Supreme Court Agrees to Hear Media Ownership Appeal

 On October 2, the Supreme Court granted certiorari in Prometheus Radio Project v. FCC, the 2016 decision in which the Third Circuit rejected for the third time in fifteen years Commission efforts to modernize its media ownership rules.

In its petition, the agency posed the following question: "Whether the court of appeals erred in vacating as arbitrary and capricious the FCC orders under review, which, among other things, relaxed the agency’s cross-ownership restrictions to accommodate changed market conditions."

Chairman Ajit Pai tweeted his approval of the decision:

Great news: the Supreme Court has granted cert in @FCC v. Prometheus! Hope #SCOTUS affirms authority Congress gave us to amend ownership rules in light of a media marketplace that’s changed dramatically since 1975—especially with local news outlets struggling more than ever. pic.twitter.com/JkGqIra95F

— Ajit Pai (@AjitPaiFCC) October 2, 2020

 And as I pointed out to Broadcasting+Cable:

The FCC's media ownership limits hark back more than 40 years to a reality long ago upended by marketplace forces. Section 202(h) of the 1996 Act requires the Commission every four years to consider whether its rules 'are necessary in the public interest as a result of competition. Over the nearly two decades during which a divided Third Circuit repeatedly has blocked agency efforts to relevel the regulatory playing field, we have witnessed numerous examples of new entrants disrupting the media landscape – and, in the process, chipping away at the relevance of traditional outlets. But in terms of game-changing competitive impact, one need only consider the Internet. Facebook was created in 2004. YouTube in 2005. Twitter in 2006. Over half of U.S. adults today obtain at least some of their news and information from social media, and more identify it as their primary source of political news than either local television stations or newspapers. I therefore welcome the announcement that the Supreme Court will hear the FCC's appeal.

Ideas for Communications Law and Policy Reform for 2013

Videos are now available for Free State Foundation's October 18 lunch seminar at the National Press Club. The event focused on ideas for reforming communications law and policy in the year to come.

The event kicked off with a conversation between FCC Commissioner Robert McDowell and Free State Foundation President Randolph May. The video for that conversation can be found online here:

The event also included an expert panel discussion, the video for which can be found here:

The panel featured Information Technology and Innovation Foundation's (ITIF) Robert Atkinson, Heritage Foundation's James Gattuso, and Minority Media & Telecommunications Council's David Honig. Mercatus Center's Adam Thierer, another panel participant, has posted an outline of his main remarks at Technology Liberation Front in a blog titled "Getting Communications & Media Reform Done Right Once and For All."

It's Not For Free Press To Decide

Today's Communications Daily [subscription required] has a story concerning News Corp.'s plan to separate its publishing businesses from its entertainment assets. Not surprisingly, the story's focus is on the impact that the News Corp. decision may have on consideration of the FCC's decades-old newspaper-broadcast cross-ownership ban. 

In my opinion, in light of all new media outlets and diversity of information sources that characterize today's media marketplace, the newspaper-broadcast cross-ownership ban is one of the most obsolete regulations (and there are many) that the agency just can't seem to get off its rule books. 

But do not fear. I am not going to recite the tortured history of efforts to relax or eliminate the FCC's media ownership rules on a hot summer Friday afternoon. I am not even going to explain, as I have done many times before, why the rules should be relaxed or eliminated.

What I want to do is pretty simple. And that is to show how the mindset of the self-denominated public interest groups that oppose all efforts to relax existing media ownership restrictions is so fundamentally at odds with sound principles. 

According to Communications Daily, while acknowledging that media companies are increasingly separating their assets, here is what Free Press Senior Policy Counsel Corey Wright had to say: 

“Media companies are recognizing in fact that cross-ownership of TV stations and newspapers is not necessarily the best for their bottom line. Why should we bother to allow increased cross-ownership when it is not really good for anyone?” 

Please let this sink in: What Ms. Wright is saying, in no uncertain terms, is that Free Press knows that cross-ownership is not really good for the firms that would prefer to adopt (perhaps to their subsequent regret) that business model. And that it is Free Press's prerogative, with the FCC's help, to save these firms from themselves by not allowing increased cross-ownership. 

This is not the way our American free enterprise system is supposed to work, of course. In competitive markets – and this now includes the markets in which the newspaper-broadcast cross-ownership ban operates – firms should be allowed to organize themselves in the manner that they discern will be most efficient, economical, and productive. This marketplace freedom ultimately enhances consumer welfare – and by this I mean to include consumers who are readers, viewers, and listeners as well. 

Some firms will decide, as News Corp. apparently has decided, to separate assets and de-consolidate. Others will decide to integrate assets and consolidate. Some will succeed in their strategies, and others will fail. Remember AOL-Time Warner merger that caused the public interest advocates to go apocalyptic with their doomsday scenarios? 

Well, it's never doomsday for me on a Friday afternoon. But I don't want to head into the weekend with you thinking, along with Ms. Wright, that a proper reason for the FCC to retain the media ownership restrictions is to protect media companies from themselves. It is not. 

News Corp.'s apparent deconsolidation decision ought to cause the FCC to think hard about the rationale for retaining outdated media ownership rules on its books. 

And, as importantly, the rationale offered for such retention by one of the most vocal advocates for status quo regulation should cause the FCC to ponder hard whether its own mindset has been unduly, and wrongly, affected such misguided thinking.

Not Mao Zedong or a Communist...But a Socialist

In its June 10th edition, Communications Daily [subscription required] reported that FCC Commissioner Michael Copps, once again bemoaning the state of investigative journalism, said the FCC may conclude the only way for news to survive is to have more government support. Commissioner Copps said it is not productive for proposals for more government support for news and investigative journalism to be met with comments to the effect that "you're Mao Zedong" or "you're a Communist."


Fair enough, up to a point. It is generally more useful to debate directly the underlying merits of proposals than it is to debate labels attached to the proposals' proponents.

But when asked about ways for the government to support journalism, Communications Daily reports that Commissioner Copps referred to the proposals of Robert McChesney, the University of Illinois professor who is co-founder of Free Press. Now, as many who follow communications policy know, Professor McChesney is an avowed socialist.

There are many on the Left who take umbrage when those who criticize their policies characterize them as "socialist" – they might even huff and puff about McCarthyism. They apparently think the characterization harmful to their cause. Not Robert McChesney. I don't know whether he would or would not be pleased with being called Mao Zedong or a Communist. But I know he doesn't shy away from the Socialist label, or from advocating what he calls socialist policies.

Indeed, anyone having any doubts should read Professor McChesney's latest essay (with co-author John Bellamy Foster) entitled "Capitalism, the Absurd System," in the current edition of Monthly Review, a self-styled "Independent Socialist Magazine." You should read the long article for yourself if you want to take in Professor McChesney's full argument as to why capitalism should be replaced with socialism. Here I want only to provide three excerpts to give you the flavor:

"It seems clear that this need for a 'bursting asunder' is where the United States is now. Capitalism, viewed as a system of generalized commodity production motivated by the competitive pursuit of private gain without limits, and thus driven to the amassing of concentrated wealth, even at the expense of public welfare and environmental sustainability, is well past its productive era—during which it could make claims to some degree of rationality. We have reached 'The End of Rational Capitalism.' It survives now on bubbles, bloated debt, military spending that borders on suicidal, and a deadening hypercommercialism."


"Mere state ownership of key productive forces is not enough to create a socialist society; the people must exercise a sovereign rule over these productive forces and society as a whole, and the society must be organized to promote collective needs. Just as democracy is not an accomplished reality unless the vast majority of the people rule society, so socialism is not an accomplished reality unless the associated producers control the productive forms of society and use them rationally and sustainably in the collective interest."


"We were provoked to write this article because the possibilities in the United States for a genuine, free-wheeling discussion of capitalism’s defects, and the merits of socialism, are greater today than at any time in generations, and we must not let this historic moment pass."

Again, if you are inclined, read the entire article. In any event, I do not think that Professor McChesney would object that I have unfairly characterized his views. And he would not disagree that his project is to further the cause of socialism in the U.S.

If I were back in college, I would enjoy debating the full range of Professor McChesney's ideas for days on end. But what I want to highlight here are McChesney's ideas concerning media policy, and the way these ideas relate to advancing his socialist project in the U.S. And, of course, I am interested in the appeal of Professor McChesney's ideas to Michael Copps because, as a commissioner at the agency that exercises great power over communications and media companies, Commissioner Copps' views matter.

To my way of thinking, it is disturbing that Commissioner Copps is sympathetic to Professor McChesney's views.

PFF's Adam Thierer has done very good work critiquing Professor McChesney's suggestions for "saving" journalism and news. For present purposes, I want to refer to just one of Adam's many pieces on the subject, which you may find here. (You may find several others to similar effect on the PFF blog.) Here are some of McChesney's quotes highlighted in Adam's piece, "Free Press, Robert McChesney & the 'Struggle' for Media":

"Instead of waiting for the revolution to happen, we learned that unless you make significant changes in the media, it will be vastly more difficult to have a revolution. While the media is not the single most important issue in the world, it is one of the core issues that any successful Left project needs to integrate into its strategic program."


"Many say that corporate journalism, based on profit maximization, best serves a free and democratic society. The position is incorrect. The connection of capitalism to journalism, which has always been fraught with problems, has always been unstable...Corporations are not in a position to generate and pay for quality journalism. The news is not a commercial product. It is a public good, necessary for a self-governing society."


"Once we accept this [the supposed "public goods" nature of all media], we can talk about the kind of media policies and subsidies we want. What are the best ones? How should they be implemented? We are now trying to answer those questions and organize around them."

Interestingly, Howard Kurtz's column in the June 21st Washington Post is all about a revival or reenergizing of investigative journalism, with the likes of new organizations such as ProPublica and Internet companies such as AOL playing a leading role. Kurtz reports:

"After years of feeling unloved and unwanted, some fortunate journalists are again finding their services in demand. While most print newsrooms remain shrunken and some major newspapers are mired in bankruptcy, new media incarnations are giving the restless and the jobless a second lease on life. AOL says it plans to add hundreds of journalists to its stable over the next year. Yahoo has opened a Washington bureau. The Wall Street Journal just created a New York section. And TBD, owned by Politico's corporate parent, is recruiting for its online effort to cover the Washington area."

There is no doubt, as I noted in my testimony in April at an FCC forum on "public media," that the news operations of newspapers and broadcasters have been hobbled due to the emergence of new media competitors (and due in no small measure to antiquated media regulatory policies steadfastly championed by Commissioner Copps.) But there is much evidence, as reported in the Kurtz piece and elsewhere, that innovative news and investigative journalism enterprises, in a variety of for-profit and non-profit forms, are arising to meet the needs of the American people. Witness the plans of Yahoo and AOL, ProPublica, and so forth.

But none of these efforts will make a bit of difference to Robert McChesney. And the extent of today's media abundance, or the diversity of views available, won't make any difference either. For, as I have set forth above in his own words, what he wants is for the government to reshape the media to his liking, away from what he sees as a media that promotes capitalism to one that promotes socialist ideals. As he puts it plainly, the connection between capitalism and journalism must be broken by eliminating the profit motive.

Integral to all Professor McChesney's proposals is the notion that the government must subsidize journalists and news organizations. This necessarily involves the government in making determinations concerning what constitutes real "news" or "journalism" and/or what constitutes an eligible "news organization" To be sure, in McChesney's world, a news organization with "capitalistic" sympathies would be unlikely to receive government subsidies. Aside from everything else I have already told you, how do we know this? Because Professor McChesney states forthrightly, in a recent edition of the Socialist Project's magazine, The Bullet, that “the ultimate goal is to get rid of the media capitalists.” You can't get rid of the "media capitalists" without the government controlling the media.

Now all of this is not to suggest that Commissioner Copps agrees with all of Professor McChesney's views, even as he says he would look to McChesney's proposals regarding expanding support for public media. But given what many Americans would surely regard as McChesney's extreme anti-capitalist socialist philosophy, it would be useful to know in what ways, if any, Commissioner Copps disagrees with Professor McChesney's views.

It would be useful, but I think I already have a sense. There is a fundamental difference between the perspective of Professor McChesney and Commissioner Copps, on the one hand, and me, on the other. Putting their views in the very best light, I think it is fair to say that they fear private (corporate, if you will) control of the media far more than they worry about the dangers arising from government control. Certainly Professor McChesney wants more government media control in order to promote views that are consistent his own vision of what America should be.

My perspective is just the opposite. I certainly do not wish to see a media environment in which a few voices, corporate or otherwise, dominate. This would not be healthy for the vitality of American democracy. But, thankfully, we do not live in such a media environment. Indeed, due to technological developments over the past thirty or so years, we have more media abundance, and more diversity of views readily available to the American people, than at any time in our country's history.

In our Bill of Rights, our Founders made a clear choice. The First Amendment stands for the proposition that we have more to fear from government control of the media than we do from private control. Our Founders understood it is only human nature for government officials to want to promote views sympathetic to their interests and to suppress those that are not. Referring to the safeguards to rights established by the Constitution, James Madison wrote in Federalist No. 51: "It may be a reflection on human nature that such devices should be necessary to control the abuses of government."

The First Amendment's intent is to prevent government officials from exercising control over the media, not to facilitate the exercise of such control through the handout of government funds with the inevitable strings attached. The strings necessarily will always have to do with deciding what journalistic content is or is not worthy of government support.

It doesn't matter much to me, for purposes of debating his ideas, that Robert McChesney calls himself a socialist. It wouldn't matter much to me if, going back to Commissioner Copps' statement, he calls himself Mao Zedong or a Communist.

What matters to me is fighting Professor McChesney's ideas, and those of Commissioner Copps to the extent he shares McChesney's views. In that fight, I am happy to stand with the Founders, and with my understanding of what they meant when they wrote the First Amendment.

Maryland's Political Speech Ban Bills

There is something profoundly unsettling about elected officials using the political process to stifle free speech about the political process. Unfortunately, a recent batch of bills introduced in the Maryland legislature seeks to do precisely that.

Political speech bans introduced in the Maryland House of Delegates this session include: HB 616, HB 690, HB 917, HB 986, HB 1087, and HB 1251. These legislative proposals run the range from bans on independent expenditures for public contractors, to forced-speech disclaimer requirements, to taxpayer-financed political campaign programs with “rescue funds” for less successful candidates, to bans on corporate political campaign contributions, and to requirements that shareholders explicitly authorize political spending. In particular, both HB 917 and HB 1251 ban corporate political contributions, and appear to allow unions to make such contributions.

Many of these bills are clearly contrary to principles laid down by U.S. Supreme Court precedents, and others are likely unconstitutional by a reasonable application of those precedents. Buckley v. Valeo (1976), for instance, bars government restrictions on independent political expenditures. Davis v. Federal Election Commission (2008) prohibits "rescue funds" designed to give public funding to electoral candidates whose opponents whose private spending exceeds a certain amount.

And the recent Citizens United v. FEC (2010) struck down speech restrictions based on speaker identity. In that case, the Court reiterated that the worth of speech doesn’t depend on the speaker’s identity, regardless of whether it’s a corporation, union, or an individual. Rather, the Court concluded that the First Amendment prohibits "restrictions distinguishing among different speakers, allowing speech by some but not others," because "restrictions based on the identity of the speaker are all too often simply a means to control content." (I discussed the case at some length in my FSF Perspectives piece "What Citizens United Means for Free Speech in the Digital Age").

To the extent these bills are part of elected officials' pushback against the Citizens United ruling – which struck down as unconstitutional bans on independent political contributions by profit and not-for-profit corporations as well as unions – the are ill-advised and ultimately futile. The wheels were already coming off the restrictions on independent political contributions when last year the U.S. Solicitor General told the Supreme Court that the federal government could ban books under the law. Or e-books. (Directly at issue in the case were speech restrictions applied to a movie.)

Political campaign finance restrictions also make far less sense in a world where websites, blogs, YouTube, Podcasts, and other forms of new media allow public and private individuals and associations to reach a far wider audience than every before with little to zero barriers to entry into the political speech marketplace.

One must also point out the absurdity of using taxpayer dollars in a time of recession and budget shortfalls to pay for political campaign speech. Is that really such a priority?

Most important of all, limits on government power to restrict speech are grounded in the U.S. Constitution's First Amendment. The issue here isn't so much about giving corporations a right to freedom of speech; it's really about consistently limiting the powers of government to ban speech by individuals or by associations of individuals however constituted—as corporations, non-profits, unions, or other organizational forms. Political speech bans adopted under the guises of campaign finance limits stifle public criticism of current office holders and also help tilt the field toward incumbents up for re-election. The First Amendment was enacted to help ensure the right of citizens to criticize the government. And that same First Amendment will stand in the way of legislative attempts to squelch that right.

Comcast-NBCU: Vertical Integration And The Difference It Makes

The Congressional Research Service (CRS) just released "The Proposed Comcast-NBC Universal Combination: How it Might Affect the Video Market." Prepared early last month, the now-public CRS report takes no overall stance on the proposed merger itself. Rather, it notes that the U.S. Department of Justice and the FCC will likely approve the Comcast-NBCU deal. Nor does CRS report make any hard predictions about the likely effects of the merger, if approved. But the report does provide an overview of some of the arguments that recently have been advanced from different quarters about the perceived benefits or perceived harms that the merger would bring.

Although the CRS report purports to summarize claims being made about the proposed Comcast-NBCU merger made by others, the report does seem to offer an overly sympathetic treatment to claimed vertical integration threats to programming access. The report reads:

Perhaps the greatest danger that a vertically integrated company poses to a non-integrated competitor is to deny the competitor access to must-have programming that it owns or controls. Lack of access could even foreclose competitors from the market. Inferior or more expensive access to that programming also could place non-integrated rivals at a competitive disadvantage.

The report then discusses disputes over cable company ownership of regional sports networks (RSN) as a situation that "[t]he FCC has identified…where a vertically integrated cable company is likely to benefit from exclusivity, to the detriment of competition and consumers." The report points out that Section 628 of the Communications Act and the program access rules adopted by the FCC to implement that section, among other things, prevent vertically integrated cable operators from discriminating in the prices, terms, and conditions at which it makes its satellite-delivered programming available to its competitors. The CRS report insists those same rules "prohibit a vertically integrated cable operator from having exclusive access to the programming in which it has an attributable interest." (Whether the statute permits application of the program access rules to terrestrially-delivered programming as the FCC concluded in a recent rulemaking order is a matter of debate and will likely be litigated.)

All of what the CRS report says in this regard may be true, or at least mostly true. But taken in a vacuum, it can also be somewhat misleading and thereby exaggerate the potential competitive harm. Vertical mergers do not typically present the kind of competitive harm to consumer welfare characteristic of horizontal mergers. As the FCC observed in the Adelphia Order, "vertical transactions, standing alone, do not directly reduce the number of competitors in either the upstream or downstream markets."

FSF Distinguished Adjunct Senior Scholar Richard A. Epstein addressed some of these issues in his recent FSF Perspectives paper "The Comcast and NBCU Merger: The Upside Down Analysis of Dr. Mark Cooper." Describing the potential harm from merger transactions as "increase in market concentration to the extent that it allows the new firm to raise its prices above the competitive level," Professor Epstein wrote: "As a matter of basic theory, this risk may materialize in horizontal mergers, but rarely will appear in vertical ones, which involve the integration of two facilities or services at different levels in the chain of production." And, " the vast bulk of this transaction lies on the vertical side of the line, which involve the linkage of a transmission company — Comcast — with a content company—NBC Universal."

Absent contextual emphasis on the contrasting competitive dynamics of horizontal and vertical mergers, one can easily read too much into conceivable harms posed by a vertical integration like Comcast-NBCU. The CRS report, however, puts vertical integration threats to programming access more in the context of "big-is-bad" concerns. The report's opening line reads: "The proposed combination of Comcast, the largest distributor of video services in the United States, and NBC Universal (NBCU), a major producer and aggregator of video content, would create a huge, vertically integrated entity with potentially enormous negotiating power." But reduction of transaction costs and technology economies resulting from vertical mergers that make a merged entity bigger typically benefit consumers.

In addition, it's worth remembering that although the FCC has previously concluded in the Adelphia Order and NewsCorp-Hughes Order that a vertically integrated cable or DBS provider might have incentive to temporarily foreclose RSN access to its competitors, it has not so held that cable or DBS providers have the incentive to engage in permanent foreclosure. Regardless, Comcast will not be acquiring any RSNs in the proposed merger.

Of course, the CRS will hardly be the last word out of Congress on Comcast-NBCU. The Senate Commerce Committee will continue the ongoing examination of the merger with a hearing Thursday. FCC Chairman Julius Genachowski will testify about the Commission's license transfer approval process. DOJ Antitrust Division Chief Christine Varney is also set to speak. But all such testimony and discussion of the proposed merger should be considered in the context of a vertical integration.

Of Transformational Moments and Media Regulation

There is an interesting piece on the Broadcasting & Cable website in which John Eggerton, B&C's longtime, highly knowledgeable media reporter, interviews Steven Waldman, senior advisor to FCC Chairman Julius Genachowski. The interview gives me pause – and it may give you pause as well.

In the setup for the interview, which you should read in its entirety, B&C states: "Waldman is charged with coming up with a report to the commission on the state and fate of the media in the midst of radical change." In the interview, Waldman is careful to say that, with the project he leads, the FCC is not looking to save any particular company or industry because "that is not really our job." But what exactly is the job that the FCC is looking to do under Waldman's charge? Mr. Waldman says: "We are looking at it in terms of preserving certain functions, in which I do include accountability journalism."

Here's the rub. It is not really the FCC's job – or generally within its delegated jurisdiction – to preserve "accountability journalism," or even to define it. Indeed, despite Waldman's appropriate nods to First Amendment sensitivities, free speech concerns are necessarily implicated when the government categorizes different kinds of media content and worries about preserving some content and not other.

I prefer to assume the good intentions of Chairman Genachowski and Mr. Waldman, and others, when they bemoan what they perceive as the troubled state of the news media and when they pledge to focus government's efforts on what Mr. Waldman calls "the information needs of the community." But the truth of the matter, if we are to be candid, is that many of those in the "fix the media" camp just don't like particular programs, or networks, or what they might call the slants of particular media outlets. They often rail against the "24-hour cable news networks," and especially against one particular cable news network they say is not as "fair and balanced" as it advertises.

Perhaps what many of the "accountability journalism" proponents really long for are the days when television news was dominated by three major network news operations with a generally liberal tilt. When Walter Cronkite closed each evening's broadcast with the soothing, "And that's the way it is." Except when it wasn't. And recall the occasions when Cronkite's successor, Dan Rather, told us the way it was, but it wasn't. We only found out because of the bloggers, certain 24-hour cable news networks, and other non-mainstream media. Accountability journalism in action, perhaps – without government help.

Now here are some of Mr. Waldman's specific responses that particularly give me pause.

He says: "But the one premise is that the chairman and I believe we are at a transformational moment. The first thing we have to do is make sure the FCC meets that moment in a smart way." When government officials speak of "transformational moments" as justification for embarking on new missions, caution is in order. The Obama Administration, especially, has been keen to invoke transformational moments, for example, as justification for radical changes in health care and energy policy. The result, in my view, has been overreaching. I worry that invocation of the "transformational moment" could lead to overreaching as well with respect to media policy.

Mr. Waldman says: "Everything the FCC does affects the structure and organization of the media, and those often have very profound effects. Traditionally there has been a line between structural rules and ownership and micromanaging content, and I think that is a reasonable line in the sand." In one (theoretical) sense, this statement about a reasonable line in the sand is reasonable enough. But in another more practical sense it is not.

First, for many years (decades really), with Commissioner Copps and similar-minded commissioners leading the charge, the FCC has stood in the way of reforms that might have prevented or slowed the demise of journalistic endeavors whose demise they now purport to decry. I refer, of course, to their reflexive opposition to any relaxation of media ownership regulations, say, for example, that would have allowed combinations of local newspapers and broadcast outlets. Such combinations might have provided the necessary financial and other resources for supporting more of the "accountability journalism" that now is of such professed concern to these media regulators. I am confident that if you ask Commissioner Copps, he will tell you he has never been so concerned about "media concentration" as he is today. Not even when three television networks dominated the 30 minute nightly news shows, before the availability of new over-the-air networks, a multitude of cable networks, satellite radio outlets, the Internet, and so forth.

Second, while Mr. Waldman expressly eschews micro-managing content, I worry about the FCC macro-managing content. The line between micro and macro-managing content is not that clear. The natural inclination of government officials is the all-too-human tendency to want to enhance control of the media control in the interest of self-promotion or self-protection. This is why we have a First Amendment, by the way.

In this regard, in the context of the net neutrality debate, it has been shocking, if not surprising, to hear high government officials with responsibilities in the area of communications regulation, such as Andrew McLaughlin, a former top Google policy executive, speak as if they do not understand the difference between government censorship and private party choice as to what to information to convey or not.

Towards the end of the interview, Mr. Eggerton asks: "Can we establish that this initiative will not be a stealth takeover of the media by the government?"

Mr. Waldman responds: "Yes, we can absolutely, definitively say that we have no plans to take over the media, and we have no plans to reinstitute the fairness doctrine while I am at it."

I do not doubt that Mr. Waldman or Mr. Genachowski have no plans for the FCC "to take over the media." Or even to reinstitute the fairness doctrine, as least in the same form we knew it back when. Nevertheless, despite my presumption of their good intentions, I do doubt the wisdom of the FCC's endeavor to preserve and promote certain media functions, including "accountability journalism" and what is now fashionably called the "public media."

It is true that in order for our democracy to function well, we need a vigorous press with sufficient resources to investigate and shine a light on wrongdoing, especially government wrongdoing. So, yes, "accountability journalism" is desirable. But above all we need an independent press.

I am certain that our Founders – who gave us not only a real transformational moment but our First Amendment – would find it somewhat odd if we gave the government more power to regulate or interfere with the media, or to support "public media" with special preferences or subsidies, in order to promote government accountability. The Founders would understand the ultimate threat to democracy inherent in such a project.

I am sure they would prefer that those in positions of power in government, such as FCC commissioners, eliminate or reduce media regulations that constrain the actions and decisions of private media outlets, rather than using presumed transformational moments to enhance government involvement in, or control over, the media.

Take Net Neutrality Out Of Merger Review

At the U.S. House of Representatives hearing on the proposed Comcast-NBCU joint venture, more than one member of Congress brought up the idea of having a network neutrality requirement imposed on the parties as a condition for merger approval. Let's hope that kind of ad hoc regulation never comes to pass. Regardless of the merits of net neutrality regulation, responsible administration calls for equal treatment by across-the-board application of rules. Genuine anti-competitive harms should be the focus of any and all merger reviews, not extraneous policy initiatives.

Currently, the U.S. Department of Justice is vetting the Comcast-NBCU merger for any anti-competitive concerns. And the Federal Communications Commission will be undertaking a public interest examination of the merger as part of the its process for approving the transfer of broadcast, broadcast auxiliary, satellite earth station, and business radio licenses. Presumably, some members of Congress have in mind net neutrality condition to be put in place pursuant to the FCC's approval of those license transfers.

Net neutrality regulation of advanced broadband technologies in dynamic markets poses no small or insignificant number of problems. (Some of the Free State Foundation's own work detailing those concerns can be found here, here, and here.) But aside from the detailed difficulties and potential consequences posed by net neutrality regulation, the scope of the issue requires a more direct and comprehensive examination. In fact, the FCC is already taking a broader look at net neutrality regulation in its current Preserving the Open Internet proceeding. (Last month, FSF filed comments with the FCC opposing the adoption of net neutrality regulation.) However undesirable such regulation may be, imposition of some kind of net neutrality regulation is only appropriate for across-the-board rules that apply equally to broadband marketplace competitors, not for an ad hoc application to merging parties in a particular transaction. Subjecting merging parties to uniquely onerous regulatory burdens puts them at a disadvantage vis-a-vis their competitors and potentially scares away mergers that enhance consumer welfare or which are competitively benign.

The FCC displayed an awareness of general rulemaking vs. specific conditioning concerns late last year when it rejected calls for adopting a handset exclusivity ban as a condition for approving the AT&T-Centennial merger. As I discussed in a blog post last fall ("FCC Keeps its Hands Off of Handset Exclusivity, For Now…"), the license transfer approval in the AT&T-Centennial merger constituted a laudable example of the FCC refraining from imposing significant conditions that would only be appropriate, if at all, in a general rulemaking. The FCC expressly recognized that the handset exclusivity raised broad, industry-wide concerns rather than merger-specific harms.

A time-limited net neutrality condition did make it into the FCC's order approving license transfers in the AT&T-BellSouth merger. However, the AT&T-BellSouth merger remains an anomaly in this respect and it should not be followed. No merger passing through the FCC since then has included any net neutrality condition. The net neutrality condition contained in the AT&T-BellSouth merger also appears to be a dubious instance of FCC "regulation by condition." In such instances, the FCC lets its informal 180-day shot clock on license transfer approval lapse and thereby puts merging parties into a precarious position. As merging parties grow increasingly desperate due to FCC delay, they end up engaging the FCC in further rounds of private talks. Those talks lead to parties' "concessions" concerning matters that may have little or nothing to do with supposed anti-competitive harms raised by the merger.

In Comcast-NBCU, the merging parties have proposed a number of initial concessions in their application and public interest statement. But a net neutrality condition would be unnecessary and irrelevant to the license transfer that the FCC will be considering. DOJ examination and future public comment at the FCC may shed light on the possible existence or scope of any video and online content distribution issues raised by the merger. Issues pertaining to retransmission consent, program access, program carriage, localism, diversity, PEG, and the like will certainly be up for public discussion as the merger application is considered. To be sure, however, the merger certainly involves no threat to last-mile broadband marketplace competition, as NBCU is not in the high-speed broadband service provider business.

So will the FCC's approach to the Comcast-NBCU merger be more like its disciplined approach in AT&T-Centennial than its undisciplined approach in AT&T-BellSouth? It's too soon to say for certain, but not too soon to hope the agency will not allow the process to run amok.

DC Circuit: Vindicating Video Competition

In a sensible and straightforward ruling, the U.S. Court of Appeals for the District of Columbia Circuit struck down the Federal Communication Commission's (FCC) regulations limiting the market share of any single cable operator to 30% of all subscribers. In an opinion by Judge Douglas Ginsburg, the D.C. Circuit panel held that the FCC’s 30% limit is "arbitrary and capricious." The FCC's "open field" analysis supporting the 30% limit, ruled the D.C. Circuit, was contradicted by "overwhelming evidence" concerning "the dynamic nature of the communications marketplace" and by "the entry of new competitors at both the programming and distribution levels." The D.C. Circuit's ruling in Comcast v. FCC was significant for a few reasons.

First, the D.C. Circuit expressly recognized the increasingly competitive and dynamic marketplace for video:

First, the record is replete with evidence of ever increasing competition among video providers: Satellite and fiber optic video providers have entered the market and grown in market share since the Congress passed the 1992 Act, and particularly in recent years. Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992. Second, over the same period there has been a dramatic increase both in the number of cable networks and in the programming available to subscribers.

Judge Ginsburg went on to write that "[t]here can be no doubt that consumers are now able to receive far more channels than they could in 1999, let alone in 1992."

Second, the D.C. Circuit shredded the FCC's proffered reasons for disregarding direct broadcast satellite (DBS) competition with cable service. The D.C. Circuit held that the supposed cost-prohibitive barrier to switching from cable to DBS was belied by evidence that almost half of all DBS customers previously subscribed to cable. It also rejected the FCC's claims that DBS competition was not significant because cable operators typically offer triple-play packages that bundle phone and Internet access with cable video. As the D.C. Circuit observed, DBS providers have partnerships with phone companies to offer bundled services. Moreover, the D.C. Circuit dismissed as non-empirical conjecture the FCC's assertions that cable consumers will not switch to competitors because they can't know the quality of competitor’s programming before they consume it. Finally, the D.C. Circuit similarly dismissed the FCC’s claim that the 30% subscriber limit is needed to help upstart networks secure financing. DBS companies already serve more than 30% of the video provider market.

Third, the FCC demonstrated a willingness to discipline a defiant agency. The D.C. Circuit struck down an earlier version of the FCC's 30% subscriber cap on cable providers, and ordered the FCC to consider DBS competition in reformulating its rules. But the FCC refused to do this, essentially dismissing DBS competition as insignificant (as recounted above) and insisting that assessment of DBS competition is difficult. Wrote Judge Ginsburg, "That a problem is difficult may indicate a need to make some simplifying assumptions…but it does not justify ignoring altogether a variable so clearly relevant and likely to affect the calculation of a subscriber limit—not to mention one the court had directed the agency to consider." In reaching an appropriate remedy, Judge Ginsburg had sharp words for the FCC, writing that "[t]he Commission's dereliction in this case is particularly egregious," that it "failed to heed our direction," and that "[i]t is apparent that the Commission either cannot or will not fully incorporate the competitive impact of DBS and fiber optic companies into its open field model." The D.C. Circuit vacated the FCC's order, thereby eliminating the 30% subscriber limit.

Incidentally, the D.C. Circuit reiterated that First Amendment protections apply in the context of video service and media regulations. For Judge Ginsburg and concurring Judge Brett Kavanaugh, the First Amendment burdens imposed by the subscriber limits were a factor supporting the vacating of the FCC's order. (Senior Judge Raymond Randolph maintained that the Administrative Procedures Act requires courts to vacate all unlawful administrative rules or orders without any multi-factor analysis.) The recognition of First Amendment protection for cable providers doesn't break any new jurisprudential ground, as that must likely fall to the U.S. Supreme Court. But the principled application of the First Amendment to media outlets is significant, not a mere afterthought.