From Diversity to Duplication: Mega-Mergers and the Failure of the Marketplace Model under the Telecommunications Act of 1996

I. INTRODUCTION II. HISTORY OF OWNERSHIP REGULATION OF RADIO STATIONS BEFORE AND AFTER THE 1996 TELECOMMUNICATIONS ACT A. Policy Justifications 1. The Early Years and the Trusteeship Model 2. The Marketplace Model B. Regulation History 1. Multiple-Station Ownership in the Same Market 2. Multiple-Station Ownership Nationally 3. The One-to-a-Market Rule III. EFFECTS ON STATION OWNERSHIP IV. ANALYSIS A. Diversity Analysis B. Competition Analysis V. CONCLUSION I. INTRODUCTION In the immediate aftermath of the September 11 terrorist attacks, radio station owners faced a difficult decision: Should the station limit its play list to reflect the nation's period of turmoil? In the weeks to follow, there undoubtedly would be a careful revision of many radio stations' musical choices--sometimes deliberately, sometimes unconsciously. Most of these efforts drew little attention. One station owner's actions, however, drew sharp criticism from media watchdogs. In the week following the terrorist attacks, an e-mail rumor began that Clear Channel Communications had developed a list of approximately 150 potentially inappropriate songs, which was circulated among its staff in an attempt temporarily to "ban" the songs from its play lists. (1) Clear Channel's official statement is that no songs were ever "banned," and that the company simply suggested in an internal memo that its staff members be sensitive to their audience's mood during a time of national mourning. (2) Even if the memo was simply a suggestion to tastefully limit play lists, there were several reasons for the outcry. Primarily, critics questioned whether some of the alleged songs on the list were truly "lyrically inappropriate," including John Lennon's "Imagine" and the Bangles' "Walk Like an Egyptian." (3) Underlying this criticism, however, was the fact that Clear Channel is a media conglomerate that owns approximately one out of every ten U.S. radio stations and has more than 110 million listeners. (4) Whether the list was misguided and the circumstances extreme, listeners ultimately became angry that Clear Channel had the ability to manipulate the entire nation's listening habits with a carefully worded fax. "Mega-owners" such as Clear Channel became possible with the Telecommunications Act of 1996 (1996 Act), (5) which radically deregulated national and local radio station ownership limits that had been in existence for almost sixty years. (6) The 1996 Act reflected Congress's firm belief that a deregulated marketplace would best serve the public interest, as suggested by the Act's preface, which described its purpose as: "[t]o promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies." (7) This Note argues that the 1996 Act is an example of excessive adherence to the marketplace model, particularly for regulating the radio industry. From the time that the Federal Communication Commission ("FCC" or "Commission") was created until the early 1980s, the Commission regulated radio based on the trusteeship model, "whereby broadcast stations were entrusted by the government to operate in the public interest" based upon specific guidelines. (8) This changed in 1981, when the Commission began to deregulate the industry and implemented a marketplace model, under which the market would determine the public interest. (9) Although a less extreme marketplace model has guided the FCC's regulation of radio since the early 1980s, the current incarnation of the marketplace model is both contrary to the public interest and economically harmful for radio stations and industries affected by radio, such as advertising. Part II of this Note describes the theoretical bases and history of radio station ownership regulation, including the trusteeship model and the marketplace model of regulation. …