U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

80–738 PDF 2013

S. HRG. 108–947 

MEDIA OWNERSHIP 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED EIGHTH CONGRESS 

FIRST SESSION 

MAY 22, 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 22, 2003 ............................................................................... 1 

Statement of Senator Allen ..................................................................................... 3 

Statement of Senator Boxer .................................................................................... 6 

Statement of Senator Breaux ................................................................................. 4 

Statement of Senator Dorgan ................................................................................. 5 

Statement of Senator Ensign .................................................................................. 5 

Statement of Senator Hollings ............................................................................... 1 

Prepared statement .......................................................................................... 2 

Statement of Senator Lautenberg .......................................................................... 88 

Prepared statement .......................................................................................... 90 

Statement of Senator Lott ...................................................................................... 86 

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

Statement of Senator Stevens ................................................................................ 4 

Statement of Senator Sununu ................................................................................ 6 

Statement of Senator Wyden .................................................................................. 3 

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

WITNESSES

Allard, Hon. Wayne, U.S. Senator from Colorado ................................................. 7 

Prepared statement .......................................................................................... 9 

Thomas Fontana, President, Fontana-Levinson on behalf of Writers Guild 

of America, East, The Caucus for Television Writers & Directors, American 

Federation of Television and Radio Artists ........................................................ 65 

Prepared statement .......................................................................................... 67 

Kimmelman, Gene, Senior Director of Advocacy and Public Policy, Consumers 

Union, on behalf of Consumers Union and the Consumer Federation of 

America ................................................................................................................. 21 

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

Mikkelsen, Dr. Kent W., Vice President, Economists, Inc. .................................. 61 

Prepared statement .......................................................................................... 63 

Murdoch, Rupert, Chairman and Chief Executive, The News Corporation, 

Ltd. ........................................................................................................................ 11

Prepared statement .......................................................................................... 12 

(1) 

MEDIA OWNERSHIP 

THURSDAY, MAY 22, 2003 

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

The Committee met, pursuant to notice, at 10:10 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. Good morning. Today the Committee continues 

its series of hearings examining consolidation of ownership in the 

media marketplace. During each of the previous hearings we have 

heard concerns about horizontal concentration in various media 

markets. The FCC is in the final days of examining the rules that 

govern media ownership. We will hear from the Commission shortly after that decision. I intend to have a hearing immediately upon 

our return from our recess. 

We have also heard concerns about increased vertical integration 

in all media. The radio, cable, and network television industries 

have all seen increased levels of vertical ownership. Many people 

fear that this phenomenon threatens diversity and competition as 

vertically integrated industries squeeze out their rivals. Recently, 

News Corp. announced its agreement to purchase a significant interest in DIRECTV. If the deal is approved, News Corp. will own 

the studios where content is created and the means to deliver the 

content either through its national broadcast network, including 35 

local broadcast stations, its 30-plus cable channels, including Fox 

News and Fox Sports Net, or its satellite system. 

I want to thank Mr. Murdoch for testifying today, and look forward to hearing more about this agreement. I also appreciate other 

witnesses for joining us today, and I will abbreviate my remarks, 

because I know all committee members are interested. I would appreciate if they would abbreviate theirs. We know we have a full 

day of votes, and we look forward to hearing from the witnesses. 

Senator Hollings. 

STATEMENT OF HON. ERNEST F. HOLLINGS, 

U.S. SENATOR FROM SOUTH CAROLINA 

Senator HOLLINGS. Thank you, Mr. Chairman. I appreciate very 

much the hearing. I would ask consent that we include my statement, an editorial in Business Week, an editorial this morning by 

William Safire, an article, ‘‘The U.S. Media Marketplace is Highly 

2 

Competitive,’’ a listing of holdings, and then, the author of that article, a listing of his holdings, that is, of the News Corporation, if 

we could include that all in the record here. 

The CHAIRMAN. Is that the article that has the ‘‘shucks, we are 

no monopolists’’ line that Rupert Murdoch will take today in testimony before the pussycats of John McCain’s Senate Commerce 

Committee? Is that the one we want included in the record? 

[Laughter.] 

The CHAIRMAN. Without objection. 

Senator HOLLINGS. As one pussycat to another, we ought to get 

that right in the record, I think, and I would include that statement, and thank you very much. 

[The prepared statement of Senator Hollings follows:] 

PREPARED STATEMENT OF HON. ERNEST F. HOLLINGS, U.S. SENATOR FROM SOUTH CAROLINA

Thank you, Mr. Chairman. Today the Committee again turns its attention to 

media ownership, and to plans afoot at the FCC that could drastically change the 

American media marketplace. Since its very beginnings, our system of broadcasting 

has been designed to ensure that the public airwaves serve the public. In that regard, we have entrusted our regulators with a fundamental responsibility—to protect the public interest from economic self-interest, and to promote the core values 

of localism, diversity, and competition that are essential to a well-functioning marketplace of ideas. 

Unfortunately, instead of fighting zealously for American citizens and these 

ideals, the FCC appears ready to unilaterally disarm. Chairman Powell has artificially set June 2 as ‘‘D-Day’’ for the current ownership rules, and a small, but wellconnected ‘‘coalition of the willing’’ has spared no expense in its assault on these 

limits. 

Already the top 5 programmers—Viacom/CBS, Disney/ABC, NBC, Time Warner, 

and News Corp./Fox (and potentially, News Corp./Fox/DIRECTV) 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. From every 

corner of the nation, there are examples where the interests of local communities 

are being sacrificed to the needs of network executives to find more eyeballs. But 

in response to claims that the future of broadcast television is in jeopardy, the FCC 

appears willing to respond—in an amazing act of corporate welfare—to raise the 35 

percent national broadcast cap established by Congress to 45 percent. 

With matters so fundamental to the fabric of democracy at stake, it was my hope 

that these issues would be considered in a fair manner with every measure taken 

to inform the public of the options under consideration, and their potential effect 

on local media markets. Unfortunately, that has not occurred. 

Mr. Chairman, the American people deserve better. They deserve to know that 

merger reviews will be searching and thorough, and that regulators will demand 

proof of tangible public benefits. But if the FCC continues its course in allowing the 

self-interest of a few media titans to trump the public’s interest in protecting a diverse marketplace of ideas, the effects may not be immediate, but they will be far 

reaching. 

We will see fewer creative outlets for independent TV and content producers; 

higher ad rates for large and small 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 community standards. 

While I welcome the testimony of the witnesses today and their responses to our 

questions, I am disappointed that we have not served our constituents by inviting 

the FCC Commissioners to testify on these issues in a public forum prior to their 

upcoming decision. While I understand it is the Chairman’s intention to invite the 

Commissioners soon after their decision, I fear that a ‘‘shoot-first, ask questions 

later’’ strategy plays right into the hands of the media conglomerates and leaves the 

American people a day late and a dollar short. 

The CHAIRMAN. Thank you. Again, I would appreciate if my colleagues would be brief in their opening remarks. Senator Allen. 

3 

STATEMENT OF HON. GEORGE ALLEN, 

U.S. SENATOR FROM VIRGINIA 

Senator ALLEN. Thanks, Mr. Chairman. I will try to be brief, and 

I would like my statement to be in the record. 

The CHAIRMAN. Without objection, all statements will be made a 

part of the record. 

Senator ALLEN. Thank you. In the midst of all of this, one of the 

key factors that I think needs to be updated as far as the regulations, is that smaller markets ought to have the same sort of regulations that are enjoyed by larger markets, including the duopoly 

rules, which I think discriminate against small markets. I am also 

in favor of newspaper cross-ownership. The costs are increasing, 

and the more you look at all the facts, where you do have the crossownership, the programming, including local programming, has improved. 

Also, I would ask people to be cognizant of the big increase in 

the number of outlets and opportunities for media, news and information via cable, satellite, FM stations and, of course, the Internet 

as well. And insofar as the hearing today will examine Fox News’ 

proposed acquisition of DIRECTV, I will note, and I am sure it will 

come out in the testimony, that in this effort to make sure there 

are no antitrust violations, which will be enforced by the Department of Justice, it seems to me that this programming appears to 

be available on a nonexclusive basis, and nondiscriminatory practices will be involved insofar as prices, terms, and conditions. I look 

forward to hearing our witnesses and their testimony, and also 

questioning them, and I thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Allen. 

Senator Wyden. 

STATEMENT OF HON. RON WYDEN, 

U.S. SENATOR FROM OREGON 

Senator WYDEN. Thank you, Mr. Chairman. I have a prepared 

statement for the record, if I could have that entered. I will just 

make a couple of comments. 

The first is that the country is now on the eve of the most important set of communications decisions in years, and I think it is important to understand what is really at issue before the Federal 

Communications Commission. It seems to me what is being debated now is that the media conglomerates are saying, trust us, we 

do not need ownership rules to do what is right. They are saying 

this despite the fact that the radio changes that are along the lines 

of these FCC changes have produced a wave of fake localism. 

They are saying this despite the needs that the cross-ownership 

conflicts need to be policed, and they are saying this in spite of the 

fact that there are new studies that indicate that public interest 

programming goes down when you have more media concentration. 

I am going to submit that set of studies as a part of the record, 

so I think it is important we have these hearings. I still hope that 

we will have a chance to review what the Federal Communications 

Commission is doing, because I think that the country is standing 

on the edge of a cliff here. We ought to look at what lies ahead, 

and these changes are not going to be good for the country. I thank 

you. 

4 

[The prepared statement of Senator Wyden follows:] 

PREPARED STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM OREGON

Time on this issue is getting very short. 

The FCC has made it clear that it intends to march ahead on its predetermined 

schedule. It won’t break stride, and it won’t heed the calls for caution by members 

of Congress (including many on this Committee) or by two of the five FCC commissioners. 

The problem is, I think the country could be standing on the edge of a real cliff 

when it comes to media consolidation. The public ought to be given a clear look at 

what lies below, because it may not like it sees. And once the threshold is crossed, 

it may be nearly impossible to turn back. 

There is a lot at stake here. Media ownership is important for diversity of viewpoints. It is important for robust public debate. And it is important for ensuring the 

kind of independent and competitive media corps that underpins a healthy democracy. 

Given the importance, I think the FCC should go the extra mile in this proceeding, not focus on efficiency or artificial deadlines. It’s really a matter of good 

government. At the very least, the agency should not be choosing this proceeding 

to cast aside its usual practice of allowing any Commissioner to request a one-month 

extension. 

There’s already been a great deal of concentration in the media industry. So I 

think it’s pretty ironic that the FCC seems to take the view that many media ownership rules are now obsolete. I think you could argue that they’re more important 

than ever. 

Perhaps the core disagreement here is whether the ownership of media really 

matters much. Some may say that jointly owned media outlets can still offer diverse 

and independent viewpoints. That media outlets owned by a distant conglomerate 

can still provide localism. That media outlets that own their own programming can 

still be open to independent creative programming. 

Maybe. But I don’t think the American public wants to bank on it. When the big 

media 

conglomerates say, ‘‘trust us, we won’t let our ownership influence our content,’’ 

I think the public reply is—thanks, glad to hear you say that, but we want a guarantee. ‘‘Trust us’’ isn’t good enough. That’s why we’ve had the media ownership 

rules. And it’s why they shouldn’t be rolled back. 

The CHAIRMAN. Thank you. 

Senator Stevens. 

STATEMENT OF HON. TED STEVENS, 

U.S. SENATOR FROM ALASKA 

Senator STEVENS. I apologize, I have no opening statement. 

The CHAIRMAN. Thank you. 

Senator Breaux. 

STATEMENT OF HON. JOHN B. BREAUX, 

U.S. SENATOR FROM LOUISIANA 

Senator BREAUX. Thank you, Mr. Chairman. Thank you for having the hearing. On the point of the 35 percent cap, whether it 

should be increased to 45 percent, I think the caps the way they 

have been set up is really a misnomer, because it goes back to the 

days when we basically watched our television from over-the-air 

transmissions, and if you lived in a city and had stations in cities 

that encompassed over 35 percent of the population, you could not 

own any more, but that is not the way people watch television 

today. They get their television through cable; they get their television through satellites. Very few, in fact, get it through over-theair transmissions, and yet, we are still looking at the area size 

where the stations are located. If the population adds up to over 

5 

35 percent, you cannot have any more stations. Well, that is ludicrous in the way things actually operate today. 

In those cities, in Los Angeles, for instance, you may have one 

NBC affiliate or CBS affiliate, and if they had a station in Chicago 

and Houston and Miami and Los Angeles and New York, it probably adds up to over 35 percent. That does not mean 35 percent 

of the people are watching that one outlet. It may be less than 3 

percent, because in Los Angeles or any one of those cities, the people have a choice between 150 stations, and just the fact that they 

are in a large area with the potential to have 35 percent viewership 

does not mean they really do, so it is really a misnomer. It is not 

the best way to judge whether people are watching more than one 

outlet. It is a throwback that is antiquated and should be replaced 

by a new and different standard. 

Thank you. 

The CHAIRMAN. Thank you. 

Senator Ensign. 

STATEMENT OF HON. JOHN ENSIGN, 

U.S. SENATOR FROM NEVADA 

Senator ENSIGN. Thank you, Mr. Chairman. I want to just echo, 

and I will keep it very brief, just echo some of the comments made 

by Senator Breaux. In just thinking when I used to visit my inlaws down in Southern California, and thinking of the large Hispanic population, I mean, that does not take into account the number of Hispanics that are watching purely Hispanic television when 

you are looking at the media percent ownership. We live in a completely different world today than when these rules were put into 

place, and to not recognize that I just think is not the right kind 

of public policy. 

Technology has radically changed the way the people get information. When looking at the purpose of the rules in the first place 

was to make sure that a small percentage of people was not dominating thought, was not dominating the information that came into 

your household. Today, that is virtually impossible to do even if the 

caps are lifted the way that they are being proposed by the FCC, 

so I think this whole thing needs to be looked at taking all the 

technologies into account: cable, satellite, over-the-air broadcasts, 

the Internet, radio, newspapers. 

Everything needs to be taken into account, because it is not just 

print newspapers anymore, there are newspapers on the Internet 

and the like, and so for us to have these antiquated rules governing 

such a completely different marketplace I think is outdated and 

needs to be changed. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Dorgan. 

STATEMENT OF HON. BYRON L. DORGAN, 

U.S. SENATOR FROM NORTH DAKOTA 

Senator DORGAN. Mr. Chairman, I regret that which some feel is 

old-fashioned—competition, diversity, and localism—are considered 

antiquated. The fact is, the American people own the airwaves. We 

license them for people’s use. If one company owned 100 different 

television channels and beamed it into your home, I suppose they 

6 

could make the case what wonderful variety you have. You have 

much more variety than if you had four channels, 25 times more 

variety, all from the same source. 

Look, the fact is, in 1995 we had the largest 25 television companies owning 24 percent of the stations. In 6 years they doubled 

that, now owning 44 percent of the stations. Seven cable companies 

have 90 percent of the U.S. cable subscribers. Ninety percent of the 

top 50 cable channels are already owned by the top four television 

and cable networks, and if the FCC gets its way in the next couple 

of weeks, we could easily be headed for a day when it will be legal 

for one company to own the cable company, the newspaper, the biggest TV stations, and the dominant radio stations all in exactly the 

same town. 

In my judgment, it ought never be old-fashioned for us to cling 

to the notion of competition, diversity and localism. The fact is we 

have gone a long way from those basic principles. I think the FCC 

is poised to march to the rear, regrettably, in the next couple of 

days, and then we will be able to visit with them after they have 

done it. I think that will be very destructive to the interests of this 

country. 

The CHAIRMAN. Senator Sununu. 

STATEMENT OF HON. JOHN SUNUNU, 

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator SUNUNU. Thank you, Mr. Chairman. I do not believe 

that the principles of competition, localism, or diversity are oldfashioned, and I would venture to say that I do not think anybody 

on this committee believes that the principles of competition, localism, and diversity are old-fashioned. 

The question, and the question probed by some of the previous 

speakers, is whether or not the rules needed to ensure those principles that were originally designed in 1955 or 1965 are appropriate to ensure those principles in 2005 or 2015 or 2025 for that 

matter. The principles are not necessarily old-fashioned, but technology has changed, competition has changed, the nature that people get their information has changed, and what we are here to discuss today is whether or not in order to keep pace with those 

changes in technology, some modification of the rules or the regulations might be appropriate. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Obviously, there is a diversity of opinion on this 

pussycat committee. 

[Laughter.] 

The CHAIRMAN. Senator Boxer. 

STATEMENT OF HON. BARBARA BOXER, 

U.S. SENATOR FROM CALIFORNIA 

Senator BOXER. Mr. Chairman, I ask unanimous consent to put 

my statement in the record. 

The CHAIRMAN. Without objection. 

Senator BOXER. I am keeping track of who the pussycats are. It 

is interesting. 

[Laughter.] 

7 

Senator BOXER. But let me say that people are calling certain 

rules antiquated when they were set in 1996, so let us get that 

squared away. The rules, the 35 percent rule went into effect in 

1996. I would like to ask unanimous consent to place into the 

record an article entitled, ‘‘Children’s TV Shows Cut in Half After 

Media Mergers,’’ and it says, as the FCC prepares to announce 

sweeping changes to regulations governing how many media outlets a single company can own. A new study shows dramatic decrease in children’s TV programming following a rise in media consolidation, and this was against all the promises that were made. 

I would just cut to the heart of it. 

We are going to hear from the FCC. I think they are being very 

unresponsive to many letters that many of us have sent. They 

refuse to really be transparent about what they are doing. They 

will not move back the date. The bottom line is, I am surprised to 

hear so many voices here who seem to take the opposite view of 

what I would think they would, meaning that we should stand for 

competition, free speech and all the rest, and believe me, I am 

going to fight for that, and I think we may have to fight for that. 

Thank you. 

The CHAIRMAN. Senator Lott. 

Senator LOTT. I believe since I have just arrived I will pass. 

The CHAIRMAN. Senator Nelson. 

Senator NELSON. Thank you, Mr. Chairman. Competition, diversity, and local coverage. Those are old-fashioned values that can be 

applied to the new age. 

The CHAIRMAN. We welcome before the Committee, our colleague 

and friend, Senator Allard, for a brief statement in preparation for 

this hearing. We thank you for your interest. We appreciate you 

appearing this morning, Senator Allard. 

STATEMENT OF HON. WAYNE ALLARD, 

U.S. SENATOR FROM COLORADO 

Senator ALLARD. Well, I would like to thank you, Mr. Chairman 

and members of the Committee, for allowing me to speak here 

today, and I would like to especially thank you, Mr. Chairman and 

Ranking Member Hollings, for both of your commitment to examining media ownership this year, and I look forward to working 

with you on these important issues. 

On May 13, this committee heard testimony from Frank Blethen, 

publisher of the Seattle Times, and Mr. Blethen stated, ‘‘the American newspaper, large and small and without exception, belongs to 

a town, a city, at the most, to a region.’’ There is a certain pride 

and comfort to be taken from the notion that the media that so pervades our lives could be so rooted in focus and accountability. 

As my colleagues well know, the Federal Communications Commission is currently reviewing a series of historical, broad rule 

changes that would make it easier for large media corporations to 

gobble up a greater share of local media, including television stations in the same market. The Commission and those who already 

hold enormous control over the content of the press claim this will 

only enhance the ability of the media to meet the needs of the consumer. The world, they claim, has grown so large and so complex 

that only vast resources and centralized control can carry imporVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00011 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80738.TXT JACKIE
8 

tant stories across the globe, and I respectfully disagree, Mr. Chairman. 

Consumers benefit from technology more today than at any time 

in history. In an age of satellite television and the Internet, I am 

not as convinced as some that the greatest toll in news coverage 

is the world beyond our region. The Consumers Union has correctly 

pointed out, in fact, that the opposite is the case. Satellite provides 

no independent local news information and is struggling just to 

make local stations available to subscribers. 

Radio providers, another acute example, prior to 1996, there was 

a 40-station national ownership cap in the radio industry. Today, 

Clear Channel alone owns almost 1,240 stations, and between onethird and one-half of all independent radio stations have been absorbed or run out of business, including many in Colorado. Suggesting allowing increased cross-ownership does not strike me as a 

policy in the greatest interest of the public, whom the FCC is chartered to serve. 

The current generation of Americans have seen the number of 

independently owned newspapers dwindle from 1,700 to 280. As 

Chairman McCain noted last week, this often equates to a loss of 

diversity of opinion in the pages of those newspapers with a common owner. I share the Chairman’s opinion on this matter, and am 

profoundly concerned with the marginalization of information being 

funneled to the local communities by multimarket media corporations. 

As Mr. Blethen stated in his testimony, the secret of a free press 

and vibrant public discourse depends upon voices in the communities themselves. While the facts stand on their own, it is equally 

compelling to examine what we have witnessed in my home state 

of Colorado in recent years. 

Since the joint operating agreement, referred to in my testimony 

as JOA, between the Denver Post and the Rocky Mountain News, 

local businesses have reported an increase in advertising rates between 6 and 10 times pre-JOA levels charged by both papers when 

they were separately owned. This represents an enormous fiscal 

impact on large and small businesses as well as individuals, infringing on their ability to reach the consumers they relied upon 

for years. Those who can still afford to advertise are forced to pass 

these increased costs to consumers. 

The issue before the FCC and this committee is not whether we 

need to redebate the Telecommunications Act of 1996, or specific 

joint operating agreements. The issue today is whether the public 

will be well served by another round of consolidation, particularly 

the wisdom of enhancing the ability of a large corporation to purchase broadcast outlets and newspapers in the same market. 

On several occasions, I have contacted the FCC chairman, Michael Powell, to express my concern over the direction the FCC appears to be taking and the speed with which it is moving. In my 

opinion, the scheduled June 2 vote of the FCC does not give the 

public nor Congress an adequate chance to comment on changes of 

such enormous consequence. 

I have joined Senator Stevens, Senator Hollings and others on 

this committee in support of legislation concerning one of the rules 

being examined by the FCC, that of a media ownership cap and loVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80738.TXT JACKIE
9 

calism in television, and look forward to working on that issue with 

this committee. I have been impressed and encouraged by the 

broad coalition of organizations expressing similar concerns over 

the FCC’s press for action. The Consumers’ Union, National Rifle 

Association, Common Cause, the Traditional Values Coalition, 

Code Pink Women for Peace, the U.S. Conference of Catholic 

Bishops, and the Future of Music Coalition are just a few of the 

organizations that share my concern for independent and diverse 

media in the United States. 

The FCC must carefully consider the prudence of these rule 

changes and the overall public interest at stake. Reed Hundt, FCC 

chairman during the passage of the Telecommunications Act, stated well the intention of the Congress. The Commission’s goal in 

this proceeding is to further competition, just as we seek to promote competition in other communications industries we regulate, 

but in our broadcast ownership rules, we also seek to promote diversity in programming and diversity in the viewpoints expressed 

on this powerful medium that so shapes our culture, close quote. 

Mr. Chairman, what we must encourage is locally driven news 

coverage, as opposed to national news that attempts to find a local 

perspective, but never gives local communities the in-depth coverage they should have. Do we want top-down coverage or bottomup coverage? I opt for local to national competition which in my 

view is the best way to go. It is my hope that the FCC will listen 

to the many voices that are coming forward, and ask them to take 

more time on these important issues before charting the course for 

media and consumers in the coming years. 

In conclusion, Mr. Chairman, the FCC would be wise to maintain 

the existing commitment made to the public, facilitating greater opportunity for Americans to do business, seek information, and enjoy 

entertainment from a vibrant, diverse, and healthy media. If the 

FCC fails in doing this, then we must be prepared to act again. 

I thank the Committee for their time and energy on these matters. I look forward to working with each of you as we address 

these most important issues. 

[The prepared statement of Senator Allard follows:] 

PREPARED STATEMENT OF HON. WAYNE ALLARD, U.S. SENATOR FROM COLORADO

I’d like to thank the members of the Committee for allowing me to speak here 

today. I would especially like to thank Chairman McCain and Ranking Member Hollings for their commitment to examining media ownership this year and I look forward to working with you on these important issues. 

On May 13 this Committee heard testimony from Frank Blethen, Publisher of the 

Seattle Times. Mr. Blethen stated ‘‘the American newspaper, large and small, and 

without exception, belongs to a town, a city, at the most to a region.’’ There is a 

certain pride and comfort to be taken from the notion that the media that so pervades our lives could be so rooted in focus and accountability. 

As my colleagues well know the Federal Communications Commission is currently 

reviewing a series of historically broad rule changes that would make it easier for 

large media corporations to gobble up a greater share of local media, including television stations, in the same market. The Commission and those who already hold 

enormous control over the content of the press claim this will only enhance the ability of the media to meet the needs of the consumer. 

The world, they claim, has grown so large and so complex that only vast resources 

and centralized control can carry important stories across the globe. I respectfully 

disagree. 

Consumers benefit from technology more today than in any time in history. In an 

age of satellite television and the Internet I am not as convinced as some that the 

10 

greatest hole in news coverage is the world beyond our region. The Consumers 

Union has correctly pointed out, in fact, that the opposite is the case: satellite provides no independent local news information and is struggling just to make local 

stations available to subscribers. 

Radio provides another acute example. Prior to 1996 there was a 40 station national ownership cap in the radio industry. Today Clear Channel alone owns almost 

1240 stations and between one third and one half of all independent radio stations 

have been absorbed or run out of business, including many in Colorado. Suggesting 

that allowing increased cross-ownership does not strike me as a policy in the greatest interest of the public whom the FCC is chartered to serve. 

The current generation of Americans has seen the number of independently 

owned newspapers dwindle from 1,700 to 280. As Chairman McCain noted last 

week, this often equates to a loss of diversity of opinion in the pages of those newspapers with a common owner. I share the Chairman’s opinion on this matter and 

am profoundly concerned with the homogenization of information being funneled in 

to local communities by multi-market media corporations, As Mr. Blethen stated in 

his testimony, the secret of the free press and vibrant public discourse depends upon 

voices in the communities themselves. 

While the facts stand on their own, it is equally compelling to examine what we 

have witnessed in my home state of Colorado in recent years. 

Since the Joint Operating Agreement (JOA) between the Denver Post and the 

Rocky Mountain News local businesses have reported an increase in advertising 

rates between six and ten times pre-JOA levels charged by both papers when they 

were separately owned. This represents an enormous fiscal impact on large and 

small businesses as well as individuals, infringing on their ability to reach the consumers they relied upon for years. Those who can still afford to advertise are forced 

to pass these increased costs to consumers. 

The issue before the FCC and this Committee is not whether we need to re-debate 

the Telecommunications Act of 1996 or specific Joint Operating Agreements. The 

issue today is whether the public will be well served by another round of consolidation, particularly the wisdom of enhancing the ability of a large corporation to purchase broadcast outlets and newspapers in the same market. On several occasions 

I have contacted FCC Chairman Michael Powell to express my concern over the direction the FCC appears to be taking and the speed with which it is moving. In my 

opinion the scheduled June 2 vote at the FCC does not give the public nor Congress 

an adequate chance to comment on changes of such enormous consequence. I have 

joined Senator Stevens, Senator Hollings, and others on this Committee in support 

of legislation concerning one of the rules being examined by the FCC, that of a 

media ownership cap and localism in television, and look forward to working on that 

issue with this Committee. 

I have been impressed and encouraged by the broad coalition of organizations expressing similar concerns over the FCC’s press for action. 

The Consumers Union, National Rifle Association, Common Cause, the Traditional Values Coalition, CodePink Women for Peace, the U.S. Conference of Catholic 

Bishops and the Future of Music Coalition are just a few of the organizations that 

share my concern for independent and diverse media in the United States. The FCC 

must carefully consider the prudence of these rule changes and the overall public 

interest at stake. 

Reed Hundt, FCC Chairman during the passage of the Telecommunications Act, 

stated well the intention of the Congress. ‘‘The Commission’s goal in this proceeding 

is to further competition, just as we seek to promote competition in other communications industries we regulate. But in our broadcast ownership rules we also seek 

to promote diversity in programming and diversity in the viewpoints expressed on 

this powerful medium that so shapes our culture.’’ What we must encourage is locally driven news coverage as opposed to national news that attempts to find a local 

perspective but never gives local communities the in-depth coverage they should 

have. Do we want top down coverage or bottom up coverage? I opt for local to national. 

It is my hope that the FCC will listen to the many voices that are coming forward 

and asking them to take more time on these important issues before charting the 

course for media and consumers in the coming years. 

The FCC would be wise to maintain the existing commitment made to the public, 

facilitating greater opportunity for Americans to do business, seek information, and 

enjoy entertainment from a vibrant, diverse, and healthy media. If the FCC fails 

in doing this then we must be prepared to act. 

Again, I thank the Committee for their time and energy on these matters. I look 

forward to working with each of you as we address these issues. 

11 

The CHAIRMAN. Thank you very much, Senator Allard. We look 

forward to working with you. This issue will be with us for sometime. 

We now would like our panel to come forward, which is Mr. Rupert Murdoch, President and CEO of News Corporation, Mr. Gene 

Kimmelman, the Director of Consumers Union, Dr. Kent 

Mikkelsen, the Vice President of Economists, Incorporated, and Mr. 

Tom Fontana, who is the President of the Levinson-Fontana Company. 

Please take your seats, gentlemen. All of your complete statements will be made a part of the record without objection, and we 

will begin with Mr. Murdoch. 

Welcome before the Committee, Mr. Murdoch. 

STATEMENT OF RUPERT MURDOCH, CHAIRMAN AND CHIEF 

EXECUTIVE, THE NEWS CORPORATION, LTD. 

Mr. MURDOCH. Thank you, and good morning, Chairman 

McCain. 

The CHAIRMAN. Could you pull the microphone a little closer? 

Thank you. 

Mr. MURDOCH. Good morning, Chairman McCain, Senator Hollings, and members of the Committee. Thank you for the invitation 

to testify this morning on News Corporation’s proposed acquisition 

of a 34 percent interest in Hughes, owner of Direct Television, 

which is not a broadcaster, but a distributor. 

This transaction will infuse DIRECTV with the strategic vision, 

expertise and resources necessary to bring increased innovation 

and robust competition to the market. The resulting public interest 

benefits are manifold and substantial, and today I would like to tell 

you specifically why this deal will be good for consumers and good 

for competition. By combining the expertise and technologies of our 

two companies, consumers will benefit from better programming, 

more advanced technologies and services, and greater diversity. 

One of the first enhancements DIRECTV subscribers will enjoy 

is more local television stations. News was the first proponent of 

local service as a part of our satellite venture 6 years ago, and it 

remains one of our top priorities. News is committed to dramatically increasing DIRECTV’s present local into local commitment of 

100 DMAs by providing local into local service in as many of the 

210 DMAs as possible, and to do so as soon as economically and 

technologically feasible. 

In addition, News is exploring new technologies to expand HDTV 

content and aggressively build broadband services. News will also 

bring a wealth of new services to DIRECTV subscribers from Britain, including interactive news and sports and access to online 

shopping, games, E-mail, and information services, and we will infuse Hughes with our deep and proven commitment to equal opportunity and diversity, including more diverse programming and a 

variety of mentoring, executive development and internship programs. You can count on these enhancements because innovation 

and consumer focus is part of our company’s DNA. 

We have a long and successful history of defining conventional 

wisdom and challenging market leaders, whether they be the Big 

Three broadcast networks, the previously dominant cable news 

12 

channel, or the entrenched sports establishment. We started as a 

small newspaper company and grew by providing competition and 

innovation in stale, near-monopolistic markets. It is our firm intention to continue that tradition with Direct Television. 

With these consumer benefits, DIRECTV will become a more formidable competitor to cable and thus enhance the competitive landscape of the entire multichannel industry. To that end, I should 

note there are no horizontal or vertical concerns arising from this 

transaction. The transaction does result in a vertical integration of 

assets because of the association of DIRECTV’s distribution platform and users’ programming interests, but this is not anticompetitive for two reasons. 

First, neither company has sufficient ties in the market in order 

to be able to act in an anticompetitive manner. Second, neither 

News nor DIRECTV has any incentive to engage in anticompetitive 

behavior. As a programmer, News’ business model is predicated on 

achieving the widest possible distribution to maximize advertising 

revenue and subscriber fees. 

Similarly, DIRECTV has every incentive to draw from the wider 

spectrum of attractive programming regardless of its source. Nevertheless, we have agreed to a series of program access undertakings 

to eliminate any concerns over the competitive effects of this transaction. We have asked the FCC to adopt these program access commitments as a condition of our application. 

Viewed from another perspective, neither News nor Hughes is 

among the top five media companies in the United States. News is 

sixth, with 2.8 percent of total industry expenditures, and Hughes 

is eighth. Even combined, the companies would rank no higher 

than fifth, half the size, or less than half the size of the market 

leader. 

In closing, I believe this transaction represents an exciting association between two companies with the assets, experience and history of innovation to ensure DIRECTV can provide better service 

to consumers and become an even more effective competitor to 

cable. 

Thank you for your attention. I look forward to your questions. 

[The prepared statement of Mr. Murdoch follows:] 

PREPARED STATEMENT OF RUPERT MURDOCH, CHAIRMAN AND CHIEF EXECUTIVE, 

THE NEWS CORPORATION, LTD. 

Good Morning, Chairman McCain, Senator Hollings, and Members of the Committee. Thank you for the invitation to testify today regarding News Corporation’s 

proposed acquisition of a 34 percent interest in Hughes Electronics Corporation. 

Let me say at the outset that we believe that this acquisition has the potential 

to profoundly change the multichannel video marketplace in the United States to 

the ultimate benefit of all pay-TV customers, whether they are direct-to-home satellite or cable subscribers. It is my hope, and my goal, that as a result of this acquisition, Hughes’ DIRECTV operation will be infused with the strategic vision, expertise, and resources necessary for it to bring innovation and competition to the multichannel marketplace and, of course, to the televisions of tens of millions of American 

viewers. 

The public interest benefits of this transaction are manifold, but I would like to 

briefly touch on three key areas today: 

First, News Corporation’s outstanding track record of providing innovative new 

products and services to consumers, a track record that it is determined to replicate 

at Hughes and DIRECTV; 

13 

Second, the specific consumer benefits that will be realized from this transaction, 

including improvements in local-into-local service, new and improved interactive 

services, and the many new diversity programs News Corporation will bring to 

Hughes; and 

Third, the absence of any horizontal or vertical merger concerns about this transaction. This transaction will only increase the already-intense competition in the 

programming and distribution markets, and market realities will compel our companies to continue the open and non-discriminatory practices each company has lived 

by. Nonetheless, to eliminate any possible concerns over the competitive effects of 

vertical integration, the parties have agreed as a matter of contract to significant 

program access commitments, and have asked the FCC to make those commitments 

an enforceable condition of the transfer of Hughes’ DBS license. 

News Corporation’s track record of innovation as a content provider and as a satellite broadcaster is without parallel. Our company has a history of challenging the 

established—and often stagnant—media with new products and services for television viewers around the world. Perhaps our first and best-known effort to offer 

new choices to consumers in the broadcasting arena came with the establishment 

of the FOX network in 1986. FOX brought much-needed competition to the ‘‘Big 3’’ 

broadcast networks at a time when conventional wisdom said it couldn’t be done. 

Seventeen years later, we have proved unambiguously that it could be done, with 

FOX reigning as the number one network so far this calendar year in the highly 

valued ‘‘adults 18–49’’ demographic. Along the way, we redefined the TV genre with 

shows like The Simpsons, In Living Color, The X-Files, and America’s Most Wanted, 

and more recently 24, Boston Public, Malcolm in the Middle, The Bernie Mac Show, 

and the biggest hit on American TV, American Idol. 

The FOX network was launched on the back of the Fox Television Stations group, 

an innovator in local news and informational programming since it was first formed. 

Today, Fox-owned stations air more than 800 hours of regularly scheduled local 

news each week—an average of 23 hours per station. We have increased the amount 

of news on these stations by 57 percent, on average, compared to the previous owners. Viewers demand more local news, and we provide it. Fox-owned stations were 

often the first—and in many markets are still the only—stations to offer multiple 

hours of local news and informational programming each weekday morning. This 

commitment to local news extends well beyond the stations we own. Since 1994, Fox 

has assisted more than 100 affiliates in launching local newscasts. 

In addition to providing greater choice and innovation in network entertainment 

and local news, we have also redefined the way Americans watch sports. With viewer-friendly innovations such as the ‘‘FOX Box’’ and the first ‘‘Surround Sound’’ 

stereo in NFL broadcasts, the catcher cam in baseball, the glowing puck in hockey, 

and the car-tracking graphic in NASCAR, FOX has made sports more accessible and 

exciting for the average fan. FOX Sports Net, launched in 1996, has provided the 

first and only competitive challenge to the incumbent sports channel, ESPN. Fox 

Sports Nets’ 19 regional sports channels, reaching 79 million homes, regularly beat 

ESPN in several key head-to-head battles. In 2002, Major League Baseball on ESPN 

averaged a 1.1 rating. On Fox Sports Net, baseball scored an average 3.5 rating in 

the markets it covers. The NBA on ESPN has averaged a 1.2 rating during the current season. In Fox Sports Net’s markets, it has rated a 2.2. The key to Fox Sports 

Net’s success is its delivery of what sports fans want most passionately: live, local 

games, whether at the professional, collegiate, or high school level, coupled with outstanding national sports events and programming. 

Perhaps News Corp.’s most stunning success against conventional wisdom—and 

our most innovative disruption of the status quo—is the Fox News Channel, 

launched in 1996. A chorus of doubters said CNN owned the cable news space and 

no one could possibly compete. A scant five years later, Fox News Channel overtook 

CNN, and since early 2002 has consistently finished first among the cable news 

channels in total day ratings. Growing from 17 million subscribers at launch to almost 82 million subscribers this month, Fox News Channel boasts some of the most 

popular shows on cable and satellite. I think it is fair to say Fox transformed the 

cable news business, introducing innovative technology and programming, and 

bringing a fresh choice and perspective to American news viewers. 

Across the dial on American television are examples of where our challenges to 

the status quo have made a difference for viewers and proven we could be competitive against entrenched competition. We’ve launched and expanded FX, a general 

entertainment channel; we’ve launched the movie channel FXM; and we’ve relaunched and expanded the Speed Channel, a channel devoted to auto racing enthusiasts. And in January 2001, we launched National Geographic Channel with our 

partner, the National Geographic Society, into nine million homes. Today, Nat Geo 

is the fastest-growing cable network in the Nation with 43 million subscribers and 

14 

is making steady progress in the ratings against the established industry leader, 

The Discovery Channel. 

News Corp.’s track record of innovation is not limited to the United States. News 

Corp. will bring a wealth of innovation to Hughes and DIRECTV from its British 

DTH platform, BSkyB. We launched BSkyB in 1989 with only four channels of programming. In 1998, frustrated by the limitations of analog technology and determined to give viewers even wider choices, BSkyB launched a digital service that 

boasted 140 channels. In 1999, in order to speed the conversion to digital and to 

drive penetration, BSkyB offered free set-top boxes and dishes. The conversion to 

digital took three years and cost BSkyB nearly one billion dollars, but by 2001, 

when the transition to digital was complete, BSkyB’s subscriber base had grown to 

5 million homes. Through BSkyB’s digital offering, BSkyB viewers may choose from 

389 channels delivering programming 24 hours each day. They also have a vast 

array of new services, including world-first interactive innovations such as a TV 

news service that allows viewers to choose from multiple segments being broadcast 

simultaneously on a news channel, multiple camera angles during sporting events, 

or multiple screens of programming within a certain genre. In addition, BSkyB 

viewers have access to online shopping, banking, games, e-mail, travel, tourism and 

information services. With the launch of Europe’s first fully integrated digital video 

recorder in 2001, BSkyB customers won access to even more interactive capabilities 

and viewing choices. 

Upon completion of this transaction, News Corp. will bring the same spirit of innovation to the DBS business in the U.S., in the process redefining the choices 

Americans have when they watch television. This spirit of never-say-die competition 

and News Corp.’s demonstrated determination to provide ever-expanding services to 

the public have the potential to re-energize the entire American multichannel video 

marketplace. 

To my second point about this transaction: its benefits to consumers. Apart from 

a history of bringing new competition and innovation to the television industry, 

News Corp. has been tremendously successful in bringing tangible benefits to consumers over nearly two decades of operating both here in the United States and 

abroad. This transaction will be no exception, enabling us to share our best practices 

across our platforms and across geographical boundaries to the benefit of consumers. These benefits will be very real, and often easily quantifiable. 

One of the first enhancements to DIRECTV’s service that News Corp.’s investment in Hughes will bring will be more local television stations for subscribers, offering consumers a more compelling alternative to cable. News Corp., as a leading 

U.S. broadcaster, was the first proponent of local-into-local service as part of our 

American Sky Broadcasting (‘‘ASkyB’’) satellite DTH venture six years ago. In fact, 

I testified before Congress on this very topic, urging passage of copyright legislation 

to allow the retransmission of local signals by DBS. ASkyB conceived and designed 

a DBS spot beam satellite to implement this previously unheard of idea. As a broadcast company, News Corp. was convinced then—as it is now—that DBS will be the 

strongest possible competitor to cable only if it can provide consumers with the local 

broadcast channels they have come to rely on for local news, weather, traffic and 

sports. 

With that in mind, News Corp. is committed to dramatically increasing 

DIRECTV’s present local-into-local commitment of 100 DMAs by providing localinto-local service in as many of the 210 DMAs as possible, and to do so as soon as 

economically and technologically feasible. To that end, we are already actively considering a number of alternative technologies, including using some of the Ka-band 

satellite capacity on Hughes Network Systems’ SPACEWAY system; seamlessly incorporating digital signals from local DTV stations into DIRECTV set-top boxes 

equipped with DTV tuners; and by exploring and developing other emerging technologies that could be used to deliver local signals, either alone or in combination 

with one of the above alternatives. 

In addition, News Corp. is exploring new technologies that promise to improve 

spectrum efficiency or otherwise increase available capacity so that DIRECTV can 

expand the amount of HDTV content. Options include use of Ka-band capacity, 

higher order modulation schemes, such as the 8PSK technology FOX uses for its 

broadcast distribution to affiliated stations, and further improvements in compression technology. News Corp. will urge DIRECTV to carry many more than the four 

HDTV channels it currently carries and the five channels that some cable operators 

carry. In this way, we hope to help drive the transition to digital television by providing compelling programming in a format that will encourage consumers to invest 

in digital television sets. 

As to broadband, News Corp. will work aggressively to build on the services already provided by Hughes to make broadband available throughout the U.S., parVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\80738.TXT JACKIE
15 

ticularly in rural areas. Broadband solutions for all Americans could come from 

partnering with other satellite broadband providers, DSL providers, or new potential broadband providers using broadband over power line systems, or from other 

emerging technologies. News Corp. believes it is critical that consumers have vibrant broadband choices that compete with cable’s video and broadband services on 

capability, quality and price. 

The public will also benefit from the efficiencies and economies of scope and scale 

that News Corporation will bring to DIRECTV. We believe by sharing ‘‘best practices,’’ and by using management and expertise from our worldwide satellite operations, we will be able to substantially reduce DIRECTV’s annual expenses by $65 

to $135 million annually. Other efficiencies include sharing facilities of the various 

subsidiaries of News Corp. and Hughes in the U.S., and developing and efficiently 

deploying innovations, such as next-generation set-top boxes with upgraded interactive television and digital video recorder capabilities and state-of-the-art anti-piracy techniques. When Hughes becomes part of News Corp.’s global family of DTH 

affiliates, it will benefit from a number of scale economies that will more efficiently 

defray the enormous research and development costs associated with bringing new 

features and services to market. Moreover, common technology standards for both 

hardware and software across the News Corp. DTH platforms should help to drive 

down consumer equipment and software costs. Through these various cost savings, 

DIRECTV will be able to finance more innovations in programming and technology 

to ensure that it achieves and maintains the highest level of service for its customers at competitive prices. 

News Corp. also plans to bring to DIRECTV the ‘‘best practices’’ it has developed 

at its satellite operations in other countries. DIRECTV’s ‘‘churn rate’’—that is, the 

rate at which customers discontinue use of the service—is around 18 percent, 

whereas BSkyB’s annual churn rate is currently 9.4 percent. By using BSkyB’s ‘‘best 

practices’’ and accelerating the pace of innovation, we predict that DIRECTV should 

experience a 2 to 3 percent decline in its annual churn rate. We calculate that every 

percentage point reduction in churn will add approximately $33 million to Hughes’ 

earnings. With these additional financial resources, DIRECTV will be able to finance additional initiatives in research, development and marketing. 

Another important element that News Corp. will bring to Hughes and DIRECTV 

is its deep and proven commitment to equal opportunity and diversity. Specifically, 

the diversity initiatives we will implement include: 

• A commitment to carry more programming on DIRECTV targeted at culturally, 

ethnically and linguistically diverse audiences; 

• An extensive training program for minority entrepreneurs seeking to develop 

program channels for carriage by multichannel video systems; 

• A program for actively hiring and promoting minorities for management positions; 

• An extensive internship programming for high school and college students; 

• Improved procurement practices that ensure outreach and opportunities for minority vendors; and 

• Upgraded internal and external communications, including the Hughes website, 

to assist implementation of the above initiatives. 

Finally, to my third point: there are no horizontal or vertical merger concerns 

arising from this transaction. Because this transaction involves an investment in 

DIRECTV, a multichannel video programming distributor with no programming interests, by News Corp., a programmer with no multichannel distribution interests, 

no ‘‘horizontal’’ competition issues arise. There will be no decrease in the number 

of U.S. competitors in either the multichannel video distribution market or the programming market. To the contrary, because of News Corp.’s plans to bring ‘‘best 

practices’’ and innovations to DIRECTV, competition in these markets will intensify 

and consumers will be presented with more and better choices. 

The transaction does result in a ‘‘vertical’’ integration of assets because of the association of DIRECTV’s distribution platform and News Corp.’s programming assets. 

But this ‘‘vertical’’ integration is not anti-competitive for two reasons. First, neither 

News Corp. nor DIRECTV has sufficient power in its relevant market to be able to 

act in an anti-competitive manner. DIRECTV has a modest 12 percent of the national multichannel market, compared to as much as 29 percent of the market held 

by the largest cable operator. News Corp. has a modest 3.9 percent of the national 

programming channels, compared to the largest cable programmer at 15.2 percent 

of the channels. 

Second, rational business behavior will prevent News Corp. and DIRECTV from 

engaging in anti-competitive behavior. As a programmer, News Corp.’s business 

16 

model is predicated on achieving the widest possible distribution for our programming in order to maximize advertising revenue and subscriber fees. Any diminution 

in distribution reduces our ability to maximize profit from that programming. Even 

if we were voluntarily willing to lower our earnings potential by withholding our 

programming from competing distributors, we would be precluded from doing so by 

the FCC’s program access rules. Similarly, DIRECTV has every economic incentive 

to draw from the widest spectrum of attractive programming, regardless of source, 

in order to maximize subscriber revenue. In short, it makes no business sense for 

either party to do anything to limit our potential customer base or our programming 

possibilities. 

Notwithstanding these strong economic and business incentives, News Corp. and 

Hughes have agreed—as a matter of contract—to a series of program access undertakings to eliminate any concerns over the competitive effects of the proposed transaction. We have asked the FCC to adopt these program access commitments, which 

are attached to my written testimony, as a condition of the approval of our Application for Transfer of Control that was filed at the FCC on May 2. These program 

access commitments are largely the same as those required of cable operators, but 

in some respects go further. These commitments will: 

• Prevent DIRECTV from discriminating against unaffiliated programmers; 

• Prevent DIRECTV from entering into an exclusive arrangement with any affiliated programmer, including News Corp.; and 

• Prevent News Corp. from offering any national or regional cable programming 

channels it controls on an exclusive basis to any distributor and from discriminating among distributors in price, terms or conditions. 

These extensive commitments apply for as long as the FCC’s program access rules 

remain in effect and News Corp. owns an interest in DIRECTV. They make it clear 

that News Corp. and Hughes are committed to fair, open and non-discriminatory 

program access practices that go well beyond what the law requires of DBS operators, cable programmers, and even cable operators. 

In any event, neither News Corp. nor Hughes is among the top five media companies, by expenditure, in the United States. As you can see in the chart attached to 

my testimony, News Corp. is sixth with 2.8 percent of total industry expenditures, 

and Hughes is eighth with 2.2 percent. Even combining the expenditures of News 

Corp. and Hughes would place the company fifth in expenditures behind AOL Time 

Warner with 10.1 percent, Viacom with 6.4 percent, Comcast with 6.3 percent, and 

Sony at 5.3 percent. If the expenditures from Disney’s theme parks were included 

in its total, the combination of News Corp. and Hughes would rank sixth in total 

‘‘entertainment’’ revenues. 

In closing, I believe this transaction represents an exciting association between 

two companies with the assets, experience and history of innovation that will ensure 

DIRECTV can become an even more effective competitor in the multichannel market. There will be significant public interest benefits for consumers as a result of 

this transaction, including bringing more local channels to more markets, innovations such as set-top boxes with next generation interactive television and digital 

video recorder capabilities, and a diversity program that will set the standard for 

the rest of the entertainment industry. 

Thank you for your attention, and I look forward to your questions. 

EXHIBIT F 

Program Access Requirements: News Corp. and DIRECTV Commitments 

News Corp. and DIRECTV will be bound by the FCC’s program access rules (otherwise applicable to vertically-integrated satellite cable programming services) regardless of whether News Corp., DIRECTV or any of their program services is 

deemed to be a vertically integrated satellite cable programming vendor under such 

rules. 

In addition, News Corp. and DIRECTV will make the following commitments, 

above and beyond those contained in the FCC’s program access rules. 

• News Corp. will not offer any of its existing or future national and regional programming services on an exclusive basis to any MVPD and will continue to 

make such services available to all MVPDs on a non-exclusive basis and nondiscriminatory terms and conditions. 

• Neither News Corp. nor DIRECTV will discriminate against unaffiliated programming services in the selection, price, terms or conditions of carriage. 

17 

• DIRECTV will not enter into an exclusive distribution arrangement with any 

Affiliated Program Rights Holder. ‘‘Affiliated Program Rights Holder’’ includes 

(i) a program rights holder in which News Corp. or DIRECTV holds a non-controlling ‘‘Attributable Interest’’ (as determined by the FCC’s program access attribution rules); and (ii) a program rights holder in which an entity holding an 

non-controlling Attributable Interest in News Corp. or DIRECTV holds an Attributable Interest, provided that News Corp. or DIRECTV has actual knowledge of such entity’s Attributable Interest in such program rights holder. 

Liberty Media owns approximately 18 percent of the non-voting equity of News 

Corp. Liberty Media currently is considered a vertically integrated programmer 

under the FCC’s program access rules and, as such, is restricted in its ability 

to enter into exclusive or discriminatory agreements with respect to satellitedelivered cable programming services in which it has an Attributable Interest. 

In the event Liberty Media is no longer deemed a vertically integrated programmer (including by reason of the sale of its Puerto Rican cable interests) 

and so long as Liberty Media holds an Attributable Interest in News Corp., 

DIRECTV will deal with Liberty Media with respect to programming services 

it controls as if it continued as a vertically integrated programmer subject to 

the program access rules. 

DIRECTV may continue to compete for programming that is lawfully offered on 

an exclusive basis by an unaffiliated program rights holder (e.g., NFL Sunday 

Ticket). 

• Neither News Corp. nor DIRECTV (including any entity over which either exercises control) shall unduly or improperly influence: (i) the decision of any Affiliated Program Rights Holder to sell programming to an unaffiliated MVPD; or 

(ii) the prices, terms and conditions of sale of programming by any Affiliated 

Program Rights Holder to an unaffiliated MVPD. 

These commitments will apply to News Corp. and DIRECTV for the later of (1) 

as long as the FCC deems News Corp. to have an Attributable Interest in DIRECTV 

and the FCC’s program access rules are in effect (provided that if the program access rules are modified these commitments shall be modified to conform to any revised rules adopted by the FCC) or (2) if these commitments are embodied in a consent decree or other appropriate order issued by or agreement with the DOJ, FTC 

or FCC, for the term specified by such consent decree, order or agreement. 

18 


522CHA1.eps

THE VAST MEDIA UNIVERSE 

The U.S. Media Marketplace Is Highly Competitive 

Company 

TOlals for Ibe Top 25 Media Companies 

(Bv Revenue) 

Source: Corporate SEC filings (except as noted in the End Notes) 

2002 u.s. Media 

Revenues 

(in millions) 

$200.560 

Company 

Revenues as a 

%ofTota. 

Media Industry 

62.1 % 
19 


522CHA2.eps 522CHA3.eps

THE VAST MEDIA UNIVERSE 

% Share of U.S. Total Media Industry, By Company 

D AOL Tme w.m.r 

100.00% · Vlacom 

a COrrcast 

90.00% a SONY COrp. 

• WllctsntyCO. 

• N"~s COrp 

00.00% • Vlnndl UnHtrsal 

a HuglitS Electronlcs 

• G. ntral BlclrlciNBCIT, lemlndo 

70.00% D anr Channel COrmunlcllllons 

a COT Enterprin. 

60.00% o Glnnelt CO. 

• TrIIl/neCo 

• B,r1tlsmann SO.OO% • EcliostarCormunlclllons 

• Charter Conmunlcations 

40.00% DAdvanc.COrrm,mlc.tions 

D HtarslCOrp. 

30.00% a Ad • .,hlaCOrrrrunlr;aHons 

a Th. New YortTmes CO. 

D CSCHoklilgs 

20.00% D KnlghlRidd.r 

a Milt,ndo 

10.00% n _ _ , ~:::~dla 

- . I 0.00% 

% of Total Media Industry 

I·:· COMPETITION FLOURISHES AMONGST A MULTITUDE OF MAJOR MEDIA COMPAN IES 1 

The largest 25 media companies collective~ account for on~ 60% of the Total Media Industry. 

Even the largest media company has on~ a small portion of the Total Media Industry. 

THE VAST MEDIA UNIVERSE 

ENDNOTES 

Medi8 include tho fd.lowing induslryugmenlS: broed<:ut tdevisioa. broadcast radio, cable&. satellite 

providett. cable&. taIdlilo programming, newspaperpublishin& oonsurnermasa2ino publishing. 

oonswner book: publishin& oonsutner Internet sik$, filmed eaten.meat. reoorded mus.ic. intcnctive 

entertainment. arid outdooradvrisina (the "Media"). Tolal U.S. ~tuR$ (end-userspendi~ OR 

theMedia wascslim8led tobo$3l4.006 biUionin 2002 (the rrocal Media fndut:tzy"). Sottrc.: PQ 

M_ta. UC; V_~SIlhI .. $u\WI.ICII, CompInyrevCll.uet ror tbeMediaarorepu1ed _ a peR:entatge 

ofdleTotaI Media Industry, SinoemCllprivateccmpaniesdonotpubtidyreport financial 

ped<mnance,. data oa total revowes for t!teM«iab wtaV1lilable, Tho Total Modia Induttty, which 

include. expenditurel (II both publidy- and privaldy-owned oompenies. approximates total U.S. 

revaluerorboth publicand priyateccmpanies ~ in the Media. 

2. OxpofateSEC fi1i.np ror AOL Time Warner, Comcast. Newt Cotporation. esc Holdings and Tribw'le 

Companydonot separatdybralkout revalues rorcert:einsegmenl. (..,., .portIlcams)that _not 

among the -.menb that ccmpriJe the Total Medi. Industry. 

Cotporale SEC 1i.1i.np rorViaoom and C1earChannd CommunicatiOll. and Bertdsmann's Annual 

Report do not separately break out revenues for certain segmalts ( .. g., themo parD. live entertainment 

andmedia scfVi_) that aronotamong tho-.ments that compriI:otbo Total Moclia Industry. 

M rq>OrIed in its IG-K, eomc.r. !i.gURt indude URalditedfll'O/OI'III(I revowes for AT4T8toedbcKI, 

which merged with Comeast in November 2002. 

5. NOONS Corp." 6.gurs indudoU.S. Md Canadian revenues rorboth Fox Entfl'tainment Group. Inc. IWId 

HarpetCollina. bute:<cluderevenues rortheN_York Poll 

6. SONY, Vivmdi Univcnal, Hushe. ElectroniC&, GElNBClTdemundo. CSC Hddinp. NintencSo, and 

UbertyModia figuresmayindudesomenoa-U.s. revenue'.$. 

1. The Ii.guteJ rorCox EnterprilOl are 2001 revenuet and have been derived from the company'. web til~ 

http://www.COXenlerprilOl.com. 

8. Addphia Communications' IigureI: nan e.timate bMed on financial statements filed bytheccmpeny 

widl the United State. BankruptcyCGurton November2S, 2002. s.. Mike FarrtJJ.Adelphkl'z 

NMmb.nAnn'IAII &d, Multichannd News, Decembcr2, 2002, at 6. 

9. Revenues r«the foUowin& privately-hdd oompenies have been derived rrom Advertising AJe: AdvancePublicationt. Heam Corporation and Bloornbez3. 3M LHdllrg Mula eoM/KIIIflu, 

Advertisi,. AJ~ Aupst 19, 2002, at S-2. The revenue Ii.gURt for diose companies are 2001 6gura 

.. d may exclude certain revenue. &om certain industry tegmenll that ocmpriso tho definition of die 

Total MeclialndustJy. 

I 
20 

Securities Laws Information 

In connection with the proposed transactions, General Motors Corporation (‘‘GM’’), 

Hughes Electronics Corporation (‘‘Hughes’’) and The News Corporation Limited 

(‘‘News’’) intend to file relevant materials with the Securities and Exchange Commission (‘‘SEC’’), including one or more registration statement(s) that contain a prospectus and proxy/consent solicitation statement. Because those documents will contain important information, investors and security holders are urged to read them, 

if and when they become available. When filed with the SEC, they will be available 

for free (along with any other documents and reports filed by GM, Hughes or News 

with the SEC) at the SEC’s website, www.sec.gov. GM stockholders will also receive 

information at an appropriate time on how to obtain transaction-related documents 

for free from GM. When these documents become available, News stockholders may 

obtain these documents free of charge by directing such request to: News America 

Incorporated, 1211 Avenue of the Americas, 7th Floor, New York, New York 10036, 

attention: Investor Relations. 

GM and its directors and executive officers and Hughes and certain of its executive officers may be deemed to be participants in the solicitation of proxies or consents from the holders of GM $1–2/3 common stock and GM Class H common stock 

in connection with the proposed transactions. Information about the directors and 

executive officers of GM and their ownership of GM stock is set forth in the proxy 

statement for GM’s 2003 annual meeting of shareholders. Participants in GM’s solicitation may also be deemed to include those persons whose interests in GM or 

Hughes are not described in the proxy statement for GM’s 2003 annual meeting. Information regarding these persons and their interests in GM and/or Hughes was 

filed pursuant to Rule 425 with the SEC by each of GM and Hughes on April 10, 

2003. Investors may obtain additional information regarding the interests of such 

participants by reading the prospectus and proxy/consent solicitation statement if 

and when it becomes available. 

This communication shall not constitute an offer to sell or the solicitation of an 

offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration 

or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements 

of Section 10 of the Securities Act of 1933, as amended. 

Materials included in this document contain ‘‘forward-looking statements’’ within 

the meaning of the Private Securities Litigation Reform Act of 1995. Such forwardlooking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to be materially different from historical results 

or from any future results expressed or implied by such forward-looking statements. 

The factors that could cause actual results of GM, Hughes and News to differ materially, many of which are beyond the control of GM, Hughes or News include, but 

are not limited to, the following: (1) operating costs, customer loss and business disruption, including, without limitation, difficulties in maintaining relationships with 

employees, customers, clients or suppliers, may be greater than expected following 

the transaction; (2) the regulatory approvals required for the transaction may not 

be obtained on the terms expected or on the anticipated schedule; (3) the effects of 

legislative and regulatory changes; (4) an inability to retain necessary authorizations from the FCC; (5) an increase in competition from cable as a result of digital 

cable or otherwise, direct broadcast satellite, other satellite system operators, and 

other providers of subscription television services; (6) the introduction of new technologies and competitors into the subscription television business; (7) changes in 

labor, programming, equipment and capital costs; (8) future acquisitions, strategic 

partnerships and divestitures; (9) general business and economic conditions; and 

(10) other risks described from time to time in periodic reports filed by GM, Hughes 

or News with the SEC. You are urged to consider statements that include the words 

‘‘may,’’ ‘‘will,’’ ‘‘would,’’ ‘‘could,’’ ‘‘should,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘projects,’’ ‘‘potential,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘intends,’’ ‘‘continues,’’ ‘‘forecast,’’ ‘‘designed,’’ 

‘‘goal,’’ or the negative of those words or other comparable words to be uncertain 

and forward-looking. This cautionary statement applies to all forward-looking statements included in this document. 

The CHAIRMAN. Thank you, Mr. Murdoch. 

Mr. Kimmelman. 

21 

STATEMENT OF GENE KIMMELMAN, SENIOR DIRECTOR OF 

ADVOCACY AND PUBLIC POLICY, CONSUMERS UNION, ON 

BEHALF OF CONSUMERS UNION AND THE CONSUMER 

FEDERATION OF AMERICA 

Mr. KIMMELMAN. Thank you, Mr. Chairman. On behalf of Consumers’ Union, the print and online publisher of Consumer Reports, 

and the Consumer Federation of America, I appreciate the invitation, and Mr. Chairman, I am particularly grateful you are willing 

to have me back to testify on these important media ownership 

issues. 

Six years ago, I appeared at this very same table next to Mr. 

Murdoch and supported a satellite venture he was proposing because it appeared quite likely to bring more competition to cable 

monopolies who were raising their rates three times faster than inflation. Unfortunately, this morning I do not believe the News 

Corp./DIRECTV deal would lead to that result. 

Mr. Murdoch owns a programming juggernaut, a national television network, 35 local stations, 20 regional sports channels with 

rights to 67 professional teams that everyone in their community 

would like to see on television, Fox News, FX, a load of other production through its own studios, programming for its own networks, ownership of professional sports teams themselves, and to 

sustain this programming empire, Mr. Murdoch’s incentives, according to Wall Street analysts, and we believe they are accurate, 

are to raise the price of his programming. 

He offers access. That is laudable. But he will make it accessible 

at a high price to every cable operator in the country, to his own 

satellite subscribers and to his one satellite competitor. Prices go 

up for everyone in the industry. Prices go up for consumers nationwide. Cable rates are now up 50 percent since you passed the 

Telecom Act of 1996. There is not enough competition. I suggest 

this is not the correct direction to go. 

We will seek conditions on this merger to prevent this from happening to consumers nationwide, and hope the Department of Justice and the FCC will take heed. Now, normally I would go on for 

5 minutes about the problems with this deal, but I believe this 

morning, Mr. Chairman, there is a much more important issue before the Committee. 

I have had the honor to testify dozens of times before this committee under your leadership, under Senator Hollings’ leadership. 

I do not believe I have ever testified on an issue more important 

than who owns the media in America, and on June 2, the FCC will 

abolish most of the important ownership rules that help make our 

markets competitive. 

Now, why do we have ownership limits in the first place? What 

is this all about? Almost all of the FCC’s rules are really about 

local markets. Let us accept that the national news market is pretty competitive. There are lots of stations, there are lots of technologies, lots of transmission. These rules are about local markets, 

not national, and while entertainment matters a lot, and Mr. Fontana will address that, the rules are really most importantly about 

local news. 

How do we get news in our communities? How do we find ways 

to make sure our citizens are informed in their home towns about 

22 

what matters to them in a local community? Let us look at just the 

facts. Where do consumers get their news? There are mile-high 

data filings at the FCC that clearly demonstrate that consumers 

get it—almost 80 percent of consumers use newspaper and their 

local TV stations as their major source of local news and information. 

And yes, there has been an enormous technology explosion, 

agreed, satellite, cable, and the Internet, but what on satellite is 

local? Only your local broadcast channels. What on cable is local? 

Only your local broadcast channels, and maybe, maybe one local 

cable news channel. In this community, it is owned by a local 

broadcast station, as it is in many other communities. 

So what the FCC is doing, according to press leaks, is allowing 

mergers of the two major sources of news and information about 

the community in more than 150 markets covering more than 90 

percent of the population of our country, allowing a dominant 

newspaper, one with 80 to 100 percent of the market share of print 

news in that local community to combine with the largest local 

broadcast station news department in the community, the station 

with the largest local news audience combining with the dominant 

newspaper. 

In more than 90 communities, this would yield one company that 

controls more than 50 percent of the news produced for the community, more than 50 percent of the employees providing news coverage. 

Why should we care about these two sources coming together? 

Because I believe everybody in America knows the media is biased. 

Let us just look at it head on. The media has a point of view, every 

owner, every editor, every writer, every news anchor, and we protect that with the First Amendment. They have the right. 

But we need different owners and different points of view in 

order to have competition, and I believe these rules are about making sure there are as many different owners, different points of 

view as possible in the most important sources of news in our local 

markets, and it is most important also to make sure the media 

companies are there to keep an eye on each other, to make sure 

that no one company is breaking the rules. 

The FCC is about to substantially reduce the level of competition 

in the local news markets in our country. You may like the owner 

of that dominant newspaper/broadcast company today. They may 

be admirable individuals, someone like Mr. Murdoch, good entrepreneurs, good citizens. What about tomorrow? What about when 

they sell, the next day and the next owner? 

I believe that is why the National Rifle Association and Consumers’ Union believe that what the FCC is doing is just simply 

dangerous to a free marketplace of news in our society. We should 

not have to rely upon a benevolent media dictator for quality news. 

That is not what our society is about. Our democracy requires competition between media owners in order to function. I ask you 

please not to let the FCC move forward and destroy that competition. 

Thank you. 

[The prepared statement of Mr. Kimmelman follows:] 

23 

1 Bureau of Labor Statistics, Consumer Price Index (March 2003). From 1996 until March 

2003, CPI increased 19.3 percent while cable prices rose 50.3 percent, 2.6 times faster than inflation. 2Tom Wolzien, ‘‘Returning Oligopoly of Media Content Threatens Cable’s Power.’’ The Long 

View, Bernstein Research (Feb. 7, 2003). 3 Consumers Union is a nonprofit membership organization chartered in 1936 under the laws 

of the state of New York to provide consumers with information, education and counsel about 

good, services, health and personal finance, and to initiate and cooperate with individual and 

group efforts to maintain and enhance the quality of life for consumers. Consumers Union’s income is solely derived from the sale of Consumer Reports, its other publications and from noncommercial contributions, grants and fees. In addition to reports on Consumers Union’s own 

product testing, Consumer Reports with more than 4 million paid circulation, regularly, carries 

articles on health, product safety, marketplace economics and legislative, judicial and regulatory 

actions which affect consumer welfare. Consumers Union’s publications carry no advertising and 

receive no commercial support. 4The Consumer Federation of America is the Nation’s largest consumer advocacy group, composed of over 280 state and local affiliates representing consumer, senior, citizen, low-income, 

labor, farm, public power an cooperative organizations, with more than 50 million individual 

members. 5See Appendix, ‘‘Promoting the Public Interest through Media Ownership Limits: A Critique 

of the FCC’s Draft Order Based on Rigorous Market Analysis and First Amendment Principles’’ 

(May 21, 2003). 

PREPARED STATEMENT OF GENE KIMMELMAN, SENIOR DIRECTOR OF ADVOCACY AND

PUBLIC POLICY, CONSUMERS UNION, ON BEHALF OF CONSUMERS UNION AND THE

CONSUMER FEDERATION OF AMERICA

Summary 

Today consumers are not receiving the fruits that a competitive cable and satellite 

marketplace should deliver. Since passage of the 1996 Telecommunications Act, 

cable rates have risen over 50 percent,1 and according to the Federal Communications Commission’s (FCC), satellite competition is not helping to keep those rates 

down. Despite the promise for more source and viewpoint diversity from new technologies such as the Internet and satellite, a mere five media companies control 

nearly the same prime time audience shares as the Big Three networks did 40 years 

ago.2 Unfortunately, the market for news production and distribution is even more 

concentrated. 

And a troubling situation is about to get much worse. 

The recently announced proposed merger between News Corporation (‘‘News 

Corp./Fox’’) and Hughes Electronics Corporation’s satellite television unit DIRECTV 

(‘‘DIRECTV’’), combined with the FCC’s current efforts to relax or eliminate media 

ownership rules, threaten to seriously harm meaningful competition between media 

companies in this Nation. This lack of competition will mean that control of media 

that Americans rely upon most for news, information and entertainment could eventually be placed in the hands of a few powerful media giants. 

Yesterday, Consumers Union 3 and Consumer Federation of America 4 released a 

report 5 critiquing the FCC’s plans to relax the ownership rules, particularly as they 

apply to the FCC’s plan to lift the cross-ownership ban on mergers between television broadcast stations and newspapers. 

Using the standard antitrust market definitions, we found that lax First Amendment policy implementation and weak antitrust enforcement has resulted in media 

markets that are already shockingly concentrated. For instance: 

• Every local television and newspaper market in the country is already concentrated. 

• Every local newspaper market in the country is already highly concentrated. 

• Over 95 percent of the TV and radio markets are highly concentrated. 

Ignoring this already concentrated media landscape, the FCC is set to undo media 

ownership limits by June 2. If a majority of the FCC Commissioners have their way, 

a wave of mergers in 150 of the top media markets could occur. This will reduce 

competition between media companies, decrease the diversity of news, information, 

and entertainment programming available to Americans, undermine media coverage 

of local issues and concerns, and raise advertising rates for small businesses. 

Consider the powerful interaction between the FCC’s rush to lift media ownership 

rules and the proposed merger between News Corp./Fox and DIRECTV, the largest 

direct broadcast satellite (DBS) network. The FCC is considering: 

• Relaxing the ban on news/broadcast cross-ownership would allow broadcasters 

to buy newspapers in the same communities they own local stations (even when 

24 

6 ‘‘As part of the acquisition, News Corp. and DIRECTV has agreed to abide by FCC program 

access regulations, for as long as those regulations are in place and for as long as News Corp. 

and Fox hold an interest in DIRECTV . . . Specifically, News Corp. will continue to make all 

of its national and regional programming available to all multi-channel distributors on a nonexclusive basis and on non-discriminatory prices, terms and conditions. Neither News Corp. nor 

DIRECTV will discriminate against unaffiliated programming services with respect to the price, 

terms or conditions of carriage on the DIRECTV platform.’’ News Corporation Press Release, 

‘‘News Corp. Agrees to Acquire 34% of Hughes Electronics for $6.6 Billion in Cash and Stock.’’ 

Apr. 9, 2003. 7 ‘‘As part of the acquisition, News Corp. and DIRECTV has agreed to abide by FCC program 

access regulations, for as long as those regulations are in place and for as long as News Corp. 

and Fox hold an interest in DIRECTV . . . Specifically, News Corp. will continue to make all 

of its national and regional programming available to all multi-channel distributors on a nonexclusive basis and on non-discriminatory prices, terms and conditions. Neither News Corp. nor 

DIRECTV will discriminate against unaffiliated programming services with respect to the price, 

terms or conditions of carriage on the DIRECTV platform.’’ News Corporation Press Release, 

‘‘News Corp. Agrees to Acquire 34 percent of Hughes Electronics for $6.6 Billion in Cash and 

Stock.’’ Apr. 9, 2003. 

there is only one dominant newspaper in that community). News Corp./Fox already has broadcast/newspaper cross-owned properties. 

• Raising or eliminating the cap on how many television stations national TV networks may own (which was set at 35 percent by Congress in 1996) would extend 

national network control over local stations. News Corp./Fox already far exceeds 

the cap, as does Viacom/CBS. 

• Letting a single TV broadcaster own more than 2 stations in a single market. 

News Corp./Fox already owns 2 broadcast stations in New York, Los Angeles, 

Dallas, Washington, D.C., Houston, Minneapolis, Phoenix, and Orlando. 

While the antitrust laws can and should be used to limit potential competitive 

abuses resulting from the News Corp./DIRECTV merger,6 these laws are not enough 

to prevent the excessive consolidation in the marketplace of ideas that would result 

from any combination of transactions under relaxed ownership rules. Antitrust has 

never been used effectively to promote competition in and across media where there 

is no clear way—like advertising prices—to measure competition/diversity in news 

sources, information and points of view presented through the media. 

Consumers Union and the Consumer Federation of America believe the Department of Justice should impose significant conditions on the News Corp./DIRECTV 

deal, and Congress should review and alter the laws that enabled industry consolidation spurred by excessive deregulation to weaken or undermine competitive conditions in media markets. The News Corp./DIRECTV merger is likely to lead to higher 

prices for both satellite TV and cable TV, since the combined company can maximize 

its earnings by inflating the prices it charges for its broad array of popular programming that all cable and satellite customers purchase. 

We are pleased to see that the combined News Corp./DIRECTV has agreed to 

offer access to their programming as part of the acquisition.7 However this promise 

must be expanded to prevent other forms of anti-competitive discrimination, and 

must be enforceable through appropriate Department of Justice oversight mechanisms. 

Even given the terms of what News Corp. is willing to concede by way of program 

access, substantial danger remains. First, there is no mechanism that can prevent 

News Corp. from discriminating against non-affiliated programmers in determining 

what programming to offer on its DIRECTV satellite system. News Corp. could also 

pressure cable operators to do the same in return for more favorable carriage terms 

for News Corp. owned programming. 

Second, the agreement preserves the right to a variety of exclusive carriage arrangements, including distribution of Liberty Media programming, as well as sports 

programming where News Corp. enjoys substantial market power. Liberty Media 

owns approximately 18 percent of News Corp., and News Corp. has interests in several Liberty properties, indicating a close relationship between the two. It is hard 

to understand how such exclusive arrangements involving a company with such 

massive market power would not have a detrimental impact on competition in video 

programming. Antitrust officials must prevent these types of behavior. 

Once again, this transaction, in conjunction with relaxed media ownership rules, 

will spur a wave of mergers among the remaining national broadcast networks, satellite and cable giants. 

We believe it is time for Congress to intervene and finally deliver more choices 

and lower prices for the media services consumers want, and to prevent excessive 

relaxation of media ownership which threatens the critical watchdog function media 

25 

8Diane Mermigas, ‘‘News Corp.’s DIRECTV Monolith.’’ Mermigas on Media Newsletter, (Apr. 

16, 2003), quoting Tom Wolzien, a Sanford Bernstein Media Analyst. 9David D. Kirkpatrick, ‘‘Murdoch’s First Step: Make Sports Fans Pay.’’ The New York Times, 

Apr. 14, 2003. 

companies play in our Nation’s democracy. It is time for Congress to drop the rhetoric and look at the reality of deregulated video markets. Congress should: 

• Reconsider its grant of retransmission rights to broadcasters, where a broadcaster also owns a second means of video distribution. 

• Let consumers pick the TV channels they want for a fair price. 

• Prevent all forms of discrimination by those who control digital TV distribution 

systems and those who control the most popular programming in a manner 

which prevents competition in the video marketplace. 

• Strengthen, rather than weaken, media ownership rules, to prevent companies 

from owning the most popular sources of news and information in both the local 

and the national markets. 

The News Corporation/DIRECTV Merger 

If competition in the multichannel video market had performed up to its hope and 

hype, the NewsCorp./Fox/DIRECTV merger might not be so threatening. But in 

light of the failure of deregulation, it presents a problem for public policy that cannot be ignored. There are two points of power in the marketplace—distribution and 

program production. The problem with a combination of News Corp./Fox and 

DIRECTV is that it combines the two. 

The reach of News Corp./Fox’s media empire is truly staggering. The following are 

highlights of some News Corp./Fox properties in the U.S.: 

• Broadcast Television Stations (35 stations, including two broadcast stations in 

New York, Los Angeles, Dallas, Washington DC, Houston, Minneapolis, Phoenix 

and Orlando) 

• Filmed Entertainment (20th Century Fox Film Corp., Fox 2000 Pictures, Fox 

Searchlight Pictures, Fox Music, 20th Century Fox Home Entertainment, Fox 

Interactive, 20th Century Fox Television, Fox Television Studios, 20th Television, Regency Television and Blue Sky Studios) 

• Cable Network Programming (Fox News Channel—the most watched cable 

news channel, Fox Kids Channel, FX, Fox Movie Channel, Fox Sports Networks, Fox Regional Sports Networks, Fox Sports World, Speed Channel, Golf 

Channel, Fox Pan American Sports, National Geographic Channel, and the 

Heath Network) 

• Publishing (New York Post, the Weekly Standard, HarperCollins Publishers, 

Regan Books, Amistad Press, William Morrow & Co., Avon Books, and 

Gemstar—TV Guide International) 

• Sports Teams and Stadiums (Los Angeles Dodgers, and partial ownership in the 

New York Knicks, New York Rangers, LA Kings, LA Lakers, Dodger Stadium, 

Staples Center, and Madison Square Garden) 

News Corp./Fox’s merger with DIRECTV adds a new, nationwide television distribution system to News Corp./Fox’s programming/production arsenal. DIRECTV is 

the Nation’s largest satellite television distribution system, with more than 11 million customers and the ability to serve all communities in the United States. 

News Corp./Fox’s vast holdings provide it with leverage in several ways. ‘‘The biggest, most powerful weapon News Corp./Fox has is ‘a four-way leverage against 

cable operators, competing with satellite and using the requirement that cable get 

retransmission consent to carry Fox-owned TV stations, while potentially leveraging 

price for Fox-owned regional sports networks and its national cable and broadcast 

networks. . .’ ’’8

One of News Corp./Fox’s most important weapons is significant control over regional and national sports programming. Mr. Murdoch often describes sports programming as his ‘‘battering ram’’ 9 to attack pay television markets around the 

world. As David D. Kirkpatrick noted in an April 14, 2003 New York Times article 

regarding Mr. Murdoch’s control over sports programming: 

In the United States, News Corp./Fox’s Entertainment subsidiary now also controls the national broadcast rights to Major League Baseball, half the Nascar 

racing season and every third Super Bowl. On cable, Fox controls the regional 

rights to 67 of 80 teams in the basketball, hockey and baseball leagues as well 

as several major packages of college basketball and football games, which it 

26 

10 Id., Emphasis added. 11David Kirkpatrick, ‘‘By Acquiring DIRECTV, Murdoch Gets Upper Hand.’’ The New York 

Times, Apr. 10, 2003. 12Frank Ahrens, ‘‘Murdoch’s DIRECTV Deal Scares Rivals.’’ Washington Post, Apr. 11, 2003. 

broadcasts on more than 20 Fox regional sports cable networks around the 

country. By acquiring DIRECTV, Mr. Murdoch gains the exclusive right to 

broadcast the entire slate of Sunday NFL games as well. 

With DIRECTV, Mr. Murdoch can start a new channel with immediate access 

to its subscribers, currently 11 million. He has other leverage in Fox News, now 

the most popular cable news channel, and essential local stations in most major 

markets around the country.10

It is important to consider the ramifications of Mr. Murdoch’s control of over 40 

percent of Fox broadcast stations nationwide, control of 11.2 million satellite subscribers, and his stranglehold over regional sports programming. With those extensive holdings, News Corp./Fox is in a position to determine what new programming 

comes to market, and to undercut competitive programming. The company will be 

able to decide what programming it does not want to carry and may be able to indirectly pressure cable operators (by offering a lower price for Fox programming as 

an inducement) not to carry programming that competes with Fox offerings. We believe Mr. Murdoch has a right as an owner to put whatever he wants on his system, 

but with the FCC moving to relax media ownership rules, companies like News 

Corp./Fox will have the ability to control key sources of news and information in 

an unprecedented manner. 

The merger between News Corp./Fox and DIRECTV is extremely unlikely to stop 

skyrocketing cable rates and could very well exacerbate the problem. According to 

David Kirkpatrick’s New York Times article:11

[S]ome analysts said the structure of the deal suggested Mr. Murdoch hoped to 

use DIRECTV mainly to punish other pay television companies and benefit his 

programming businesses. The Fox Entertainment Group, an 80 percent-owned 

subsidiary of News Corporation, will own a 34 percent stake in DIRECTV’s parent, creating the potential for programming deals that favor Fox over 

DIRECTV. 

‘‘My sense is that the major purpose for News Corporation controlling DIRECTV 

is to use it as a tactical weapon against the cable companies to get them to pay 

up for its proprietary programming,’’ said Robert Kaimowitz, chief executive of 

the investment fund Bull Path Capital Management. 

While News Corp./Fox has agreed to abide by the FCC’s program access requirements, this pledge could end up being nothing more than a tool for pumping up 

cable prices. That is, while News Corp./Fox agrees to make its programming available on non-discriminatory terms and conditions, there is absolutely nothing that 

would prevent News Corp./Fox from raising the price that it charges itself on its 

satellite system, in return for increased revenues from the other 70 million cable 

households. If a cable system refuses to pay the increased price, then News Corp./ 

Fox will be able to threaten cable operators to use its newly acquired satellite system to capture market share away from cable in those communities. 

An article in the Washington Post 12 recently detailed the way this might work: 

For instance, News Corp./Fox raised the cost of his Fox Sports content to some 

cable systems by more than 30 percent this year, according to one cable operator. Like most officials interviewed yesterday, he refused to be identified, saying he had to continue dealing with News Corp./Fox. 

Most recently, in Florida, News Corp./Fox pulled its Fox Sports regional sports 

programming off of competitor Time Warner Cable’s system over a rate dispute. 

News Corp./Fox wanted to charge more than Time Warner was willing to pay, 

but the conflict was resolved and service restored. ‘‘If this happens when Rupert 

owns DIRECTV, you can assume DIRECTV will go into the market and just 

pound away at the cable system,’’ said one cable channel executive. 

And price is only the beginning of the problems in this industry. Even in the 500- 

channel cable universe, control of prime time programming rests in the hands of a 

very few media companies. Given the enormous power that will be concentrated in 

News Corp./Fox as a result of the DIRECTV transaction, not only will the combined 

entity be able to insist on top dollar for its programming, it will be able to determine 

who makes it and who fails in the programming marketplace. 

27 

13 Bureau of Labor Statistics, Consumer Price Index (March 2003). From 1996 until March 

2003, CPI increased 19.3 percent while cable prices rose 50.3 percent, 2.6 times faster than inflation. 14 Report on Cable Industry Prices, February 14, 2002, p. 36. 15 Report on Cable Industry Prices, February 14, 2001, p. 36. 16Pearce, George, The Dictionary of Modern Economics (MIT Press, Cambridge, 1984), p. 94. 

Cross Elasticity of Demand. The responsiveness of quantity demanded of one good to a change 

in the price of another good. Where goods i and j are substitutes the cross elasticity will be positive-i.e., a fall in the price of good j will result in a fall in the demand for good i as j is substituted for i. If the goods are complements the cross elasticity will be negative. Where i and 

j are not related, the cross elasticity will be zero. Taylor, John, B., Economics (Houghton Mifflin, 

Boston, 1998), p. 59. 

A sharp decrease in the price of motor scooters or rollerblades will decrease the demand for 

bicycles. Why? Because buying these related goods becomes relatively more attractive than buying bicycles. Motor scooters or rollerblades are examples of substitutes for bicycles. A substitute 

is a good that provides some of the same uses or enjoyment as another good. Butter and margarine are substitutes. In general, the demand for a good will increase if the price of a substitute 

for the good rises, and the demand for a good will decrease if the price of a substitute falls. 

Bannock, Graham, R.E. Banock and Evan Davis, Dictionary of Economics (Penguin, London, 

1987). 

Substitutes. Products that at least partly satisfy the same needs of consumers. Products are 

defined as substitutes in terms of cross-price effects between them. If, when the price of records 

goes up, sales of compact discs rise, compact discs are said to be a substitute for records, because 

consumers can to some extent satisfy the need served by records with compact discs. This account is complicated by the fact that, when the price of an item changes, it affects both the 

REAL INCOME 01 consumers and the relative prices of different commodities. Strictly, one 

Continued 

Cable Rates Have Escalated and Satellite Competition Has Not Kept Them 

Under Control 

Despite the growth of satellite TV, the promise of meaningful competition to cable 

TV monopolies remains unfulfilled. Cable rates are up 50 percent since Congress 

passed the 1996 Telecommunications Act, nearly three times as fast as inflation.13

We welcome the possibility that satellite would aggressively cut its price and compete with cable, thereby keeping cable rates in check, but for several reasons that 

is unlikely to happen. 

Satellite competition has failed to prevent price increases on cable because cable 

and satellite occupy somewhat different product spaces. First and foremost, the lack 

of local channels on satellite systems in many communities prevents satellite from 

being a substitute for cable; in fact, many satellite subscribers also purchase cable 

service for the express purpose of receiving local channels. And while many larger 

communities now receive local broadcast channels from satellite, service is not as 

attractive as cable in several respects and many consumers simply cannot subscribe. 

Many urban consumers cannot receive satellite services because of line of sight 

problems, or because they live in a multi-tenant dwelling unit where only one side 

of the building faces south. 

Restrictions on multiple TV set hookups also make satellite more costly. The most 

recent data on the average price for monthly satellite service indicates that consumers pay between $44 and $80 a month to receive programming comparable to 

basic cable programming. This monthly fee often includes two separate charges 

above the monthly fee for basic satellite programming—one fee to hook a receiver 

up to more than one television in the household, and another fee so consumers are 

able to receive their local broadcast channels. 

Satellite customers often subscribe to receive high-end services not provided (until 

the recent advent of digital cable) on cable systems, such as high-end sports packages, out of region programming, and foreign language channels. In essence, it is 

an expensive—but valuable—product for consumers that want to receive hundreds 

of channels. 

If satellite were a close substitute for cable, one would expect that it would have 

a large effect on cable. In fact, the FCC’s own findings and data have contradicted 

the cable industry claims for years. The FCC found that satellite only ‘‘exerts a 

small (shown by the small magnitude of DBS coefficient) but statistically significant 

influence on the demand for cable service.’’ 14 In the same econometric estimation, 

the FCC concluded that the ‘‘the demand for cable service is somewhat price elastic 

(i.e., has a price elasticity of minus 1.45) and suggests that there are substitutes 

for cable.’’ 15 This elasticity is not very large and the FCC recognizes that in using 

the adjective ‘‘somewhat.’’ The FCC also attempted to estimate a price effect between satellite and cable. If cable and satellite were close substitutes providing stiff 

competition, one would also expect to see a price effect. Most discussions of in economics texts state that substitutes exhibit a positive cross elasticity.16 The FCC can 

28 

product is a substitute for another if it enjoys increased demand when the other’s prices rises 

and the consumer’s income is raised just enough to compensate for the drop in living standards 

caused (pp. 390–391). 

Cross-price elasticity of demand. The proportionate change in the quantity demanded of one 

good divided by the proportionate change in the price of another good. If the two goods are SUBSTITUTES (e.g., butter and margarine), this ELASTICITY is positive. For instance, if the price 

of margarine increases, the demand for butter will increase (p. 99). 17 Report on Cable Prices, p. 11. 18Federal Communications Commission, 2002b. 19Federal Communications Commission, 2001b, describes the DBS variable as the level of 

subscription. Federal Communications Commission, 2002b, uses the DBS dummy variable. 20The cluster variable was included in the Federal Communications Commission 2000a and 

2001b Price reports. Its behavior contradicted the FCC theory. It has been dropped from the 

2002 report. The MSO size was included in the 2002 report. System size has been included in 

all three reports. 21 Vertical integration was included in Federal Communications Commission, 2002b. 22 U.S. General Accounting Office, ‘‘Report to the Subcommittee on Antitrust, Competition, and 

Business and Consumer Rights, Committee on the Judiciary, U.S. Senate: Issues in Providing 

Cable and Satellite Television Services.’’ October 2002. In an important clarifying footnote, the 

report finds that: 

‘‘This was a larger effect than that found by FCC in its 2002 Report on Cable Industry Prices 

(FCC 02–107). Using an econometric model, FCC found that cable prices were about 7 percent 

lower in franchise areas when there was an overbuilder. One possible explanation for the difference in results is that we conducted further analysis of the competitive status of franchises 

that were reported by FCC to have an overbuilder. We found several instances where overbuilding may not have existed although FCC reported the presence of an overbuilder, and we 

found a few cases where overbuilders appeared to exist although FCC had not reported them. 

We adjusted our measurement of overbuilder status accordingly. 

find none. In fact, it found quite the opposite. The higher the penetration of satellite, the higher the price of cable.17

The most recent annual report on cable prices shows that the presence of DBS 

has no statistically significant or substantial effect on cable prices, penetration or 

quality.18 This is true when measured as the level of penetration of satellite across 

all cable systems, or when isolating only areas where satellite has achieved a relatively high penetration.19 At the same time, ownership of multiple systems by a 

single entity, large size and clustering of cable systems results in higher prices.20

Vertical integration with programming results in fewer channels being offered 

(which restricts competition for affiliated programs).21

In other words, one could not imagine a more negative finding for intermodal competition or industry competition from the FCC’s own data. All of the concerns expressed about concentrated, vertically integrated distribution networks are observed 

and the presence of intermodal competition has little or no power to correct these 

problems. The claims that the cable industry makes about the benefits of clustering 

and large size—measured as price effects—are contradicted by the data. In fact, 

only intramodal, head-to-head competition appears to have the expected effects. The 

presence of wireline cable competitors lowers price and increases the quality of service. 

While we hope that satellite will ultimately have a price disciplining effect in 

those communities where satellite offers local broadcast stations it is clear that the 

single most important variable in cable prices is whether there is a cable overbuilder in a particular community. Wire-to-wire competition does hold down cable 

rates and satellite does not seem to do the trick. The U.S. General Accounting office 

describes this phenomenon: 

Our model results do not indicate that the provision of local broadcast channels 

by DBS companies is associated with lower cable prices. In contrast, the presence of a second cable franchise (known as an overbuilder) does appear to constrain cable prices. In franchise areas with a second cable provider, cable prices 

are approximately 17 percent lower than in comparable areas without a second 

cable provider.22

In other words, where there are two satellite and one cable company in a market, 

prices are 17 percent higher than where there are two cable companies and two satellite providers in a market. If we had this type of competition nationwide, consumers could save more than $5 billion a year on their cable bills. 

Program Production 

The failure of competition in the cable and satellite distribution market is 

matched by the failure of competition in the TV production market. In the 1980s, 

as channel capacity grew, there was enormous expansion and development of new 

content from numerous studios. Policymakers attributed the lack of concentration 

29 

23Tom Wolzien, ‘‘Returning Oligopoly of Media Content Threatens Cable’s Power.’’ The Long 

View, Bernstein Research (Feb. 7, 2003). Emphasis added. 24 Coalition for Program Diversity, Jan. 28, 2003. 25 Victoria Riskin, President of Writers Guild of America, West. Remarks at FCC EnBanc 

Hearing, Richmond, VA (Feb. 27, 2003). 26Federal Communications Commission, Ninth Annual Report, In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, MB 

docket No. 02–145 (Dec. 31, 2002). 

in the production industry to market forces and pushed for the elimination of the 

Financial Interest in Syndication rules (Fin-Syn) that limited network ownership 

and syndication rights over programming. The policymakers were wrong. 

Following the elimination of the Fin-Syn rules in the early 1990s, the major networks have consolidated their hold over popular programming. The market no 

longer looks as promisingly competitive or diverse as it once did. Tom Wolzien, Senior Media Analyst for Bernstein Research, paints the picture vividly—he details the 

return of the ‘‘old programming oligopoly’’: 

Last season ABC, CBS and NBC split about 23 percent [of television ratings] 

. . . 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 net[work]s did 40 years ago. The 

programming oligopoly appears to be in a process of rebirth.23

In addition, the number of independent studios in existence has dwindled dramatically since the mid-1980s. In 1985, there were 25 independent television production studios; there was little drop-off in that number between 1985 and 1992. 

In 2002, however, only 5 independent television studios remained. In addition, in 

the ten-year period between 1992 and 2002, the number of prime time television 

hours per week produced by network studios increased over 200 percent, whereas 

the number of prime time television hours per week produced by independent studios decreased 63 percent.24

Diversity of production sources has ‘‘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 companies 

more than quintupled to 77 percent. In 1992, 16 new series were produced independently of conglomerate control, last year there was one.’’ 25

The ease with which broadcasters blew away the independent programmers 

should sound a strong cautionary alarm for Congress. The alarm can only become 

louder when we look at the development of programming in the cable market. One 

simple message comes through: those with rights to distribution systems win. 

Of the 26 top cable channels in subscribers’ and prime time ratings, all but one 

of them (the Weather Channel) has ownership interest of either a cable MSO or a 

broadcast network. In other words, it appears that you must either own a wire or 

have transmission rights to be in the top tier of cable networks. Four entities— 

News Corp./Fox (including cross ownership interests in and from Liberty) AOL Time 

Warner, ABC/Disney and CBS/Viacom—account for 20 of these channels. 

Of the 39 new cable networks created since 1992, only 6 do not involve ownership 

by a cable operator or a national TV broadcaster. Sixteen of these networks have 

ownership by the top four programmers. Eight involve other MSOs and 10 involve 

other TV broadcasters. Similarly, a recent cable analysis identified eleven networks 

that have achieved substantial success since the passage of the 1992 Act. Every one 

of these is affiliated with an entity that has guaranteed carriage on cable systems.26

Moreover, each of the dominant programmers has guaranteed access to carriage 

on cable systems—either by ownership of the wires (cable operators) or by carriage 

rights conferred by Congress (broadcasters). 

• AOL Time Warner has ownership in cable systems reaching over 12 million 

subscribers and cable networks with over 550 million subscribers. 

• Liberty Media owns some cable systems and has rights on Comcast systems and 

owns cable networks with approximately 880 million subscribers. Liberty owns 

almost 20 percent of News Corp./Fox. 

• Disney/ABC has must carry-retransmission rights and ownership in cable networks reaching almost 700 million subscribers. 

• Viacom/CBS has must carry-retransmission rights and ownership in cable networks reaching approximately 625 million subscribers. 

30 

27One of the more ironic arguments offered by the cable operators feeds off of the observation 

that broadcast networks have carriage rights. They argue that even if cable operators foreclosed 

their channels to independent programmers, these programmers could sell to the broadcast networks. This ignores the fact that cable operators control the vast majority of video distribution 

capacity. There are approximately 60 channels per cable operator on a national average basis 

(Federal Communications Commission, 2002b, p. 10). There are approximately 8 broadcast stations per DMA on a national average basis (BIA Financial, 2002). Each broadcast station has 

must carry rights for one station. They can bargain for more, particularly in the digital space, 

but the cable operators control more stations there as well. In other words, if we foreclose 85 

percent of the channels, the programmers will be able to compete to sell to the remaining 15 

percent of the channels. Needless to say, this prospect does not excite independent programmers. 28Public Law 102–385, Section 2(a)(9). 29Public Law 102–385, Section 2(a)(12). 

• Fox (has must carry-retransmission and ownership in cable networks reaching 

approximately 370 million subscribers and a substantial cross ownership interest with Liberty). 

These five entities have ownership rights in 21 of the top 25 cable networks based 

on subscribers and prime time ratings. They account for over 60 percent of subscribers to cable networks, rendering this market a tight oligopoly. Other entities 

with ownership or carriage rights account for four of the five remaining most popular cable networks. The only network in the top 25 without such a connection is 

the Weather Channel. It certainly provides a great public service, but is hardly a 

hotbed for development of original programming or civic discourse. Entities with 

guaranteed access to distribution over cable account for 80 percent of the top networks and about 80 percent of all subscribers’ viewing choices on cable systems. 

In the world of broadcast and cable networks, almost three-quarters of them are 

owned by six corporate entities.27 The four major TV networks, NBC, CBS, ABC, 

Fox, and the two dominant cable providers, AOL Time Warner (which also owns a 

broadcast network) and Liberty (with an ownership and carriage relationship with 

Comcast and Fox), completely dominate the tuner. Moreover, these entities are thoroughly interconnected through joint ventures. 

If distribution rights win then an entity like News Corp./Fox/DIRECTV would create a powerhouse with guaranteed transmission rights on all three of the technologies used to distribute TV to the home. It will own broadcast stations, have 

must carry/retransmission rights on cable and satellite because of the broadcast licenses it holds, and own the largest satellite network. This is an immense power 

of distribution for a company that is vertically integrated into both broadcast and 

cable programming. 

In the 1992 Cable Act, Congress recognized that the Federal government ‘‘has a 

substantial interest in having cable systems carry the signals of local commercial 

television stations because the carriage of such signals is necessary to serve the 

goals . . . of providing a fair, efficient, and equitable distribution of broadcast services.’’ 28 Congress also recognized that ‘‘[t]here is a substantial government interest 

in promoting the continued availability of such free television programming, especially for viewers who are unable to afford other means of receiving programming.’’ 29

These governmental interests, as well as a finding that ‘‘[c]able television systems 

often are the single most efficient distribution system for television programming,’’ 

formed the original rationale behind Retransmission Consent. Because a majority of 

the country was receiving broadcast television service through cable, it was necessary to require that cable systems carry local broadcast signals. However, a merger between News Corp./Fox and DIRECTV would change the landscape against 

which Retransmission Consent was created. Given that this transaction will provide 

News Corp./Fox with assets that no local broadcaster had in 1992 when Retransmission Consent was originally put in place—it will have a satellite distribution system capable of reaching a majority of the country—it seems that the original logic 

behind the rule is strained in the present circumstances. Not only will News Corp./ 

Fox own its own transmission system, but it also owns other programming that it 

bundles with its network programming, which may give it too much market power 

in negotiating cable and other carriage agreements. Congress should revisit the necessity of Retransmission Consent as it pertains to stations owned and operated by 

News Corp./Fox. 

Conclusion 

Consumers Union and Consumer Federation of America believe that the Dept. of 

Justice should impose substantial conditions on this deal which will otherwise be 

31 

harmful to competition in the video programming market—harm that will be borne 

on the backs of consumers. 

Congress should impose a new set of nondiscrimination requirements that would 

enable all media distributors and consumers to purchase video programming and related services on an individual—as opposed to bundled—basis under terms that 

maximize competition and choice in the marketplace. Congress must reexamine the 

enormous market power and leverage that Retransmission Consent provides broadcast programmers—particularly one like News Corp. which, as a result of the merger with DIRECTV, will own a new nationwide video distribution system (in addition 

to its over-the-air broadcast distribution system). And Congress should require cable 

and satellite operators to offer consumers the right to select the channels they want 

to receive at a fair price—in other words, require an a la carte program offering 

from all video distributors. Since the average household watches only about a dozen 

channels of video programming, this requirement could empower consumers to help 

discipline excesses in cable (or satellite) pricing, and could possibly spur more competition. 

Congress must also carefully consider all the ramifications associated with the 

rulemakings on media ownership. Specifically, given that the FCC has announced 

an intended June 2nd decision date on media ownership rules, Congress should insist on seeing the FCC’s proposal before any decision is finalized. 

If media ownership limits are significantly relaxed or eliminated by the FCC then 

the News Corp./DIRECTV deal may look almost harmless in comparison to an avalanche of media mergers that ensue. It is completely unfair to force American consumers to accept inflated cable rates and inadequate TV competition. But excess 

consolidation in the news media is even worse: the mass media provides Americans 

the information and news they need to participate fully in our democratic society. 

Without ownership rules that effectively limit consolidation in media markets, one 

company or individual in a town could control the most popular newspaper, TV and 

radio stations, and possibly even a cable system, giving it dominant influence and 

power over the content and slant of news. This could reduce the diversity of cultural 

and political discussion in that community. 

The cost of excessive media consolidation and further media deregulation is very 

high. The cost of market failure in media markets is the price we pay when stories 

are not told, when sleazy business deals and bad accounting practices do not surface, when the watchdog decides that it would rather gnaw on the bone of softer 

news than chase down the more complicated realities that must be uncovered to 

make democracy function. 

APPENDIX

PROMOTING THE PUBLIC INTEREST THROUGH MEDIA OWNERSHIP LIMITS: A CRITIQUE

OF THE FCC’S DRAFT ORDER BASED ON RIGOROUS MARKET STRUCTURE ANALYSIS

AND FIRST AMENDMENT PRINCIPLES—MAY 2003 

Dr. Mark N. Cooper, Director of Research, Consumer Federation of America 

TABLE OF CONTENTS

Executive Summary 

I. Legal and Analytic Framework 

The Evidence Supports Limits on Media Ownership 

The Courts Support Congressionally Mandated Public Interest Standards To 

Promote Diversity In Media Markets; They Want Coherent Policy Analysis 

A High Standard Is Necessary To Serve The Public Interest 

Promoting The Public Interest Through Unconcentrated Media Markets 

III. Rigorous Analysis of Media Markets 

Market Structure Analysis Must Recognize Differences Between Media In Function, Reach, Impact and Audience 

Television and Newspapers Should Be The Focal Point Of Analysis 

The Analysis Of News and Information, As Opposed To Entertainment Or Ad 

Markets, Should Be The Primary Basis Of Market Structure Analysis 

Cable, Satellite And The Internet Provide Little, If Any, Local News and Information 

Media Markets Are Already Concentrated 

32 

IV. Proposed FCC Rules Have No Analytic Or Legal Basis 

Flaws In The FCC Rules 

The FCC Proposal Guts The Public Interest Standard For Media Ownership 

Under The Communications Act 

V. A Responsible Approach To Ownership Limits 

Counting Voices In A Total Media Market 

Reasonable Adjustments To Counting Of Voices 

Establishing Thresholds And Market Screens 

Conclusion 

Endnotes 

LIST OF EXHIBITS

Exhibit 1: TV and Newspapers are the Public’s Most Important Source of All 

News 

Exhibit 2: TV and Newspapers Dominate as Local News Sources 

Exhibit 3: Comparing News Capabilities: Newspapers Produce the Bulk of Local 

News 

Exhibit 4: Few Cable Viewers Get Their Local News From Local Cable Channels 

Exhibit 5: Most Internet Users Visit Websites of the Major TV News Outlets and 

Newspapers 

Exhibit 6: Broadcast TV Voice Count 

Exhibit 7: Newspaper Voice Count 

Exhibit 8: Radio Voice Count 

Exhibit 9: Concentration of National Programming Markets 

Exhibit 10: Graphic Representation of Concentrated Markets 

Exhibit 11: Impact of Newspaper-TV Mergers in One-Paper Cities 

Exhibit 12: Impact of Newspaper-TV Mergers in Two-Paper Cities 

Exhibit 13: Increase in HHI Caused by Leading Paper-TV Station Mergers 

Exhibit 13: Increase in HHI Caused by Leading Paper-TV Station Mergers 

Exhibit 14: Most Concentrated News Markets Open to Cross-Ownership Under 

the FCC Draft Order 

Exhibit 15: Impact of Newspaper-TV Mergers in Cities with Three Papers and 

Three or Fewer TV Stations Providing News 

Exhibit 16: Media Market Categorization for Merger Review 

Exhibit 17: Total Media Voices 

Exhibit 18: Two-Pronged Market Standard for Cross-Ownership 

Exhibit 19: Simple News Voice Count Vs. Market–Share Based, Adjusted Voice 

Count [(TV+Newspaper)/.8] 

Exhibit 20: Market Eligible For Cross–Ownership Mergers 

Executive Summary 

Courts Support Public Interest Standards to Promote Diversity in Media Markets; 

They Want Coherent Policy Analysis 

While the Federal Appeals Court for the District of Columbia has issued decisions 

instructing the FCC to provide better justification for its rules, it has clearly stated 

that public policies to promote a more diverse media landscape are constitutional, 

even if they reduce economic efficiency. The notion that the courts have demanded 

that the FCC get rid of or substantially relax media ownership rules is simply 

wrong. The fact that the Court of Appeals has demanded a coherent analytic framework based on empirical facts does not necessarily indicate a relaxation of the limits 

on ownership is warranted. To the contrary, the court recognized that the limits 

could go be loosened or tightened. 

In Fox v. FCC, for example, the court noted that ‘‘it is not unreasonable—and 

therefore not unconstitutional—for the Congress to prefer having in the aggregate 

more voices heard,’’ even though ‘‘an industry with a larger number of owner may 

well be less efficient than a more concentrated industry.’’ In Sinclair v. FCC the 

court thoroughly rejected Sinclair’s claim that its First Amendment rights had been 

33 

harmed by the duopoly rule and reminded the parties that the Supreme Court ‘‘saw 

nothing in the First Amendment to prevent the Commission from allocating licenses 

so as to promote the ‘public interest’ in diversification of the mass communications 

media.’’ 

Yet, to the public’s great detriment, we find that the FCC is not doing the one 

thing the court demanded—i.e., careful analysis of media markets keeping with 

longstanding principles of economic analysis. For example, one of the most important media ownership rules, the newspaper-broadcast cross-ownership prohibition, 

the FCC is: 

• Looking at the wrong product (entertainment), 

• Analyzing the wrong market (national news), 

• Doing the market structure analysis incorrectly (not considering market 

shares), and 

• Choosing a dangerously low standard. 

The Supreme Court has repeatedly defined the public interest for electronic mass 

media by expressing a bold aspiration for the First Amendment declaring the widest 

possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public. 

Applying High Standards in Rigorous Market Structure Analysis 

While the goal of promoting diversity under the Communications Act is broader 

than the goal of protecting competition under the antitrust laws, the Merger Guidelines of the Department of Justice and the Federal Trade Commission are a useful 

starting point for analysis of media markets. For two decades the antitrust authorities have used these Guidelines—which are based on extensive theoretical and empirical evidence—to categorize markets for purposes of merger analysis. 

• A market with the equivalent of 10 or more equal-sized firms is defined as 

unconcentrated. 

• Markets with fewer than the equivalent of 10 but more than 6 equal-sized firms 

are considered moderately concentrated. 

• Markets with the fewer than 6 equal-sized firms are highly concentrated. 

Concentrated markets like these ‘‘raise significant competitive concerns’’ for antitrust authorities because they create market power that can be used to raise prices, 

reduce quality, or retard innovation. Those charged with promoting the public interest under the Communications Act should be more than concerned if media markets 

become this concentrated because of the broader goals of First Amendment policy. 

To the extent the Commission chooses to rely on the analysis of commercial media 

markets, especially if different types of media are combined, caution is necessary 

and should be expressed in the form of rigorous analysis and high standards. Public 

policy should err in favor of more competition, which translates into greater diversity, to reflect the unique importance and role of media in promoting the robust exchange of views on which democratic dialogue and debate depends. 

Media Markets Are Already Concentrated 

The evidentiary record before the FCC shows that the mass media have not experienced an Internet or broadband revolution. Most people still get their news and 

information from TV and newspapers. Further, there is no simple common ‘‘currency’’ by which TV viewing and newspaper reading can be measured. In other 

words, is a half hour of TV worth an inch of newspaper space? Citizens do not easily 

substitute between these media, making it even more difficult to compare them. Different media are used in different ways, have different impacts, and play different 

roles in civic discourse. Rigorous analysis must recognize the distinct product markets and the importance of newspapers and television. 

Using the standard antitrust market definitions, we find that lax First Amendment policy implementation and weak antitrust enforcement has resulted in American media markets that are shockingly concentrated, especially in light of the bold 

aspiration for the First Amendment. 

• Every local television and newspaper market in the country is already concentrated. 

• Every local newspaper market in the country is already highly concentrated. 

• Over 95 percent of the TV and radio markets are highly concentrated. 

• Local TV news markets are much more concentrated than entertainment markets. 

34 

• Even adding together television and newspaper outlets, we find that virtually 

every local market is concentrated. 

• National markets for prime time entertainment programming are concentrated 

and national TV news markets are highly concentrated. 

The evidence provides strong support to those who feel the analysis of the media 

under the First Amendment jurisdiction of the Communications Act cannot be reduced to simple economic terms and that further relaxation of the rules on media 

ownership will lead to much more concentrated markets and decreased diversity of 

news and information sources. 

The FCC Proposal Effectively Repeals the Public Interest Standard, Affording Less 

Protection for Media Mergers than the Antitrust Laws 

Unfortunately, the proposed rules circulated by the Commission are driven by political deals, not rigorous analysis or high standards. 

• The Commission has failed to define the product market properly, ignoring the 

fact that almost half of all broadcast stations do not provide news. 

• It has ignored the local market, by counting stations and outlets that do little, 

if any local news. 

• It has failed to conduct proper market structure analysis, by failing to consider 

the audience (markets shares) of the media outlets. 

• The FCC has set a dangerously low standard for competition in local media 

markets allowing the count of major media voices to decline as low as three or 

four in many markets. 

The result will be to allow markets to become extremely concentrated and the 

local news markets to be dominated by one huge media giant. There is no chance 

for effective competition between TV-newspaper combinations in as many as threequarters of the markets in which such mergers would be allowed because there is 

only one dominant newspaper. Exhibits ES–1 and ES–2 graphically depict these 

markets. 

• In one-paper cities, the local media giant would have a 90 percent share of the 

newspaper circulation, one-third of the TV audience, and one-third of the radio 

audience. No second entity could come close to matching this media power. 

• In the typical two-paper town, the dominant firm would have four-fifth of newspaper market, and one-third of the TV and radio markets. The second firm 

would have a paper with only one-seventh of the circulation. In most of these 

markets, the TV market is also highly concentrated. 

Exhibit ES–1: Impact of Newspaper-TV Mergers In One-Paper Cities (Based 

on TV Entertainment HHI and Newspaper Circulation HHI) 

Pre-Merger Market 


522GENE1.eps
35 

Post-Merger Market 

Exhibit ES–2: Impact Of Newspaper-TV Mergers In Two-Paper Cities 

(Based on TV Entertainment HHI and Newspaper Circulation HHI) 

Pre-Merger Market 


522GENE2.eps 522GENE3.eps
36 

Post-Merger Market 

We believe that the FCC would inappropriately allow mergers in 140 of the top 

150 markets. Of those 140 markets, approximately 90 are one or two newspaper 

towns. Approximately 45 million households reside in these types of markets. In approximately 50 markets that have three or more papers, a merger between a newspaper and a TV station would render the local news media market concentrated. 

Exhibit ES–3 characterizes the 150 largest markets in which the draft order would 

allow cross-ownership mergers. Almost one half are one or two paper cities in which 

the TV news market is highly concentrated. One-sixth are one or two paper markets 

in which the TV market is moderately concentrated. One-quarter have three or 

more newspapers, but the TV market is highly concentrated. In only one-fifteenth 

of these markets is the TV market not highly concentrated and the total local news 

market unconcentrated. 

The absurdity of the FCC’s approach is readily apparent when the mergers it 

would allow are viewed in terms of the Merger Guidelines. Based on the record, we 

count newspapers and TV stations as equal voices and set radios equal to one-tenth 

of the market. 

In one-paper cities, the pre-merger market is highly concentrated and the merger 

would raise the HHI by approximately 1,200 points. The antitrust authorities believe mergers that raise the HHI by merely 50 points in a market such as this ‘‘are 

likely to create or enhance market power or facilitate its exercise.’’ The increase in 

concentration that would pass the FCC’s scrutiny is over twenty times the level that 

triggers antitrust concerns. 

Two-newspaper markets would be somewhat less concentrated, but the FCC 

would still allow excessively high levels of concentration that would not support vigorous competition. This pre-merger market would fall just below the highly concentrated threshold and the merger would raise the HHI by over 900 points. This 

is over nine times the level that triggers antitrust concerns. 

A Responsible Approach 

We believe that a set of rules based on rigorous analysis of the current structure 

in contemporary media, using careful geographic and product definitions and audience market shares, that adopts a high standard is consistent with the record in 

this proceeding. It would restrict merger activity to a small number of markets. Preventing the overall media market from becoming concentrated and individual product markets from becoming highly concentrated is a reasonably cautious standard. 

• No mergers between TV stations and newspapers should allowed if the overall 

media market in a locality is or would become concentrated as a result of the 

merger. 

• No mergers involving TV stations should be allowed if the TV market in a locality is or would become highly concentrated as a result of the merger. 

This approach would allow cross-ownership mergers in ten of the largest markets. 


522GENE4.eps
37 

Exhibit ES–3: Concentration of Top 150 Markets 

I. Legal and Analytic Framework 

The Evidence Supports Limits on Media Ownership 

This paper presents the case for a rigorous, unified framework for media ownership analysis under the Communications Act of 1934. It demonstrates that the current limits on media ownership should not be substantially relaxed. It shows that, 

consistent with the empirical record, the Federal Communications Commission 

(FCC) can adopt a rule based on market structural analysis—which has a long history in the industrial organization literature—that promotes the public interest by 

limiting mergers. Such a rule should build on economic fundamentals but it must 

be driven by the First Amendment policy articulated by Congress and endorsed by 

the courts for the electronic mass media. 

The policy aspiration for the First Amendment is embodied in the principle that 

‘‘the widest possible dissemination of information from diverse and antagonistic 

sources is essential to the welfare of the public.’’1 The Supreme Court has repeatedly supported this principle for more than half a century. Modern First Amendment jurisprudence has also clearly recognized that ‘‘Freedom of the press from governmental interference under the First Amendment does not sanction repression of 

that freedom by private interests.’’2

The empirical evidence demonstrates that traditional mass media still dominate 

the dissemination of news and information. Lax implementation of First Amendment policy and weak enforcement of antitrust policy have allowed media markets 


522GENE5.eps
38 

to become concentrated. Further relaxation of the limits on media ownership will 

allow more concentrated ownership of media conglomerates to be consolidated in national chains and result in a severe loss of diversity of news and information sources 

and local news content. 

At a practical level, the paper answers each of the main questions raised in the 

court cases and the omnibus media ownership proceeding initiated by the FCC. 

For example, in the case of Sinclair v. Federal Communications Commission, the 

D.C. Appeals Court held ‘‘that the Commission had failed to demonstrate that its 

exclusion of non-broadcast media from the eight voices exception ‘is necessary in the 

public interest’.’’3 Why didn’t the FCC include newspapers and radios in its voice 

count for the rule that limited the number of markets in which one owner could hold 

licenses to more than one TV station (the duopoly rule)? The answer it could have 

given is now clear and supported overwhelmingly by the empirical evidence in the 

record: 

• TV is the dominant source of news and information, while radio, newspapers 

and the Internet are not good substitutes for TV. 

• These other products do not belong in a TV voice count analysis and TV markets 

are already highly concentrated. 

• The limits on TV mergers are well justified. 

Similarly, the question posed by the review of the newspaper broadcast cross-ownership ban can be answered with a strong empirical statement. The Commission 

‘‘seeks comments on whether and to what extent we should revise our cross-ownership rule that bars common ownership of a broadcast station and daily newspaper 

in the same market.’’ 

• Newspapers are the second most important source of information and play a 

unique watchdog role, providing in-depth and investigative reporting. 

• All newspaper markets are highly concentrated and virtually all newspaper-TV 

markets are already concentrated. 

• Newspaper-TV combinations should not be allowed in all but a handful of media 

markets because they would drive media concentration above already unacceptably high levels and allow excessive control over the production of news content 

in local media markets. 

The empirical evidence on radio markets not only confirms that there is a problem, but it underscores the point that antitrust authorities cannot be relied upon 

to prevent excessive concentration in media markets. 

• No additional radio mergers should be allowed because virtually every radio 

market in the country is highly concentrated. 

The Courts Support Congressionally Mandated Public Interest Standards To 

Promote Diversity In Media Markets; They Want Coherent Policy Analysis 

The Fox and Sinclair Circuit Court decisions affirm First Amendment principles 

Over the past two years the Federal Appeals Court for the District of Columbia 

has issued decisions instructing the FCC to reexamine several of its rules governing 

structural limitations on media ownership.4 The Appeals Court has been careful to 

point out that it is not challenging the constitutional or even policy basis on which 

the rules rest; it is demanding that the FCC give better justifications for its rules. 

In fact, while the D.C. Appeals Court was stinging in its criticism of the FCC for 

not doing its homework, it also chided media companies for ignoring the importance 

of noneconomic considerations in policies to promote civic discourse.5 It clearly stated that public policies to promote a more diverse media landscape are constitutional, 

even if they reduce economic efficiency. 

An industry with a larger number of owners may well be less efficient than a 

more concentrated industry. Both consumer satisfaction and potential operating 

cost savings may be sacrificed as a result of the Rule. But that is not to say 

the Rule is unreasonable because the Congress may, in the regulation of broadcasting, constitutionally pursue values other than efficiency—including in particular diversity in programming, for which diversity of ownership is perhaps 

an aspirational but surely not an irrational proxy. Simply put, it is not unreasonable—and therefore not unconstitutional—for the Congress to prefer having 

in the aggregate more voices heard, each in roughly one-third of the nation, 

even if the number of voices heard in any given market remains the same.6

In the Fox case, a rule that increases the number of voices in the Nation without 

increasing the number of voices in a local market can pass constitutional muster 

39 

if it is properly justified. Rules that are aimed at increasing local voices, as are 

many currently under review by the FCC, stand on even firmer ground. In fact, in 

the Sinclair decision, which dealt with local media markets, the Court went to considerable lengths to reject Sinclair’s claim that it’s First Amendment rights had 

been harmed by the duopoly rule. 

[B]ecause there is no unabridgeable First Amendment right comparable to the 

right of every individual to speak, write or publish, to hold a broadcast license, 

Sinclair does not have a First Amendment right to hold a broadcast license 

where it would not, under the Local Ownership Order, satisfy the public interest. In NCCB the Supreme Court upheld an ownership restriction analogous to 

the Local Ownership Order, based on the same reasons of diversity and competition, in recognition that such an ownership limitation significantly furthers 

the First Amendment interest in a robust exchange of viewpoints. The Court 

states in NCCB that it ‘‘saw nothing in the First Amendment to prevent the 

Commission from allocating licenses so as to promote the ‘public interest’ in diversification of the mass communications media.’’ 7

The conclusion that broadcasters do not have ‘‘unabridgeable rights’’ in their licenses is typically linked to a specific concept of scarcity that looks at citizens not 

simply as listeners, but also as speakers. Thus, in Red Lion the court notes that 

where there are substantially more individuals who want to broadcast than 

there are frequencies to allocate, it is idle to posit an unabridgeable First 

Amendment right to broadcast comparable to the right of every individual to 

speak, write, or publish.8

While the number of networks and TV channels has certainly increased, the total 

available comes nowhere close to the number of potential speakers. Thus the key 

underpinning for the public interest policies to promote diversity of ownership, the 

scarcity of the opportunity to speak with an electronic voice, persists. 

Furthermore, the Court did not challenge the specific threshold the FCC had chosen, noting in Sinclair that ‘‘We leave for another day any conclusion regarding the 

Commission’s choice of eight’’ and adding that ‘‘[o]n remand the Commission conceivably may determine to adjust not only the definition of ‘voices’ but also the numerical limit.’’9

The public interest is still the master of the biennial review standard 

While some of the structural limits on media ownership are being reviewed at the 

direction of the Appeals Court, others are being evaluated as part of a biennial review process mandated by the Telecommunications Act of 1996 under the standard 

in section 202(h).10 There the FCC must ‘‘determine whether any of such rules are 

necessary in the public interest as the result of competition. The Commission shall 

repeal or modify any regulation it determines to be no longer in the public interest.’’ 11

Simply put, the public interest still prevails in the 1996 Act.12 The Act does not 

embrace competition for competition’s sake, nor did it change the definition of the 

public interest when it comes to media ownership policy. The public interest is the 

master that competition must serve; the FCC must find that competition is sufficient to promote the public interest before it repeals or modifies these rules. It can 

certainly find that stronger rules are necessary to promote competition—under the 

first prong of 202(h)—or the public interest—under the second prong of 202(h). 

Notwithstanding some concerns about preconceived notions,13 the court’s rulings 

and the biennial review are the starting point for debate, not the end point. There 

is nothing in the court ruling that would preclude the preservation or even strengthening of the rules if the evidentiary record supports such action. 

A High Standard is Necessary to Serve the Public Interest 

For reasons of both public policy and economic fundamentals, market structure 

analysis, as the basis for determining merger policy and ownership limits in broadcast media markets, requires a high threshold or standard for competition. Preventing the overall media market from becoming concentrated and submarkets from 

becoming highly concentrated is a reasonably cautious standard. 

First Amendment policy is broader than antitrust 

The goal of First Amendment policy under the Communications Act is broader 

than the goal of competition under the antitrust laws. In merger review, the antitrust laws seek to prevent the accumulation of market power while merger review 

under the Communications Act seeks to promote the public interest,14 defined by 

the courts as the ‘‘widest possible dissemination of information from diverse and antagonistic sources.’’ 

40 

In both cases, these standards are prophylactic, asking the authorities to make 

predictive judgments about the effect of the merger and take actions to prevent negative outcomes (in the case of antitrust) or ensure positive outcomes (in the case 

of the Communications Act). Media mergers must pass both reviews because Congress and the courts recognize that media and communications industries play a 

special dual role in society. They are critical commercial activities and deeply affect 

civic discourse. They affect both consumers and citizens. 

While economic competition is one way of promoting the public interest, the Communications Act and the Courts identify several others. Under the Act, the needs 

of citizens and democracy take precedence. 

Economic analysis under the Merger Guidelines restricts mergers 

Antitrust authorities have adopted guidelines that indicate when mergers are 

likely to be challenged. The Guidelines consider the state of competition and the extent to which concentration of a market would increase as a result of a merger. They 

use market shares to create an index known as the HHI, which describes the level 

of concentration in a market.15 They define highly concentrated markets as markets 

with an HHI of 1800. This is the equivalent of fewer than (roughly) six equal-sized 

competitors.16 They define unconcentrated markets as markets with an HHI of 

1000, which is the equivalent of ten or more equal-sized competitors. Moderately 

concentrated markets have the equivalent of between 6 and 10 equal-sized competitors. 

The guidelines identify the types of mergers that will raise competitive concerns 

as follows: 

Mergers producing an increase in the HHI of more than 100 points in moderately concentrated markets post-merger potentially raise significant competitive concerns . . . Mergers producing an increase in the HHI of more than 50 

points in highly concentrated markets post-merger potentially raise significant 

competitive concerns.17

To appreciate the nature of these thresholds, a firm with a 15 percent market 

share that sought to buy another with a two percent market share would violate 

the 50-point threshold. If the firm being acquired had a market share of just over 

three percent, it would violate the 100-point threshold. 

The competitive concern for antitrust authorities is the potential for the exercise 

of market power. The Guidelines define market power as ‘‘the ability profitably to 

maintain prices above competitive levels for a significant period of time’’ or to ‘‘lessen competition on dimensions other than price, such as product quality, service or 

innovation.’’18 While concerns exist in all concentrated markets, the Guidelines note 

that in highly concentrated markets, mergers ‘‘are likely to create or enhance market power or facilitate its exercise.’’ 

Although the antitrust authorities frequently allow mergers to go forward after 

considering other factors, we believe that for media markets these should be firm 

thresholds. The Sinclair decision notes that in 1995 the Commission had already argued ‘‘the merger guidelines of the Justice Department and the Federal Trade Commission might be too low as their purpose lay in defining the point at which antitrust scrutiny is required, and not in encouraging a wide array of voices and viewpoints.’’ 19 Whereas antitrust authorities become concerned about these levels of concentration, Communications Act authorities should become alarmed about concentrated markets like these because of the broader goals of First Amendment policy. 

Promoting the Public Interest Through Unconcentrated Media Markets 

Local Media Markets Should not be Concentrated 

The evidentiary record makes it clear that the Commission must proceed cautiously in relaxing limits on media ownership. It shows that the mass media have 

not experienced an Internet or broadband revolution. The dominant sources of information are still TV and newspapers. Further, there is no simple common ‘‘currency’’ 

by which TV viewing and newspaper reading can be measured. Different media are 

used in different ways, have different impacts, and play different roles in civic discourse. The evidence provides strong support to those who feel the analysis of the 

media under the First Amendment jurisdiction of the Communications Act cannot 

be reduced to simple economic terms and that the rules should not be relaxed. 

At the same time, the record sends a strong warning to those who would rely on 

economic analysis, especially if different types of media are combined, that great 

caution is necessary and should be expressed in the form of rigorous market analysis and high competitive standards. Public policy should err in favor of more ownVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\80738.TXT JACKIE
41 

ers, which translates to greater diversity, to reflect the unique importance and role 

of media in civic discourse. 

Based upon the above legal framework and observations, we propose a two 

pronged market structure standard that builds on economic fundamentals but is 

driven by First Amendment jurisprudence. Preventing the overall media market 

from becoming concentrated and broadcast markets from becoming highly concentrated is a reasonably cautious standard. 

The Federal Communications Commission should not tolerate or encourage concentrated media markets. The standard definition of unconcentrated markets, well 

grounded in economic theory and practice, is a market with the equivalent of ten 

or more equal-sized producers. Civic discourse demands even more vigilance. 

The Commission must approach the market structure analysis in a rigorous manner that reflects the current empirical reality of media markets. Since the Merger 

Guidelines have been a part of market structure policy for two decades, these simple 

rules are transparent. The data needed to categorize media markets are available. 

Furthermore, as a matter of economic fundamentals, caution is called for. Media 

markets are difficult to define and most data available is limited to very large markets. Using concepts like the Designated Market Area (DMA) for TV or the Arbitron 

rating area for radio, creates market areas that are generally larger than and certainly do not fit precisely with each other, or with newspaper markets. Including 

the Internet and cable in the local market definition, when the FCC’s own expert 

declared these to be national, not local, media, further confounds market analysis. 

Given these difficulties in product and geographic market definitions, the FCC 

should be extremely cautious about thresholds. By combining products that are not 

good substitutes and do not compete head-to-head in the market we are likely to 

overestimate the extent of actual competition. Therefore, based on strict economic 

grounds we should be cautious in the thresholds. 

Thus, a rule that takes unconcentrated local markets as the minimum standard 

is justified in both the antitrust and First Amendment contexts. 

Broadcast Markets Should Not Be Highly Concentrated or The Source of Excessive 

Leverage Across Sub-Markets 

Many TV markets are highly concentrated because they have never had a large 

number of stations, even though frequencies are available. For these, unconcentrated markets are a goal, but the existence of such markets does not mean that where 

markets are not concentrated we should abandon that goal or allow mergers to frustrate it. At a minimum, FCC policy should encourage or allow individual TV broadcast product markets to become highly concentrated. 

Excessive market concentration in electronic media cannot be compensated for by 

cross media competition. Each product market should be no worse than moderately 

concentrated. The FCC should not allow horizontal mergers in properly defined TV 

media markets that are highly concentrated, post-merger. That is, if the merger proposed is in a market that is highly concentrated or would result in a market that 

is highly concentrated it should not be allowed. 

TV broadcast should not be a source of excessive leverage in the overall media 

market. The FCC should not allow dominant firms in highly concentrated broadcast 

markets to merge. The FCC should have a waiver policy to allow horizontal mergers 

in properly defined media markets that are moderately concentrated (post-merger). 

The merging parties should be required to show that the merger would promote the 

public interest. The FCC should require the preservation of functionally separate 

news and editorial departments in the subsidiaries of the merged entity. 

III. Rigorous Analysis of Media Markets 

Market Structure Analysis Must Recognize Differences Between Media in Function, 

Reach, Impact And Audience 

The empirical record does not support the conclusion that the various media products (broadcast video, cable TV, newspaper, radio, Internet) are substitutes. On the 

contrary, the overwhelming evidence indicates that they are complements. Allowing 

mergers between them may undermine the ability of each media type to fill the distinct needs that it addresses. Therefore, the Commission must proceed with great 

caution if it combines media for purposes of market structure analysis. Market 

structure analysis should recognize the function, reach, and impact of different 

media products. 

Market structure analysis must start with the audience that each of the media 

outlets has. Just as market power is grounded in the size of the market an individual firm gains, so too media influence and impact, the ability to be heard, is a 

function of the audience. It is absurd to ignore the audience of a media outlet in 

42 

assessing its influence and impact on civic discourse, as it would be absurd to ignore 

the market share of a firm in assessing its economic market power. 

Television and Newspapers Should Be The Focal Point of Analysis 

Television and newspapers dominate the news media market (see Exhibits 1 and 

2). Television provides the announcement function. Newspapers provide in-depth 

coverage. Other sources of news are dwarfed by the two dominant sources. Approximately 80 percent of respondents say they get most of their news and information 

from TV or newspapers. The percentage of local news is similar, with newspapers 

playing a role closer to TV. That percentage has been stable since the advent of the 

Internet. It is even higher for election information. Clearly, market analysis must 

focus on TV and newspapers. The number of voices could be adjusted to take account of the lesser voices available on radio, the Internet, and other sources. 

The Analysis of News and Information, As Opposed To Entertainment or Ad 

Markets, Should Be The Primary Basis of Market Structure Analysis 

Much of the FCC’s previous analysis has focused on entertainment and advertising markets. The evidence before the Commission now shows that news and information is a distinct product market. Many broadcast stations do not provide news 

whatsoever. Radio has all but abandoned news (see Exhibit 3). As a consequence, 

news media markets are much more concentrated than broadcast and video TV markets. 

Exhibit 1: TV and Newspapers Are The Public’s Most Important Source of 

All News 

SOURCE: Federal Communications Commission, Study 8, Consumer Survey on Media Usage, 

prepared by Nielsen Media Research, September 2002, Question 10. 

Exhibit 2: TV and Newspapers Dominate as Local News Sources 

SOURCE: Federal Communications Commission, Study 8, Consumer Survey on Media Usage, 

prepared by Nielsen Media Research, September 2002, Question 1. Multiple responses allowed, 

percentage of total responses. 


522GENE6.eps 522GENE7.eps
43 

Exhibit 3: Comparing News Capabilities: Newspapers Produce the Bulk of 

Local News 

SOURCES: Vernon Stone, News Operations at U.S. Radio Stations, News Operations at TV Stations; U.S. Bureau of the Census, Statistical Abstract of The United States: 2000 Tables 2, 37, 

932; Lisa George, What’s Fit To Print: The Effect Of Ownership Concentration On Product Variety In Daily Newspaper Markets (2001); Editor And Publisher, International Yearbook, Various 

Issues. 

Newspapers dominate the production of local news content. They are devoted to 

news, whereas most other media are primarily devoted to entertainment. Newspapers also have large staffs. As Downie and Kaiser point out 

Television, like radio, is a relatively inefficient conveyor of information. The text 

of Cronkite’s evening news, after eliminating the commercials, would fill just 

over half the front page of a full-sized newspaper. A typical network evening 

news show now mentions just over fifteen or so different subjects, some in a 

sentence, whereas a good newspaper has scores of different news items every 

day. A big story on television might get two minutes, or about 400 words. The 

Los Angeles Times coverage of the same big story could easily total 2,000 

words.20

The Commission should examine the difference between entertainment HHIs and 

news HHIs. News markets are much more concentrated than entertainment markets. National aggregate data suggests that TV news markets are twice as concentrated as TV entertainment markets. 

Cable, Satellite and the Internet Provide Little, If Any, Local News and Information 

The Commission has considered cable TV as a single additional voice. However, 

the data before the commission shows that cable is not an independent source of 

local news and information. At present, satellite provides no independent local news 

or information. Indeed, it is struggling just to make all local stations available. It 

is most interesting to note in this context that the Commission’s task force study 

on media substitutability assumed that cable and the Internet are national, not 

local, sources of news. 


522GENE8.eps
44 

Cable plays only a small role as a source of local news and information. Only eleven percent of those who rely on cable cite a local cable channel (see Exhibit 4). Few 

cable operators provide news, and when they do, it frequently replicates one of the 

broadcast networks. 

The Internet’s role as an independent source of news is even smaller. The 

websites of the dominant TV outlets and newspapers dominate as sources on the 

Internet (see Exhibit 5). Even the 6 percent of respondents who say it is their primary source of news are more likely to say they use the websites of major TV networks or newspapers than other sites. The Internet should not be counted as an additional local voice. 

Exhibit 4: Few Cable Viewers Get Their Local News From Local Cable 

Channels 

SOURCE: Federal Communications Commission, Study 8, Consumer Survey on Media Usage, 

prepared by Nielsen Media Research, September 2002, Question 7. Multiple responses allowed, 

percentage of total responses. 

Exhibit 5: Most Internet Users Visit Websites of the Major TV News Outlets 

and Newspapers 

SOURCE: Federal Communications Commission, Study 8, Consumer Survey on Media Usage, 

prepared by Nielsen Media Research, September 2002, Question 9. Multiple responses allowed, 

percentage of total responses. 

Media Markets are Already Concentrated 

Applying the above methods to the analysis of media markets, we find that they 

are concentrated at present. Exhibits 6 thru 8 show the level of concentration in 

each specific media product in local media markets using the standard market definition and analytic approach applied by the Department of Justice and the Federal 

Trade Commission. We find that every television and newspaper market in the 

country is already concentrated. In fact, every newspaper market in the country is 

already highly concentrated, as are over 95 percent of the TV and radio markets. 

We use television markets as the geographic basis for defining markets because television is the primary news source. 

While most of the rules apply to local markets, the national broadcast cap applies 

to a national market. The national TV market greatly affects the ability of program 


522GENE9.eps 522GENE10.eps
45 

developers to gain access to a sufficient market to launch programs or channels. For 

example, one of the FCC studies examined the owners of programming aired in the 

national prime time market. Exhibit 9 shows three important indicators of concentration in national programming markets, network prime time producers, total 

prime time viewing and news programming. The prime time market is concentrated 

and the news market is highly concentrated. 

IV. Proposed FCC Rules Have No Analytic Or Legal Basis 

Flaws in the FCC Rules 

According to press accounts, the FCC appears to be headed in a very different direction than the above approach. The analytic framework adopted by the FCC is not 

rigorous. It is apparently based on a simple voice count of all TV stations. Thus, 

it addresses neither the product market in question, nor the market shares. To 

make matters worse, the simple TV voice count appears to include PBS stations, 

although few do local news and all have a very small market share. 

Furthermore, the FCC has failed to set a high standard for the most important 

rule—TV/newspaper cross-ownership. It will apparently allow the count of independent newspapers and TV stations to decline to as low as four. That is, it will 

allow a TV station to buy a newspaper in a market where there are only a total 

of four TV stations. 

In short, the FCC is 

• looking at the wrong product (entertainment), 

• analyzing the wrong market (national news), 

• doing the market structure analysis incorrectly (not considering market shares), 

and 

• choosing a dangerously low standard. 

Exhibit 6: Broadcast TV Voice Count 

SOURCE: BIA Financial, Television Market Report: 2000. Year 2000 broadcast TV viewing data 

for all 211 DMAs. 


522GENE11.eps
46 

Exhibit 7: Newspaper Voice Count 

SOURCE: Market profiles from Editor and Publisher and Media Week, various issues; ‘‘Initial 

Comments of the NAA,’’ and Initial Comments of Hearst Argyle, Exhibit 1, ‘‘Selected Media 

‘Voices’ by Designated Market Areas,’’ In the Matter of Cross-Ownership of Broadcast Stations 

and Newspapers; Newspaper-Radio Cross-Ownership Waiver Policy: Order and Notice of Proposed Rulemaking, MM Docket No. 01–235, 96–197, Table 3. Year 2000 newspaper circulation 

for 68 markets. Missing data estimated by regression of DMA size. 

Exhibit 8: Radio Voice Count 

SOURCE: Keith Brown and George Williams, Consolidation and Advertising Prices in Local 

Radio Markets (Federal Communications Commission, Media Bureau Staff Research Paper, September 2002). HHIs based on top 4 firms only, assuming firms 3 and 4 have equal shares. 


522GENE12.eps 522GENE13.eps
47 

Exhibit 9: Concentration of National Programming Markets 

SOURCE: Mara Epstein, Program Diversity and the Program Selection Process on Broadcast 

Network Television (Federal Communications Commission, Media Ownership Working Group, 

September 2002); ‘‘Comments of Sinclair Broadcasting,’’ Exhibit 15; Bill Carter, ‘‘Nightly News 

Feels Pinch of 23-Hour News’’ New York Times, April 14, 2003, p. C–1. 

The result will be to allow markets to become extremely concentrated. 

The FCC’s analysis also appears to be applying logically inconsistent approaches 

across media markets, an analytic flaw that was particularly offensive to the D.C. 

Circuit. 

• UHF stations appear to be counted as one-half for the purposes of the national 

cap, but a full station for purposes of the cross-ownership and the duopoly rule. 

This inconsistent treatment biases the rules toward greater concentration and 

less diversity. 

• Similarly, the FCC recognizes the importance of major TV voices by banning a 

duopoly merger between two TV stations ranked in the top four in any market. 

However, the FCC does not recognize the importance of newspapers for broadcast newspaper cross-ownership. It fails to impose a similar restriction on a top 

four TV station combining by a newspaper. 

The FCC Proposal Guts the Public Interest Standard for Media Ownership Under 

The Communications Act 

The impact on media market structure will be devastating. The FCC approach 

would allow newspaper-TV combinations in 150 markets. These markets cover approximately 90 percent of the total population. The media market structure in many 

of these localities would become greatly distorted because of a lack of competition. 

We believe that the FCC has misclassified at least 140 of these markets and 

would incorrectly allow mergers. These 140 markets cover approximately 70 percent 

of the population in the Nation. 

Of the 140 misclassified markets, 36 are one-newspaper towns. That is, the second 

newspaper has a market share of less than five percent. Another 55 are two newspaper towns. Thus approximately two-thirds of these markets would have one or 

two newspaper-TV combinations. 

Moreover, even in multiple newspaper towns, most newspaper markets are dominated by a single paper. We have data on 17 of the 55 two paper towns in which 

the FCC would inappropriately allow mergers. This sample of markets is representative of all two-paper towns, with an average DMA ranking of 38 compared to 39 

for all two-paper cities. We find that the number one newspaper has a market share 

of 80 percent compared to 15 percent for the number two newspaper. 

This very lax rule holds the prospect of having many markets dominated by a single newspaper-TV combination, with few TV stations and no prospect of an equal 

combination being formed in the market. Exhibit 10 presents a graphic representation of moderately concentrated and highly concentrated markets as a point of reference. Exhibit 11 presents a graphic picture of the impact that this lax rule would 

have on single paper markets. 


522GENE14.eps
48 

Exhibit 10: Graphic Representation Of Concentrated Markets 

Moderately Concentrated Market (Nine Equal Sized Competitors) 

Highly Concentrated Market (Five Equal Sized Competitors) 


522GENE15.eps 522GENE16.eps
49 

Exhibit 11: Impact Of Newspaper-TV Mergers In One-Paper Cities (Based 

on TV Entertainment HHI and Newspaper Circulation HHI) 

Pre-Merger Market 

Post-Merger Market 

In a typical one-paper city, the local media giant would have a 90 percent share 

of the newspaper circulation, one-third of the TV audience, and one-third of the 

radio audience. No second entity could come close to matching this media power. 

The 36 markets include just under 20 million households, or one-fifth of the country. 

There are some very large cities on the list, like Atlanta, Baltimore and New Orleans, as well as small cities. 

Applying the framework developed above (treating newspapers and TV as equal 

sources, and weighting radio at 10 percent of the total market). The FCC would approve mergers that fracture the Merger Guidelines. In one-paper cities, the premerger market is highly concentrated and the merger would raise the HHI by approximately 1100 points. Recall that the antitrust authorities believe mergers that 

raise the HHI by 50 points in a market such as this ‘‘are likely to create or enhance 

market power or facilitate its exercise.’’ One entity would thoroughly dominate the 

media landscape in these markets, accounting for over one-half of the local market. 


522GENE17.eps 522GENE18.eps
50 

The increase in concentration is over twenty times the level that triggers antitrust 

concerns. 

Two-newspaper markets would be somewhat less concentrated, but the FCC 

would still allow excessively high levels of concentration that would not support vigorous competition (see Exhibit 12). In the typical two-paper town, the dominant firm 

would have two-thirds of newspaper market, and one-third of the TV and radio markets. The second firm would be a paper with only one-fifth of the circulation. These 

cities include approximately 25 million households, or about one-quarter of the national population. 

This pre-merger market would fall in the just below the highly concentrated 

threshold. The merger would raise the HHI by about 1000 points. This is over nine 

times the level that triggers antitrust concerns. 

The problems that these mergers pose are obviously not close calls, but the difficulty runs deeper (see Exhibit 13). Even if the number 2 TV stations in either of 

these types of markets were, which typically has a market share of 24 percent, were 

to combine with the dominant newspaper, the increase in concentration would far 

exceed the threshold that triggers concern. In fact, even if the fourth largest station, 

which typically has a market share of 10 percent, were to combine with the leading 

newspaper, the resulting increase in concentration far exceeds the antitrust threshold. This supports the observation that it is inconsistent to preclude mergers between the top four TV outlets under the duopoly rule but not between top four TV 

stations and newspaper for the cross ownership rule. 

Exhibit 14 characterizes the 150 largest markets in which the draft order would 

allow cross-ownership mergers. Almost one half are one or two paper cities in which 

the TV news market is highly concentrated. One-sixth are one or two paper markets 

in which the TV market is moderately concentrated. One-quarter has three or more 

newspapers, but the TV market is highly concentrated. In only one-fifteenth of these 

markets is the TV market not highly concentrated and the total local news market 

unconcentrated. 

Exhibit 12: Impact of Newspaper-TV Mergers in Two-Paper Cities (Based on 

TV Entertainment HHI and Newspaper Circulation HHI) 

Pre-Merger Market 


522GENE19.eps
51 

Post-Merger Market 

Exhibit 13: Increase in HHI Caused by Leading Paper-TV Station Mergers 

(Based on TV Entertainment HHI and Newspaper Circulation HHI) 


522GENE20.eps 522GENE21.eps
52 

Exhibit 14: Most Concentrated News Markets For to Cross–Ownership 

Under the FCC Draft Order 

One or Two Paper Markets Where TV News Market is Highly Concentrated 

Of the 91 one and two paper markets, 71 would have six or fewer news voices 

before a cross ownership merger. In those markets, newspapers already can be considered dominant or leading firms. Thus the FCC is allowing mergers involving 

dominant firms in highly concentrated markets. 

Moreover, there are many other combinations that should be a source of concern. 

In one-third of the three newspaper cities, there are very few TV stations. These 

markets would become very tight oligopolies (see Exhibit 15). These markets represent almost another 3 million households. 

In the broader perspective, the FCC approach would allow mergers in a total of 

79 markets that have six or fewer major media firms. Of the 140 markets inappropriately opened to mergers, over 100 have either six or fewer major local news 

voices or two or fewer newspapers. 

While the discussion of individual market situation shows the problem, it can be 

complex. We believe that a systematic approach to market structure analysis and 

a rule based on a high competitive standard is called for. The next section outlines 

such an approach. 


522GENE22.eps
53 

V. A Responsible Approach To Ownership Limits 

It is clear that the FCC’s proposed rules are extremely. We believe the record supports a principled approach to market structure analysis and a much higher standard. The high standards described above for merger policy under the Communications Act can be summarized in two principles. 

• No mergers between TV stations and newspapers should be allowed if the overall media market in a locality is or would become concentrated as a result of 

the merger. 

• No mergers involving TV stations should be allowed if the TV market in a locality is or would become highly concentrated as a result of the merger. 

Exhibit 16 demonstrates how markets would be categorized for First Amendment 

ownership limits. Implementing the principles requires care. 

Exhibit 15: Impact of Newspaper-TV Mergers in Cities with Three Papers 

and Three or Fewer TV Stations Providing News 

Pre-Merger Market 

Post-Merger Market 


522GENE23.eps 522GENE24.eps
54 

Exhibit 16: Media Market Categorization for Merger Review 

Counting Voices in a Total Media Market 

The Courts have suggested that the FCC should adopt a consistent methodology 

for voice counts for all of the rules. The empirical evidence supports the proposition 

that each of the media constitutes a separate product. Rules about mergers within 

those markets can be written in terms of the number of voices within the individual 

product and geographic markets, as long as a consistent methodology and analytic 

framework is utilized across all markets. 

However, the cross ownership rule poses more of a challenge. The case can be 

made that TV and newspapers play such important and unique roles in civic discourse that they should be kept separate. This paper has suggested that if the two 

are to be allowed to combine, a cautious market structure approach should be taken. 

These rules must reflect the reality of the marketplace and should promote 

unconcentrated markets, when all voices are being counted. The following formula 

is consistent with the record before the Commission. 

Voice Count = (Broadcast + Newspaper)/.8)-jointly owned voices 

The important role of newspapers and the closeness of usage in local markets lead 

us to equate TV and newspapers. Market share data must be used as the basis for 

voice counts and can be readily translated into voice count equivalents. As an example, consider the following calculation, which is actually close to the national average. 


522GENE25.eps
55 

A broadcast HHI of 2000 converts to equal-sized voice equivalents of five equalsized voices (10,000/2000)]. Newspaper HHIs would be similarly converted to equalsized voice equivalents (e.g., an HHI of 5000 converts to two equal-sized voice 

equivalents). Thus, treating TV and newspapers equally, we start with seven major 

voices. 

As a first approximation, the Commission could assume the major TV and newspaper voices represent 80 percent of the market (based on the Nielsen study). Radio 

is the primary source of news for only ten percent of the people. The Internet is 

given as the most frequent source by only six percent of the respondents, but the 

most frequent sites mentioned are the websites of the major broadcasters and newspapers. Another four percent of respondents identify other sources as their primary 

means of getting news or refused to answer. To continue the previous example, the 

TV plus newspaper voice count of 7 voice equivalents represents 80 percent of the 

market. Therefore, we can divide that voice count by .8 to adjust for the lesser 

voices. This increases the voice count to 8.75 (7/.8=8.75). 

This is a generous estimate of the voice count for three reasons. First, in many 

markets there is at least some cross-ownership of radio stations by newspapers and 

TV broadcasters. This should be taken into account by increasing the adjustment 

factor. In the above example, the adjustment was .8, based on .1 for radio and .1 

for Internet and other. If the radio holdings of broadcasters and newspapers have 

a market share of 40 percent of the radio market, then the adjustment for radio 

would be decreased to .06. The voice count would be (7/.84=8.33). Second, as noted 

above, the typical geographic market definitions used are too broad. Third, the 

Internet and other categories do not represent independent sources of local news. 

Exhibit 17 shows the estimation of market voices based on this approach. There 

are about one dozen that are unconcentrated. A large number falls into the moderately concentrated region. 

Reasonable Adjustments To Counting Of Voices 

Existing cross-ownership and duopoly situations should be taken into account in the 

final market-wide voice count 

Ownership of multiple outlets must be taken into account. For example, the television HHI would attribute viewers of both stations in a duopoly to the parent firm. 

Similarly, where a newspaper is cross-owned with a television station, both the TV 

and newspaper audience should be attributed to one owner. 

A diminimus exception should be allowed to promote civic discourse 

Relatively small newspaper or television outlets (less than five percent market 

share) should be exempted from the above rules. To the extent that larger media 

outlets seek to obtain cross technology partners, this should be allowed as it can 

increase the availability of important voices. 

Similarly, the Commission should keep the traditional failing firm exception. 

Under the principle that it is better to keep a media voice that is bankrupt in the 

market through a merger than to lose it, failing firms have been allowed to merge, 

even where such a merger would not otherwise be approved. 

The empirical estimate of market structure analysis can be altered if empirical evidence indicates changes are justified 

The above principles are well supported in the record before the Commission. 

They are based on data that can be reviewed and updated on a regular basis, as 

required by the Telecommunications Act of 1996. The biennial review process affords the Commission the opportunity to systematically and routinely examine the 

assumptions used in constructing the market screens used to determine the markets 

in which mergers will be allowed mergers. 

56 

Exhibit 17: Total Media Voices 

SOURCE: See previous Exhibits. 

Establishing Thresholds and Market Screens 

Having counted voices, it is important to keep in mind that thresholds and market screens apply to the post-merger market. That is, if we establish a rule that 

total local media markets should not be allowed to become concentrated, we mean 

that the total number of voices should not be less than ten after the merger. This 

means that we must start scrutinizing mergers when the number of voices reaches 

eleven, since a merger could lower the voice count below the threshold. Similarly, 

in the case of specific product markets, if we adopt a policy that prevents markets 

from becoming highly concentrated, we would not want fewer than six voices and 

we would begin scrutinizing mergers when the voice count reached seven. 

Market-share based analysis 

The adoption of this approach would make a small number of cross-ownership 

mergers possible (see Exhibit 18). Based on the unconcentrated total market requirement, about a dozen markets would be candidates. Factoring in the requirement that TV markets not be highly concentrated, the number of market in which 

cross-ownership mergers would be allowed would fall to fewer than half a dozen. 

The market share based approach would have an impact on the number of markets in which TV mergers would be allowed. There are just over two dozen such 

markets. Almost all of these are markets in which duopoly mergers would be allowed today. There are just over another two dozen markets that pass the current 

voice count test, but would fail the market share based test. 

Simple Voice Counts vs. Market Share Weighted Voice Counts 

The above analysis is based on market shares for entertainment. Market shares 

for news are not widely publicly available (although they are routinely collected for 

proprietary purposes). However, a simple count of local stations that program news 

is available. If the FCC were to count only those broadcast stations that produce 

news, the results would be similar to the results based on the entertainment market 

share based approach, as Exhibit 19 shows. The reason is that the stations with 

smaller audiences do not contribute much to the HHI. They are also the stations 

that are least likely to provide news. 

If the unconcentrated total market thresholds/moderately concentrated thresholds 

are applied to the simple news voice count markets, where both important newspapers and TV stations are counted on a simple basis (not market share based), the 

number of markets where cross-ownership mergers would be allowed is similar to 

the market share based analysis, although somewhat different markets could witness mergers (see Exhibit 20). In about 20 markets TV mergers would be allowed. 


522GENE26.eps
57 

Exhibit 18: Two-Pronged Market Standard for Cross–Ownership 


522GENE27.eps

12.00 

1000 

Cross-ownership allowed 

in unconcentrated total 

markets where TV market 

8.00 

is not highly concentrated. -~ 

TVn ergers allowed subject ,/ l- to ret iuttable presumption and z 

::J 

U 

0 condi Ions ~ .. . • • w 6.00 • u •• •• 0 

> ..... • • ~ i:: t ....... • 

4.00 -'". -:.,~ ... ~ •• 1:1:.l V •• .. +. • ••• 

. 'i'/" · 

2.00 , 

~ 

· t.· ~ .. ~ .' 

0.00 

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 

TOTAL LOCAL VOICE COUNT 

(TV+NEWSPAPERY·8 
58 

Exhibit 19: Simple News Voice Count vs. Market–Share Based, Adjusted 

Voice Count [(TV+Newspaper)/.8] 

SOURCE: Newspaper voice count, ‘‘Initial Comments of the Media,’’ In the Matter of CrossOwnership of Broadcast Stations and Newspapers; Newspaper-Radio Cross-Ownership Waiver 

Policy: Order and Notice of Proposed Rulemaking, MM Docket No. 01–235, 96–197. Television 

voice count, Bruce Owen, Michael Baumann and Allison Ivory, ‘‘News and Public Affairs Programming Offered by the Four Top-Ranked Versus Lower Ranked Television Stations,’’ Comments of Fox, Economic Study A. 


522GENE28.eps
59 

Exhibit 20: Market Eligible For Cross-Ownership Mergers 

(Cities Surpassing Threshold on Two or More Screens) 

Conclusion 

When the FCC abandoned a principled analysis of media market structure in 

favor of political deals, the media ownership proceedings lost any hint of intellectual 

or public policy integrity. The number and types of markets in which TV-newspaper 

mergers would be allowed are completely out of line with First Amendment jurisprudence and even antitrust principles. 

In order to eliminate or dramatically relax the limits on newspaper-TV cross-ownership and TV stations ownership, the FCC must take the position that concentrated media markets defined loosely in terms of products and broadly in terms 

of geographic scope are acceptable First Amendment policy. It must ignore audience 

size (market shares), ignore actual patterns of media use, and ignore the dramatic 

difference between entertainment and the dissemination of news and information. 

We do not think that this is consistent with the Communications Act or the recent 

court remands of ownership rules. 

We conclude that the ‘‘empirical gap,’’ to which D.C. Appeals Court referred in the 

Sinclair decision has been closed.21 The hard data and evidence on the record does 

not support the rules the FCC has proposed. A set of rules that restricts merger 

activity to a small number of markets is well justified on the basis of the empirical 

data. If the empirical record shows anything, it shows that lax antitrust enforcement and First Amendment policy have allowed media markets to become far too 

concentrated. Democratic discourse demands many more media voices. 

Endnotes 1 Associated Press v. United States, 326 U.S. 1, 20 (1945). 2 Associated Press v. United States, 326 U.S. 1, 20 (1945). 3Sinclair Broadcasting, Inc. v. FCC, 284 F.3d 148 (D.C. Circ. 2002) (hereafter Sinclair). 4Fox Television Stations, Inc. v. FCC, 280 F.3d 1027 (D.C. Circ. 2002) (hereafter 

Fox v. FCC); Sinclair. 5Fox v. FCC, pp. 12–13. 

The networks . . . argue that the Rule fails even rationality review because 

‘‘[P]ermitting one entity to own many stations can offer . . . more programming 

preferred by consumers’’. . . but for the Rule ‘‘buyers with superior skills 

[could] purchase stations where they may be able to do a better job’’ of meeting 

local needs even as they realize economies of scale. 

This paean to the undoubted virtues of a free market in television stations is 

not, however, responsive to the question whether the Congress could reasonably 


522GENE29.eps
60 

determine that a more diversified ownership of television stations would likely 

lead to the presentation of more diverse points of view. 

6Fox v. FCC, p. 13. 7Sinclair, p. 15. 

8 395 U.S. 388 (1969). 

9Sinclair, p. 11. 

10The ongoing proceedings include Cross-Ownership of Broadcast Stations and 

Newspapers, MM Docket No. 01–235; Newspaper/Radio Cross Ownership Waiver 

Policy, MM No. 98–82; Rules and Policies Concerning Multiple Ownership of Radio 

Broadcast Stations in Local Markets, MM Docket No. 01–317. 11Telecommunications Act of 1996, Pub. LA. No. 104–104, 110 Stat. 56 (1996), 

202(h). 12Fox erroneously establishes a far more stringent legal test than actually contemplated by Congress in enacting Section 202(h). First, Fox improperly treated the 

2000 Biennial Review Report as reviewable agency action. Second, Fox treated Section 202(h) as creating a different review standard than would otherwise be required under the Administrative Procedure Act (APA) for review of an agency decision not to repeal a rule. Third, the Fox decision ignored the clearly defined framework of the statute in vacating the Commission’s cable-broadcast cross-ownership 

rule. The only remedy contemplated by Section 202(h) upon a finding that a regulation no longer serves the public interest is a rulemaking to determine what rule, 

if any, would be appropriate. The net effect of the Fox decision is to undermine the 

public’s rights under the APA by denying the opportunity to create a record to justify a particular rule in response to a targeted Notice of Proposed Rulemaking. The 

D.C. Circuit Court in Fox found that protecting diversity and safeguarding competition can be the proper basis for promulgating and preserving media ownership 

rules, but insisted that the Commission must present better evidence for those rules 

if the burden of § 202(h) is to be met. We agree with the FCC’s interpretation of 

the statute set forth in its Petition for Rehearing or Rehearing En Banc in Fox: the 

D.C. Circuit court has misapplied § 202(h), creating a counter-intuitive and nonsensical situation where there is a higher standard to retain an existing rule than to 

adopt it in the first instance. As the FCC correctly notes, this misguided interpretation would impose a ‘‘substantial and continuing burden on the agency that threatens administrative paralysis. This result is not compelled by the language of the 

statute or by its legislative history.’’ Id. at 2. 13 Judge Sentelle,’’ Concurring and Dissenting in Part,’’ Sinclair Broadcast Group, 

Inc. v. Federal Communications Commission, April 2, 2002. The Washington Post 

echoed this concern, offering the following observation on things to come under the 

headline Narrowing the Lines of Communications, February 24, 2002. 

The decisions will give added support to FCC Chairman Michael K. Powell, who 

views such restrictions as anachronisms in an era of Internet, broadband and 

satellite technology . . . Any excess concentration, Powell argues, can be handled by the Justice Department in its traditional role as enforcer of the antitrust laws. 

14The difference between simple economics under the antitrust law and civic discourse under the Communications Act is woven into the fabric of the statutes. 

Under the antitrust laws, mergers may be ‘‘prohibited if their effect may be substantially to lessen competition or to tend to create a monopoly,’’ or ‘‘if they constitute 

a contract, combination . . ., or conspiracy in restraint of trade,’’ or ‘‘constitute an 

unfair method of competition’’ (U.S. Department of Justice and the Federal Trade 

Commission, Horizontal Merger Guidelines, 1997, section 0); The standard under the 

Communications Act is higher, reflecting the special role of communications and 

mass media in our democracy. The Federal Communications Commission is charged 

to transfer cable, broadcast and telecommunications licenses only upon a ‘‘finding 

by the Commission that the public interest, convenience and necessity will be 

served.’’ (U.S.C., 47, 310(b)). 15William G. Shepherd, The Economics of Industrial Organization (Englewood 

Cliffs, NJ: Prentice Hall, 1985), p. 389, gives the following formula for the 

Herfindahl-Hirschman Index (HHI): 

61 

where 

n = the number of firms 

m= the market share of the largest firms (4 for the four firm concentration 

ratio) 

Si = the share of the ith firm. 

16The HHI can be converted to equal-sized equivalents as follows 

Equal-sized voice equivalents = (1/HHI)*10,000. 

17 U.S. Department of Justice and the Federal Trade Commission, Horizontal 

Merger Guidelines, 1997, section 1.51. 18 Id., section 0.1. 19Sinclair, p. 5. 20Leonard Downie, Jr. and Robert G. Kaiser, The News About the News (New 

York: Alfred A. Knopf, 2002), p. 125. 21Sinclair, p. 5. 

The CHAIRMAN. Thank you. 

Dr. Mikkelsen. 

STATEMENT OF DR. KENT W. MIKKELSEN, VICE PRESIDENT, 

ECONOMISTS, INC. 

Dr. MIKKELSEN. I am pleased to have an opportunity today to 

present an economist’s perspective on three media ownership 

issues, the broadcast television national ownership cap, the socalled duopoly rule, and the ban on newspaper-broadcast crossownership. I have been looking at these issues for nearly 20 years. 

I have worked for clients with an interest in these rules, including 

broadcast networks and the Newspaper Association of America, but 

I am not representing any clients here today. 

Economists and society as a whole generally believe in free markets. Individuals and firms acting in their own self-interest will 

generally produce socially desirable outcomes. A totally free market 

is not always best. An exception to the rule is in the area of competition. Economic theory teaches that competing firms have an incentive to combine together, reduce competition, and raise their 

profits at the expense of consumers. The antitrust laws are designed to prevent such a concentration from occurring. 

These laws are justified by the clear potential for what economists call market failure. The antitrust agencies have developed 

regular, widely accepted procedures for determining whether or not 

a particular merger or joint ownership situation is likely to reduce 

competition significantly. As a rule of thumb, five to six equal-sized 

firms or a larger number of unequal-sized firms is considered sufficient to safeguard competition. 

The agencies do not attempt to maximize the number of competitors by opposing all mergers. Mergers and joint ownership can 

yield benefits to consumers in the form of improved product offerVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00065 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80738.TXT JACKIE

522GENE30.eps
62 

ings and lower costs. In addition, economic freedom should not be 

curtailed unless there are clear compelling benefits to be gained. 

For these reasons, only mergers that are likely to reduce competition significantly should be opposed. 

One of the reasons given for the FCC media ownership rules 

under review today is that they protect competition. In my view, 

they are not needed to preserve this function. Broadcast stations 

compete locally to attract audience and advertisers and to acquire 

local programming rights. It is possible that a merger of two television stations in the same market or the purchase of a broadcast 

station by a local newspaper could significantly reduce competition, 

particularly in a smaller local market with relatively few media 

outlets, but there are other markets in which such a merger would 

raise no competitive problem. 

These are precisely the issues of ownership concentration and 

competition that the antitrust agencies routinely deal with in enforcing the antitrust laws. There is no need for a separate set of 

competition standards for media, nor is there any need for a onesize-fits-all restriction such as the duopoly rule and the cross-ownership ban. 

Diversity is offered as a second basis for the FCC’s ownership 

rules. I find it instructive to contrast the competition and diversity 

rationales. First, competition policy is justified by clearly identified 

market failure. In contrast, I do not know that anyone has shown 

there is a corresponding market failure that leads the market to 

produce the wrong amount of diversity. 

Second, unlike with competition, there is no sound theoretical 

basis for linking deconcentrated station ownership to content diversity or viewpoint diversity. Often maximizing station owners do not 

typically enforce their viewpoints on their stations. Instead, they 

provide the diversity their audiences demand. 

Note that the national television ownership cap does not bear on 

any competition or diversity issues whatsoever. Competition among 

television stations and other media outlets occurs at a local level. 

Audience coverage across multiple markets does not affect local 

competition. Likewise, the diversity available to an individual consumer is determined in a local market and is not affected by ownership in other markets. 

Finally, a third FCC objective, localism, is advanced when stations provide programming, including news, that serves the needs 

and interests of their community. All media outlets have strong 

economic incentives to provide programming appealing to their 

local audiences. Local ownership is not required, and if it were, the 

ownership rules under consideration today would be poor tools to 

ensure local ownership. There is no reason to think that eliminating these rules would decrease localism. To the contrary, there 

is evidence that news and public affairs programming would increase if the rules were removed. 

In conclusion, competition in broadcasting can be preserved using 

antitrust standards without the need for one-size-fits-all restrictions like the duopoly and cross-ownership rules. If, in selected 

markets, ownership concentration were allowed to rise to somewhat higher levels consistent with antitrust standards, I see no 

reason to think that the associated amount of diversity provided by 

63 

broadcast stations and other sources would be insufficient. No separate ownership standard based on diversity is warranted. The national television ownership cap, which serves neither competition 

nor diversity, should also be removed. None of the rules are needed 

to promote localism. 

Thank you. 

[The prepared statement of Dr. Mikkelsen follows:] 

PREPARED STATEMENT OF KENT W. MIKKELSEN, VICE PRESIDENT, ECONOMISTS, INC. 

I am pleased to have an opportunity to present an economist’s perspective on 

three media ownership issues now being considered by the Committee: the broadcast television national ownership cap, the so-called ‘‘duopoly’’ rule and the ban on 

newspaper-broadcast cross-ownership. 

A few brief words about my background would be in order. I received a Ph.D. in 

economics from Yale University in 1984. I was an economist in the Antitrust Division of the U.S. Department of Justice, analyzing competition issues. Since 1986 I 

have been employed by Economists Incorporated, an economic research and consulting firm located in Washington D.C., where I am a vice president. I have been 

examining competition and regulatory issues in media, including broadcast and 

newspapers, for 19 years. Economists Incorporated is currently retained by Fox, 

NBC and Viacom to conduct research and analysis related to the ownership rules 

now before the Federal Communications Commission. I have previously been retained by the Newspaper Association of America to analyze newspaper-broadcast 

cross-ownership issues. However, the views I express today are my own; I am here 

on behalf of none of my clients. 

Among economists, there is a general presumption that in a free market, the selfinterested actions of individuals and firms will lead to socially desirable amounts 

and types of goods and services being produced as efficiently as possible. 

Exceptions to this general presumption can occur due to what economists call 

‘‘market failure.’’ Market failure can occur, for instance, when too much or too little 

of some good is produced because economic actors do not fully internalize the costs 

or the benefits of their actions. Of particular interest today is another type of market failure referred to as problems of monopoly or market power. In many industries, firms could increase their profits by combining to reduce or eliminate competition among themselves. The participating firms get higher profits, but consumers 

suffer through higher prices and inferior products and services. For this reason, the 

antitrust laws were designed to discourage or prevent firms from significantly reducing competition. These laws are justified by this potential market failure. 

Economic theory teaches that competition can be threatened if economic activity 

in a market is concentrated into the hands of a small number of firms. Generally 

speaking, the larger the number of firms in the market, and the more similar the 

firms are in size, the greater is the likelihood that competition will prevail (other 

things being constant). Thus, there is a clear theoretical link between the structure 

of ownership in the market and the presence of competition. 

The U.S. Department of Justice and the Federal Trade Commission, the two main 

Federal antitrust agencies, have developed a standard methodology to identify 

changes in ownership structure that can potentially reduce competition. Their ‘‘Horizontal Merger Guidelines’’ are also widely used elsewhere in analyzing competition 

issues. At the risk of oversimplification, I would like to very briefly describe the analytical process. 

• The first step is to determine all the products and services in which the merging parties compete. 

• Next, one determines who else competes. That is, one determines what other 

products and services are close substitutes in use and are available in the relevant geographic area. 

• Having identified the relevant products and competing providers, the next step 

is to assess the concentration of ownership among the providers. Concentration 

is usually measured using an index based on the market shares attributable to 

each separate owner in the market, using actual sales shares or shares based 

on capacity. 

• The measured concentration level is then compared with external standards. 

While there are other factors that are also considered, the Federal agencies that 

routinely analyze mergers have identified as a minimum threshold the concentration level that would exist in a market with 5–6 equal-sized firms, or 

64 

some larger number of unequal-sized firms, depending on the degree of inequality. 

• Based on the results of this analysis, an antitrust agency would decide whether 

a proposed merger was likely to result in a significant decrease in competition. 

If so, the agency would likely oppose or seek modification of the proposed merger. 

Please note that the antitrust agencies do not attempt to ‘‘maximize’’ the number 

of competitors. Against the possibility that competition would not be preserved if 

two firms merged, competition policy recognizes that mergers and joint ownership 

can yield benefits to consumers in the form of improved product offerings and lower 

costs. It is also recognized that economic freedom should not be curtailed unless 

there are clear, compelling benefits to be gained. For these reasons, the antitrust 

agencies only oppose those mergers that are judged likely to have a significant impact on competition. 

One of the reasons given for the FCC media ownership rules now under review 

is that they protect competition. In my view, they are not needed to serve this function. 

Competition among television stations to attract viewers and advertisers and to 

acquire local programming rights occurs at a local level. It is possible, particularly 

in smaller local markets with relatively few media outlets, that competition would 

be significantly reduced if two television stations that now have different owners 

were brought under common ownership. Competition might also be reduced in specific markets if a television station or radio station were to be acquired by the owner 

of a local newspaper. But these are precisely the issues of ownership concentration 

and competition that the antitrust agencies routinely deal with in enforcing the 

antitrust laws. There is no need for a separate set of competition standards for 

media. Nor is there any need for one-size-fits-all restrictions such as the ‘‘duopoly’’ 

rule and the cross-ownership ban. Joint ownership of two of the leading television 

stations in a market, or cross-ownership of a newspaper and a broadcast station, 

need not significantly reduce competition in local markets with many media outlets. 

In individual cases, joint ownership could be beneficial despite producing concentration levels that would appear troubling. If joint ownership or operation is necessary to bring stations on the air that would otherwise not be broadcasting or 

would be insignificant as a competitive force, joint ownership is probably not anticompetitive. Joint ownership or operation can also enable stations to provide superior services that would not be economical for either station to offer by itself on a 

stand-alone basis. Such gains may outweigh competitive concerns. But this can best 

be determined by looking at each specific case. 

Finally, the national television ownership cap does not bear significantly on any 

competition issues whatsoever. Competition among televisions stations and other 

media outlets occurs at a local level. Competition in one local market is not reduced 

if one of the stations in the local market is jointly owned with a station in another 

market. 

Another reason offered for the media ownership rules is to promote diversity. I 

find it instructive to contrast the competition and diversity rationales. 

First, the justification for a competition policy is ‘‘market failure.’’ I do not know 

of a corresponding rationale that demonstrates that the amount of diversity produced by economic agents in the market is or would tend to be too small. 

Second, unlike with competition, there is no sound theoretical basis for linking 

deconcentrated station ownership to the types of diversity the Commission is concerned about. It is presumed that, with a given number of stations, content diversity 

will be greatest if all stations are separately owned. However, it is equally plausible 

to believe that, if one party owned several stations, it would purposely diversify the 

offerings on its stations so as to increase the overall audience it would attract. 

The link between ownership diversity and viewpoint diversity is equally tenuous. 

Station owners do not typically enforce their viewpoint on their stations. If we assume profit-maximizing behavior, diversity in the audience seems to dictate that 

there will be diversity of viewpoints expressed on each station, as well as diversity 

across stations. Furthermore, station managers and news directors usually determine what is aired, not the corporate owners. 

Even if it could be demonstrated that deconcentrated ownership resulted in increased diversity, this would not justify what I will call an ‘‘absolutist’’ approach to 

diversity, i.e., if diversity is good, then a policy that leads to more diversity must 

be preferred to a policy that yields less diversity. Such an absolutist approach is not 

the basis for sound decision-making. To illustrate with an example, most people 

would agree that safety is a desirable goal. Nevertheless, we do not adopt policies 

that ‘‘maximize’’ the amount of safety. Mandating speed limits of 25 mph everyVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\80738.TXT JACKIE
65 

where, or imposing restrictive licensing that would sharply reduce the number of 

cars on the road, would both likely increase traffic safety. We choose not to adopt 

these policies, however, because the cost in inefficiency and loss of personal freedom 

is judged to be too high. Similar balancing is needed in the pursuit of diversity or 

any other social goal. 

As with competition, it is difficult to find any connection at all between diversity 

concerns and the national television broadcast ownership cap. What matters to diversity is the range of viewpoints available to individuals. That range is not diminished when a local media outlet available to an individual is jointly owned with another media outlet in another geographic area that is not available to the individual. 

A third FCC objective is localism. I understand this objective to be that stations 

will provide programming, including news and public affairs programming, that 

serves the needs and interests of their community. All media outlets have strong 

economic incentives to respond to the needs of their local audiences. Local ownership is not required to achieve local responsiveness; if local ownership were necessary, the ownership rules under consideration would be very inefficient tools to 

bring it about. There is no reason to think that cross-ownership of a broadcast station and a newspaper in a market, or joint ownership of two television stations in 

a market, would decrease localism. To the contrary, there is evidence that a television station that is jointly owned or operated with another local television station 

is more likely to carry news and public affairs programming. No one has shown that 

lifting the national television broadcast ownership cap would lead to less localism. 

In conclusion, competition in media can be preserved using antitrust standards 

without the need for one-size-fits-all restrictions like the ‘‘duopoly’’ rule and the 

cross-ownership ban. If, in selected markets, ownership concentration were allowed 

to rise to somewhat higher levels consistent with competition standards, I see no 

reason to think that the associated amount of diversity provided by broadcast stations and other sources would be insufficient. No separate ownership standard 

based on diversity is warranted. The national television ownership cap, which serves 

neither competition nor diversity, should also be removed. None of the rules is needed to promote localism. 

The CHAIRMAN. Thank you. 

Mr. Fontana, welcome. 

STATEMENT OF THOMAS FONTANA, PRESIDENT, 

FONTANA-LEVINSON ON BEHALF OF WRITERS GUILD OF 

AMERICA, EAST, THE CAUCUS FOR TELEVISION WRITERS 

& DIRECTORS, AMERICAN FEDERATION OF TELEVISION 

AND RADIO ARTISTS 

Mr. FONTANA. Thank you very much. Hello to everybody. Thank 

you, Chairman McCain, for allowing me to speak, and Senator Hollings and the rest of you. My name is Tom Fontana. I am on the 

Council of the Writer’s Guild of America, East, and I am also a representative of the Caucus of Television Producers, Writers, and Directors. Somewhere behind me is John Connolly, the President of 

AFTRA, and Mona Mangan, the Executive Director of the Writers 

Guild of America, East. 

Obviously, I have never done this before, so bear with me. I 

think the last time I wore a tie was when I got married. 

[Laughter.] 

Mr. FONTANA. In the past 22 years, I have produced and written 

numerous television programs, from the gritty realism of Homicide: 

Life on the Street, to the religious fable, The Fourth Wise Man, and 

to America: A Tribute to Heroes, and I really have to tell you that 

in the past day-and-a-half, since it was discovered that I was going 

to be speaking before you, I realized your jobs are a lot harder than 

I ever thought, because I suddenly found out I had a constituency, 

and I have been getting faxes and phones and e-mails from a wide 

range of people with a lot of opinions, and I am going to try to boil 

all of that down to a simple fact. 

66 

I am a small businessman, and unlike my father, who ran a bar, 

I am blessed to be able to work in a profession that I love, in an 

industry that I love, and I do think of it as an industry. I know 

it is a business, and I guess the question that I came here to ask 

is what kind of business is it going to be in the years to come? 

I think the answer lies somewhere in the past. It usually does. 

Twenty years ago, I worked for the best independent production 

company in the history of television, Mary Tyler Moore Enterprises, or MTM. You know, Mary and Rhoda, Bob Newhart, Hill 

Street Blues, and the show I did, St. Elsewhere. Ten years ago I 

started making Homicide for Reeves Entertainment, and 6 years 

ago I created Oz for Rysher, Incorporated. 

Now, what do these three independent production companies 

have in common? They are all out of business. They have all been 

bought by large conglomerates, as a result in part of the elimination of the Fin-Syn rules. Eight years ago, after much public debate, the Fin-Syn rules were dropped, and at that time, the heads 

of the major networks assured us that nothing would change. 

Here is what has actually occurred. In 1992, 15 percent of new 

prime time series were produced by the major networks. Ten years 

later, 2002, that number increased five times to 77 percent. In 

2002, only one new series, Dinotopia, which I am sure you all 

watched—— 

[Laughter.] 

Mr. FONTANA.—was completely produced, was the only show 

completely independent, not produced in any way, shape or form by 

a conglomerate, and it was almost immediately canceled. 

To go back to MTM for a second, it was an independent not just 

because it was not owned by anybody else, but because Grant Tinker made decisions based on both business savvy and a passion for 

quality. Grant was fearless when fighting against the dumbingdown of his products. He could afford to be strong because he had 

no corporate structure to answer to. As a result, his extraordinary 

vision nurtured several generations of TV’s best talent, including 

many minorities and women, but as I said, MTM is no more. 

Big is not necessarily bad, but sometimes by deregulating a big 

business, you can choke the life out of a small one, and with that, 

you lose energy, imagination, and the entrepreneurial spirit. An example of that is Norman Lear’s landmark series, All in the Family. 

Rejected by ABC, Mr. Lear took his idea to CBS. Because ABC did 

not own or control Mr. Lear’s production company, he was free to 

take his show elsewhere, and I think we are all richer for the freedom he enjoyed. 

Another example is The Cosby Show. When Marcy Carsey first 

presented The Cosby Show to the network executives, they wanted 

to turn the middle-class Dr. Huxtable into a cigar-smoking Las 

Vegas entertainer. Cosby and Carsey stuck by their guns and went 

to another network, NBC. They could do that because they were 

protected by the FCC rules. 

Without Fin-Syn, many other fundamental practices in our industry have corroded over time, so rather than eliminate the rules 

we have, I am going to be bold enough to encourage you to establish a program source diversity rule which would require that 

broadcast networks and cable or satellite programming services 

67 

purchase a specific percentage of their prime time programming 

from independent producers. By independent, I mean not owned in 

whole or in part by a company affiliated with a network or the distributor. Without such a rule, competition and diversity in my business will become a fiction. 

But simply adding a new rule is not enough. As you heard, we 

need to keep the national TV ownership cap at 35 percent, and the 

duopoly rule in place. Why? Because the leaders of the media are 

telling us once again that eliminating these rules will not hurt the 

industry. Well, I think, what are they going to say? It is unfair and 

unreasonable for us to expect any businessman to police himself. 

To do so would contradict the very model of capitalism that dictates 

corporate growth. It is not the job of business to protect us, it is 

the job of Government. Why? Television is democracy, it is our only 

national town hall. 

Television is where divergent points of view can be expressed, 

where conflicting opinions can be argued not just within one segment of Meet the Press, but from program to program. The brutality of NYPD Blue is balanced by the spirituality of Touched by 

an Angel, yet NYPD Blue would never have made the CBS schedule, and Touched by an Angel would have never aired on NBC. 

People will say there is diversity simply by the sheer number of 

networks currently available, but those channels are owned and 

controlled by a smaller and smaller number of companies, and in 

reality, many series are now repurposed, with episodes airing on 

cable several days after their broadcast premier. These shows, however, are not offered for sale on the open market, as has been traditionally done, but are automatically going to an entity tied corporately to the major network. 

For example, the ABC series, Life With Bonnie, was repurposed 

on the Family Channel because Disney owns both the broadcast 

network and the cable network. Back alley deals diminish a program’s long-term value, but the need for diversity in television has 

a much larger reach. My series, Oz, is extremely popular all over 

the world, including such countries as Israel, Canada, and Italy. 

Entertainment is the second-largest product exported by this country after aerospace. In order for us to maintain our leadership in 

an industry so vital to our economy, we must ensure the quality 

of the product, and quality only comes through diversity and competition. 

By changing the rules, television will not get better, not for me 

as a writer/producer, not for me as a viewer, not for me as a stockholder, and not for me as an American, so I ask you to think long 

and hard before you allow history to be so dangerously rewritten. 

Five companies should not be permitted to own all the voices on 

the airwaves. 

Thank you. 

[The prepared statement of Mr. Fontana follows:] 

PREPARED STATEMENT OF THOMAS FONTANA, PRESIDENT, FONTANA-LEVINSON ON

BEHALF OF WRITERS GUILD OF AMERICA, EAST, THE CAUCUS FOR TELEVISION

WRITERS & DIRECTORS, AMERICAN FEDERATION OF TELEVISION AND RADIO ARTISTS

First, I want to thank Chairman McCain, Senator Hollings and the members of 

the Committee for giving me the opportunity to speak. 

68 

My name is Tom Fontana. I am a Council Member of the Writers Guild of America, East and a representative of the Caucus for Television Producers, Writers and 

Directors. In the past twenty-two years, I have produced and written numerous television programs, from the gritty realism of Oz and Homicide: Life on the Street to 

the religious fable The Fourth Wiseman to America: A Tribute to Heroes. 

I’d like to start by saying that for the first time in my life, I have a much greater 

appreciation of what you Senators go through to do your jobs. After it was decided 

that I would be appearing before this Committee, I started to hear from my constituency: I have been flooded with phone calls, e-mails, faxes, facts, figures—the 

amount of input is staggering. 

But the simple truth is this: I am a small businessman. Instead of running a bar, 

like my father, I have been blessed, doing work that I love. I am proud to be a part 

of the entertainment industry. Yes, I say industry. I know that television is a business. The question is what kind of business will it be in the years to come. The answer, as usual, lies in the past. 

Over twenty years ago, I worked for the best independent production company 

that ever existed—MTM—Mary Tyler Moore Enterprises. Mary and Rhoda, Bob 

Newhart, Hill Street Blues and, the series I did, St. Elsewhere. Ten years ago I 

started making Homicide for Reeves Entertainment. Six years ago, I created Oz for 

Rysher, Incorporated. 

What do these three independent production companies have in common? They 

are all out of business, swallowed up by conglomerates, in part, as a result of the 

elimination of the Fin-Syn rules. 

Eight years ago, after much public debate, the Fin-Syn rules were dropped. At the 

time, the heads of the major networks assured us that nothing would change. 

Here’s what has actually occurred: 

• In 1992, 15 percent of new prime time series were produced by the major networks; 

• By 2002, that number increased over 5 times to 77 percent; 

• In 2002, only one new series, Dinotopia, was completely produced independent 

of a conglomerate. It was soon cancelled. 

MTM was an independent not just because it wasn’t owned by anyone else, but 

because Grant Tinker made decisions based on both business savvy and a passion 

for quality. Grant was fearless when fighting against the dumbing down of his products. He could afford to be strong, he had no corporate structure to answer to. His 

extraordinary vision nurtured several generations of TV’s best talent, including 

many women and minorities. But, as I said, MTM is no more. 

Big is not necessarily bad. But sometimes by deregulating a big business, you can 

choke the life of a small one. And with that you lose energy, imagination and entrepreneurial spirit of that small business. 

Norman Lear’s landmark series, All In The Family, is another example of that 

spirit. Rejected by ABC, Mister Lear took his idea to CBS. Because ABC did not 

own or control Mister Lear’s production company he was free to take his show elsewhere and I think we are all richer for the freedom he enjoyed. 

Another example is The Cosby Show. When Marcy Carsey first presented The 

Cosby Show to network executives they wanted to turn Doctor Huxtable into a cigar 

smoking Las Vegas entertainer. Cosby and Carsey stuck to their guns and went to 

NBC. They could do that because they were protected by FCC rules. 

Without Fin-Syn, many other fundamental practices in our industry have corroded over time. So, rather than eliminate the rules we have, I encourage you to 

establish a Program Source Diversity Rule, which would require that broadcast networks and cable or satellite programming services purchase a specific percentage of 

their prime time programming from independent producers. By independent I mean, 

not owned in whole or, in part, by a company affiliated with a network or distributor. Without such a rule, competition and diversity will become a fiction. 

But simply adding a new rule is not enough: the rules currently in place must 

be maintained. In particular, the National TV Ownership cap must remain at 35 

percent and the Duopoly Rule must remain intact in order to prevent the homogenization of local TV. 

The media giants are once again telling us that eliminating these rules will not 

hurt the industry. What else can they say? 

I think it’s unfair and unreasonable for us to expect businessmen to police themselves. To do so would contradict the very model of capitalism that dictates corporate growth. It is not the job of business to protect us, it’s the government’s. 

Television is democracy, it is our only national town hall. Television is where divergent points of view can be expressed, where conflicting opinions can be argued, 

69 

not just within one segment of Meet The Press, but from program to program. The 

brutality of NYPD Blue is balanced by the spirituality of Touched By An Angel. Yet, 

NYPD Blue would have never made the CBS schedule and Touched by an Angel 

would have never aired on NBC. Certain shows can only exist at certain networks, 

either because of branding or because of some executive’s individual taste. 

People will say there’s diversity simply by the sheer number of networks currently 

available, both broadcast and cable. But those channels are owned and controlled 

by a smaller and smaller number of companies. And in reality, many series are now 

‘‘repurposed’’, with episodes airing on cable several days after their broadcast premiere. These shows, however, are not offered for sale on the open market as has 

traditionally been done, but are automatically going to an entity tied corporately to 

the major network. For example, the ABC series Life With Bonnie was repurposed 

on the Family Channel because Disney owns both the broadcast network and the 

cable network. Back alley deals diminish a program’s long-term value. 

But the need for diversity in television has an even larger reach. My series Oz 

is extremely popular in such countries as Israel, Canada and Italy. Entertainment 

is the second largest product exported by this country after aerospace. In order to 

maintain our leadership, in an industry so vital to our economy, we must ensure 

the quality of the product. And quality only comes through diversity and competition. 

By changing the rules, television will not get better. Not for me, as a writer and 

producer. Not for me, as a viewer. Not for me, as a stockholder. Not for me, as an 

American. 

So, I ask you to think long and hard before you allow history to be so dangerously 

rewritten. Five companies should not be permitted to own all of the voices on our 

airwaves. 

I wish to quote from a fellow Italian American more famous than I in these halls 

and ask you to listen to the advice of one the industry’s wisest statesman: 

Unless we knowingly abuse the essentials of a free and living land, our government must, at all costs and in spite of all pressure, never allow a tiny group 

of corporate entities, no matter how seemingly benign the management, to establish dominion over what is seen on television. 

I agree with these sentiments that were originally presented to this Committee 

by Mr. Jack Valenti on June 1989. 

Thank you for your kind attention. 

The CHAIRMAN. Thank you, Mr. Fontana. That is a good-looking 

tie. 

[Laughter.] 

Mr. FONTANA. Thank you very much. I have to get it back this 

afternoon. 

[Laughter.] 

The CHAIRMAN. Mr. Murdoch, Mr. Kimmelman states in his written testimony, and I quote—and by the way, we will stick to 5 minutes. We will have additional rounds. I will try not to go over, and 

I will ask my colleagues to do the same. 

Mr. Murdoch, Mr. Kimmelman says, quote, while News Corp. 

Fox has agreed to abide by the FCC’s program access requirements, this pledge could end up being nothing more than a tool for 

pumping up cable prices. There is absolutely nothing that would 

prevent News Corp./Fox from raising the price that it charges itself 

on its satellite system in return for increased revenues from the 

other 70 million cable households. If the cable system refuses to 

pay the increased price, then New Corp./Fox would be able to 

threaten cable operators to use its newly acquired satellite system 

to capture market share away from cable in those communities. 

Would you respond to that, please? 

Mr. MURDOCH. Thank you, Mr. Chairman. I would be delighted. 

I am surprised at Mr. Kimmelman’s ignorance of how things work, 

although I do not mean to be insulting to him. 

70 

[Laughter.] 

Mr. MURDOCH. The fact of the matter is, we are only buying 34 

percent of Direct Television. A majority of the directors will be 

independent directors with no connections to News Corporation at 

all. The Audit Committee will be 100 percent manned by those 

independent directors, and it is absolutely impossible for us to do 

what he suggests, and as the legislators in this country, you will 

all know the penalties that exist in the Sarbanes-Oxley Act should 

we try to rip off our company and use our shareholding for what 

Mr. Kimmelman suggests. It would be go-to-jail time, and there is 

no interest or possibility of that. 

We have the same situation, as a matter of fact, in Britain—I 

will just give a little anecdote, if I may indulge you, seek your indulgence—where we have 36 percent of BSkyB, and it has taken 

us 3 years to get only last week an agreement with BSkyB to carry 

a Fox channel for 7 cents a month. I can assure you there is a lot 

of blood on our corporate floors over that, so it is just not possible 

to do what Mr. Kimmelman suggested legally, or in our economic 

interest or in anybody’s interest. 

The CHAIRMAN. Mr. Kimmelman, by the way, we are in agreement that the change in the FCC rules will trigger a wave of consolidations. Is there any disagreement to that, even you, Dr. 

Mikkelsen? There will be purchases by newspapers of television 

stations, et cetera. That is the whole reason why they are seeking 

relaxation of these rules, right? 

Dr. MIKKELSEN. I am sure if no one wanted to make any acquisitions there would not be any interest in relaxing the rules. I do not 

know if I would characterize it as a wave. 

The CHAIRMAN. Thank you. Thank you. 

Go ahead, Mr. Murdoch. 

Mr. MURDOCH. If I could interrupt, I certainly have no plans for 

anything other than what I have before you today. 

[Laughter.] 

The CHAIRMAN. Thank you. 

Mr. KIMMELMAN. If I may respond, Mr. Chairman, there are a 

couple of hundred newspapers abroad that you own, Mr. Murdoch. 

I guess at some point you owned 100 or 50? 

Mr. MURDOCH. That would include—— 

Mr. KIMMELMAN. Apparently you have a pretty good appetite for 

acquisitions. I am not suggesting anything illegal. I want to make 

it clear, I am not suggesting violations of any laws, but since the 

last time I supported Mr. Murdoch’s effort to try to compete 

against cable, a number of things have happened. 

When he initiated that process, he got quite a strong reaction 

from the cable industry. They did not really like it. He changed his 

mind. He decided he was going to try to sell his satellite capacity 

to PrimeStar Properties, owned by the cable industry. The Justice 

Department did not really like that idea of having cable-owned satellites, and they blocked it, and in their complaint to block that 

transaction, they quote from someone you know well, Mr. Malone. 

And if I may I would just like to quote it. 

There is some kind of peace in which Rupert gets what he 

wants, which is broader distribution of his programming netVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00074 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80738.TXT JACKIE
71 

work, in exchange for which he is not quite as aggressive in 

DBS. 

Well, when the deal was made, before Justice intervened, the 

Justice Department found more information from Mr. Malone, 

quote—— 

The CHAIRMAN. Make your point. 

Mr. KIMMELMAN. Malone testified, this agreement, in effect, resolved the difference between Murdoch and the cable industry because, quote, it just really says, hey guys, I am not Darth Vader 

any more. If you carry my programming, you will not be subsidizing the enemy, and therefore feel free to treat me as a friend, 

not as an enemy, although the written agreement did not so specify, at about the time the agreement was reached, certain 

PrimeStar partners’ cable systems began to widely carry Murdoch’s 

program networks. 

The CHAIRMAN. Dr. Mikkelsen, I would like you also to respond, 

but at the same time, because I am trying to stay within a reasonable time here. I received a letter from Diane English, the developer of the TV show, Murphy Brown. Ms. English states that she 

left series television in 1998 after Fox told her it would not put her 

pilot on the air unless she made a production deal with Fox’s sister 

company, 20th Century Fox, for far less than what she paid for 

producing Murphy Brown. 

In order to have a television series picked up by a network, are 

networks forcing writers and producers to team up with the network’s affiliated studios? Do you want to address the first question, 

Mr. Murdoch? 

Mr. MURDOCH. As far as Ms. English goes, I heard about that allegation. I have inquired into it. She did offer us a program. We 

said that we were prepared to invest $600,000 in a pilot, and she 

said that was not enough, and we said, we are very sorry, we are 

not prepared to put more money than that into it, and that lapsed. 

I would say I am a little surprised at Mr. Fontana, of whom I 

am a very great admirer—we just recently signed a contract with 

him for a pilot program which we are looking forward to getting 

into production as soon as Disney releases it in July—— 

The CHAIRMAN. Thank you. 

Mr. MURDOCH.—and we will buy programs simply from anyone 

who has got a good idea, and if I just can go on for a second, this 

year, for instance, we have just announced our new programming. 

Forty percent of all our programs will come from completely 100 

percent independent producers, nothing to do with Fox, 30 percent 

will be done in association with other companies and independents, 

only 30 percent, the remaining 30 percent will be done by Fox 100 

percent. 

The CHAIRMAN. Thank you. My time has expired. 

Senator Hollings. 

Senator HOLLINGS. Well, let the record show that I am sorry we 

do not have Mr. Powell up here, the Chairman, and I know you 

and I discussed it, Mr. Chairman. I have written two letters asking 

for it. The reason I pursued it is because Mr. Powell has been appearing everywhere else—— 

[Laughter.] 

72 

Senator HOLLINGS.—and to come after the ruling on June 2 is 

like the horse already leaving the barn. 

With respect to antiquated rules, come on. We took 2 years when 

I had the bill, and then 2 more years when Chairman Pressler had 

the bill, over a 4-year period, and I wish Mr. Dorgan was here, because we had an amendment on the cap of 25 percent, but did not 

agree to the 35 percent. Mr. Dorgan won, and Mr. Kimmelman can 

shake his head, because he knows that Mr. Dole with some of the 

other lobbyists and so forth changed that vote. We came back and 

it went up to 35 percent, not antiquated rules. It took us 4 years 

to bring everything up to date in 1996. These caps now released to 

35 percent. You have got five programmings, not just 77 percent, 

Mr. Fontana, but the recent report of the analyst is that they will 

own, increase their share to 85 percent of the prime time programming. 

Mr. FONTANA. Well, I gave you the 2002—— 

Senator HOLLINGS. Yes, that is right. So, they are going up to 85 

percent under the present rules of holdings, just five programmers, 

and three companies own over 50 percent of the radio stations. We 

have a witness say that no rules are needed to promote localism. 

Come on. 

Mr. Murdoch, I admire you. There is not any question you come 

out of Australia and you built up a fourth network, but—and I was 

saying, well, it is not so bad. What is wrong? We could see the 

wrong in EchoStar, because that left rural America with one provider in obtaining DIRECTV, so I said what is really wrong with 

Murdoch and News Corporation taking hold of this one. I saw 

where you said the media market is highly competitive, and I 

looked at that and found out about the five and the three on radio. 

Then I looked at your holdings, where you said they are completely 

independent. I wish I could buy some stock in this thing, 10 pages. 

Mr. MURDOCH. Any day. 

[Laughter.] 

Senator HOLLINGS. I will tell you, you have got it all. I mean, 

what are you going to do with an additional takeover? What are 

you going to do with it? 

Mr. MURDOCH. We are going to work very, very hard to make it 

successful. I know that things add up to a lot there, but for instance, you throw in a book publisher, Harper Collins. It is one of 

hundreds of book publishers. 

I repeat what I said in my opening statement. We only have 2.8 

percent of the market here, and we feel that is not a significant 

thing in any anticompetitive terms or even in anticompetitive 

power. 

Senator HOLLINGS. Well, I do not know. We had a witness here 

just a week or so ago, Mr. Goodman, who was one of your affiliates. 

He said look, they put in the contract—you say they are going to 

operate independently, but here is what the lawyers put in the contract, that Fox can terminate the entire contract if Fox’s program 

is not carried, or if the station intends not to carry or preempt 

three of their programs. That is three strikes and you’re out. You 

have got that in your contract. That does not sound like localism 

or anything else, when the poor fellow is struggling. He just did not 

want to put on Who Wants to Marry a Multimillionaire. 

73 

[Laughter.] 

Mr. MURDOCH. It was a different program, sir, but he— 

[Laughter.] 

Mr. MURDOCH. He—Mr. Goodmon is not a poor struggler. However, he did preempt a series, I believe, or half a series on what 

he considered was a matter of taste, and we did not penalize him 

in any way at all. There are often preemptions. We do have these 

rules. We have to run a network. We have to run a business. We 

spend $2 million an hour on programming. We have to get advertising to cover that. 

These stations, all these affiliates are dependent on having good 

prime time viewing. It is the basis, really, of the identification in 

the market, whether it be for weekend football or all this expensive 

programming which the Big Three broadcasters bring them. That 

really is the bedrock. 

Now, to succeed further in their markets, they need to do a great 

job locally, and I agree with that entirely, but if I could just go on 

for a second here, we have heard from people that everything 

should be about localism and diversity, and public interest. Can I 

just give you my history of this? We have 33 stations, it is true. 

Since we have bought those stations, we have increased the local 

news on those stations on an average of 60 percent. 

We now have 800 hours of local news on our stations, and we are 

very proud of it, and we are continuing to expand them. We are 

just about to go with morning news in Boston and in Denver. By 

the end of this year, we plan to have 3 to 4 hours of news every 

morning on every station that we own. That is not true, you will 

find, if you go into the small affiliate groups who are complaining 

about expansion. They do not do nearly as good a service in local 

news. 

And I cannot come to you and honestly say I am doing this out 

of the interest of the public good. It is simply good business for stations to identify—the only way a free broadcaster can really stay 

in business against 100 cable channels is to identify with his local 

community as well as have some headline programs at night. 

Senator HOLLINGS. Your lawyer is good. Your answer went past 

the red light. Thank you, Mr. Chairman. 

[Laughter.] 

Mr. MURDOCH. Sorry. 

Senator HOLLINGS. Jesus. 

[Laughter.] 

The CHAIRMAN. Senator Stevens. 

Senator STEVENS. Mr. Kimmelman, I have been very interested 

in your testimony before, and I thought I heard that you said that 

over 60 percent, these five companies own over 60 percent. You are 

talking about cable operations, though. Five companies own 60 percent, they account for 60 percent of subscribers to cable networks. 

Do you disagree with this chart that Mr. Murdoch has given us 

that shows that his company, the News Corporation has 2.8 percent of total media? 

Mr. KIMMELMAN. Well, when you define total media as including 

Consumer Reports, which we publish, he probably is down at that 

percentage. It includes everything that—probably every napkin 

that has something written on it. 

74 

[Laughter.] 

Mr. KIMMELMAN. The issue that I focused on, Senator Stevens, 

has been prime time programming. 

Senator STEVENS. You are talking about cable, though? 

Mr. KIMMELMAN. Yes. Cable and network. 

Senator STEVENS. Maybe rural America does not get cable yet. 

Mr. KIMMELMAN. Satellite, cable, and networks, any technology 

transmitting the programming. We are looking at where it comes 

from, who owns it, and prime time is where you have the largest 

audience share. That is where the networks—— 

Senator STEVENS. All right. I only have 5 minutes. Let me tell 

you, my state is 20 percent of the land mass of the United States. 

We have 227 different villages. You know how they get television 

today? Our state pays for 4 hours of television distribution of network programming. We are talking about total media now, not just 

the people who get cable. To be a monopolist today, you have to 

have control of total media because of the vibrant competition between all sources of means to deliver the news or whatever it is 

to our consumers, but I do not think you are looking at rural America. I hope you will take another look at this from the point of view 

of media control. 

Mr. Murdoch, let me ask you—I do not have much time—thinking about this problem of rural America, you will have the ability 

now, if you exercise it, to deliver signals to any small town anywhere in rural America. Are you going to try and proceed to cover 

the whole country with your system? 

Mr. MURDOCH. We want to cover all the designated market areas 

which make up all of America, which is 210 areas. 

Senator STEVENS. Well, there are some areas that are not market 

areas. My mother-in-law happens to live out in rural Arizona, as 

a matter of fact. 

Mr. MURDOCH. If she has a local station there—— 

Senator STEVENS. No. They waited a long time for signals and 

they finally got satellites, but they do not have access to total 

media. Your system could deliver to rural America total access to 

all media if it wanted to do so. 

Mr. MURDOCH.—Senator Stevens, we do that. I understand that 

both satellite operators do, in fact, carry the network, a network 

station at least, in what we might call the white areas where there 

is no local station, all of our programs are there. 

Senator STEVENS. Would this merger expand the capability? 

Mr. MURDOCH. We do have a problem in Alaska, but that is a 

rather special one. 

Senator STEVENS. We are considered special. This committee gets 

tired of hearing about exceptions for Alaska. 

Mr. MURDOCH. I am afraid it has to do with the curvature of the 

Earth and where we have the spectrum. 

Senator STEVENS. What is your answer, though, to Mr. 

Kimmelman about the percentage that you do control with regard 

to the cable systems? 

Mr. MURDOCH. I think he is misled. We have four or five channels he lumps together as a great number of channels, or this chart 

that I have here, what we call the Fox Sports Net—in fact, we are 

involved in and have our name on 24 local channels, like in Los 

75 

Angeles or in Chicago or Detroit or Phoenix. Of those—I think 

there are actually 23. We have ownership and control of 12 of 

them, in a junior partnership role with other people in the remainder of those channels, and they were lumped together and said, 

hey, Murdoch’s got 24 channels. 

I have a different chart here, as a matter of fact, crediting me 

with all of those, but actually says that about 10 companies—I will 

give it to Mr. Kimmelman, but these include—really, a lot of them 

are very minority investments in channels. Liberty is there with a 

lot, and they only—they have 50 percent in one channel, and a lot 

of influence. The rest—— 

Senator STEVENS. Can you proceed with your merger without the 

FCC lifting the 35 percent cap? 

Mr. MURDOCH. Oh, yes, sir. 

Senator STEVENS. I have no more questions. 

The CHAIRMAN. Senator Wyden. 

Senator WYDEN. Thank you, Mr. Chairman. 

Mr. Murdoch, what is of concern to me is, your proposal would 

take consolidation to a new and unprecedented level, and let me be 

specific. Your impending purchase of DIRECTV would be the first 

time there was a merger between a major broadcast network and 

a multichannel video distribution platform, specifically cable, or 

satellite, and my sense is that this is going to mean everybody else 

has got to keep up with the Joneses. So there will be great pressure for NBC and ABC and CBS to go forward with exactly the 

same kind of approaches. Now, do you think that is in the public 

interest? 

Mr. MURDOCH. Senator, I can only answer that by saying that all 

of those companies which are very, very much bigger companies 

than mine, had a look at Direct Television and passed on it, so they 

had their opportunity. That is all I can give you, so I presume they 

do not have any intention of following it. 

Senator WYDEN. What do you think happens to consumers, Mr. 

Kimmelman, if the big networks go out and buy cable or satellite? 

Mr. KIMMELMAN. I think there is a likelihood they are going to 

at least want to. Whether they have the cash to do it, I do not 

know. I think everyone is going to want to bulk up and make sure 

they control the distribution system as well as content. They are 

going to want to make sure they are as well-positioned as they can 

be vis-a`-vis Mr. Murdoch, and so I think it is very likely that a 

Comcast and an AOL-Time Warner, EchoStar, are likely to be looking at network relationships to try to match Mr. Murdoch. 

Senator WYDEN. Mr. Murdoch, we had testimony from the Media 

News Group recently that viewpoint diversity does not require 

ownership diversity, and they basically said that even if we get 

down to two or three companies in this country, we are going to 

still have plenty of diversity. Do you share that view? 

Mr. MURDOCH. No. I think there was a problem of diversity, and 

I think there is a monolithic view. The almost farthermost powerful 

newspaper and the farthermost powerful force in this country is 

The New York Times. Its news and its priorities are repeated in 

hundreds of newspapers across the country that buy its service. I 

am not saying it is not a fine newspaper, but there is very much 

a tendency there, if you like, to domination by one company. 

76 

Senator WYDEN. Do you think, Mr. Murdoch, that there ought to 

be any limits on vertical integration at all? I mean, do you basically 

think that the more the merrier, and there should not be any limits? 

Mr. MURDOCH. No. I do not think you can defend—in the particularly small markets, where there may only be one newspaper and 

one television and a couple of radio stations, I do not think you can 

defend that being all in one hand, not for a minute. 

Senator WYDEN. So, how do consolidations in different areas of 

the media reinforce each other? Mr. Kimmelman, maybe this would 

be appropriate for you, because it seems to me, again, when you 

start down this consolidation path, I have said it is sort of like 

being on a cliff. Once you go over it, you are not going to like what 

is below, but tell us in your view why it is going to result in areas 

of the media reinforcing each other. 

Mr. KIMMELMAN. As you well know, Senator Wyden, it is extremely expensive to build out infrastructure to distribute anything 

from telephone service to television service in this country, extremely expensive. It is very expensive to invest in quality programming and maintain it. 

There are key inputs to this industry, and so when one person 

controls satellite distribution and has—granted by Congress—the 

right under law to get on every cable system through must-carry 

or retransmission consent and owns a lot of programming, Mr. 

Murdoch’s right, a lot of it is regional sports channels, that happen 

to be the most important channel, often, in every community to get 

your local teams, so it is significant in that community, when one 

company has all of that, the others who have these similar investments and needs to keep up I think are going to be looking at 

cross-platform investments and combinations. 

Senator WYDEN. Mr. Murdoch, on this point, with respect to the 

producers getting their shows on the network, do you know how 

many shows in your, say, prime time schedule Fox is coproducing 

or has a financial stake in? 

Mr. MURDOCH. Yes, sir. We have a full financial stake in 30 percent and we coproduce a further 30 percent, and 40 percent is 

bought totally from outside. That is the plan as we have for this 

year. Now, it comes up and down and it varies, but frankly, anyone 

who will come to us with an idea that we think will get us a commercial audience, we will be the first to buy it. 

Senator WYDEN. Mr. Fontana, I share your views that these 

issues are a concern, that it is a problem for your people from a 

creative point of view. Why don’t you amplify on that? 

Mr. FONTANA. Well, for me, it is interesting, sitting here with 

Mr. Murdoch, because this is one of the few cases where we wrote 

a show for ABC, they passed on it, and yet because they owned a 

part of it, they did not want us to do it on Fox. Fox was very open 

to us and is very open to us doing it there, and after a very intense 

negotiation, the project has moved forward quite stunningly, I 

think. 

Having said that, there are those times when the pressure to get 

a series on the air, things that happen the weekend before the 

schedule is announced in hotel rooms that I am not privy to, because I am not an executive, people are told that they have to give 

77 

the networks a piece of the show. That has happened, and what 

happens sometimes is, the network will not step up until they have 

decided they are going to air the show, so they make the studio put 

up the money and then take a piece of it after the time, after they 

decide they are going to air it. 

Senator WYDEN. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Allen. 

Senator ALLEN. I first want to direct my questions to you, Dr. 

Mikkelsen. In reading through your testimony and background, you 

have performed intensive research on media ownership rules, and 

people seem to think that things have not changed in the last six, 

seven, 8 years, or the last 20 years, and clearly they have changed 

in the last 6 to 7 years, since the 1996 act. Have you seen any 

changes in the media marketplace in, say, the last 10 years that 

would justify retaining the FCC’s newspaper-broadcast cross-ownership rule in any market? 

More particularly, I would like you to address if there are any 

studies that empirically show that there is a basis that the FCC 

ought to treat smaller markets differently from larger markets. In 

other words, why should not smaller markets have the same benefits as do large metropolitan areas insofar as cross-ownership is 

concerned? 

Dr. MIKKELSEN. Thank you for your question, Senator. As I think 

the members of the Committee know, the cross-ownership ban was 

put in place in 1975. A few years ago, I and some others did a 

study comparing local concentration among the media that are affected by this rule, radio, TV, and newspaper, in a sample of 23 different markets. We took one at random from 1 through 10, and one 

at random from 11 through 20 and so on, to try to cover the entire 

representative scope of the markets, and we found that in 20 of 

these markets, concentration as measured conventionally by economists decreased significantly. 

In 19 of those it increased by an average of 20 percent or more, 

so we looked at on a local basis, where competition issues are really 

important, as I think Mr. Kimmelman also acknowledged, in many 

markets, there has been a drastic decrease in concentration, and 

this was done, of course, several years after the 1996 Act, so it also 

reflects buying activity that followed on that Act. 

With respect to local markets in rural areas or in smaller markets, as I said in my earlier statement, I really think that what we 

need to preserve competition is effective antitrust enforcement. It 

is a fact that in some smaller markets, there tend to be fewer 

media outlets selling advertising or presenting points of view than 

in some of the Nation’s largest markets. 

Senator ALLEN. Let me ask you to give us a summation. The 

point is, in larger markets there is a reason for these duopoly rules. 

For larger markets there are limits on cross-ownership and so forth 

that apply, in small markets that do not. However, have you not 

seen in some of your studies there are costs in programming updates and technology and so forth that you could actually have improved capabilities in localities if there were the relaxation or updating of the rules, as opposed to having discrimination in smaller 

areas in cross-ownership, or for that matter the duopoly rules? 

78 

Dr. MIKKELSEN. Well, I guess I see two areas in which smaller 

markets might benefit from a relaxation of this absolute ban and 

a focus on market-by-market analysis to see whether cross-ownership is merited. One is in the area that you spoke of, possibly increased efficiencies through cross-ownership is something that the 

antitrust agencies always look at in connection with a merger, and 

the second would be if there is a prospect of one of these media outlets actually going out of business where the cross-ownership allowed them to remain a business and provide a service that they 

would otherwise not provide. 

Senator ALLEN. So your testimony, to sum it up, is that it ought 

to be looked upon on a case-by-case basis, or market-by-market 

basis, as opposed to absolute, one-size-fits-all rules for every community in this country? 

Dr. MIKKELSEN. That is correct. 

Senator ALLEN. Thank you. 

Mr. Murdoch, it is my understanding DIRECTV, and this was 

somewhat of an answer to Senator Stevens’ question, that you committed to providing local-to-local to the top 100 designated market 

areas by the end of the year. What commitments would you be willing to make to provide local-to-local in the final 110 DMAs? 

Mr. MURDOCH. Well, let us say at least another 100, but that will 

mean launching two more satellites. They have to be ordered; that 

will take time, but we will do that. 

Senator ALLEN. So your commitment to local-to-local in the top 

100 is firm, and you have those capabilities? 

Mr. MURDOCH. Oh, yes. Those satellites are already in production, and I think one is launching very shortly. We will have something over, slightly over 100, I believe, by the time this deal is even 

concluded. 

Senator ALLEN. Quickly, Mr. Murdoch, broadband access is important to many people in rural areas. Do you have any plans to 

provide broadband, utilizing your DIRECTV satellites or customers 

in rural areas? 

Mr. MURDOCH. Senator, we are studying this, and we have people on it all the time. To do it by satellite on the technologies that 

I have so far heard about is perfectly possible, but very expensive 

in that the two-way receiver that has to be installed in the home 

is about eight times as much as what it costs to put cable in. That 

will come down, but not to that sort of level. 

We are investigating at the moment two or three different technologies to be able to provide broadband to every home via the electricity grids and the utility companies. There is a lot of promising 

work being done there, particularly Allied, with this new Wi-Fi 

technology. We are not at a stage to make promises about it, but 

we are working at it. 

Senator ALLEN. Thank you for your honesty. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Breaux. 

Senator BREAUX. Thank you, Mr. Chairman, again for having the 

hearing. I thank the panel. I have no problems with having some 

type of a cap established to prevent market dominance by any 

group of station owners. My argument is only that the current 

79 

standard that is being used has nothing to do with market dominance of the station owners. 

Mr. Kimmelman, is it not correct that you could have a group of 

station owners or a network that had a station in every one of the 

largest cities in the United States, but had a viewership of only 1 

percent of the people there, because they do not like what they are 

putting on the air—— 

Mr. KIMMELMAN. That is correct. 

Senator BREAUX.—and yet they would be exceeding the cap of 35 

percent, not because anybody is watching them, not because they 

have market or economic dominance, but only because they have 

a station in an area that has the potential audience to reach 35 

percent of the population? I just think it is an archaic way of measuring market dominance. 

I mean, if nobody is watching the stuff that they are putting on 

the air, that is certainly not market dominance, and that is what 

we are relying on really, is an estimate of the population in the 

area, not how many people watch the channel or watch the broadcast. It seems to be deficient to me, how we measure it. 

Mr. KIMMELMAN. Senator Breaux, I do not disagree that it is a 

very odd measurement. 

Senator BREAUX. Yes. 

Mr. KIMMELMAN. Forty-five percent is no better than 35 percent 

in that regard. The other thing the FCC does is it treats UHF stations as half a station, and Mr. Murdoch has got 17 of those. When 

you get it on cable, when you get it on satellite, it is the same as 

anything else, so there is a clear problem here in how the measurement is being done. 

Senator BREAUX. I agree with that. I mean, I looked at the thing 

that one of the networks put out. I mean, it shows that—they probably should not put this out to their advertisers because it shows 

how little people are watching the networks, but I mean, NBC with 

all their stations has 1.6 percent of the population in prime time. 

Fox, Mr. Murdoch, has 2.7 percent in prime time. I mean, that is 

not anywhere near 35 percent market dominance. I mean, you 

could have a station, like I said, in every large city in the country, 

and nobody watches it. You could not get another station because 

you have market dominance. It is unrealistic, the way we measure 

market dominance. 

I think people ought to have choices. If you are a network in Los 

Angeles or New York, you probably have 150 other choices, and 

people look at those other choices. 

Mr. KIMMELMAN. If I could just add one thing, Senator Breaux, 

the one critical thing, you are absolutely right about the illogic of 

that, but here is where it is important. It is the potential eyeballs 

that can be seen over that network—— 

Senator BREAUX. Sure. 

Mr. KIMMELMAN.—and it is what advertisers are paying for, and 

it is what local affiliates have to deal with, and where it is relevant, whatever the number is, it is relevant in who has more bargaining power in the negotiation over whether a locally selected 

program goes on or a network program. 

Senator BREAUX. But advertisers just do not look at the size of 

the city that the station is in. They look at the ratings to see if anyVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00083 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80738.TXT JACKIE
80 

body is watching the stuff, and that is what the prices are determined on. They are not determined on how big the city, or station 

is. They say, what is your percentage of people watching your station, OK. 

The other point is, the whole argument—I thought we had set 

this argument aside, that somehow local ownership versus network 

ownership guarantees more local news. That is not correct. In Louisiana, we have seven media markets. I have got one station in one 

market of the seven that is locally owned. One. I mean, and some 

are owned by networks, but everything else is owned by people in 

New York or Los Angeles. That is not local input. I mean, they do 

not even know where Lafayette, Louisiana is, or Lake Charles. I 

mean, they are all owned by people and conglomerates who are 

very sophisticated, but they run local news because it is in their 

interest to do so. 

The FCC has told us that network-owned stations, in fact, have 

about 30 percent more local news than the non-network-owned facilities. They run local news because it is good for business, and 

they cannot tell me that in my home town, that the local station, 

which is non-network-owned, serves the community better because 

all the owners are in New York City. String them up. 

[Laughter.] 

Senator BREAUX. But, that argument, I thought has been set 

aside. I cannot—I think that argument is really not responsive, so 

I guess my point is, really that we ought to have a measurement 

of dominance, and you should not have any outlet that dominates 

the market, but having said that, the standard that we use is not 

connected to reality. We ought to find out which one is and move 

in that direction. The 35 percent, 45 percent is meaningless in 

terms of market dominance. 

Mr. Fontana, I have a great deal of sympathy for you, but, the 

networks are the content providers. They hire. They have to hire 

writers. You are either writing independently, or you have negotiated a contract to write for a network, and you agree to the price 

or not agree, or negotiate and get a better price. They cannot 

produce content without writers. The writers are either going to be 

working for themselves or working for the people who are producing the content. Explain the difference, and why one is better 

than the other—— 

Mr. FONTANA. Well, this is less about the specific deal than it is 

about the kind of programming that a particular network wants to 

do, and, you know, if you have a deal, let us say with a specific 

company, and this is why the thing with Fox is so extraordinary, 

because I do have a deal with HBO, which has a deal with ABC, 

and normally what would happen if ABC said we do not want it, 

it would be dead. 

Senator BREAUX.—if you worked for ABC. 

Mr. FONTANA. With the way my current deal is set up, it would 

be dead. Normally that is what would happen. 

Senator BREAUX. Did anybody negotiate a deal with the content 

provider that says, look, I am writing this, if you do not like it, I 

will reserve the right to take it somewhere else? 

81 

Mr. FONTANA. Well, there are those things in there. You usually 

have to wait about 9 months to a year to get the property back, 

and—— 

Senator BREAUX. But it is your property. 

Mr. FONTANA.—well, technically it is theirs until they are willing 

to sell it back to me. 

Senator BREAUX. But every writer is being compensated for the 

product. 

Mr. FONTANA. Oh, absolutely. I am not complaining with the 

compensation, believe me. 

Senator BREAUX. Well, you all do great work. I admire it immensely. Oh, I am sorry, I am out of time. Thank you. 

The CHAIRMAN. Senator Sununu. 

Senator SUNUNU. Thank you, Mr. Chairman. 

Dr. Mikkelsen, the studies you have done on ownership, whether 

it is TV or newspapers, does your evaluation support the assertion 

of Senator Breaux that having an owner from outside the local area 

does not necessarily mean that you will not carry local content, 

local news in your media property? 

Dr. MIKKELSEN. Our research does support the notion that network ownership of a station results in statistically more news programming being shown than ownership by an affiliate. It does not 

go directly to the question of where they are located, and I frankly 

do not see that any of these rules are very well designed to ensure 

that a station is owned in the same city in which its operated. The 

relevance of where the owner is to where the station is located is 

oblique at best. 

Senator SUNUNU. I appreciate that point. 

The other concern would be that somehow opening up the rules 

means that more owners from outside the area will come up and 

buy local properties, and I think the question that has been raised 

by Mr. Kimmelman and others is whether that results in less local 

news and local information, and Mr. Kimmelman, can you speak a 

little bit to that point? You raise the issue that the rules first and 

foremost are about, or at least should be about local news and information, and Senator Allen pointed out that this acquisition will 

result in rural areas getting into local content for, I guess, 100 

market areas by the end of the year. Would that not be a good 

thing for local news and information? 

Mr. KIMMELMAN. We have supported local-into-local forever, getting local broadcast signals to as many communities as possible. 

That is wonderful. That is repeating the current voice in the local 

community, the existing broadcasters, and bringing them in 

through a new technology. It is wonderful. It is a new option for 

satellite customers. It is not another local news voice. 

I do not know of a satellite channel that is a local Roanoke or 

Manchester station beaming in just to your community. I wish 

there were. I think it would be wonderful, but I do not know of 

that. 

Senator SUNUNU. But those rural communities are relying on a 

distributor to put together the technology necessary to get them access, and I have rural communities in New Hampshire, and they 

cannot get that local voice because of geography and interference 

and other issues, and it seems to me that there is some value—it 

82 

might not be a reason for you to support the acquisition, but some 

value in a commitment to get that local-into-local in 100 areas by 

the end of this year, I think that was the number, and 200 long 

term. 

Mr. KIMMELMAN. Yes, Senator, and we have supported it from 

Mr. Murdoch’s competitor, and I would just note I heard him say 

where it is economically and technically feasible, and that is totally 

logical and reasonable, but I am not sure what number that ends 

up getting you. We hope that through competition, he and 

EchoStar will serve every community with local channels as soon 

as possible. 

Senator SUNUNU. Fox also has ownership of 40 local sports networks. I am pretty sure—— 

Mr. KIMMELMAN. Twenty-three. 

Mr. MURDOCH. Twenty-three. 

Senator SUNUNU. Twenty-three? 

Mr. MURDOCH. Yes, I believe so. 

Senator SUNUNU. I stand corrected. 

Mr. MURDOCH. Nineteen, sir. I am sorry. It is going down fast. 

[Laughter.] 

Senator SUNUNU. A number of local sports channels, and I think 

eight, 10 years ago, I certainly do not recall having access to these 

local sports networks. Again, putting aside, Mr. Murdoch, your 

News Corporation, is not this a positive trend in delivering local 

source sports information or news, and is not that a positive step 

forward at least in the delivery of that local content? 

Mr. KIMMELMAN. Absolutely, Senator Sununu. I can remember 

when I had to listen to a local radio late at night to hear those 

games. Now you can see them. My question is, is it exclusive control and distribution? What is the cost of it? Is it at a competitive 

price? That’s all, and we have a problem here with leagues that 

have protection from antitrust laws, and that is another difficulty 

in the price of a product. 

Senator SUNUNU. I would agree with a number of those points. 

I mean, the concerns of pricing and antitrust issues in local markets I think need to be addressed, but the reason that we are addressing them is because someone has made the investment to create the local networks in the first place, and I just wanted to underscore at least my sense that having this new option, having this 

new source of information, having this locally driven source of information is a positive thing. 

Mr. Fontana, Mr. Murdoch indicated that 40 percent of their programming, at least this year, is exclusively independent. I assume 

you think that is a good thing, and second, do you think that is 

part of the reason for the current level of success of the network, 

or is it a coincidence? 

Mr. FONTANA. Well, I do think it is a good thing. You know, I 

am not opposed categorically to the network owning shows, but I 

do think—I did not know the statistic that 40 percent of Fox was 

outside programming, and I think that is an admirable thing, so 

what makes success is something, if I had that answer I would not 

be sitting here right now. 

Senator SUNUNU. With regard to the Fin-Syn rules, I found it 

very dismaying that at the time that the rules change was put forVerDate Nov 24 2008 11:24 May 23, 2013 Jkt 075679 PO 00000 Frm 00086 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80738.TXT JACKIE
83 

ward, two things, (1) that executives suggested that it would not 

change anything, and (2) that anyone believed them when they 

said that. 

[Laughter.] 

Senator SUNUNU. Of course changing those rules would change 

things, and I think it is inevitable that it would result in a reduction in purely independent production players, and that is not necessarily a bad thing. 

The question in my mind is the degree to which those independents provide some special virtue, some special value, and that is 

what I am struggling with a little bit here. You mentioned some 

good programs and some bad programs actually. The Cosby Show 

and Dinotopia, we do not need to talk about which is which, and 

then, of course, a lot of the product you put together, but I also see 

equally good product that may well be produced and controlled by 

the networks. Can you try to give a little bit clearer picture as to 

what the special virtue is, or the uniqueness of the independently 

produced programs? 

Mr. FONTANA. I will give you an example in the sense of what 

happened to Homicide when Reeves went out of business, and 

Homicide was sold to NBC Studios by Reeves. There was a kind 

of like a buy-three-desks-and-a-TV-series fire sale, and what happened was, is that the studio that I answered to and the network 

that I answered to were basically the same people, so I did not 

really have an advocate. 

I did not really have back-up. The studio functions for me in a 

way to say, no, no, no, we are behind Tom and where he wants to 

take the direction of the series. When it is all homogenized and 

when you are talking to the studio, but they really are the network, 

and the network is really the studio, I am kind of out there by myself. 

Now, I happen to be somebody who is very willing to argue for 

things that I believe in, but I am not sure the next generation— 

I am less worried about myself than I am about the next generation—of creative people coming into the business, because they will 

have never known the joys of the Fin-Syn world, and so I find myself like some elder, you know, storyteller trying to go back to the 

golden days of yore. 

That is where I worry. I worry about a television universe created by people who do not know that they do not have to listen to 

from the studio/network. 

The CHAIRMAN. Senator Boxer. 

Senator BOXER. Thank you very much, Mr. Chairman, for this 

hearing. This has been a fascinating hearing, as yours usually are. 

I think there is grave concern across the political spectrum in this 

country from Wayne LaPierre of the NRA to very liberal groups 

that—and as a matter of fact, he said diversity is what America is 

all about, so let us take that as a centerpiece. 

I agree with that, so the ability to echo a particular political 

point of view, now—and it could be echoed in many ways. It could 

be echoed on news programs; it could be echoed on entertainment. 

You know, it could be echoed in so many ways. This is the concern, 

frankly, that I have, and I have it across the board. Just because 

Mr. Murdoch is here, I have this chance to ask him about that. 

84 

What it said was, on February 23, when it was clear that France 

would oppose an American resolution at the United Nations, a Fox 

News anchor described France as a ‘‘member of the axis of weasels.’’ This phrase was then picked up—— 

The CHAIRMAN. Which he got from the New York Post, I think. 

[Laughter.] 

Senator BOXER. No, no. It was picked up in the New York Post, 

which is owned by the same individual. OK. That is exactly my 

point, and it often appeared at the scroll at the bottom of the 

screen on Fox News. 

Senator LOTT. And in the Congressional Record, probably. 

Senator BOXER. Well, that is fine. I am just talking about how 

one can take a political—suppose it just said, you know, America 

is acting terribly in this, and that was repeated, it all is disturbing 

that a political point of view is represented in one place, second 

place, third place, fourth place, fifth place, sixth place, whatever, 

whether it is from The New York Times, which owns many stations, or you, so I am trying to be fair here. I am using this as an 

example because it was used in this particular article. 

So I guess my question is to Mr. Murdoch and whoever else 

might want to comment on it. Do you believe there should be any 

limits at all on how much media one individual or one company can 

control, and if so, what would those limits be? 

Mr. MURDOCH. I have no idea what the limits are, but I do not 

think anybody today is anywhere near those limits. I think 2.8 percent is neither here nor there, which is what we have. That is in 

media. What we are talking about, what I am talking about today, 

DIRECTV is hardly media. It is simply a distribution platform. 

Senator BOXER. I was not talking about DIRECTV at all. 

Mr. MURDOCH. I understand that. 

Senator BOXER. I am talking about the other issue that is before 

Chairman Powell. I am not talking about that. 

Mr. MURDOCH. Right. Right. 

Senator BOXER. I am talking about the ability to take a point of 

view, left, right, center, whatever the point of view is, and have the 

ability to reiterate it. 

Mr. MURDOCH. I do not know what the right limits are, but I am 

certainly in favor of relaxing the existing limits, Senator. 

Senator BOXER. You are in favor of relaxing the limits. Do you 

have any idea if there should be any limits at all? 

Mr. MURDOCH. No. I think it depends. I mean, as I say, I do not 

intend to take advantage of it. On the other hand, I think I have 

demonstrated how much in the public interest our ownership of 33 

stations has been to those 33 major communities. 

Senator BOXER. Well, what if you owned everything? 

Mr. MURDOCH. What if I owned everything? 

Senator BOXER. Would there be any limits on you? 

Mr. MURDOCH. No, of course not. And we do not expect—— 

Senator BOXER. You think there should be limits? 

Mr. MURDOCH. I think there should be competition everywhere. 

My life has been built, and my business, starting competition and 

starting up against other people, and providing diversity. 

Senator BOXER. So we have gotten this far, so you agree there 

should be limits? 

85 

Mr. MURDOCH. I should think there should always be diversity. 

Senator BOXER. Good. Limits and diversity, we agree. So then, 

the question is, how much, and you are saying you cannot put a 

number on it. 

Mr. MURDOCH. There should be no limit to diversity. And—— 

[Laughter.] 

Senator BOXER. No, no, no. I am not asking you to limit diversity, limit the ability for one to own many, those are the limits we 

are talking about. 

Mr. MURDOCH. I do not know what the antitrust laws would say, 

you know, if you have 25 percent of a media market or something, 

I am sure that could be enormous. 

The CHAIRMAN. Let me weigh in on this. Do you think it is right 

for one city, for all six radio stations to be owned by one company? 

Mr. MURDOCH. No, sir. 

The CHAIRMAN. That is the case. Go ahead. 

Senator BOXER. Thank you. 

Mr. MURDOCH. I do not have a dog in that fight. Yet. 

[Laughter.] 

Senator BOXER. That is good. Mr. Kimmelman, I think what we 

are having here is a problem, because Mr. Murdoch is using 1 percentage of this 2.8. You are saying he is including things like Consumer Reports. I think that needs to be discussed. So are we going 

to have another round after this if we want? Is it possible? 

The CHAIRMAN. If you desire it, yes. 

Senator BOXER. That would be swell. Maybe while the yellow 

light is on, just tell me, do you agree when Mr. Murdoch uses this 

2.8 percent? 

Mr. KIMMELMAN. Absolutely not, Senator Boxer. You need to look 

at exactly what Senator Breaux said. You need to look at market 

dominance, market concentration. The issue is, what is the market? What do you care about? I think most people care about news 

and information. I am not worried about the national market. I am 

worried about local markets. 

Here is what the FCC is doing. They are saying, if you are a national network you are going to count UHF stations for 50 percent 

so they can own more, but when you look at the local market and 

they say how many local broadcasters there are, they are not 

counting the UHF as 50 percent, they are counting it as 100 percent, and when they are looking to see whether a newspaper can 

buy a local broadcaster, they are not looking at you to see whether 

it is 50 percent or 100, they are calling it 100 percent. They are 

relaxing any way they can, inconsistently, to allow more ownership 

without looking at real concentration factors. 

I think to get diversity, you need the appropriate concentration 

measures. I do not think antitrust is enough, because antitrust, it 

can measure advertising revenue. It cannot measure what is competition of ideas. It never has. I wish it could. It cannot, and they 

have not ever tried to. 

The CHAIRMAN. Senator Lott. 

86 

STATEMENT OF HON. TRENT LOTT, 

U.S. SENATOR FROM MISSISSIPPI 

Senator LOTT. Thank you, Mr. Chairman, for having this hearing. I agree with Senator Boxer, this has been very, very interesting, very informative. Thank you all for being here. You have 

given very thoughtful testimony and have been very interesting, 

listening to you answer the questions. 

I may come at it from a completely different point of view than 

Senator Boxer, but I do think that the 35 percent ownership cap 

is a reasonable one. I was involved in legislation, as were a number 

of the members of this committee, that came up with that kind of 

cap. 

Now, generally speaking, philosophically I like deregulation. I do 

not like caps, but I do think in the media area, the possibilities of 

concentration and limiting people’s access is something that you 

need to consider. It is dangerous. 

I think that—I want to congratulate Mr. Murdoch for the fact 

that he has brought more diversity of viewpoint into the media in 

America. In the past, it was The Washington Post, New York 

Times, L.A. Times, the three networks, and they all took the same 

point of view, and if The New York Times said it, the networks 

picked it up. Used to, when I would go on the Senate talk shows— 

I do not do that much any more, but when I did— 

[Laughter.] 

Senator LOTT.—I knew exactly what the question was going to 

be on Meet the Press or Face the Nation. All you had to do was read The New York Times. There it was. 

They were going to ask the questions based on the front page article, simple as pie. And so, you looked like you knew what they were 

going to ask. You did, because you read the Post and The New York 

Times. So I am glad that you brought that diversity, but you did say 

that you think that there should be some limit. In answer to Senator Boxer’s question, you did say that you had concern about a 

small local market, that the idea that one company would own the 

TV station and both radio stations and the newspaper, that would 

not be good. 

But I do think we need to get to a really important question here 

to show that the Senate really does pay attention to pop culture, 

and this is the question. Did you do it internally, or was it an independent idea to come up with American Idol that led us to Ruben? 

[Laughter.] 

Mr. MURDOCH. That was actually a British idea and an independent programmer who offered it to Fox, and all I can claim is, 

I heard about it and called them and said, ‘‘for God’s sake, buy it.’’ 

That was last summer. 

Senator LOTT. I hope he was well-paid, because he has created 

a phenomenon. 

Mr. MURDOCH. I can assure you he will become very rich. 

Senator LOTT. You know, also, looking at this philosophically, 

generally speaking my disposition would be that mergers are OK. 

I never thought that necessarily big is bad. I think if it makes good 

business sense, if it makes good sense in terms of providing the 

service, that that ought to be all right unless there is a good reason 

87 

not to do it, and unless it does, as the Justice Department has to 

review it and the FCC, it wipes out competition, it has certain antitrust considerations, then you should not do it, and I had reservations about the earlier proposal for DIRECTV, and Dish to come together, because I do think that that was going to eliminate the 

competition in that area of media. 

I think your situation is different, though, and I assume you 

would say it was different, because now you are going to be chairman of this board that will own it though, are you not, Mr. 

Murdoch? 

Mr. MURDOCH. I hope so, yes. 

Senator LOTT. But I do think—I mean, you are going to add 

strength and money, I presume—— 

Mr. MURDOCH. Yes, sir. 

Senator LOTT.—to DIRECTV, and Dish is, I presume, hopefully 

going to be strong, and you all are going to really get out there and 

compete. You are not going to mistreat your installers. 

Mr. MURDOCH. Dish already makes more money, more money per 

customer and more money totally than DIRECTV. 

Senator LOTT. Since my son-in-law is an installer, I am worried 

about his future, too, but, so I do not feel like in this case that it 

is a further consolidation. I think it may, in fact, strengthen and 

improve what is offered in this particular area, but let me ask you 

a question where I do have some concerns, and that is about program access commitments. 

I understand that News Corp. and DIRECTV have agreed to a 

series of program access commitments similar to the ones in the 

1992 Cable Act, which are designed to ensure that News Corp. 

makes its programs available to other distributors in a nondiscriminatory way, but there has been some indication that if the FCC 

eliminates that access requirement, or it is rescinded, that News 

Corp. would not be inclined to keep its program access commitments. What is the situation on that? 

Mr. MURDOCH. I think we will be certain to keep the practice because it is good business. On the other hand, I am not prepared 

to come here today and say I am prepared to operate under rules 

that do not apply to any of my competitors. If Comcast went and 

bought the Disney Company, or other people started things or used 

things in a discriminatory way against me, I would reserve the 

right to retaliate, but that is competition, and all I am saying is, 

we will abide by the rules, and we think it is good business to 

abide by the rules. 

Senator LOTT. Well, I understand what you are saying—— 

Mr. MURDOCH. I think it is highly unlikely. 

Senator LOTT.—but let me just say to you and to the industry, 

and we have had other people here, you know, program access is 

important to a lot of parts of the media now. I think this is a place 

where you all could get in real trouble. If you limit program access, 

eventually we are going to intervene, if there is not some fairness 

there. 

Mr. MURDOCH. I agree totally. 

Senator LOTT. You invented the fair and balanced term. Let us 

make sure it applies to program access, too. 

Thank you very much, Mr. Chairman. 

88 

Mr. MURDOCH. Thank you, Senator. 

The CHAIRMAN. You decide. 

[Laughter.] 

Senator Lautenberg. 

STATEMENT OF HON. FRANK R. LAUTENBERG, 

U.S. SENATOR FROM NEW JERSEY 

Senator LAUTENBERG. Thank you, Mr. Chairman, for conducting 

this fair and balanced hearing. The one thing about our Chairman, 

he lets you spin, because he thinks that as you present different 

views, you get an energy source that produces conclusions that are 

well-thought-out. We salute the Chairman’s deft hand. 

I am pleased to have a chance to say hello to you, Mr. Murdoch. 

I do not think we have had a chance to meet over the years, and 

let me say I admire your success in having built this corporation 

that you now have. The prospects for the future are, some peril to 

the glow of that success, because you just said whatever the rules 

are, you will obey them. But you will, I assume, agree with the fact 

that you would like to change the rules. 

Mr. MURDOCH. Not the program access rules, sir. 

Senator LAUTENBERG. No, but other rules such as percentage of 

market and so forth. 

Mr. MURDOCH. Yes. 

Senator LAUTENBERG. Yes. And Dr. Mikkelsen, you said that you 

were not representing anybody here. You are not here on behalf 

of—I am here on behalf of none of my clients. Do you represent Fox 

at times? 

Dr. MIKKELSEN. Our firm has worked for Fox, yes. 

Senator LAUTENBERG. Yes. Mr. Murdoch, did you appear before 

the Commission, the FCC, to give any testimony? 

Mr. MURDOCH. No, no, not on this matter, no. 

Senator LAUTENBERG. Dr. Mikkelsen, did you appear before the 

Commission? 

Dr. MIKKELSEN. I and others at my firm have written papers 

that have been submitted to the Commission, Senator. 

Senator LAUTENBERG. Yes. So—and you present a point of view 

that you registered here. You were very clear and articulate, and 

I respect that, that you think we ought not to have these limitations. I do not know whether you said that there is an artificiality 

to them in the marketplace, or that maybe they are redundant because we have our rules that Justice maintains. 

Dr. MIKKELSEN. I think that is the way I put it, Senator. There 

are some legitimate concerns, but I do not think these rules are 

needed to advance the goals we have. 

Senator LAUTENBERG. Did you represent other people before the 

Commission who were also in the industry, other media companies? 

Dr. MIKKELSEN. As I mentioned, I have done some work, some 

independent research that Senator Sununu asked about previously—— 

Senator LAUTENBERG. Right. 

Dr. MIKKELSEN.—for the Newspaper Association of America, and 

some of the research we did most recently was funded by Fox and 

NBC and Viacom. 

89 

Senator LAUTENBERG. Are you under retainer now with Mr. 

Murdoch’s company? 

Dr. MIKKELSEN. I am not working for them presently. We have 

been working throughout this proceeding. 

Senator LAUTENBERG. But you have a continuing relationship? 

Dr. MIKKELSEN. Yes, sir. 

Senator LAUTENBERG. OK. So can you be so balanced that when 

you come in here, you do not represent any of those points of view 

that you worked on so hard for such a long time? 

Dr. MIKKELSEN. The views I have expressed have been views 

that I have articulated before and long held, Senator, and I would 

ask that people look at the research that we have done and evaluate it on its merits. 

Senator LAUTENBERG. Yes. OK. So there might be coincidence of 

value that Mr. Murdoch receives as a result of your view here. 

Dr. MIKKELSEN. Well, I do not know how the panel was chosen, 

Senator, but I think that—— 

Senator LAUTENBERG. No, but, I mean, based upon your testimony, you are saying, look, take off the wraps, and that certainly 

complies with Mr. Murdoch’s intention at this point. 

One thing about Mr. Murdoch, we know that what he means, he 

says, and what he says, he means, and sometimes you can agree— 

I find it a little harder as time goes on to agree, maybe because 

I am getting younger or something. 

[Laughter.] 

Senator LAUTENBERG. The fact is that I have spent some time 

with Hannity and Bill O’Reilly and so forth, and it is easy, I have 

put on my bulletproof jacket, I go into the studio, and we get along 

famously because I will not lie down. 

But there is a coincidental common point of view that spreads 

through the Fox programs that we see that tend to be a little more 

conservative, and once we include the New York Post, we see all 

kinds of assertions, weasels and all of that. It is not bad to be 

called a weasel. There are worse names. Peter Arnett got a real 

scalding. We did not see the same applied to Geraldo when he violated the rules that the military thought were bad, and it is hard 

to get either fair or balanced views out of that. 

Mr. Murdoch, did Star Satellite TV stop the BBC and CNN because Beijing had problems with their reporting? 

Mr. MURDOCH. No, sir. 

Senator LAUTENBERG. What was the cause? 

Mr. MURDOCH. I just bought Star TV and it was losing $100 million a year, and an easy way to save $10 million was to drop BBC. 

Senator LAUTENBERG. That only had you losing $90 million a 

year? That was—it really got to look like a good deal at that point. 

Mr. MURDOCH. That is correct. It would have taken us 10 years 

to break even, and BBC then went up at their own cost. 

The CHAIRMAN. The Senator’s time has expired. 

Senator LAUTENBERG. OK, Mr. Chairman. Thanks very much. If 

we had the time, we could sit here all day, but none of us has the 

time, Mr. Murdoch. 

The CHAIRMAN. Thank you, Senator Lautenberg. 

[The prepared statement of Senator Lautenberg follows:] 

90 

PREPARED STATEMENT OF HON. FRANK R. LAUTENBERG, 

U.S. SENATOR FROM NEW JERSEY

Mr. Chairman, 

I look forward to today’s hearing on broadcast media ownership. I congratulate 

you for holding ‘‘fair and balanced’’ hearings in this Committee. We don’t want any 

‘‘spin’’ in this ‘‘zone’’ and I know the Chairman well enough that he won’t permit 

it. He enables competing views to be heard. He is ‘‘fair’’ and ‘‘balanced’’ and we get 

all the data we require for an informed discussion. That’s something we need in the 

media that I fear we are losing because of deregulation that is harming the public 

interest. 

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. That’s already happened under 

the 1996 Telecommunications Act, which relaxed the media ownership rules significantly. With regard to broadcast television, for instance, 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. 

I would submit that the media consolidations and mergers we have already seen 

have not been in the public interest in at least one crucial area, and that’s the 

public’s access to ‘‘fair and balanced’’ news coverage that reflects varied viewpoints. 

Consolidating media ownership means that a few large corporations can exercise 

considerable control over the news. 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.’’ Is it really in the public interest to make it easier for a few companies to dominate the airwaves and determine what news the American people will—or won’t—hear? I don’t think so. 

It’s fitting that our first witness today is Rupert Murdoch, the President and CEO 

of News Corporation. I doubt there is any other individual or corporation that 

stands to benefit as much from additional de-regulation. Mr. Murdoch has deftly assembled a horizontally and vertically-integrated media behemoth that exceeds the 

35 percent cap, has duopolies in nine of the top ten media markets, has an FCC 

waiver allowing cross-ownership of newspapers and broadcast stations, and was able 

to avoid complying with the FCC’s so-called ‘‘FinSyn’’ (Financial Interest and Syndication) rules. 

And now Mr. Murdoch and News Corp. would like to purchase a controlling interest in DIRECTV. On its face, this acquisition might appear to be good for consumers 

since DIRECTV, which is a Direct Broadcast Satellite (DBS) service, is cable’s principal competitor. 

But I’m not so sure. By gaining control of the DIRECTV platform, Mr. Murdoch 

would have considerable leverage to extract higher licensing fees, which would driver subscriber costs up, not down. He claims that News Corp. will continue to make 

its national and regional programming available to other pay-TV distributors on a 

nonexclusive basis and with non-discriminatory prices, terms, and conditions. We 

shall see. 

And if Mr. Murdoch is so devoted to diverse programming, as he repeatedly 

claims, I’m curious to know why he dropped the BBC from his Star TV satellite operation in China. 

Jeffrey Chester of AlterNet has written an article dated May l9, ‘‘Rupert 

Murdoch’s Digital Death Star,’’ which draws attention to potential problems with 

the merger. Mr. Chester calls the DIRECTV acquisition ‘‘A triple play when it comes 

to influencing U.S. television with his (i.e., Murdoch’s) control of broadcast, cable 

and satellite channels.’’ 

This concerns me. In the New York metropolitan area, News Corp. already owns 

two VHF broadcast stations, a daily newspaper, a broadcast network, a movie studio, a satellite service, and four cable networks. 

‘‘Imagine Fox News on steroids,’’ is how Mr. Chester describes the impact of the 

DIRECTV acquisition if it goes through. 

The danger here, as Washington Post columnist Richard Cohen recently wrote, is 

that Mr. Murdoch’s media empire tends to ‘‘infuse’’ his conservative political ideology into news coverage ‘‘while insisting it does nothing of the sort.’’ 

91 

Mr. Murdoch certainly has a right to his views and he certainly has a right to 

express them. But to call Fox News ‘‘Fair and Balanced’’ is a joke. I know—I have 

been on several of the Fox News Channel shows. I try to ‘‘give as good as I get’’ 

and I enjoy the banter, but I have no illusions whatsoever that these shows are anywhere near balanced. 

There is an organization called FAIR—Fairness and Accuracy in Reporting. Interestingly, FAIR founder Jeff Cohen appears on Fox News on a regular basis. But he 

is about the only Fox commentator who presents a progressive viewpoint. In 2001, 

FAIR issued a report entitled ‘‘The Most Biased Name in News: Fox News Channel’s 

Extraordinary Right-Wing Tilt.’’ The report convincingly debunks any notion that 

Fox News is anything more than a mouthpiece for the right wing. It documents, for 

instance, that over a five-month period, of 56 partisan guests on ‘‘Special Report 

with Brit Hume,’’ 50 were Republicans and 6 were Democrats. That’s 89 percent Republican. The conservative point of view outnumbered all others by more than 2 to 

1. 

The FAIR report draws an interesting conclusion, similar to the point Richard 

Cohen made in his column: 

With the ascendance of Fox News Channel, we now have a national conservative TV network in addition to the established centrist outlets. But like the 

mainstream networks, Fox refuses to admit its political point of view. The result is a skewed center-to-right media spectrum made worse by the refusal to 

acknowledge any tilt at all. 

Fox could potentially represent a valuable contribution to the journalistic mix 

if it admitted it had a conservative point of view, if it beefed up its hard news 

and investigative coverage (and cut back on the tabloid sensationalism), and if 

there were an openly left-leaning TV news channel capable of balancing both 

Fox’s conservatism and CNN’s centrism. 

So the problem isn’t that Fox News is conservative. The problem is that it bills 

itself as ‘‘fair and balanced.’’ And the problem isn’t that Mr. Murdoch is conservative. The problem is that his company, News Corp., has enormous control over the 

media now, and he wants even more control. That burgeoning control threatens to 

drown out other voices and different points of view. 

I urge my colleagues to review the broadcast ownership very carefully. We made 

substantial changes in 1996 that I don’t think are in the public interest. At best, 

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 has said: ‘‘getting it right is more 

important than just getting it done.’’ Getting it right means serving the public interest, not boosting profitability and ownership concentration. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I want to thank the witnesses. 

Senator BOXER. Can we have one more round? 

The CHAIRMAN. Yes, ma’am. Can I finish? I want to thank the 

witnesses. We try to get the most qualified people to come here before the Committee and with diverse opinions, as Senator Lautenberg pointed out, and Dr. Mikkelsen, you were recommended to us 

as an extremely knowledgeable person basically with a difference 

of opinion from Mr. Kimmelman, and we appreciate you being here. 

Mr. Fontana, I do not think you are going to see a return to FinSyn. 

Mr. FONTANA. No, I do not expect so. 

The CHAIRMAN. I think it is because of a court decision, but I am 

very impressed by the letters that I have received from the creators 

such as yourself, Mr. Gelbart, Mr. Burns, John Gay, some of the 

most respected people in your line of work, the creators, and they 

are all deeply concerned about this issue, and I will do what I can 

to pursue it, but frankly, right now, I do not know an answer, but 

you have helped the Committee and you have helped all of us by 

being here. 

Mr. Murdoch, I do not know what the correct level of diversity 

is. I do not know what is the precise, appropriate rule, whether 35 

92 

or 45 or 55 or 25. I do know this, that the Clear Channel hearing 

we had was a miner’s canary to all of us, whether it be an 

idiosyncracy in the rule, or what, but when one corporation owns 

every radio station, no matter how small the city is, there is something wrong with that picture. 

I agree with Senator Lott’s point about The New York Times and 

what questions we are going to be asked. I also agree that with 

Gannett, which owns USAToday, which owns the Arizona Republic, 

which owns Channel 12, I know what the news anchor’s going to 

ask me about on the radio and television, and that is what was in 

the Arizona Republic, and I do not know if Gannett should own 

more than one station, three, four, five. Should they own every television station in Arizona? 

I do not know where that answer is, but we need to look at this 

issue I think with great care so that we do preserve diversity, localism, et cetera, and I do believe that there is some danger that at 

least in some segments—and you know, you said that in rural 

areas that you would be concerned about diversity. What is a rural 

area? Phoenix, Arizona 20 years ago used to be a rural area. Now 

there are 31⁄2 million people that live there. 

So I am asking more questions than I am answering here. Example: Is EchoStar now going to have to be bought by one of the major 

networks? Can EchoStar survive independently now that you will 

acquire Direct? 

Mr. MURDOCH. Very easily. I said it already makes a lot more 

money than Direct per customer, and you know the owner and I 

do, and I can tell you he is a very, very able operator. 

The CHAIRMAN. I agree, and it is one of the great American success stories I think, just as yours is. 

Mr. MURDOCH. Yes. 

The CHAIRMAN. But there are many experts who say that 

EchoStar cannot survive independently, and I am not saying that, 

but there are a whole lot of experts in the media that say that is 

the case. 

Mr. MURDOCH. Senator, we have neither the skills nor the financial resources. 

The CHAIRMAN. I do not think bought by you. I am saying, 

bought by one of the other major networks—— 

Mr. MURDOCH. No, I mean, it could compete in a way to hurt 

them. Both services are increasing their reach by more than a million customers a year. They are both expanding very fast, giving 

cable a rough time. 

The CHAIRMAN. Well, you have heard my sort of comments there, 

and so, since I am not going to ask questions again, maybe I could 

just have some responses to those comments, starting with you, 

Mr. Murdoch, down the line, or no response if you do not choose 

to. 

Mr. MURDOCH. I do not wish to get into a debate with Mr. Fontana. I would just point out that in 1986, when we wanted to start 

a little network and get going, we could not do it without a waiver 

of the Fin-Syn rules. We received that waiver, and we started and 

struggled and lost some money, but we finally got there. 

Later, the rules were taken away by the courts. Then you got 

Warner Brothers starting a network. Then you got Paramount 

93 

starting a network. There are 6 networks today, where there were 

only 3, and there were not any really major cable operators. Today, 

a cable operator can reach 77 percent of the country. There are no 

limits on what he can reach up to 77 percent, and they do have 

a very great advantage. 

I just wanted to make that point. 

The CHAIRMAN. Thank you. Mr. Kimmelman. 

Mr. KIMMELMAN. Mr. Chairman, you know that since 1997, I 

have been coming before this committee saying it is time to reopen 

a lot of these issues and consider the flaws in these markets. Will 

there be a merger with EchoStar? Well, Bell Atlantic bought 

NYNEX and SBC bought Pacific Telesis, and they said that would 

be it, but then Bell Atlantic bought GTE. It is now Verizon, and 

SBC bought Ameritech. I mean, it does not—this has to be mutual 

assured destruction in these industries. Given the assets involved, 

I think we will be back here looking at some other transactions in 

the future. 

I think the big problem, Mr. Chairman, is the FCC is just about 

to make an enormous mistake about local markets, because it is 

looking at the wrong issues. It is not looking at the real facts, and 

I think there are easy ways to take the data the FCC has, and I 

think in some ways, the Chairman of the FCC has the right inclinations. He just may not have the votes or the support to look at 

this from a simple market concentration point of view, and look at 

where you get news and information, look at it right smack down 

the middle. 

Look at where Mr. Murdoch’s companies and Viacom’s have 

bought two stations and reduced them down to one news operation, 

or where, in Chicago, Mr. Murdoch has taken local programming 

off of a channel he bought—he has two channels—and eliminated 

a top-rated children’s television program. Look at the facts, and 

just set the limits. That is what we need. I am afraid we are going 

to be back here having to redo it. 

The CHAIRMAN. Dr. Mikkelsen. 

Dr. MIKKELSEN. Thank you for this opportunity. One thing that 

I have noticed in many of the discussions, not your comments in 

particular, Senator, is confusion with overbigness. 

I spoke earlier about how I think the antitrust laws help us out 

to ensure competition. I think they also bring an analytical focus 

because they help us think about what goes together and what 

really does not go together, and so, I think it is quite dangerous 

to think about this as big. It has lots of media, without thinking 

carefully about whether they compete with one another or whether 

they are really alternatives to one another. 

So, if stations in two different markets are commonly owned, I 

do not see how that reduces or even affects diversity because you 

have different people living in those two markets, so I think that 

we need to be cautious in worrying about some of these things. 

And I have lost the other point. 

[Laughter.] 

The CHAIRMAN. That is all right. I just want to point out, we 

seem to see that often a group of stations, even though there is diversity in programming, use the same news source to keep down 

94 

cost. We have already seen that, so you lose the diversity of news. 

I mean, that is just fact. 

I have long exceeded my time. 

Mr. Fontana. 

Mr. FONTANA. The only thing I would like to add is, I always 

thought that what was brilliant about what Mr. Murdoch did in 

order to form Fox Network was to take a bunch of independent stations and pull them together to create that fourth network. It was 

a very bold move, and it also creatively opened up a whole new avenue for writers and producers. 

What I guess I am worried about is, there are really only four 

networks. The other two, I do not really think are in the game, but 

there are no more opportunities to build another network, because 

all the stations seem to have been bought up. 

The CHAIRMAN. Senator Dorgan. 

Senator DORGAN. Mr. Chairman, thank you very much. I had to 

go to an Appropriations Subcommittee hearing and I have just returned. 

Dr. Mikkelsen, you, in your testimony, said that, quote, what 

matters to diversity is the range of viewpoints available to individuals, that range is not diminished when a local media outlet available to an individual is jointly owned, and so on. Just because I 

have the information in front of me, I want to talk just for a moment about radio, because I know we are talking about television 

today. 

The 44 largest stations owned by the five largest ownership 

groups in the country, 50,000 watts or greater, so these are the big 

stations owned by the five major groups, on a weekday, each weekday there are 312 hours of nationally syndicated conservative talk 

radio and 5 hours of nationally syndicated progressive or liberal 

talk radio. Now, that has come about, of course, as we have had 

this galloping concentration in radio. How does that fit with your 

theory in your testimony about a diversity of range of viewpoints? 

Would you consider that troublesome? 

Dr. MIKKELSEN. I do not know whether that has been a result 

of, as you put it, galloping consolidation, Senator. 

Senator DORGAN. Whatever its result, how do you square that 

with the issue of range of viewpoints and diversity? 

Dr. MIKKELSEN. What you need to focus on in evaluating diversity is what viewpoints are available to people located in a single 

spot, so I would not count shows that are showing in California as 

either adding or detracting from diversity from shows that are 

available in some other state. I am not sure how the 305 are calculated, but that sounds like a lot of programming in a single market, that no individual, I would guess, is being exposed to or has 

even an opportunity to listen to 300 hours of conservative and 5 of 

liberal in the same market. 

Furthermore, there are many, many other outlets available to 

people, other than radio. You have said let us look at radio, but we 

have other broadcasts. 

Senator DORGAN. I understand that. 

Dr. MIKKELSEN. And many other opportunities to inform oneself 

and for people to express their views. 

95 

Senator DORGAN. I was just asking this piece, because it seems 

to me every time we talk about the issue of concentration. We have 

got people saying, well, look, there is no concentration. Are you kidding me? There is so much more diversity, and such a range. Are 

you joking? It is kind of like the old, the gag in the movie, are you 

going to believe me or your own eyes? 

It is quite clear what has happened in radio and television. I recited what has happened at the start of this hearing. It is hard to 

argue with that. One might say it is great. I mean, we had airlines 

in here saying let us just have one or two airlines. That way you 

would have seamless transportation. 

It is fine for somebody to come and argue with us or debate the 

point that concentration is great for the American people. That is 

fine to do, but it is not fine for me to have somebody come in and 

say, well, there is no concentration going on. I mean, the evidence 

is quite clear it is. 

Dr. MIKKELSEN. Well, Senator, I know you are not advocating 

that the FCC regulate whether stations have conservative viewpoints or liberal viewpoints, or wanting to get involved in content 

at all. 

Senator DORGAN. I am only asking about your—well, you are an 

economist. I taught economics in college 2 years and overcame 

that—— 

[Laughter.] 

Senator DORGAN.—but you are an economist, and you said that 

what matters is a range of viewpoints and diversity. I was only 

making the point to you, it does not appear to me, as I drive in 

my car and listen to the radio, you find much diversity, and so I 

think this is an economic theory that does not hold a drop of water. 

Dr. MIKKELSEN. Well, the question is whether that range of diversity would be any different if we had a different ownership 

structure, and I do not think that has been demonstrated. And that 

is what is at issue in these rules. 

Senator DORGAN. I want to ask Mr. Murdoch a couple of questions. I might say you are begging that we be cautious in worrying 

about concentration. You have a great constituency down at the 

FCC. They are very cautious in worrying about concentration of 

ownership, regrettably so, I must say. 

Anyway, look, I love economists. I mean, the field of economics 

is really just psychology pumped up with a little helium. We all 

love to talk about all of these theories. 

Dr. MIKKELSEN. And a little math. 

Senator DORGAN. That is right. 

Mr. Murdoch and Mr. Kimmelman, I was interested in your 

opening dialogue. I know you patted him on the arm when you said 

he was ignorant, so you were just kidding Mr. Kimmelman. Later 

you said he was misled, but you and Mr. Kimmelman have very 

different views of not just this issue, but also, I think, the issue of 

concentration. I want to ask you just a bit about that if I can. I 

do not want to talk so much about this proposal. I mean, there is 

time to do that, because I think that is before the FCC, and there 

is a lot to discuss, I suppose. 

You indicate that you will agree to abide by the FCC program 

access regulations for as long as those regulations are in place. One 

96 

of my concerns about all of these things with respect to the media 

is—and especially ownership, is the regulations do not always stay 

in place. You know, you say, well, I will abide by whatever is there, 

and then we have got people trying to change it very aggressively. 

My colleague, Senator Hollings, indicated that in 1996, I offered 

an amendment on the floor of the Senate, and my amendment was 

to restore the 25 percent ownership limitation with respect to television stations. It was opposed by Senator Dole very aggressively, 

and I will be darned if I did not beat him. I beat him by, I think, 

three or four votes at 4 in the afternoon, and I thought, this is pretty incredible. I mean, you seldom ever have that kind of a win. 

And then dinner intervened—supper, in North Dakota, we call it, 

intervened, and apparently four or five of my colleagues had an 

epiphany over dinner. Lord knows what they ate, and we had a revote and I lost, and so, we have 35 percent rather than 25 percent. 

Now we have a proposal to take it to 45 percent. The question is, 

I guess, what would concern you about concentration? 

I understand you have answered a question from other colleagues that there might be circumstances in which concentration 

would be bad for the American people. Can you describe your feelings about that? 

Mr. MURDOCH. Not well, but I think I would find myself in agreement with what Mr. Kimmelman hinted at earlier, that there 

should be some measure of what is concentration market by market, which apparently, rumor has it Mr. Powell proposed and could 

not get through the FCC. Mr. Kimmelman would know more about 

that than I do, but I may disagree about where the level is, but 

I think there are very strong reasons for something like that. 

Senator DORGAN. As an expert, and you are quite an incredible 

businessman with a reputation of great success, let me ask you if 

you might respond to the same question I asked Dr. Mikkelsen. I 

described to you what is happening on the top 44 radio stations, 

50,000 watts and above, owned by the five largest ownership 

groups with respect to diversity, 312 hours of nationally syndicated 

conservative talk, and 5 hours of nationally syndicated liberal or 

progressive talk. Can you give me your impression of that? 

Mr. MURDOCH. Yes. Apparently conservative talk is more popular. The people running that are just businessmen. I can tell you 

that, for instance, Infinity, which is owned by CBS, is no conservative organization. 

Senator DORGAN. What if, at some moment, there is only one 

thing the American people want to hear, and only one viewpoint, 

and we have substantial concentration in the media, and only one 

viewpoint is available to the American people because it makes 

money, and that is what they want to hear. Is that a good thing 

for our country and our democracy? 

Mr. MURDOCH. I think one should always—as I say, we should 

always be fair and balanced. I am most serious about that. I know 

that Democrats are not used to seeing conservative viewpoints put 

on the air, but we put on both sides, and we are very, very serious 

about it, and if you can point to anything where we have erred, I 

will be the first to move in and try and put it right. 

Senator DORGAN. If it were your stations, it was 312 hours to 5 

hours, would that be fair and balanced? 

97 

Mr. MURDOCH. I am not in the radio business. 

Senator DORGAN. Oh, I understand that, but I am just asking 

what your definition of fair and balanced is. Is the 312 to five fair 

and balanced? 

Mr. MURDOCH. Oh, if we could find a popular—maybe you could 

do it, if we could find a popular, amusing broadcaster to talk for 

an hour or two every day, and he was a liberal, we would have him 

on like a shot. 

Senator DORGAN. So do you think this is an audition for me? 

[Laughter.] 

Mr. MURDOCH. You are doing very well. 

Senator DORGAN. I understand you pay better than the Senate. 

[Laughter.] 

The CHAIRMAN. Senator Boxer. 

Senator BOXER. Thanks, Mr. Chairman, for allowing me a second 

round. I do not agree that Democrats are not used to conservative 

viewpoint. I mean, do you ever watch the Senate? 

[Laughter.] 

Senator BOXER. Do you ever watch television? We are quite used 

to it, believe me. Coming from the state I come from, you know, 

it is a very interesting State, because we have, I say the most conservative and the most liberal politicians get elected from different 

areas of the state, and sometimes even statewide, so we are used 

to it, but I have got to tell you, and I need you to take a look at 

this, I have seen crawls under politicians’ names when they go on 

your fair and balanced news show that are ridiculous, and why 

anyone would want to go on there and subject themselves to that 

is another issue, so I hope you will take a look at it. 

Mr. MURDOCH. Senator, I know of your conversation about this 

yesterday. 

Senator BOXER. I have had many. 

Mr. MURDOCH. I only learned about it last night, and I will certainly look into it, and if there was anything unfair or inaccurate, 

I will certainly have it put right. You would be very welcome back. 

Senator BOXER. Well, it has nothing to do with me. I do not need 

to go back. That is not the point. I do not care about myself. I am 

making a point that has nothing to do with that. This is not about 

special favors. It is about decency and fairness, and I have to say, 

if you believe that your—that Fox News is fair and balanced, if you 

really believe that, I am kind of stunned, because I do think it is 

fair and balanced between the right and the far right—— 

[Laughter.] 

Senator BOXER.—but in terms of overall—I mean, you have an 

absolute right to do what you do on your show. You have a right 

if I go on, or Senator McCain, to run anything underneath our 

name you want. That is free speech. It is your right. 

The question I am trying to get you to think about is not personal, it is what is really fair, and I hope you will take that away 

from this hearing today. 

Mr. Kimmelman, I wanted to ask you, there have been more 

than 20,000 public comments about the media ownership rules at 

the FCC, and the analysis of that is, 9,000 were citizens opposed 

to changing existing rules, 99 were organizations opposed to the 

98 

rule, 46 were organizations supporting a relaxation of the rules, 

and 11 were comments supporting the rules change. 

As an observer of the FCC, how seriously do you think the commissioners have taken what I consider to be a pretty decent public 

outcry against media concentration, and I have to say, our office 

has been overwhelmed. That is why I was so happy to have a 

chance to be on this committee to be able to address this. Do you 

think they are really seriously looking at it? 

Mr. KIMMELMAN. Senator Boxer, I think when Chairman Powell 

started this process, he talked about the need to gather facts to 

deal with the court that had overruled the previous rules, and to 

make sure that he was updating them to fit with market conditions. Everything I have seen in the last few months tells me he 

has thrown out the facts, he has thrown out the market conditions 

analysis, and he is not listening to these thousands and thousands 

of individuals coming in. 

It appears that this is a decision that will, in the end, favor a 

handful of media companies that have lobbied aggressively for 

many, many years, and you know it. They have been up here as 

well to say what they want to own, in what cities they want to 

own, and I think the definition of too much concentration that 

comes out of this, Mr. Chairman—you raised the question before— 

is, are any politicians afraid of any media companies? Are any politicians afraid to take them on? 

When I sat behind many of you in a different situation and had 

the privilege of doing that, I saw some of that. I think it is getting 

worse and worse, and I think that is the danger of concentration, 

when people who otherwise represent the American people are 

afraid to get out and state their points of view because of retaliation from media companies, there is something wrong. 

Senator BOXER. Well, let us hope that we will have an opposite 

effect today, because I think we have had a chance to be pretty upfront in this committee. I do not think there were that many pussycats here today. I am proud of that, and certainly, our Chairman, 

who has been called a lot of things, but never a pussycat as far as 

I am concerned, and—a lion would be more like it. 

But I just want to ask my final question to Mr. Fontana. I represent a lot of the creative community in this country, and I do not 

know where we would be without a creative community, regardless 

of what politics they have, it does not matter, but they are the ones 

that make life so interesting, that challenge us, that bring us different points of view through entertainment, and I would like you, 

in the final moments here of this hearing, to tell us. I know you 

have been successful, but do you think you would have been any 

less successful if you were in a more consolidated marketplace, and 

if you could put that so that the people in my state and across the 

country can understand what is at stake here. 

Mr. FONTANA. Well, the only thing I can think of, the extreme 

example is, having gone to China last year on a trip, I watched 

Chinese television, and I do not think I would have been very successful doing what I do in China, because I do not know how to 

write operas celebrating the triumph of the proletariat. 

I think that the great danger is, as things get smaller, that people who take risks will be moved aside in favor of people who can 

99 

do yet another version of yet another wildly successful show. The 

problem with my business is that we only think in terms of this 

week’s ratings and last week’s revenues, and so, I live in fear, as 

I said, for the next generation of young writers coming up that they 

will not be able to express themselves, create original kinds of programming, and so, it is a great concern of mine, and I thank you 

for asking about it. 

Senator BOXER. I think you said it very eloquently. Thank you. 

The CHAIRMAN. The witnesses have been very patient. You have 

been here over 21⁄2 hours. I appreciate it. It has been an excellent 

hearing, and I thank you. This hearing is adjourned. 

[Whereupon, at 12:30 p.m., the hearing was adjourned.] 

Æ