire life. 

Senator SUNUNU. How many papers did you own, say, 30 years 

ago? 

Mr. BLETHEN. Two. 

Senator SUNUNU. Two. Now, you talked about the 1,700 newspapers, and now there are only 280 independents. How many of 

those 1,700 do the 280 own? 

Mr. BLETHEN. I am not sure I completely tracked the question, 

but I think what the answer is, is when you look at—— 

Senator SUNUNU. Well, let me be clear. You said there are 1,700 

newspaper voices deeply connected to the communities they serve. 

Mr. BLETHEN. Right. 

Senator SUNUNU. Today there are fewer than 280 left. Are you 

saying the 1,700 have gone down to 280 independents? 

Mr. BLETHEN. No, there are about 1,500 newspapers left in 

America, and about 280 of them are classified as independents. 

And the—— 

45 

Senator SUNUNU. Do you consider yourself an independent? 

Mr. BLETHEN. I consider us an independent. 

Senator SUNUNU. But you own six papers. 

Mr. BLETHEN. We own papers in two states where we have, in 

one state, 108-year family connection; and, in one state, a 300-year 

family connection. We have no intention of ever owning any newspapers outside of states that we deeply care about—— 

Senator SUNUNU. But my point is, obviously, that you are partly 

responsible for this consolidation, and you suggest that at the beginning of your career, when there were more of these papers, 

American democracy appeared secure because there were 1,700 

voices. Today, there are fewer than 280. Does that mean that, as 

a participant in this consolidation, you are a threat to democracy? 

Mr. BLETHEN. No, it is a great question, and you phrase it very 

well. The fact of the matter is, I have never taken objection with 

some level of size or scale in newspaper ownership. 

Senator SUNUNU. Is Mr. Singleton a threat to democracy? 

Mr. BLETHEN. Yes. 

[Laughter.] 

Mr. BLETHEN. What I object to is—— 

Senator SUNUNU. And I appreciate—— 

Mr. BLETHEN.—54 newspapers and—— 

Senator SUNUNU.—the candidness of your response, but I think 

it is an outrageous response. I think to suggest that a business 

owner that happens to own 50 newspapers, by virtue of his ownership of 50 newspapers, is somehow a threat to democracy, I think 

that is an outrageous statement. And I will certainly give you time 

to amplify it a little bit, but it is a strong charge, and I think it 

is an inappropriate charge. But, please, give your side of the story. 

Mr. BLETHEN. There are two things that matter, whether it is absentee ownership and whether it is Wall-Street-controlled ownership. And what we are seeing in the—— 

Senator SUNUNU. Which does Mr. Singleton represent? 

Mr. BLETHEN. He represents both. He is not a public company, 

but he has financed his newspaper chain through heavy debt, dealing extensively with bankers and Wall Street folks. 

Senator SUNUNU. Mr. Singleton—— 

Mr. BLETHEN. My—— 

Senator SUNUNU. Mr. Singleton, who did you—— 

The CHAIRMAN. Senator Sununu? 

Senator SUNUNU. —borrow your money from? 

The CHAIRMAN. Senator Sununu, please let the witness respond. 

Go ahead, Mr. Blethen. 

Mr. BLETHEN. In the America I talked about that—30 years ago, 

most ownership was connected to the city or the region. Today, that 

is not the case. And when your newsrooms are run by people who 

are absentee owners, in effect, who do not have any connection 

with the community that they are involved in, you get a different 

brand of commitment and a different brand of journalism. When 

you make the next step, and you go to publicly traded ownership, 

you only have one fiduciary responsibility, and that is your shortterm stock prices and your short-term earnings, and it is not journalism, and it is not community service. 

46 

I am going on my 18th year as publisher of my newspaper, and 

I have not hit the average yet. The Hearst newspaper we compete 

with averages a new publisher about every 5 years. 

Senator SUNUNU. Mr. Singleton, how do you respond to the 

charge that your local newspapers are not committed to the communities they serve, and that because you have borrowed money, 

somehow you owe fealty to Wall Street? 

Mr. SINGLETON. I think it is preposterous. Our company is owned 

by two families, one family in New Jersey that goes back in this 

business to 1852 in this business. We are a privately-owned company owned by two families that are expansion minded. Yes, we 

borrow money. But I suspect my debt ratio is no higher than Mr. 

Blethen’s debt ratio. 

To say that we are a problem because we have 50, but he is not 

a problem because he has 6 really makes no sense. And it gets into 

the emotional issue that we are talking about. 

The facts are the facts. There are 13 public companies that own 

newspapers, and they control 22 percent of the daily newspapers 

published in this country, and they put out some of the best newspapers in this country; not just because they are public. Being public does not get in the way of putting out good newspapers. But 

there are only 22 percent controlled by public companies; 78 percent are controlled—privately-owned, private families like mine 

and like Frank’s and like many other private families. And to suggest that private families that own newspapers are a threat to democracy is not very credible. 

Mr. BLETHEN. Could I respond? 

Senator SUNUNU. Well, I think you already did, and my time is 

limited. I mean, I think you responded to the exact point that was 

made, which is trying to justify the argument that by virtue of his 

ownership of 50 newspapers, he is a threat to democracy. 

Mr. Karmazin, you own local stations? Or you own TV stations, 

certainly. How many do you own? 

Mr. KARMAZIN. Local TV stations and local radio stations. 

Senator SUNUNU. How many TV stations? 

Mr. KARMAZIN. Thirty-five. 

Senator SUNUNU. Thirty-five stations. Do you do any local news 

on those stations? 

Mr. KARMAZIN. On all but one. Or two. 

Senator SUNUNU. Do you do any other local programming? 

Mr. KARMAZIN. Sure. Yes, obviously in order for our TV stations 

to be successful in the market, they have got to serve their local 

community. So, obviously, in addition to running the network, all 

of our stations do, with the exception of a couple, local news and 

local programming and local public affairs and local fund raising 

and the same kind of localism that any good television operator 

would do in any market. 

Senator SUNUNU. Finally, let me just ask Mr. Blethen. You 

talked about cross-ownership. There are, I think, a couple of dozen, 

maybe a few dozen, cases where there is cross-ownership between 

newspapers and TVs. These have been grandfathered, I guess, over 

time or, in some cases, waivers have been given. You suggested 

earlier, in response to questioning, that somehow this cross-ownership results in less local value, less quality of news, or it somehow 

47 

weakens the local connection, but you did not give any specific examples. Can you give an example of where there is a partnership 

or a consolidation between TV and the newspaper and that the 

quality of service has degraded and the local interests have not 

been served? 

Mr. BLETHEN. Spokane, Washington. 

Senator SUNUNU. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Would you like to elaborate? 

[Laughter.] 

Mr. BLETHEN. Well, I am already at risk of losing one friend, and 

I would kind of hate to—— 

[Laughter.] 

Mr. BLETHEN. I am trying to save a few friends, and I would 

rather not elaborate. 

The CHAIRMAN. In the Committee, we try to stay with a time 

clock, but we also think it is most important to make the record 

complete. And I appreciate Senator Sununu’s questions, and perhaps, for the record, you could elaborate on your answer to Senator 

Sununu’s—I think it is an important question. 

Mr. BLETHEN. Well, it is a very good question, but let me elaborate in a little different fashion. Mr. Singleton referred to the Committee of Concerned Journalists and the Columbia study, which 

took a look at the 40 grandfather stations and came to the conclusion that they are two-and-a-half times more likely to have good 

news. What that does not tell you, though, is—it does not get under 

the individual makeup of each of those 40. 

I know in some of the newspaper associations comments, they 

have singled out Cedar Rapids, Iowa, as an example of this quality 

news. Well, Cedar Rapids, Iowa, is a third-generation family newspaper and television station that does some of the best journalism 

and public service in our country. Ownership matters. And I think 

if you get under those 40—and I am not sure where they all are— 

but when you get under those 40, what you are going to find is if 

you do not have ownership that is connected to those communities—and increasingly, that is the case—you get a disinvestment 

in the news on both the print side and the TV side. 

The CHAIRMAN. What happened to Spokane, Washington? 

Mr. BLETHEN. You are going to make me lose more friends, aren’t 

you? Spokane, Washington, is a grandfather—it is a family-owned 

paper, it is a grandfathered situation. The family that owns the 

newspaper and the TV station has been involved in a major city 

redevelopment that has become very controversial. Even Editor 

and Publisher Magazine, which never criticizes the industry, criticized them for not covering it. The only coverage that has come out 

of this controversy, and there is lots of legal action around it now, 

has been by a struggling weekly that has been trying to get their 

story out. 

Senator SUNUNU. If I may conclude, Mr. Chairman, that suggests 

that you do not find cross-ownership a problem as long as the 

cross-ownership is not driven by people that uncaring and cold and 

do not really care about local content. And—— 

Mr. BLETHEN. I find cross-ownership a problem whether it is 

public or whether it is private. You are making—— 

48 

Senator SUNUNU. But you are—— 

Mr. BLETHEN.—35 percent margins—30, 35 percent on newspaper, 50 percent on TV. Why in the world do you need to combine 

your voice? 

Senator SUNUNU. Well, this is not a—— 

Mr. BLETHEN. Why not remain a more—— 

Senator SUNUNU.—question of who is making money. It should 

not be a question of who is making money and who is not making 

money and are they making enough money. I am certainly—— 

Mr. BLETHEN. Except that is—— 

Senator SUNUNU. I do not want the—— 

Mr. BLETHEN.—that is the argument the advocates make for 

wanting to repeal cross-ownership, that they need it to compete. 

Senator SUNUNU. I have not heard that argument made, at least 

not in this panel. Maybe somebody will step up, maybe in the next 

panel, and make that argument. But you certainly have not refuted 

the facts of the study that show increased local content over all of 

these 40 combinations, and you have expressed the concern about 

the personality or the tenor or the management style of those involved in the consolidation. But I do not see that. There may be 

other reasons, but I do not see that as a basis for sound regulation. 

You have been very generous, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Lautenberg? 

Senator LAUTENBERG. Thanks, Mr. Chairman. 

This last discourse was kind of interesting, because it was said 

earlier that the FCC knows best about what ought to happen, and 

we legislators ought not to interfere. But we legislators can call one 

person’s statement outrageous and talk about the other person as 

wanting to make money and all kinds of insinuation and accusations here. 

I would like to modify that a little bit, because what we should 

be interested in is encouraging commentary from the witnesses, to 

the fullest extent possible, that has relevance to whether or not we 

do anything to reexamine the law as it was promulgated. 

Mr. Singleton and I know each other a long time. I have not seen 

you. You look well. And, based on what I hear, you are doing OK. 

[Laughter.] 

Senator LAUTENBERG. I would ask you about a comment that was 

made apparently while I was out of the room or maybe in your 

statement—I did not see it—13 public companies owning just 22 

percent of the newspapers. That was the statement that you made 

that—— 

Mr. SINGLETON. That is correct. 

Senator LAUTENBERG. OK. I think the more relevant issue is, 

What percent of the circulation, percentage of the circulation, do 

these 13 companies account for? 

Mr. SINGLETON. Because they tend to own larger newspapers, 

they account for somewhere close to 50 percent. 

Senator LAUTENBERG. Wow. 

Mr. SINGLETON. Because they tend to own larger newspapers, 

they account for somewhere close to 50 percent. 

Senator LAUTENBERG. Wow. And I think that is really the issue. 

The question is—and I asked it in my initial comments—What 

49 

good does it do the public at large? What good does it do to promote 

interest, values, et cetera? I am not talking about a cleansing 

mechanism. I am just talking about—people can hear what they 

want. Mr. Singleton, you know very well that there is a chain in 

New Jersey that has newspapers around the country, some of 

which have very radicalized conservative views, some of which are 

more liberal. But the fact is that people are getting a chance to 

hear—or to read, rather, what it is that they choose to read, if 

there is competition. 

And I ask the question, once again, about what good does it do 

the public to have these ceilings lifted? Right now, the prospects 

are 45 percent. But what happens if we were to get down to where 

there were five papers, five media outlets that had all of the 

power? What possible good can come out of that kind, if I can call 

it, a deregulation of a standard? It is, after all, a public commodity 

that we are talking about—the airwaves, not so much directed at 

the newspapers, but the broadcasts over the airwaves. Does the 

public get better served as these companies get larger? I am afraid 

to ask Mr. Karmazin, because his—why do I not ask you that? 

[Laughter.] 

Mr. KARMAZIN. Thank you for asking. 

Yes, I do. Before the radio consolidation took place, in 1996, 

there were about 60, six-zero, percent of all the radio stations losing money. Legitimate, not funny accounting. Losing money. The 

fact is today there are still 3,800 different owners of radio stations 

today. In order for you, as a businessman, to invest in your programming, to invest in your business, to hire people, you need to 

have a good business. So what you want to do—I cannot tell you 

the number, but what you need to do is have a healthy, free, overthe-air broadcasting system, because if, in fact, you did not have 

it, there would be no investment, there would be nobody covering 

the news, there would be nobody investing in their business, there 

would be nobody paying—I assume you listen to some New York 

radio every once in awhile, so we are paying Don Imus an awful 

lot of money to be on the radio. We think that serves the people 

of New York and New Jersey real well. The same, though you probably do not listen to Howard Stern, but the same thing for Howard 

Stern. 

Senator LAUTENBERG. Then you are deciding where my taste begins and ends, huh? 

Mr. KARMAZIN. Yes, I can tell in your phone calls. 

Senator LAUTENBERG. Get me out of that realm. How about public radio? 

[Laughter.] 

Mr. KARMAZIN. We have, as you know, two all-news radio stations. If we were not healthy, if we were not successful, we would 

consolidate the news room of CBS and WINS and have one allnews radio station. So it is very important, and it is very important 

to the public, to have a successful, free, over-the-air broadcasting 

system. 

And, listen, I do not have a horse in this race, but I cannot let 

it go. To say that companies like the New York Times and Tribune 

and Gannett, these public companies, you know, are causing deVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000053 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
50 

mocracy to go away in the United States is bizarre to me. OK? I 

do not see it at all. 

Senator LAUTENBERG. Well, you obviously are expressing—I 

know it is not a self-interest opinion. 

Mr. BLETHEN. Could I respond to that, please? 

Senator LAUTENBERG. I would like you to. 

Mr. BLETHEN. I did not say the New York Times is making democracy going away, and I need to clarify. The New York Times, 

the Wall Street Journal, and the Washington Post are publicly companies, but they are controlled by the families. They are essentially 

private companies. And thank goodness that we do have them, because right now they are a beachhead against the pall that has 

been created in journalism in America today. 

Mr. SINGLETON. Senator Lautenberg, could I respond to that 

question, too? 

Senator LAUTENBERG. Sure. 

Mr. SINGLETON. I do not have a horse in cap rate percentage, but 

what we are talking about in newspapers and owning television in 

the same market, there are 40 stations last year who eliminated 

local news because they could not afford to produce it anymore, and 

there will be many, many more of those as network compensation 

goes away. 

We are saying we are in the news business in our markets. We 

do an excellent job with a lot of people covering local news. Let us 

use those resources to keep local news in stations that otherwise 

would not have local news. That goes by the wayside in this argument. We are trying to improve or even have local news in television markets where there is not much local news in the television 

markets. 

Senator LAUTENBERG. Mr. Goodmon, you are the only one who 

has not commented. Do you have a—— 

Mr. GOODMON. I am enjoying this. 

[Laughter.] 

The CHAIRMAN. You need the microphone, Mr. Goodmon. 

Mr. GOODMON. What we are talking about, again, is localism. 

Mr. Karmazin says that broadcasting stations are very, very profitable. I would suggest there is nothing any more profitable than 

that. Next he says is that he has to own more because his network 

does not make much money. I cannot connect it. I mean, I do not 

know—that is certainly not in the communications. That is never 

mentioned network financial health. We are talking about localism, 

diversity, and competition. 

We have a fixed market here. The financial problems of other organizations—you do not want to throw away localism for that, and 

I will argue forever—I will argue forever that a local owner is better than a group owner, because the local owner is there. I mean, 

I know—I mean, I call it the ‘‘haircut rule.’’ When I get a haircut, 

and that is not often, but when I do, I hear about what is on my 

television station. Localism is very important. It is why we have 

them. 

In the Communications Act, it did not say we are going to have 

these national stations. It said we are going to have these local stations. And if there is a fixed number, we need as many owners as 

51 

possible. And I do not understand why we are going to change this 

because Mr. Karmazin wants to make more money on his network. 

I am just—let us do a tax break or an oil well or something. 

[Laughter.] 

Mr. GOODMON. I mean, it does not—the two are not connected. 

Now, this relationship is really important. I love my network. I 

cannot go without my network. He cannot go without a local station. But this balance is very important, and we have got to have 

some say in what is cooking. 

Mr. KARMAZIN. But when I go to this affiliate, and I tell him the 

new AFC football contract is costing us so much money that we 

cannot afford to put it on our CBS network, we are going to put 

it on cable, he is going to sit there and say, ‘‘What is my network 

doing to me? Where is my network?’’ The NCAA tournament costs 

us $6 billion. You know, then I am saying, ‘‘OK, what is my network doing if they do not give me that program?’’ If we do not do 

CSI, if we do not do the kind of programming our affiliates want, 

you know, they are not going to be affiliates. 

So I think it is sort of disingenuous to separate the network and 

the stations. 

Mr. GOODMON. Now, the FCC report that I read said that the 

networks are very profitable. I mean, maybe I will go back and look 

at that, but the FCC report said the networks are profitable. We 

will have a national system of broadcasting if you allow the networks to own the stations. They will determine all the programming. They do—the big groups. I am not just picking on the networks. The groups do it, too. A group will buy a program. It will 

call all of its stations and say, ‘‘You are going to run this.’’ They 

buy everything for the group, they program the group nationally, 

there is no local input. I mean, that is all I am saying. 

Mr. KARMAZIN. If you have—— 

Senator LAUTENBERG. Mr. Chairman, I thank you very much for 

the time, Your Honor, but the witnesses—the case rests. 

[Laughter.] 

Mr. KARMAZIN. There are—let us assume the big networks, say— 

so Fox, Viacom, and CBS, Disney, and GE—you can call as a witness anyone in the financial community—I cannot speak for whatever the FCC report is—to determine the profitability of the broadcast networks. That data is available. Disney is losing hundreds of 

millions of dollars this year. 

Senator LAUTENBERG. Is some of that—since you are provoking 

this; forgive me a minute more, Mr. Chairman—does that talk to 

Disney’s management? 

[Laughter.] 

Mr. KARMAZIN. I think Disney’s management is terrific. I think 

Michael Eisner has done a great job for that company. I think it 

speaks to the complexity and the difficulties of running a business 

where the costs are going up, the audiences are going down, there 

is far more competition; and the best way to solve it is relaxing the 

ownership rule. 

Senator LAUTENBERG. I come out of the corporate world, and I 

ran a pretty good company, I think that Dean Singleton knows, 

and we have done well because we worked hard. But simply because you get larger does not mean that you get more profitable, 

52 

and that cannot be the objective in something as sensitive as the 

public access to information. That, to me, is the question that really is at stake here, and I think we have to determine whether 

growth in size will benefit or harm the public’s access to information. 

Thanks, Mr. Chairman. 

The CHAIRMAN. Senator Allen? 

Senator ALLEN. Thank you, Mr. Chairman. 

Several points I want to make here. Number one is, let us get 

updated in reality. Number two, Mr. Jefferson. And, number three, 

on to the cross-ownership issues. 

Let us look at reality here, and it seems to be getting lost. Let 

us look at the media marketplace. We are talking about regulations, and regulations have to have some rational reason, and also 

this discussion ought to be based on reality in the real marketplace 

here in the last 25 years, and you have these FCC regulations. 

FM, there are twice as many FM stations, 4,000 to over 8,200 

stations. Full-power TV stations, from 988 in 1978 to now over 

nearly 1,700. Low-power TV stations have gone from zero in 1978 

to 2,200-plus. Cable subscribers, from about 13 million in 1978 to 

now 69 million. DBS subscribers, zero in 1978, 16-million-plus now. 

And a variety of other things, including the Internet, which were 

no one on the Internet in 1978, 72 percent now. There were three 

networks back then, broadcast networks. Now there are seven in 

English, two in Spanish, 231 cable networks, as opposed to 28 back 

then. And you just think back then, in some local communities you 

had a weekly newspaper in that county. You have a daily that may 

have been in that community, and you had maybe a TV station and 

a radio station. The point is, is that the people have so many more 

options and opportunities to get their ideas. 

And as far as Mr. Jefferson is concerned and regulations, 202 

years ago, Mr. Jefferson enunciated his view of the sum of good 

Government in his inaugural address here in Washington, and he 

said, ‘‘The sum of good Government was a wise and frugal Government, which should restrain men from injuring one another, but 

shall leave them otherwise free to regulate their own pursuits of 

industry and improvement, and that the Government should not 

take from the mouths of labor the bread they have earned.’’ 

So the point is, is Mr. Jefferson loved freedom. Mr. Jefferson 

loved people searching and finding the truth. In his day, the only 

opportunity was the newspaper. Today, Mr. Jefferson would be 

thrilled, because he was one who embraced advances in technology. 

He was an inventor, an innovator, and he would love—as far as localism, the Internet is an individualized empowerment zone where 

the individual determines whether they want to read 

WashingtonPost.com or the Danville or the Roanoke paper or any 

other paper, the Denver Post if you want to see what they are 

blasting the Raiders about, or any other newspaper, you can read 

it. And so the reality is, is that there has been a tremendous 

change here. 

Now, my question to you all is, where you have cross-ownership, 

newspaper/TV cross-ownership, which according to facts, and it is 

not just from the FCC, but also from the Columbia University 

Project on Excellence in Journalism 5-year study released, they 

53 

said that stations in cross-ownership situations were more than 

twice as likely to receive an A grade than were other stations. And 

they are also more likely to do stories focused on important community issues, more likely to provide a wide mix of options and 

opinions, and less likely to do celebrity human-interest features. 

Now, let me ask you all, any who want to comment on this, why 

would these studies that have shown an empirical basis that the 

FCC should treat smaller markets more similarly than large markets? Why should small markets not be able to have that same opportunity, as do larger markets? 

Mr. BLETHEN. Well, there is a real danger in using that study 

as empirical evidence. That is the only study I am aware of that 

has been done trying to evaluate that quality. It has not been out 

very long. It has not been discussed, it has not been vetted, and 

it has not been debated. And I have already mentioned a handful 

of communities that I am aware of where I am aware that there 

is good television journalism and investment in these situations is 

where there is local ownership. 

And I know, in our situation in Seattle, if we were to buy a television station, we do not see that there is any synergism, but we 

would eliminate a competitor, we would have more control over 

rates. And any kind of sharing of information and news, we already 

have an arrangement with the owner of another newspaper—— 

Senator ALLEN. Well, let me ask you this. Why should larger 

markets allow this? Why should there be a distinction between 

larger markets and small markets on these limitations? 

Mr. BLETHEN. I do not think there should be. 

Senator ALLEN. You do not think they should be allowed anywhere. 

Mr. BLETHEN. Exactly. 

Senator ALLEN. All right. Well, let me ask you—anybody else 

want to comment on this? 

Mr. Singleton? 

Mr. SINGLETON. I would just like to point out, once again, in the 

media issue there are emotions and there are facts, and the facts 

speak for themselves. 

Thank you. 

Senator ALLEN. Let me ask Mr. Goodmon a question. How many 

stations do you own in Raleigh? 

Mr. GOODMON. Two. 

Senator ALLEN. Two. 

Mr. GOODMON. Yes. 

Senator ALLEN. All right. Any why do you own two stations? 

Why did you desire to own two stations? 

Mr. GOODMON. Well, the Commission made it possible. I compete 

against an ABC O&O, an NBC O&O, a Sinclair duopoly, and a 

Paxson duopoly. I did not want them to get it. I mean, that is a 

strategic issue. If you are asking me if I like duopolies—is that the 

question? 

Senator ALLEN. Well, I mean, I would not imagine that you 

would invest in something you do not like. 

Mr. GOODMON. No, well, I—well, no, that is defense. I did not 

want the other guy to get it. You do not want the other stations 

to get it against you. I do not think we should have duopolies. 

54 

Senator ALLEN. Even though you do have that. 

Mr. GOODMON. Well, but the—— 

Senator ALLEN. Under what—— 

Mr. GOODMON. Well, but the rule says you can do it, and if your 

opposition can buy one, you want to get it before they do. 

Senator ALLEN. Has that been harmful to the viewers in the Raleigh/Durham area that you own those two stations? 

Mr. GOODMON. Has it been harmful? 

Senator ALLEN. Has it been beneficial or harmful, the fact that 

you all own two stations in the Raleigh/Durham viewership area? 

Mr. GOODMON. Well, I would have to say because I own it, it is 

beneficial. 

[Laughter.] 

Mr. GOODMON. But I—that is not the issue. It was—— 

Senator ALLEN. Well, no, this is—— 

Mr. GOODMON. No, it is a financial issue. 

Senator ALLEN. Well, the fact that you have done this—— 

Mr. GOODMON. Right. 

Senator ALLEN. —and your testimony is that it has been beneficial. Maybe you do not think it is beneficial, but do you not think 

others in smaller markets ought to have that same opportunity? 

Mr. GOODMON. Well, if you are going to do duopolies, I think the 

test that they have now is pretty good. You know, if you are going 

to do—— 

Senator ALLEN. You have to have eight stations. 

Mr. GOODMON. You have to have some others. My view—right. 

That is what I am saying. I think we have got a pretty good rule 

now. I think if you—— 

Senator ALLEN. Were you—— 

Mr. GOODMON.—do not have many stations and you do duopolies—if you have got a station with four markets or—— 

Senator ALLEN. Four stations. 

Mr. GOODMON.—a market with three stations or four stations, I 

do not think, in terms of voices, you want to double them up. But 

I am not—the truth is, I do not—you know, I just—— 

Senator ALLEN. All right. Let us say you have a small—— 

Mr. GOODMON. I think it is another—— 

Senator ALLEN. Let me ask you this. 

Mr. GOODMON. Right. 

Senator ALLEN. As far as your business—— 

Mr. GOODMON. Right. 

Senator ALLEN.—these two stations you own—— 

Mr. GOODMON. Yes. 

Senator ALLEN.—where there is some convergences or efficiencies 

and that some of the improvements, your technology or—— 

Mr. GOODMON. Yes. 

Senator ALLEN.—equipment could be used for both—— 

Mr. GOODMON. Yes. 

Senator ALLEN.—both stations? 

Mr. GOODMON. Yes. 

Senator ALLEN. Now, in a smaller market, do they not have a 

harder time, really, sometimes, because they do not have as many 

viewers that they do in larger areas? 

Mr. GOODMON. Yes. 

55 

Senator ALLEN. And so could they not also benefit—— 

Mr. GOODMON. They are having a tough—— 

Senator ALLEN.—from this—— 

Mr. GOODMON.—time with the digital conversion, too. 

Senator ALLEN. Exactly. 

Mr. GOODMON. Right. 

Senator ALLEN. And so to the extent they can do that and will 

cover two stations rather than having one completely fail, would 

that not be beneficial, conceivably, as a business proposition? 

Mr. GOODMON. As a business proposition, yes. As a matter of localism and number of voices, I am not sure. You got me on one on 

this list that I am not working on. Generally speaking, I think 

there should be as many owners as possible. Now, there might be 

some economic reasons to do them in a—but that is fine. That is 

fine. 

Senator ALLEN. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Allen. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Mr. Chairman. I believe that 

Senator Snowe was giving her statement before I—— 

The CHAIRMAN. Senator Snowe? 

Senator CANTWELL. Senator Snowe, go ahead. 

Senator SNOWE. That is OK. Go ahead. 

Senator CANTWELL. Well, thank you, Mr. Chairman. 

I guess, listening to the back and forth from our witnesses, I 

guess the question that comes to mind is really in categorizing this 

issue of whether you think there are cultural differences between 

your organizations. And I guess Mr. Karmazin, I wondered if you 

thought that there was a cultural difference between your organization and Mr. Blethen’s organization. 

Mr. KARMAZIN. Sure. I think that each of our general managers 

at each radio station creates the culture at that radio station, and 

the same thing would be true of the general manager of a TV station. The culture at Nickelodeon is very different than the culture 

at MTV. So I believe that, within an organization, the managers 

create their culture. And particularly on the local level, there is a 

distinct cultural difference. If you were to walk into our radio stations here in Washington, D.C., you will see a different culture in 

each different radio station. 

Senator CANTWELL. And so you do not believe that there is a 

larger parent umbrella culture that is created by being part of a 

large organization? 

Mr. KARMAZIN. I cannot see it at all. I do not believe that anybody who is watching Nickelodeon and watching Sponge Bob knows 

that that is the same company that is watching Ozzy Osbourne. 

Senator CANTWELL. Well, let me be more specific. The Dixie 

Chicks and Clear Channel. Now, whether the organizations collectively decided or somebody said, ‘‘Hey, our station in such-and-such 

city is deciding they are not going to play the Dixie Chicks,’’ I have 

to believe that culturally there was a lot more security of somebody 

saying, ‘‘Hey, some organization—some of the radio stations within 

our organization felt the same way, so let us use our own discretion, but let us do the same thing because there is a little bit of 

comfort here. Our parent organization is not coming down on this. 

56 

Our parent organization is encouraging it, so let us join the fray,’’ 

which I find to be different culturally stationed in Seattle, all of a 

sudden deciding that some station unrelated in Miami is doing 

some activity, now they are going to pick it up. So, culturally, I see 

a difference. 

Mr. KARMAZIN. And I do not. I compete with Clear Channel. 

They own 1,200 radio stations, and we own 15 percent of their stations. So if they are not playing Dixie Chicks, and the people in 

that market, because these have a lot of choices, want to hear Dixie 

Chicks, I am all over the Dixie Chicks. 

[Laughter.] 

Mr. KARMAZIN. So the sense is that I do not find those—and I 

am not suggesting, by the way, that the decision—I do not know 

where the decision was made, but if they make dumb decisions, you 

can own 100 radio stations and make dumb decisions. It does not 

matter whether you own 1,200. 

Senator CANTWELL. Mr. Karmazin, I disagree. It reminds me of 

a discussion of another company in the State of Washington who 

felt, just because it got big, that maybe the culture was not going 

to cause problems for it, and they found out that the culture and 

aggressive attitude of their employees did, in fact, cause problems 

for them, because they did not realize that they were a large corporation. They did not realize how big they had become and how 

far their reach had gone. 

Mr. KARMAZIN. Senator, I would invite you to visit any operation 

within our company and see whether or not we have sacrificed the 

culture for its size. 

Senator CANTWELL. Well, I—thank you for your answer, because 

I do believe you are different cultures, and you said you were. 

Mr. Blethen, did you want to comment on that? 

Mr. BLETHEN. Well, yes, I—they are clearly different cultures. 

One is a culture of maximizing profits for an absentee owner, and 

one is the culture of journalism and public service when you have 

local ownership. 

We have an example in Seattle that you know well, Senator, 

which is KING Television, which was long owned by the Bullitt 

family and was considered one of the best journalism and community-service stations in the country. I would even argue—I think 

they had had a period of time when it was probably the best of an 

exceptional commitment by the family. Unfortunately, they sold to 

a public company a few years ago. And, you know, you watch the 

same stations I do, and they are a shadow of their former selves. 

Senator CANTWELL. Well, I guess that is my concern. I believe 

that communities across this country are melting pot of different 

opinions and ideas, and they have different texture, they have different flavors to them. And I think this proposal is about stripping 

that away. It is about making things more vanilla. And I do not 

think that that is what America wants to see in the diversity of 

their news. 

So it leads me to the question, What is the rush? When I think 

about these rules and regulations, they have been in place for 60 

years, and now all of a sudden—and I certainly applaud everyone’s 

interest in the variety of new technologies and medium devices 

that people will be able to get content, but I think we are still quite 

57 

a few years from that providing any kind of true competition to today’s mass market. So what is the rush in overturning this rule? 

And what is the secrecy about? 

Mr. Karmazin, I think, in your testimony, alluded to the fact that 

this had gotten more public debate than just about any other issue, 

and yet all I know was one public hearing, officially, in Richmond, 

and it took two FCC Commissioners, who decided to go out on their 

own to have non-formal hearings, and we almost had a riot in Seattle, people were so upset over this concept. I mean, I have gotten 

more mail on this issue lately than just about any other issue, because citizens are concerned. And yet we really have not had a 

public-hearing process. 

So what is the rush? 

Mr. KARMAZIN. So I guess the rush is that in 1996, in the biennial, the Congress told the FCC to review these rules every 2 years. 

I mentioned in my opening comment that I was down here 2 years 

ago, which was the start of this biennial. I cannot imagine anybody 

in Washington would want to be believing that this is a process 

that is being rushed. In my 30-plus years in the broadcasting business, I have never seen a issue get more attention than this one 

has gotten. 

Senator CANTWELL. Well, here is a very detailed letter from 14 

Members, mostly from this committee, and many from my colleagues. So we have, in the budget, I think, some language to the 

FCC saying, ‘‘Complete your business in a required timeframe.’’ I 

am sure one of my well-meaning colleagues slipped in that little 

note basically urging the FCC to finish their business, in direct 

contrast to a very detailed position statement by many members of 

this committee and others who say, ‘‘We are going too fast, without 

public comment.’’ I mean, if you think you are right, if you think 

that you are on the right side of this, you should not care whether 

we have more dialogue and debate about this issue to make sure 

that the public concern is addressed. 

Mr. KARMAZIN. There are many things that I have read in the 

papers about this issue that I do not like, but the one thing I do 

have is a great deal of respect for all five members of the FCC. If 

they believe they needed more time, then they would have taken 

more time. But if they believe they have exhausted this study and 

that they have a conclusion, then I say this body should let them 

do their work and let them come out with their report in order. 

Senator CANTWELL. Well, I think this hearing is probably a sign 

that there is anxiety about just letting them do just that. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I think they are constrained, also, by a court 

order to act, Mr. Karmazin. 

Senator Snowe? 

Senator SNOWE. They certainly are. But, on the other hand, Mr. 

Karmazin, June 2 is final. I mean, that is the issue here today. 

And it is true, the biennial review has been incorporated, in the 

1996 Act. It does mandate the FCC to review it, obviously, every 

2 years. And so it certainly was anticipated on their part that they 

had to conduct this review. And, yes, it was a court order, but it 

still does not negate, I think, the responsibility of the FCC to share 

the intent of their changes and modifications. Would you not agree 

58 

these are significant changes, just based on what has been speculated about in the media? 

Mr. KARMAZIN. I really do not know what the outcome is going 

to be. 

Senator SNOWE. Yes, that is the point. 

Mr. KARMAZIN. But I trust the process. And if we do not trust 

the process, then I do not know what else we have. So the sense 

would be there are checks and balances. I assume we have—there 

have been hearings here. As I mentioned, I testified 2 years ago at 

a hearing here. There comes a time when even unpopular decisions—I mean, whatever way it goes, I have to live with it or go 

to court. But I do think we have a right to move on with our business and should not take this long to develop those modifications, 

if there are to be modifications. Whatever the rules are, we have 

an opportunity to follow them or go to court and see if they are constitutionally correct. 

Senator SNOWE. Well, you know, I guess the fact of the matter 

is that, obviously, the FCC has to conduct its own exploration, but 

we also have a responsibility, as well, and it is to serve the public. 

I mean, this is serving the public interest, without question. I 

mean, we have had precedent in law, precedent in statute for more 

than 70 years with respect to these issues. And they are going to 

be undone very quickly on one day, June 2. That is the issue here. 

Mr. KARMAZIN. That is true. 

Senator SNOWE. There is no flexibility. And I have enormous respect for the members of the Commission. And obviously some 

Commissioners have concerns, as Senator Cantwell indicated, several of them had their own public hearings. I had urged public 

hearings back in January, and we had the first of three oversight 

hearings on this matter. 

I just was watching CNN last night, and they were doing a story 

on this subject, and they invited the viewers to register, to log in, 

their yes or no with respect to the question, Do you think too few 

companies own too many media outlets? Yes, 98 percent. 

Mr. KARMAZIN. And you want to—— 

Senator SNOWE. No, 2 percent. So, you know, I think the point 

is that there is a concern publicly about it, and it is the sanitizing 

of this process now. The fact that five companies are going to own 

60 percent of prime-time broadcasting both in the broadcast and 

cable networks, that is disconcerting, because I do not know how 

that affects the three-pronged approach of diversity and localism 

and competition. I mean, those are the issues that we cannot overlook. Those were, sort of, the foundations and premises for these 

rule changes. 

Now, I do not object, necessarily, to deregulation, per se, but we 

have gone through many deregulations—with the airline industry, 

with the telecommunications sector—and they have unintended 

consequences, and I have not been able to understand how you put 

the genie back in the bottle. I do not understand how you reverse 

courses once this is unleashed. That is what I am not understanding. Because this is really the last barrier. It is the last bulwark against open, unfettered ownership, you know, and that is 

the problem that I have with this. And I do not understand either 

with the rush. 

59 

I understand that the deadlines, but I think if the Commission 

had asked for time to—given the enormity of this issue, or if our 

biennial review is unreasonable, then that is something we ought 

to consider in terms of the timetable, Mr. Chairman. But it should 

not negate the consequences of not having a full airing of these 

issues before the Congress and before the public. 

Mr. KARMAZIN. And, Senator, it is for that reason—— 

The CHAIRMAN. I think Mr. Goodmon wanted to comment, if he 

might. 

Senator SNOWE. Yes, OK, thank you. Yes, go ahead, Mr. 

Goodmon. And we will go back. 

Mr. GOODMON. Please remember my sign. 

Senator SNOWE. Yes, 70 percent. 

Mr. GOODMON. 70 percent, not 35 percent. 

Senator SNOWE. Yes. 

Mr. GOODMON. We have got plenty of diversity. What is the 

rush? 

Senator SNOWE. Yes. 

Mr. GOODMON. What is the hurry? The hurry is they have the 

votes at the Commission, and the hurry is that this is very important to the investment and financial sector in the country. Because 

what they see is going to be, as there was last time when the rules 

changed, a whole lot of station trading. There is going to be a lot 

of money loaned, and there are going to be a lot of commissions. 

So what we have is the big companies wanting to get bigger, and 

I think that—Mr. Karmazin should want to own all of his affiliates. 

But I am saying that is not a good plan. We have enough—they 

are 70 percent. If they raise it to 45, it becomes 90 percent. 

So I am saying there is already enough relaxation of ownership. 

There is no hurry on this, particularly because we are going into 

digital, and nobody has a clue as to what the broadcasting world 

is going to be like when we get there. 

Senator SNOWE. That is right. Mr.—— 

Mr. GOODMON. But it does not make any sense. 

Senator SNOWE.—Mr. Blethen, you mentioned an important 

point in response to Senator Sununu’s question. The issue is ties 

to the community and localism. And that is one of the important 

dimensions in terms of establishing and upholding important principles regarding the dissemination of news and information to the 

public, and that is having ties to the community. And that is essentially what you have done both in Seattle and both in Maine with 

your ties to the state. We welcomed that, I should tell you, Mr. 

Chairman, because at the time we were sort of very concerned 

about who was going to purchase the Portland newspapers that 

had been owned by the Gannett family, as I said, for well more 

than 100 years and rooted in the community, they have been part 

of the community. And so we were certainly relieved when the 

Blethen family, the Blethen newspapers, purchased those newspapers, because it really continued that very important tradition in 

our State, and that is having ties and being sensitive to the issues 

and the needs of the community. 

Mr. BLETHEN. If I could comment—— 

Senator SNOWE. Yes. 

60 

Mr. BLETHEN.—the comment about the ‘‘we should trust the 

process.’’ You know, I am sort of a newcomer to this, but I am finding it really hard to trust a process which has been done behind 

closed doors with only the major players, the major owners involved. Over 80 percent of the American public does not know what 

is going on. Most of the Hill did not even know what was going on 

until recently. And where the vast preponderance of all these comments the FCC says they have received, indeed, have been against 

any relaxing of these rules. The Commission will talk about something like 18- to 20,000 comments, but I am told that 18,000 or so 

of those are all against repeal and that they are hard-pressed to 

find anything for appeal that is not from a corporation. 

Senator SNOWE. Mr. Karmazin? 

Mr. KARMAZIN. I think it is important to have a healthy industry 

to be able to evolve into a digital environment. We are all going to 

be UHF stations in the digital world, and I do not think, since it 

is many years away, regretfully not our fault, that I think you 

want to have a healthy industry to get to that digital transition. 

This is a bogus argument, because there is clearly a disadvantage 

of being a UHF station in the market, and the rules over the years 

have looked at the difference between a UHF station and a VHF 

station. I want one VHF station in a market, as compared to two 

UHF stations, when I can. So, you know, it is just another argument. 

And regarding the process, just like I respect the Senator, the 

Chairman, and Senator Hollings, that this committee has had plenty of opportunities to deal with this over the time. And, again, I 

cannot speak for whether you have all the facts or not, but I think 

it is open. I hear a total disconnect. I hear no one knew about it, 

but there are 18,000 people complaining about it. So somebody 

knows about it. 

Senator SNOWE. We do not know the specificity of what they are 

going to recommend. 

Mr. KARMAZIN. Neither do we. 

Senator SNOWE. OK, well, that is—but that is the point. Should 

we not? I mean, that is the issue here on a major modification. 

This is not inconsequential, and that is the issue that we are raising. Hence, the 20,000, you know, responses to the FCC. I would 

assume that that is a very substantial response to proposed 

changes by the FCC, whatever they happen to be. We are saying 

given the magnitude and the enormity of this issue and the implications for the future that will be unending, and the risk if we are 

wrong—the risk if we are wrong—and where is the balance, as Mr. 

Goodmon and Mr. Blethen have indicated? Where is going to be the 

balance? It is a high-risk proposition if we are wrong, and I think 

that is the issue, and it has been enshrined in statute and judicial 

precedent for more than 70 years, so I think we should hesitate 

and pause before we go into this June 2 up-or-down vote and no 

recourse. 

And that is a concern, Mr. Chairman. And, you know, when they 

predicate this decision on the diversity of voices out there with subscribers to cable and Internet and so on, but the fact of the matter 

is, it is whose ownership? Who are the owners of all of these entities? And that is going to be the concentration of the source that 

61 

is going to be disseminating the information in the final analysis. 

And that is, I think, a major concern. And they are predicating it 

on that basis, in terms of, you know, the diversity of voices, but it 

is going to be owned by a few, and that is the bottom line. 

And so, you know, I just wish we were in a very different position here today and in the future, because I know the FCC is struggling with the deadline and all that. But I think, in the final analysis, it is more important to get it right, because the risks are far 

too great. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Snowe. 

We are all in agreement that no one entity or company or corporation should own 100 percent of any media market. Is that 

right? Mr. Karmazin, do you agree with that? 

Mr. KARMAZIN. That is right. 

The CHAIRMAN. Mr. Goodmon? 

Mr. GOODMON. Yes, sir. 

The CHAIRMAN. Mr. Blethen? 

Mr. BLETHEN. Yes, sir. 

The CHAIRMAN. Mr. Singleton? 

Mr. SINGLETON. Yes, sir. 

The CHAIRMAN. So I guess what we are doing here is trying to 

decide what is appropriate, and that is what the difficulty that we 

are encountering. I think that Clear Channel, the situation that exists there today with 1,200-and-some stations and domination of 

various markets, was a warning sign to me, and I am concerned 

but unsure, uncharacteristically, unsure in how we maintain the 

balance that is necessary. But this hearing has been very helpful. 

I thank you for the spirited discussion, and I hope you will all remain friends. 

[Laughter.] 

The CHAIRMAN. And I thank the witnesses for coming. Thank 

you. 

Due to the lateness of the hour and the lack of participation by 

members of the Committee, we will have another hearing between 

now and June 2, and Mr. Kimmelman and Mr. Mikkelsen will be 

invited back at that time, because I do not think they would get 

a fair amplification of their views by calling them at this late hour. 

I thank you, and I thank the witnesses. This hearing is adjourned. 

[Whereupon, at 12:10 p.m., the hearing was adjourned.] 

(63) 

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. Today we return to the topic of media ownership, and 

more specifically, to plans afoot at the Federal Communication Commission to radically liberalize or eliminate many, if not all, of the current media ownership rules 

that have long guided our stewardship of the public airwaves. 

Over the last several years, the amount of consolidation in the entertainment and 

media industries has been staggering. We have seen the combination of AOL and 

Time Warner, Viacom and CBS, Tribune and Times Mirror, and now, face Rupert 

Murdoch’s bid to merge News Corporation with DirecTV. While technology has provided Americans with new media outlets, this growth has failed to outpace the insatiable desire of big media to effectively control what Americans see and hear on television. Today 90 percent of the top 50 channels on cable are owned by either the 

major TV networks or by cable operators. Moreover, the top 5 programmers 

(Viacom/CBS, Disney/ABC, News Corporation/Fox, NBC, and Time Warner) now 

control 75 percent of prime time programming and are soon projected to increase 

their share to 85 percent—the level reached by NBC, CBS, and ABC at their peak. 

Mr. Chairman, Teddy Roosevelt once said that ‘‘the only way to meet a billion dollar corporation is by invoking the protection of a hundred-billion dollar government.’’ 

As defenders of capitalism, we expect large media corporations to pursue policies in 

their own economic self-interest. But to protect the public interest, we similarly demand that our government act to protect civic and local community interests of ordinary citizens, particularly in areas related to the public airwaves and the marketplace of ideas. 

While details of the Commission’s proposal are finally starting to leak into the 

press, the process conducted by the FCC on a matter so fundamental to the foundation of American democracy has been shameful. Instead of sparking a national debate by putting forward specific rule changes to stand in the rigors of sunlight, as 

earlier requested by a majority of the members of this committee, the FCC has instead opted to keep its plans under wraps, further strengthening the hand of big 

media companies with direct-dial connections to the FCC and keeping the American 

public in the dark. Furthermore, by creating an arbitrary deadline of June 2, Chairman Powell and other proponents further deregulation have sought to squelch any 

meaning criticism of this proposal and hammer through one of the most far-reaching 

policy decisions in the history of American media. 

Mr. Chairman, the American people deserve better. Unless we reverse course, 

radical rule changes in the existing national and local ownership limits could seriously, and perhaps irreparably, alter the fabric of American culture and civic discourse. While proponents claim that new rules will only be ‘‘incremental changes,’’ 

the American public will not be fooled. 

Further media concentration will mean fewer creative outlets for independent TV 

and content producers; higher ad rates for local and family businesses; fewer antagonistic sources of news and opinion, less air time for local politicians and community groups, and a growing reluctance of local station operators to take on network 

executives in rejecting nationally-produced programming that violates local community standards. 

While many of us in Congress had hoped that the FCC would recognize the serious consequences that could result from a laissez faire approach to media ownership, it appears the message is not getting through. As a result, Senator Stevens 

and I will introduce legislation today to do what should not have to be done—namely, to re-establish by statute a 35 percent national broadcast ownership cap. This 

legislation is identical to a bill introduced in the House last week by Congressmen 

Burr and Dingell, and serves to underscore the substantial support in Congress for 

keeping the existing TV broadcast cap and protecting the interests of local communities. 

64 

While I welcome the testimony of the witnesses today and their responses to our 

questions, I hope that in the near future, we will have the opportunity to hear from 

the individual members of the Commission. These are not state secrets. The American people deserve to see the specifics of changes in store for them so as to allow 

for vigorous and meaningful debate. I have seen little out of the FCC to suggest that 

such a change of heart is in the offing, but I look forward to being pleasantly surprised. 

PREPARED STATEMENT OF J. STEWART BRYAN III, CHAIRMAN

AND CHIEF EXECUTIVE OFFICER, MEDIA GENERAL, INC. 

Twenty-eight years is a long time to ban an entire industry from entering a market based on nothing more than a conjectural ‘‘hoped-for’’ gain in diversity and absolutely no proof of any competitive harm. Yet, that is how long newspapers will have 

been prohibited from purchasing broadcast stations in their home markets when the 

Federal Communications Commission (‘‘FCC’’) meets early next month to act in its 

omnibus media ownership proceeding. And this ban has continued despite the fact 

that the FCC does not regulate newspapers. The time for repeal of the FCC’s newspaper/broadcast cross-ownership rule in all markets is long overdue, particularly 

given the recent liberalization of every other FCC media ownership regulation. This 

liberalization has left newspaper owners unique, among all business owners in the 

nation, in their inability to buy broadcast outlets in their home markets. 

At the same time, the existence of the rule is preventing the development and delivery of new and innovative local information services and the infusion of new resources into struggling television news operations. In the last decade, as the cost 

of operating television stations and producing televised news, in particular, has gotten more expensive, we have begun to see an erosion in the delivery of local television news. Not only have television stations been faced with the expense of converting to digital transmission, but the presence of large group buyers has made it 

more difficult for small operators to compete in the program syndication market. 

Many small television stations have also seen their network compensation payments 

evaporate or change into ‘‘reverse compensation.’’ 

The result has been that many small market stations, and even some in large 

markets, have had to curtail or entirely eliminate their local newscasts. In the last 

4 years, viewers of over 40 television stations around the country have lost local 

news coverage. Repeal of the newspaper/broadcast cross-ownership rule is desperately needed to reverse this trend. 

The Media General Experience: Common Ownership of Newspaper and 

Broadcast Television Outlets in the Same Markets Has Increased Local 

News and Information Content and Not Caused Any Diminution in 

Staff 

My name is J. Stewart Bryan III, and I am the Chairman and Chief Executive 

Officer of Media General, Inc., an independent, publicly-owned communications company situated primarily in the southeastern United States with interests in newspapers, broadcast television stations, interactive media, and diversified information 

services. Media General’s corporate mission is to be the leading provider of highquality news, information, and entertainment in the southeast by continuing to 

build on its position of strength in strategically located markets. 

Media General is also one of the media industry’s leading practitioners of ‘‘convergence,’’ the melding of newspaper, broadcast television, and online research in the 

preparation and dissemination of local news. Media General’s News Center in 

Tampa, Florida, is the most advanced convergence laboratory in the nation, and the 

only one, as far as Media General is aware, in which the news staff of a newspaper 

(The Tampa Tribune), broadcast television station (WFLA-TV), and online operations (TBO.com) are housed together under one roof. Besides this strong presence 

in Tampa-St. Petersburg (Sarasota), the Nation’s 13th-ranked Designated Market 

Area (‘‘DMA’’), an operation that is ‘‘grandfathered’’ under the FCC’s cross-ownership rule, Media General has similar convergence efforts underway in five additional markets where it has recently purchased television broadcast stations and 

daily newspapers—Roanoke-Lynchburg, Virginia, the 67th-ranked DMA; Tri-Cities, 

Tennessee/Virginia, the 90th-ranked DMA; Florence-Myrtle Beach, South Carolina, 

the 110th-ranked DMA; Columbus, Georgia, the 126th-ranked DMA; and Panama 

City, Florida, the 159th-ranked DMA. 

At the beginning of 1995, Media General owned just three daily newspapers and, 

as of the start of 1997, it held only three broadcast television station licenses. Since 

then, Media General has expanded, now serving newspaper readers in 25 markets 

65 

and television viewers in 21 DMAs. To The Tampa Tribune, the Richmond TimesDispatch, and the Winston-Salem Journal, Media General has now added 22 other 

daily newspapers in Virginia, North Carolina, Florida, Alabama, and South Carolina, as well as nearly 100 weekly newspapers and other periodicals. Today, its 26 

network-affiliated television stations reach more than 30 percent of the television 

households in the southeastern United States and nearly 8 percent of the nationwide television audience. Media General’s Interactive Media Division also provides 

online content that includes news, information, and entertainment sources in virtually every one of the company’s markets. 

Initially, Media General’s convergence efforts focused on Tampa, where it has 

owned NBC affiliate WFLA-TV and The Tampa Tribune since before adoption of the 

newspaper/broadcast cross-ownership rule. Over 10 years ago, WFLA–TV’s news director and The Tampa Tribune’s sports department began to take a coordinated approach to covering local high school football and other sports. Shortly thereafter, the 

two outlets began sharing political polling information and coordinating political 

coverage, and the paper’s religion columnist began making on-air reports on WFLA– 

TV. 

Expanded convergence at Media General began in earnest 3 years ago, when 

WFLA–TV, The Tampa Tribune, and TBO.com moved all their news staffs and content operations into a new $35 million state-of-the-art facility, The Tampa News 

Center. While each of the three outlets has its own specific news and editorial staffs 

that make independent, final decisions about content, this convergence laboratory 

features a central news desk, the ‘‘Super Desk,’’ which is continuously staffed by editors from all three media and facilitates the rapid exchange of story ideas, news content, and video images among the three outlets. All three outlets also maintain their 

news ‘‘budgets’’ or plans for stories on a building-wide ‘‘intranet,’’ and the staff of 

each outlet can access the news ‘‘budgets’’ from the other properties. 

Newspaper reporters are writing scripts for television newscasts and appearing 

on-air, and television reporters are writing stories for the newspaper. The newspaper has also made its archives available to the other two outlets. With the provision of special equipment to the photographers of all three outlets, The Tampa Tribune and TBO.com have been able to provide stories with pictures that otherwise 

would have been only text, including aerial footage obtained from WFLA–TV’s helicopter. Similarly, The Tampa Tribune’s photojournalists have been able to provide 

WFLA–TV with video for airing on its newscasts. 

In Tampa, the pooling of news-gathering resources has increased the output of 

news content and has allowed the reporters at the three outlets to build on each 

other’s ‘‘scoops’’ to present various angles of the same story. WFLA–TV’s and 

TBO.com’s full access to The Tampa Tribune’s archives and research desk has also 

allowed these electronic outlets to bring more depth and perspective to their coverage of news and information. In return, The Tampa Tribune has gained faster access to breaking news and valuable opportunities for branding its product in a highly-competitive, two-newspaper market. Finally, by working together, the three outlets have gained improved access to political candidates and government officials. 

Together, they now conduct their own joint polls, hold town hall meetings, and organize other civic events, such as health fairs and community telephone banks that 

would not have been feasible without common ownership. 

These convergence efforts have benefited both the Tampa outlets themselves and 

the communities they serve. A little over a year after moving into The Tampa News 

Center, WFLA–TV was recognized by the Project for Excellence in Journalism, 

which is affiliated with Columbia University, as providing the best television journalism in the Tampa-Bay region. Local polls of Tampa-Bay area residents have also 

found that a majority of the respondents believe that convergence has improved the 

quality of news coverage and had a positive effect on news presentations in the 

Tampa market. The three properties have also experienced the following successes 

as a result of the convergence model: 

• Media General has increased the number of full-time news professionals in 

Tampa, despite the very serious advertising recession. 

• While daily newspapers across the country generally have been suffering declining newspaper circulation, the Tribune’s circulation again increased in total and 

in its core market of Hillsborough County during the last quarter of 2002 and 

the first quarter of this year. 

• While many television stations were losing viewers, the ratings for WFLA–TV’s 

11 p.m. newscast have increased consistently through 2001, 2002, and 2003. 

• Despite a downturn in the economy, WFLA-TV has maintained the same number of local newscasts and has replaced a syndicated program with a new, locally originated entertainment/variety program at 10 a.m. on weekdays. 

66 

Media General’s three Tampa outlets continue to gain recognition in the journalistic community, receiving an extensive list of journalistic awards. 

As in Tampa, the newspapers and television stations in each of Media General’s 

other five convergence markets maintain separate news and editorial staffs. Nonetheless, despite the fact that they do not have the advantages of co-location as in 

Tampa, the news staff at these co-owned properties regularly share story ideas by 

e-mail, fax and telephone, and they publicize each other’s news content. Media General’s convergence markets have made great progress in providing their television 

cameramen with equipment that allows the newspapers to retrieve newsprint-quality photos, and they are equipping the print photojournalists with digital video cameras to provide the television station with video. The newspapers consistently make 

their archives available to the television stations. As a result of cross-ownership, the 

television stations in each of Media General’s five smaller convergence markets have 

been able to increase the news and information they deliver to their communities. 

Roanoke-Lynchburg DMA. Since Media General acquired WSLS(TV) in Roanoke, 

the station has expanded its weekday early morning newscast from 60 to 90 minutes. It has also added a locally-produced hunting and fishing show; numerous local 

specials concerning the Virginia and NASCAR races in Martinsville, Virginia, and 

the opening ceremonies of a nearby National D-Day memorial; and coverage of local 

and statewide political debates. As a result of convergence, the station’s overall staff 

has grown by two individuals, and the news department staff, in particular, has increased by nine. 

Tri-Cities, TN/VA DMA. Through convergence, WJHL(TV) in the Tri-Cities, TN/ 

VA DMA has added a new 30-minute weekday newscast at 5 p.m. In addition, its 

program lineup now includes locally produced sports specials and periodic ‘‘Medical 

Watch’’ and ‘‘Education Week’’ shows. Convergence has also created employment opportunities. The station’s full-time staff has increased from 74 to 88 employees. 

Florence/Myrtle Beach DMA. In Florence, South Carolina, WBTW(TV) and The 

(Florence) Morning News have shared coverage of a number of major stories over 

the last year, including initiation of new local airline service, expansion of a local 

plant, and the shooting of a sheriff’s deputy. Together, they have completed many 

projects, which the outlets believe could not have been covered if they had tried to 

do so alone, such as a seven-part series about the seven worst local traffic intersections and distribution of a hurricane tracking chart, which helped many local citizens monitor potentially devastating storms in the area during hurricane season. 

Perhaps the Florence outlets’ most notable achievement to date has been the extensive effort that they made in 2002 to cover local political campaigns and elections 

and provide debates among the candidates. In April 2002, the combined outlets 

sponsored a debate among gubernatorial candidates in the Republican primary, the 

first debate of the campaign and the first in which all seven party candidates participated. In October 2002, the outlets sponsored a debate among the Democratic 

and Republican gubernatorial candidates. In both debates, the outlets encouraged 

their readers and viewers to submit questions to be used in the debate. In November 2002, the outlets established a joint ‘‘election results’’ desk to which their reporters telephoned results, enabling both improved timeliness and an expansion of their 

election coverage. Both Florence outlets also launched a cooperative effort to stage 

a ‘‘town hall’’ community meeting called ‘‘Our Town Hartsville,’’ and they each coordinated on a six-part series covering the meeting. In Florence, the overall employee count at WBTW(TV) has also increased by two individuals. 

Columbus, GA DMA. Through convergence, WRBL(TV) in Columbus, Georgia, has 

been able to add a new 30-minute weekday newscast and, later this fall, is scheduled to debut both an additional half-hour newscast at 5:30 p.m. and a locally produced public affairs show. The combined outlets have also been active in efforts intended to facilitate civic discourse and debate, hosting a ‘‘Political Forum’’ in spring 

2002 that was carried in both outlets and brought together a cross-section of local 

citizens to discuss and ascertain civic topics that they thought candidates should address. Several months later, on election night, the newspaper’s reporters created 

print stories and provided constant on-air updates. The outlets’ combined efforts 

have also allowed in-depth coverage of a local murder trial, presentation of a ‘‘Hurricane Watch’’ project, coverage of the collegiate Iron Bowl football game, and hosting 

and coverage of special events related to National Signing Day, featuring local area 

high school football players and their college selections. As a result of convergence, 

WRBL(TV) has added an additional staff reporter in the newsroom and plans to add 

another two in September 2003, with the debut of its expanded newscast and public 

affairs programming. 

Panama City, FL DMA. In Panama City, Florida, Media General’s smallest convergence market, WMBB(TV) works closely not only with the Jackson County 

Floridan, which is in the same DMA, but also with The Dothan Eagle and the EnVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000070 Fmt 06601 Sfmt 06621 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE
67 

terprise Ledger in the adjacent Dothan, Alabama DMA. In May 2002, WMBB(TV), 

the three newspapers, and their websites jointly produced a special section on a locally controversial proposal to construct an I–10 highway connector between Florida 

and Alabama; reporters from the newspaper appeared on-air, and television station 

reporters contributed print pieces. 

With convergence, WMBB(TV) has added an early evening newscast on Sundays 

from 5 p.m. to 5:30 p.m., and the newsroom staffs of the Panama City station and 

newspaper daily discuss developing new stories to improve both the timeliness and 

depth of local reports. In one recent example, the television station first learned 

about a breaking news story involving a bank robbery from a report phoned in by 

a member of the newspaper’s staff. The two outlets also worked together to delve 

into accusations against a local sheriff’s deputy for sexual misconduct with a young 

girl. Despite efforts from local government officials to prevent the story’s dissemination, the station’s and newspaper’s reporters, working together, used their combined 

resources and clout to ensure its presentation to local residents. 

As in other Media General markets, the outlets have collaborated on weather-related stories. The newspaper’s daily weather package is produced by Media General’s Interactive Division based on information from the television station’s meteorologists. Both the newspaper and television station jointly produce a hurricane 

tracking map that includes basic information about hurricanes, a list of telephone 

numbers to call for help, and pointers on developing a severe weather survival plan. 

Convergence has allowed staffing levels at WMBB(TV) to remain constant despite 

the general economic downturn. The station’s news staff has increased by three, but 

overall the station has lost three employees. 

Media General’s success with convergence shows that the size of the market is 

irrelevant. With co-owned operations, it has been able to bring better, faster, and 

deeper news and other benefits to communities, large and small. The critical ingredients for successful implementation of convergence are co-ownership and strong 

leadership, and it is for these reasons that Media General has been able to achieve 

these public interest benefits in markets large and small. 

Repeal of the Newspaper/Broadcast Cross-Ownership Rule Is Long Overdue 

In 1975, the FCC asserted authority under the Communications Act to adopt a 

rule flatly prohibiting newspaper publishers, who hold no spectrum-related assets, 

from acquiring and operating broadcast stations in markets in which their newspapers are published. This rule was adopted not because the FCC had found any 

reason that newspaper owners as a group were unqualified for broadcast ownership, 

or because any claim had been made that newspaper-television station owners committed any specific non-competitive acts, but solely because the FCC hoped such a 

rule would add to local diversity. Although well-intentioned, the FCC conjectured 

that the rule would improve diversity despite making a number of contrary empirical findings on the record. For instance, the FCC found that there generally was 

significant diversity or separate operation between commonly owned broadcast stations and newspapers. Moreover, a study of licensee programming conducted by the 

FCC’s staff documented that newspaper-owned stations rendered more locally-oriented service. On appeal, the reviewing courts explicitly recognized the lack of any 

documented public interest harm compelling adoption of the rule. 

More than a quarter century later, the newspaper/broadcast cross-ownership rule 

still remains unchanged despite profound growth in media outlets and owners, liberalization of all other media ownership rules, and a mountain of evidence on the rule 

that shows, in contrast to the predictive judgments upon which the FCC relied in 

1975, that cross-ownership does not harm any of the FCC’s articulated policy goals 

and that the rule, in fact, now hinders the provision of news and innovative media 

services. Last fall, when the FCC issued its Notice of Proposed Rulemaking in its 

omnibus ownership proceeding, the action was at least the eighth time in almost 

as many years that the FCC had considered or been asked to consider the rule’s 

possible repeal. Time and again, the FCC has collected more and more evidence supporting repeal, and each time has failed to take action on the evidence, promising 

repeatedly to act but never doing so. 

The omnibus media ownership proceeding, which is to be decided on June 2, 2003, 

incorporated by reference all the comments filed in a separate 2001–2002 rulemaking proceeding dedicated solely to review of the newspaper/broadcast cross-ownership rule. Common throughout all the comments opposing repeal of the newspaper/broadcast cross-ownership rule that have been filed in both the omnibus and 

the newspaper-specific proceedings is a profound misunderstanding of the 

newsgathering resources and financial commitment required to deliver high-quality 

local news and information to the public. The same comments also reflect a complete 

unawareness of the fact that local media content at successful outlets is not dictated 

68 

on a ‘‘top-down’’ basis but is consumer-driven and responsive to the needs of the audiences and communities they serve. The opponents of repeal cling to the simplistic 

and erroneous notion that maximization of the number of separate media owners 

is the only way to ensure diversity and competition in the local information marketplace. In light of the very real financial constraints and pressures facing broadcasters and newspaper publishers in today’s vigorously competitive environment, 

however, eliminating the ban is the FCC’s best option for ensuring continued vitality and, indeed, improvement in local news and information available to the public. 

As the media industry has recognized and called to the FCC’s attention in virtually unanimous comments, the current system is broken. Diversity of viewpoint 

does not require diversity of ownership, and the newspaper/broadcast cross-ownership ban has resulted in noneconomic ownership ‘‘islands.’’ As noted above, both 

worsening financial conditions in the media sector and the economy overall and increasing competition from larger national and international players, which typically 

present the same undifferentiated non-local information in all markets, have caused 

many television stations in both large and small communities to curtail or terminate 

local newscasts. Prompt repeal of the rule is needed to stem and help reverse this 

decline. 

Any Action Short of Complete Repeal of the Newspaper/Broadcast CrossOwnership Rule Is Unconstitutional and a Violation of Numerous 

Statutory Provisions 

Anything short of total repeal of the newspaper/broadcast cross-ownership rule 

will raise a whole host of legal problems. Most significantly, any ban on local newspaper/broadcast cross-ownership violates the First Amendment. Failing to repeal the 

rule in its entirety will also violate the Equal Protection Clause and Section 202(h) 

of the 1996 Telecommunications Act. In addition, keeping the rule in any market 

will run counter to the FCC’s goals of fostering localism, innovation, and diversity. 

First Amendment. Although the newspaper/broadcast cross-ownership rule unquestionably implicates First Amendment rights, the Supreme Court declined to 

apply traditional standards of First Amendment scrutiny when it affirmed the rule 

in 1975. Instead, relying on two cases from the early days of broadcasting, the Court 

concluded that broadcast spectrum scarcity justified a less rigorous First Amendment analysis that did not require consideration of whether the regulation was narrowly tailored or otherwise sufficient to withstand traditional First Amendment 

scrutiny. 

In the intervening years, technological advances, media proliferation, and the 

FCC’s revised approach to licensing broadcast stations have rendered the spectrum 

scarcity rationale obsolete. Broadcast licenses are now auctioned and, for all practical purposes, traded on the open market. There is no longer anything unique about 

spectrum that distinguishes it from other economic goods. Today, broadcasters are 

entitled to the same level of constitutional protection that all other media enjoy. 

Without spectrum scarcity, the newspaper/broadcast cross-ownership rule must be 

evaluated, for First Amendment purposes, under strict or intermediate scrutiny, and 

it can survive neither analysis. Strict scrutiny requires the FCC to show that the 

rule is the ‘‘least restrictive means available of achieving a compelling state interest.’’ In the past, the FCC and the courts have justified the newspaper/broadcast 

rule on the ground that it would produce a ‘‘hoped for’’ gain in diversity. As the extensive record before the FCC shows, with the amazing growth of new and traditional media outlets over the last quarter century and evidence that the rule is preventing the development of new and innovative information services, fostering diversity is no longer a ‘‘compelling state interest’’ that requires retention of any vestige 

of the cross-ownership rule. Moreover, the FCC cannot demonstrate that a ban on 

newspaper/broadcast cross-ownership actually achieves diversity. A blunt ownership 

restriction that bans all cross-ownership, particularly in smaller markets, is not ‘‘the 

least restrictive means’’ for attaining the FCC’s purported ‘‘diversity’’ goal. Indeed, 

the rule may have the opposite effect of protecting and perpetuating ownership by 

companies not interested in providing news and information, a possibility that is 

more likely in small markets where the economics of television operations can be 

especially dire. The rule thus cannot survive strict scrutiny review. 

The rule must also fail even under the lessened standard of intermediate scrutiny. 

That standard requires the FCC to demonstrate the harm posed by cross-ownership, 

provide a record that validates the regulation, and show that the rule is ‘‘narrowly 

tailored to further a substantial governmental interest.’’ Again, the record before the 

FCC fails to demonstrate any actual harm but shows very positive benefits of crossownership, such as those common to Media General’s experience in its six convergence markets. Moreover, a ban on cross-ownership in all small markets is not ‘‘narrowly tailored.’’ 

69 

No matter which standard is applied, small markets have been just as affected 

as large markets by the dramatic growth in the number of media outlets and owners 

since the newspaper/broadcast cross-ownership rule was adopted. Media General 

has seen this profusion in all its markets, but particularly in the six DMAs where 

it practices convergence. The FCC staff’s own recent study on outlets and owners 

also included many medium- and small-sized markets and found such a high rate 

of growth that it used words like ‘‘whopping’’ to describe it. There is also no question 

that consumers in smaller markets are just as entitled as those in large markets 

to the benefits of common ownership and access to the increased local information 

it produces. 

Equal Protection. When restrictions like the newspaper/broadcast cross-ownership 

rule affect fundamental rights such as the First Amendment, the Equal Protection 

Clause of the United States Constitution requires that such regulations be narrowly 

tailored to a legitimate governmental objective. In the absence of an effect on fundamental rights, if a regulation is to withstand an Equal Protection challenge, the government must establish a rational relationship to a legitimate state interest. 

As noted earlier, the ‘‘legitimate’’ objective that the FCC asserted in defending the 

initial adoption of the newspaper/broadcast cross-ownership rule, i.e., enhancing diversity, has completely evaporated because of the profusion of media and lack of 

spectrum scarcity. In addition, ‘‘diversification’’ is no longer taken into account in 

initial licensing by the FCC, a point upon which the Supreme Court had relied in 

1978 in upholding the rule based on a spectrum scarcity rationale. 

Even if the FCC’s assertion of a ‘‘diversity’’ objective in the Equal Protection context were deemed to be legitimate, a modified ban on cross-ownership that stops 

short of providing small-market relief would not be ‘‘narrowly tailored’’ because the 

FCC could not show, based on the record before it, that the rule in any way directly 

or materially advances diversity in such markets. The record before the FCC does 

not include evidence of any correlation at all between diversity and the existence 

of the rule, but, rather, suggests that the rule is harming the delivery of diverse 

local news. Thus, the rule also flunks the less strict ‘‘rational relationship’’ test. 

The Supreme Court’s denial in 1978 of the Equal Protection claims of newspaper 

owners has preserved a regulatory regime that has radically changed, and retaining 

any form of a newspaper/broadcast cross-ownership rule that discriminates against 

small market owners would also fail on Equal Protection grounds given other 

changes in the FCC’s regulation of media ownership. For instance, vacatur of the 

cable television/television cross-ownership rule has occurred in all markets. When 

the Court of Appeals for the District of Columbia Circuit recently vacated that rule, 

it did not suggest any need to retain its restrictions in small markets; the FCC 

never mentioned such a concept when it sought rehearing; and the FCC has allowed 

the rule to disappear nationwide. If there is no reason to follow a graduated market 

approach in repealing cross-ownership of television and cable television, two outlets 

that the FCC does regulate, there can be absolutely no reason to do so for combination of newspapers, which are otherwise unregulated by the FCC, and broadcast stations. In addition, television/radio cross-ownership is allowed in all markets provided a certain number of ‘‘voices’’ remain, a standard that can be met in virtually 

all small markets. Moreover, businesses closely related to broadcasting, such as advertising agencies, rep firms, broadcast networks, equipment manufacturers, and 

program suppliers, may own broadcast stations in small markets, whereas newspaper publishers in the same markets are not be able to do so. Finally, all other 

businesses unregulated by the FCC (many of which compete with newspapers and 

television stations at the local level, such as Internet site owners and billboard companies) may own broadcast stations in their home markets, regardless of size, 

whereas newspapers may not. 

Section 202(h) Violation. Section 202(h) of the Telecommunications Act clearly requires the FCC biennially to determine whether any of its ownership rules remain 

‘‘necessary in the public interest as the result of competition’’ and to ‘‘repeal or modify any regulation’’ that is ‘‘no longer in the public interest.’’ The United States 

Court of Appeals for the District of Columbia Circuit has found that this section carries with it a strong presumption in favor of repeal. The record before the FCC overwhelmingly demonstrates that the public interest benefits of repeal, in markets of 

all sizes, outweigh the benefits of retention. This record combined with the presumption in favor of repeal leaves no legally sustainable case other than full repeal. Section 202(h) also requires the FCC to consider the impact of competition on its rule 

review and, any standard short of full repeal that measures the permissibility of 

cross-ownership only by reference to one or two types of outlets in a market and 

ignores the documented and pervasive competition from all other media in a market 

will run afoul of Section 202(h). 

70 

Violation of the Statutory Goals of Localism and Innovation. The Communications 

Act articulates a number of specific public policy goals. Among them is the duty to 

foster localism under Section 307(b) and the duty to encourage the provision of new 

technologies and service to the public under Section 157(a). 

Since the 1930s, localism has been one of the bedrock or core principles of our 

national communications policy. For nearly 70 years, the FCC has been carrying out 

this mandate by ensuring that licenses and frequencies are fairly, efficiently, and 

equitably distributed throughout the nation, so that citizens, no matter what the 

size of their communities, have access to broadcast stations and the local news they 

deliver. 

As noted above and as Media General has documented extensively in the FCC’s 

record, the ever increasing cost of producing quality news as well as other financial 

pressures on broadcasters and the general downturn in the economy have resulted 

in over 40 stations in small and even some large markets curtailing or entirely 

eliminating their local news broadcasts. Common ownership will allow the infusion 

of news-related resources into these failing local television operations. Refusing to 

allow common ownership in smaller markets will ensure that this negative trend 

in decreased local content will continue unabated, and the goal of localism will be 

poorly served. 

The policy in favor of innovation was added to the Communications Act much 

more recently. With equal force, however, it requires full repeal of the newspaper/ 

broadcast cross-ownership rule. There is no rationale in the record before the FCC, 

nor is there any other legally sustainable reason, for denying small market operators and consumers the same innovations and benefits, such as the enhanced local 

news resulting from convergence, that are available to their counterparts in larger 

markets. If anything, the costs and difficulties faced by small market operators 

make such changes even more deserved and compelling. The record is replete with 

the journalistic and public interest benefits that can redound to the benefit of consumers in smaller markets through convergence. 

Media General has a strong interest in expanding its convergence efforts beyond 

the six markets where it currently offers such benefits. Like all other newspaper 

owners, however, Media General is hampered in doing so by the FCC’s newspaper/ 

broadcast cross-ownership ban. 

* * * * * 

For decades, communications policymakers have been struggling to find a way to 

foster the provision of diverse local news and informational programming in the 

smaller markets of the United States. Media General has demonstrated that it can 

be done and done profitably. The result is hundreds of journalistic awards, a quantifiable growth in news and public affairs programming, ratings and circulation increases, and job creation. There is nothing in the FCC’s record, other than anecdotes 

and speculative musings, that demonstrates any public interest detriment from such 

convergence. The FCC should be strongly encouraged to allow the benefits of newspaper/broadcast cross-ownership to flourish in all American markets, large and 

small. 

PREPARED STATEMENT OF VICTORIA RISKIN, PRESIDENT, WRITERS GUILD OF AMERICA, WEST

Thank you Senator McCain and Senator Hollings, and Members and staff of the 

Senate Commerce Committee, for conducting these hearings. I appreciate the opportunity to submit this testimony for the record on behalf of the Writers Guild of 

America, west. 

Senators, the Writers Guild is deeply concerned that the Federal Communications 

Commission is preparing to issue rules that will further deregulate the media and 

accelerate the negative effects of consolidation. 

The media are the modern-day American Town Square, the place where people 

from different backgrounds and points of view share their stories and the American 

public learns about the world. Here is where American democracy comes alive and 

the American identity is forged. But today, barriers have been erected to keep all 

but a handful of voices from being heard in our town square. 

The Federal Communications Commission and the Courts asked for data about 

diversity in entertainment programming. As president of the Writers Guild of America, west, which represents the great majority of writers and producers who create 

primetime entertainment programs, I can tell you that over the past decade, diversity of production sources in the marketplace has been eroded to the point of near 

extinction. In 1992, only 15 percent of new series were produced for a network by 

a company it controlled. Last year, the percentage of shows produced by controlled 

71 

companies more than quintupled to seventy-seven percent. In 1992, 16 new series 

were produced independently of conglomerate control; last year there was one. 

The opportunity for access for a broad range of voices has been cut dramatically. 

The claim has been made that because we now have hundreds of channels on 

cable. ‘‘choices abound.’’ But more channels does not really mean more choices. In 

the past the FCC has defined a ‘‘major’’ network as one that reaches 16 million or 

more homes. By that definition there are ninety-one major networks. But of these 

ninety-one, 73, or fully eighty percent, are owned or co-owned by 6 corporate entities. Five of these 6 are the same corporations that run the broadcast networks: 

Viacom, Disney, News Corporation, General Electric, and AOL Time Warner. 

Any doubt about the control exercised by these five companies was dispelled in 

a recent report by respected Wall Street media analyst Tom Wolzien, which I have 

attached to my comments. Wolzien points out that a ‘‘strong programming oligopoly 

is beginning to reemerge.’’ For December, 2002, he found that the five conglomerates 

‘‘controlled about a 75 percent share of prime-time viewing.’’ Wolzien concludes that 

over the next few years, with the further consolidations he expects to occur, these 

five companies will control roughly ‘‘the same percentage of TV households in prime 

time as the three networks did 40 years ago.’’ 

In other words, the control by a few conglomerates will be as absolute as ever in 

history. 

The data we submitted to the Federal Communications Commission as part of our 

official filing clearly documents the dominance of content by a handful of vertically 

integrated conglomerates; that is now corroborated by an independent analyst. No 

longer can anyone argue that the facts of such control or their potential impact are 

in doubt. The old programming oligopoly of media content is being rebuilt. 

The creative community has seen in recent years how increasingly difficult it is 

to bring innovative shows to the air. All too often—indeed, virtually invariably—to 

get their work on television writers and producers must cede ownership and creative 

control to the network or cable companies. Most have no choice, none at all. They 

must accept the network or cable company as a partner and surrender their independence, with one result that if their show doesn’t make the schedule, they are 

now prohibited from taking it elsewhere. Nearly one hundred small and mediumsized businesses—each with its unique point of view—have disappeared in the last 

10 years. Why is the disappearance of the small independent producer and writer 

an issue for public concern? Because with them have gone stories from hundreds 

of writers and producers who care deeply about original drama and comedy, history, 

culture, and not just, for example, ratings, ratings, all the time ratings. 

Members of the Commerce Committee have recently received letters from some 

of the most respected and famous independent writers and producers in Hollywood, 

including Grant Tinker, Diane English, Allan Burns and others, expressing their 

concern about the chilling control media conglomerates now have over entertainment programming and how this is impacting quality television. In fact, all the creative Guilds of the Hollywood community including the Producers Guild, the Directors Guild and, the Screen Actors Guild have warned the FCC in the strongest 

terms possible about the negative impact of media concentration and have called 

upon the FCC to establish limits on how much programming the conglomerates can 

produce for their own networks. In a letter to the Commissioners, Senators Wyden 

and Collins this week called upon the FCC to consider a new access rule that would 

be vital to the protection of the diversity of voices on television. 

The Writers Guild urges the FCC to adopt rules governing media ownership that 

expand access and diversity, not limit it to these few gigantic companies. We ask 

you to encourage the FCC to take constructive action to remedy the serious imbalance that has taken root in the programming marketplace. We are asking that a 

few companies do not continue to have a stranglehold on free expression and robust 

open debate, and that independent voices are once again allowed to be heard in the 

land. Openness will help ensure program source diversity not for any given group 

of entrepreneurs or writers but for the marketplace of ideas and for Democracy 

itself. We ask that storytellers from all backgrounds be once again allowed independent access to America’s town square. We ask these things because we believe 

that diverse programming from distinct and varied sources is the very definition of 

the public interest. 

72 

ATTACHMENT

Bernstein Research—Weekly Notes—February 7, 2003 

RETURNING OLIGOPOLY OF MEDIA CONTENT THREATENS CABLE’S POWER

by Tom Wolzien and Mark Mackenzie 

The Long View 

Returning Oligopoly of Media Content Threatens Cable’s Power 

Overview 

Common wisdom these days has the consolidated cable companies, particularly 

Comcast, taking a commanding lead in the age-old leverage battle with programmers. Supposedly this will give cable free rein to drive down prices paid for content. 

On the contrary, a strong programming oligopoly is beginning to re-emerge. This is 

permitting a three-pronged pincer movement that combines a surprising growth in 

control of national content with consolidated cable’s unintentional increase in its exposure to powerful local retransmission consent requirements. The growth in content 

power will be additionally enabled by new consumer hardware and high-speed networks to the home. Comcast ($25) now must gain retransmission agreements covering 

55 stations owned and operated by the largest programmers, who, together with 

AOL, controlled more than 70 percent of the prime-time viewing in December. This 

number would increase to 85 percent if independent and joint-venture services are 

consolidated with the big five—a likely event over the next few years as weaker cable 

networks are hammered on price. At that point, five programming giants would split 

roughly the same number of rating points controlled by ABC, CBS and NBC during 

television’s ‘‘golden age.’’ Additionally, the introduction of in-home networks and 

servers, coupled with the evolution of unbundled routes for content into the home, 

suggest that the implication of these changes may go far beyond the price paid to 

programmers. Going forward, the programmers’ power threatens cable’s ability to 

maintain the value of its ‘‘bundle’’ and eventually may shift it to ‘‘dumb pipe’’ status, 

devoid of the upside from intellectual property. 

Part I: Programming Power Grows 

The subject of this Long View is leverage—whether content or distribution can get 

an edge on one another going forward and, if content can get an edge, does that 

threaten cable’s historic ability to bundle content and transport at a high-margin 

markup. Our view is that big-content is slowly gaining an edge, even as cable consolidates. That edge comes from a combination of local and national distribution and 

from evolution in the consumer electronics area. 

Programming Oligopoly Reforming: A study of the December ratings from Nielsen 

Media suggests that we are beginning to see a rebuilding of the old programming 

oligopoly when cable and broadcast network and station viewing are considered. In 

December, Viacom ($37) controlled about 22 percent of prime-time viewing through 

its broadcast and cable networks. Disney ($17) controlled 18 percent, while News 

Corp. ($25), NBC and AOL ($10) were each in the 10–12 percent range. Together, 

the five companies controlled about a 75 percent share of prime-time viewing, not 

including their nonconsolidated partnerships like A&E, Court TV and Comedy Central. 

Exhibit 1 shows what we found to be a major disconnect, at least for us, in perception and reality. Column (a) shows classic prime-time viewership during television’s 

‘‘golden age,’’ when three networks split an average of 57 percent of the television 

households (ratings). Last season ABC, CBS and NBC split about 23 percent, as 

seen in column (b). But if the viewing of all properties owned by the parent companies—Disney, NBC and Viacom—is totaled, those companies now directly control 

television sets in over a third of the TV households. Add AOL, Fox and networks 

likely to see consolidation over the next few years (Discovery, A&E, EW Scripps, 

etc.), and five companies or fewer would control roughly the same percentage of TV 

households in prime time as the three nets did 40 years ago. The programming oligopoly appears to be in a process of rebirth. 

73 

Increased Retrans Exposure: In another surprising twist, the consolidation of the 

cable industry has actually left the largest cable company, Comcast, more exposed 

to the leverage of the largest programmers, as their local television stations can further exploit the need for the cable company to gain permission to retransmit the 

local signals. The math resulting from consolidation is working against Comcast. In 

23 of the top 26 television markets covering half the population of the United 

States, Comcast now must gain retransmission consent for some 62 separate television stations owned by four of the top five program companies. Of the top 26 markets, only Houston, Phoenix and Portland, Oregon, currently don’t have an overlap 

of Comcast with ABC/Disney, CBS/Viacom, Fox/News Corp. and/or NBC/GE. Exhibit 

2 shows the programmers’ big market leverage against Comcast. 

Comcast’s historic approach has been to avoid high-profile conflicts. Just how 

high-profile retransmission consent conflicts can be is recalled from 2000 when then 

Time Warner Cable took the ABC stations off in New York and other major markets 

for a day before the company was crucified in Washington and other media. The lesson: the more exposed cable companies are to high-quality local television stations 

owned by the major programmers, the more leverage those programmers have 

against cable. And Comcast is now the most exposed of all, even before taking into 

account what News Corp. might do with retransmission permission for its Fox stations should it enter the satellite business. 

This overlap means that the programmers other than AOL probably now have 

sufficient control over Comcast through retransmission consent requirements for 

major stations to: (a) neutralize Comcast’s scale threat to reverse program cost increases, and (b) parry cable attempts to place limits on data transmissions. 


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Part II: Convergence (Finally) Is Real 

Revelation at the Kitchen Counter: Christmas day at my brother and sister-inlaw’s place in central New Jersey seemed like many others——toys and electronics 

for the teenage sons, the latest digital camera for their dad, Howard; but it was 

their mother Linda’s present that was stunning in its simplicity, and, perhaps, for 

what it said about convergence and the coming threat to what is becoming to be 

seen as an all-powerful cable industry. 

There on the kitchen counter, between the Kitchen Aid mixer and the Christmas 

cookies, was a new screen. It was a flat screen made by View-Sonic. The computer 

sat over the edge of the counter in a corner on the floor. Computers in kitchens 

aren’t all that unique these days, but this screen had a couple of buttons on the 

front. Push one and get the Web. Push another and there was cable television. Right 

there on the display unit. No separate TV. No All-in-Wonder cards jammed into the 

computer. Just a cable wire and a computer wire into the back of the flat screen. 

Just buttons. Just like AM–FM. TV-Internet. One device regardless of band. Simple. Threatening because it reminds that the consumer doesn’t care how programming gets into the home . . . just that it is available. 


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Today when you buy cable television service, it is a bundle—transport and content. The reason the top cable companies are able to get away with charging such 

high margins is that they are selling that transport/content bundle. We consumers 

are unable to separate the bundle. We analysts have a difficult time even figuring 

out what the parts actually cost. 

Data service is different. With their move into high-speed data, cable companies 

have, for the first time, unbundled their service. We consumers buy the data transport service for $40 or $50 a month, but, unlike video, we don’t buy online content 

from the cable company. And this may be the beginning of the demise of cable’s 

margins, not for what they make on data, but for what they may lose in conventional bundled services. Now, this isn’t going to happen right away, but it should 

be considered in strategic discussions. 

The coming threat is most easily illustrated by the difference between cable videoon-demand and the new Movielink—Web-delivered movie downloads on demand. 

The economics of a video-ondemand movie purchased from and delivered by the 

cable company are distinctly different for the cable company from a movie purchased via the studio’s Web proxy, Movielink. To keep it simple, assume that both 

movies cost $4, assume that the revenue is split equally between the studio and the 

distributor. For the cable VOD purchase, half of the consumer’s $4 goes to the studio and half goes to the cable company. For the Movielink purchase, half the conVerDate Nov 24 2008 11:42 Jul 26, 2011 Jkt 67526 PO 00000 Frm 000079 Fmt 06601 Sfmt 06621 S:\GPO\DOCS\67526.TXT SCOM1 PsN: JACKIE

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sumer’s $4 goes to the studio, and the remainder goes to Movielink. The cable company gets nothing above and beyond what it is already receiving for the data connection. It is providing transport just like the phone company. 

Cable operators have been thinking that they will be able to make out very well 

in this environment if they just begin to ratchet up price for those who transfer 

large files. But, as we just saw, they were missing the intellectual property upside 

that they get from bundling transport and content. Two analogies: you and your associates work all night putting together a deal that creates $10 million in value. The 

lights burn late, but the electric company only gets in additional $0.13 cents for the 

extra kilowatt-hours. It doesn’t get any of the value created under its lights. The 

same applies to a long distance phone company when you make a call on which 

value is created. The thought that a linear ratcheting of transport price can offset 

the intellectual property upside denies cable’s basic bundling premise. 

It is easy to deny any problem with the cable approach today. After all, Movielink 

is in its infancy and based on downloads of less than DVD quality for viewing on 

a computer screen. You can’t watch it on your TV. And there is no other streaming 

product, much less pay-per-view streaming product, that we care about. If you’re a 

consumer, just wait. If you’re a longer-term cable investor, watch out. As the consumer electronics industry accepts the better MPEG–4 compression standard and 

couples it with in-home storage and these new hybrid computer-television flat panel 

displays, the combination could begin to threaten cable’s wired monopoly. 

Real Networks now claims some 800,000 customers paying for streaming video 

content via the Web—content which often rides the high-speed cable pipe without 

allowing cable to take any intellectual property upside. In the next few months, 

Major League Baseball games will begin to be sold by Real, and ride the cable pipe. 

Cable won’t get an extra cent. 

But the threat to cable goes much further than just the fledglings of Real and 

Movielink. It would have been easy to miss the small print on one of the ESPN 

slides at Disney’s presentation to the UBS conference in December. Under the future business heading were listed ‘‘streaming video’’ and ‘‘payper-view.’’ There was 

no indication that these would be provided in cooperation with the cable operator, 

and streaming could help give Disney its long-sought-after alternate distribution 

system. If Disney develops an alternative distribution system to the home, it 

wouldn’t attack cable outright, but rather begin to offer bits and pieces of content 

that would steadily increase in length and quality over time. 

Likewise, the troubled AOL is trying to reposition its ‘‘bring your own access’’ approach to delivering high-speed content. BYOA opens the door for going around the 

cable operators, who have had more than enough time to cut deals with AOL to control long-term streaming. Whatever the reasons—most likely ‘‘stereo hubris’’ from 

both sides—not only are there no streaming controls on AOL in the current deals 

with Time Warner Cable and Comcast, but even the old 10-minute limitation on 

streaming from the original @Home and Roadrunner contracts, seems to have gone 

away. While AOL made a big deal at its December analysts’ meeting of planning 

to provide only small chunks of video by high speed, one mid-level AOL executive 

later told me that it wasn’t whether they could stream much more than small 

chunks of video, but whether they had the guts to do so. 

Cable companies may think they can control Movielink and Real and Disney and 

AOL by refusing to pass their data bits without being given a cut. This would be 

the old cable way. But to do so would initiate a radical change in the now well-established ‘‘open-ness’’ of the Internet—the ability of any consumer to get to any 

place in the world. Such a change by the largest cable companies likely would once 

again raise the profile of cable as gatekeeping monopolists. Such an attempt would 

pay hell in Washington and, depending on the content available, push users toward 

DSL or, in the future, wireless. 

Cable had its chance to develop original high-speed content at the outset, but 

failed. The original concept for @Home lent itself to providing preferred positions to 

certain content providers who would make content available on an exclusive or priority basis to @Home subscribers. That potential died when @Home decided to 

merge with Excite, was pushed into AT&T, and subsequently became embroiled in 

the internecine warfare of that now dismembered company. 

Part III: Hardware and Routes Benefit Content 

High-Density Storage Alternative: Making this all the more complicated is the rise 

of in-home storage and networking. These new technologies open cable to competition from stored content as well as that streaming in real time. At this year’s consumer electronics show, high-density storage was a major attraction. TiVo and Replay continued with their TV storage devices, but they were joined by the Sonys, 

Panasonics and Phillips’ and others which were converting television storage into 

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in-home servers for just about any type of material, including video. These devices, 

some of which can plug directly into the Internet, potentially provide the ability to 

put material on the television screen from any source, including material that has 

been streamed or downloaded. 

Competitive Principles: Capacity to deliver video content to the consumer is determined by a combination of: (a) the ability to compress the content into smaller total 

packages using continuing advances in digital compression, (b) the capacity in the 

circuit to transport that data, (c) the ability to separate a piece of content into moreeasily transportable components, and (d) the capability to store and reassemble the 

content before or at the home display device. Different types of content require different thresholds of capacity to reach the consumer. 

The highest threshold of capacity is required by something that is happening live, 

in real time. Of course, a live concert, sporting, or news event only happens live 

once. After that it is prerecorded someplace—centrally, at the edge, or in the home. 

At minimum, a live transmission demands all of the bandwidth required by the currently best compression system, and direct access to the consumer without intervening storage. 

Once content is preproduced or delayed, there become many more opportunities 

for delivery beyond a continuous stream. In theory, the content can also be transmitted: (a) in short bursts for reassembly, (b) not in real time (slowly), (c) by multiple routes and reassembled, or (d) splatted at super high speed. The only end requirement is that the data all wind up on a storage device in the home and in a 

form that can be reassembled by that device to make a coherent program. How it 

gets there and how long it takes to get there is not material, so long as it is available when the consumer wants it. At this point the aggregation of data potentially 

becomes more important than one single path, thereby suggesting the potential for 

a new generation of would-be gatekeepers who try to control the servers in the 

home. 

Routes into the Home: When considering the potential routes into the home, we 

began by thinking how few there were 25 to 30 years ago. Back then, there was 

broadcast radio and television and the telephone. And you couldn’t carry content in 

because hardware was too expensive. Video was recorded on huge reels of two-inch 

wide tape that played on sofa-sized machines costing hundreds of thousands of dollars. Today the number of routes into the home have exploded and may continue 

to expand with wireless data. And in-home storage is coming of age not only with 

the high-density storage of TV devices and the new consumer electronics servers, 

but also with PCs and video game consoles. 

It is not difficult to imagine one of these storage devices offering the option of receiving content by any combination of: (a) cable modem, (b) cable, (c) satellite, (d) 

DSL, (e) over-the-air digital television, and (f) by wireless (WiFi) running at 2.4 

GHz, another frequency, or using bits and pieces of the entire spectrum. 

Part IV: Cable’s Alternatives 

Investing in High-Speed Content: To avoid ‘‘dumb pipe’’ status, the cable industry 

can try to return to what made it great in the video realm—the combination of 

transport and exclusive content. In addition to offering high-speed Internet transport, a cable company might also elect to offer another high-speed data option that 

includes content not available elsewhere. Of course, this would require the cable industry, once again, to fund the development of exclusive content, as it did during 

the 1980s. Back then, this effort was hugely successful because there weren’t any 

alternatives—no Discovery, no TNT, etc. It was also an effort that was successful 

before the alternative distribution system of satellite. 

To date, cable development of a premium alternative to data has not been successful in the marketplace, to great extent because of the @Home fiasco discussed earlier. But there may be another reason. Cable operators have taken to high-speed 

modem service and its 50 percent+ margins like drugs. Of course they love it. The 

content is free, and the profit ramp is steep. The problem is that in selling a commodity they may be setting themselves up for a fall by selling nonexclusive content 

that is not only free to them—but also free to any competitor that may emerge. It 

should be remembered that the key to satellite’s emergence in the United States 

was Congressional action that required cable companies to sell to the satellite companies content that had previously been exclusive to cable. 

Cable vs. Programmer Leverage in Contracts: If the cable operators don’t want to 

invest in high-speed content, and if they don’t want to have their commodity-data 

pipe compete with the intellectual property upside of their classic cable-video bundle, then their only other alternative is to attempt to prohibit competition through 

contracts with programmers. On the surface, it would seem to be easy to require 

cable programmers to refrain from providing any digital services over the Web that 

78 

might compete with the cable operator’s bundled businesses. The simple deal would 

be, ‘‘if you want your network on our cable, you must agree not to compete on the 

Web.’’ Or, at least, cut the cable operator in on any broadband content action. Certainly that is possible with the likes of Movielink, Real or independent networks 

with little negotiating leverage. 

However, what would seem to be easy for a powerful cable company, may not be 

in the future when it has to deal with the big content companies. As noted earlier, 

the growing leverage of the programmers through both national distribution and 

local stations will provide significant leverage to maintain price and develop new 

services. 

Investment Conclusion 

While it is currently popular to view cable as having ‘‘won’’ in the leverage battle 

against content (if not against satellite), such a view is both momentary and premature. The growing power of the content providers in viewership across their multiple network and local platforms threatens cable’s short-term abilities to gain program pricing leverage, and its longer-term ability to protect its ‘‘intellectual property’’ upside within its content bundle. When coupled with the possibility of pricewarfare from a reconstituted satellite industry seeking market share, cable’s response will likely be to improve the offering in its ‘‘bundle,’’ probably by offering 

very low-cost telephone service using the scale economics of Internet Protocol telephony. 

Should this occur, then we would view the revenues of video from cable and satellite, data from cable and RBOC, and phone from cable and RBOC as all sloshing 

around the same bathtub. If satellite removes revenues from cable, then cable will 

try to remove revenues from the RBOCs. In the end, the economic realities of overcapacity will prevail to the detriment of both cable and the RBOCs, with principal 

distribution benefit accruing to the low-cost provider for any service. 

If the scenario plays out as we expect, cable operators will neither invest in highspeed content in the near term, nor succeed in blocking programmers who want 

their content to ride the high-speed pathways. Having failed to differentiate themselves, cable operators will likely return to the idea of developing their own content. 

While the cable operators may think this approach will be successful, as it was for 

video in the 1980s, they run a high risk because, by then, the programmers will be 

far down the road in establishing their own services to the detriment of cable. Simply put, cable will be too late if it waits. 

Programmers will continue to consolidate their cable networks, exploit the Internet and other distribution methods, and, barring heavy investment from the distribution players, move rapidly to strengthen what is already beginning to appear 

as a return to content oligopoly. Right now, the balance may appear to have tipped 

to cable, but over the longer term, the programmers hold the power. 

Disclosures 

Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration, productivity and proactivity 

of investment ideas. No analysts are compensated based on performance in, or contributions to, generating investment banking revenues. 

Bernstein rates stocks based on forecasts of relative performance for the next 6– 

12 months versus the S&P 500 for U.S. listed stocks and versus the MSCI Pan Europe Index for stocks listed on the European exchanges—unless otherwise specified. 

We have three categories of ratings: 

Outperform: Stock will outpace the market index by more than 15 pp in the 

year ahead. 

Market-Perform: Stock will perform in line with the market index to within +/ 

¥15 pp in the year ahead. Underperform: Stock will trail the performance of 

the market index by more than 15 pp in the year ahead. 

Bernstein currently makes or plans to make a market in every NASDAQ security 

contained within our coverage universe. 

Tom Wolzien, Bernstein’s Senior Media Analyst, holds an interest in a public company,ACTV, Inc., and is a director of a subsidiary to exploit his patents linking 

mass media with online services. ACTV may be involved in business dealings or 

legal actions with companies covered by Wolzien. Currently ACTV has business arrangements with Viacom, Comcast (which Mr. Wolzien also maintains a position in) 

and is involved in legal action against Disney. ACTV is in the process of being acquired by Liberty Media. 

79 

Accounts over which Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, and/or their affiliates exercise investment discretion own more than one percent of the outstanding common stock of VIA, T. 

One or more of the officers, directors, members or employees of Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited and/or its affiliates may at any time 

hold, increase or decrease positions in securities of any company mentioned herein. 

Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, or its or their 

affiliates may provide investment management or other services for such companies 

or employees of such companies or their pension or profit sharing plans, and may 

give advice to others as to investments in such companies. These entities may effect 

transactions that are similar to or different from those mentioned herein. 

Copyright 2003, Sanford C. Bernstein & Co., LLC, a subsidiary of Alliance Capital Management. 

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