It’s Time to Modernize America’s Media Regulations

Former commissioner McDowell gives his FCC modernization 'to do' list

Sweeping changes are coming to America’s legal and regulatory landscape starting Jan. 20.  Within hours of taking the oath of office, Donald J. Trump will start appointing the heads of powerful administrative agencies, including my old stomping grounds, the Federal Communications Commission (FCC). 

Cheered on by an optimistic stock market, new Republican regulators are poised to act quickly to rewrite or outright repeal many regulations they view as obsolete and a drag on growth.  A good place to start would be a comprehensive update of antiquated media regulations designed long before the rise of competition from cable, satellite TV, and radio, let alone the Internet and the explosion of over-the-top (OTT) content.  Changing or eliminating some of these dusty and counterproductive rules is not only a good idea, it’s the law.

Over two decades ago, a large bipartisan majority in Congress passed section 202 of the Telecommunications Act of 1996, which was signed into law by President Bill Clinton.  Section 202(h) states quite clearly: “The Commission shall review…all of its ownership rules biennially … and shall 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.”  (Emphasis added.)

While Bill Clinton campaigned for re-election that year on “building a bridge to the 21st Century,” Congress foresaw that a communications revolution was in the making and that the FCC needed not just a suggestion, but a congressional command, to modernize its media regulations.  Congress’s directive was shouted loud and clear right when the “Information Superhighway” blossomed to create competition throughout the media space.  Quite simply, with section 202(h), Congress and President Clinton expressed their will for the FCC to deregulate as more competition produces more consumer choices.

Yet, despite this clear bipartisan call for sensible deregulation, the FCC has not only retained most of its outdated 20th Century media rules, it has heaped more regulations onto the backs of broadcasters. Recent FCC actions have created market distortions through a regulatory asymmetry that hobbles broadcasters but not their competitors - all while ignoring the dynamic media market of the early 21st Century.

So, what should be at the top of the FCC’s modernization “to do” list?  For starters, reform the newspaper/broadcast ownership ban.  Adopted in 1975, the ban sticks out like a prominent proboscis begging for rhinoplasty.  More than 400 newspapers have shuttered (nearly one quarter of the print newsrooms in America) since the inception of the ban.  That means fewer reporters on the beat to cover city hall, state capitols and otherwise serve as a watchdog for society.  Newspapers are weaker than at any time in American history.  Their decline is due, in part, to the rise of competition from TV and radio broadcasting, cable and satellite TV and the recent explosion of online media sources.  For example, seven in 10 American consumers regularly receive news on their computers and mobile devices.  Clearly, this is the competition Congress had in mind when it required the FCC to eliminate outdated and needless rules.  Yet the FCC has, for decades, failed to recognize these irrefutable trends.

Relaxing or eliminating the cross-ownership ban could produce significant public interest benefits, furthering the goals of 202(h).  For instance, the FCC is aware of studies showing that a TV station that is cross-owned with a local newspaper produces 50% more news and airs 30% more coverage of state and local elections than non-cross-owned stations.  So, the simple question for the FCC is: Does it want more newsrooms serving local communities, of fewer.

As is usually the case, markets are way ahead of regulators.  Online ad revenue grew 20%  between 2014 and 2015 at the expense of traditional media, as consumers turn their attention and pocketbooks toward a cornucopia of OTT choices.  The spike in competition from those sources suggests other burdensome FCC rules should be put on the operating table or chopping block, including restrictions on how many TV stations one entity can own in a market.  A pile of evidence strongly suggests that common ownership of more than one TV station in a market can lead to more local news and information programming, not less, thus better serving local communities.  In fact, the FCC itself recently said that common ownership structures produce benefits such as “substantial operating efficiencies” which allow “a local broadcast station to invest more resources in news or other public interest programming that meets the needs of the local community.”  So, if the FCC agrees that relaxation of restrictions on common ownership structures benefit local communities, why hasn’t it modernized its rules as required by Congress?

Similarly, the FCC’s recent aggressive regulation of joint sales agreements between otherwise unrelated broadcasters makes no sense and should be reversed.  For instance, a JSA in the Burlington, Vermont/Plattsburgh, N.Y., market allowed WFFF-TV to launch its first-ever news operation and liberated WVNY-TV to rebuild its newsroom - creating 28 new local jobs.  Likewise, a Dayton, Ohio, JSA allowed WBDT to add to its multi-cast stream Bounce, an African-American focused network. 

Reversing recent FCC restrictions on JSA’s could help bolster minority programming and bring other benefits.  Combine that with a new tax certificate program to incentivize access to capital to stimulate more minority ownership (Congress, are you listening?) and America could witness a renaissance in minority broadcasting.

While many other existing rules could use a one-way trip to the recycling bin, the Commission should cast its eyes over the horizon to the future:  Next-generation TV.  A powerful new and voluntary standard, ATSC 3.0, offers tremendous hope to transform commerce, mobility, entertainment, public safety and spectral efficiency.  This next-gen TV technology allows for the simultaneous use of two-way Internet Protocol signals with multiple one-to-many video streams emanating from broadcasters’ existing facilities straight to consumers’ devices.  This incredible advancement will allow unprecedented viewer personalization and interactivity.

The possibilities and benefits are limitless.  To speed the arrival of next-gen TV, the FCC should first do no harm, then grant the pending petition. Next, it should encourage more nimble secondary spectrum markets and flexible use policies to help provide the regulatory freedom needed by entrepreneurs to have the proper incentives to invest in next-gen TV endeavors.

In sum, creating an environment that fosters investment, innovation and constructive risk-taking will promote spectral efficiency, economic growth and consumer empowerment, thereby allowing broadcasters to better serve their communities and the public interest.  A bipartisan Congress not only foresaw the need for the FCC to modernize its rules, it required it to do so.  The time to live up to that commitment is now.

McDowell, an FCC commissioner from 2006-13, is coleader of the global communications practice at Cooley LLP and a senior fellow at the Hudson Institute.