CU Launches Campaign to Overturn FCC Rule Changes

Wednesday May 21,
2003

CONTACT:
Consumers
Union
, 202-462-6262


GREEN LIGHT FOR MERGERS COULD RESULT IN MEDIA GIANTS DOMINATING 100 LOCAL MARKETS
GROUPS CHARGE FCC PROPOSAL GUTS PUBLIC INTEREST STANDARD


WASHINGTON – The Consumer Federation of America (CFA) and Consumers Union (CU)
today warned that the Federal Communications Commission’s (FCC) proposal to
relax media ownership rules will lead to dramatic consolidation of the two most
important sources of news for as many as 70 million households. In a comprehensive
critique, the groups argue that the FCC proposal effectively guts the public
interest standard of the Communications Act and affords less protection for
media mergers than the antitrust laws traditionally do for economic mergers.

"Unfortunately, the proposed
rules circulated by the FCC are driven by political deals and deregulatory ideology,
not rigorous analysis or First Amendment principles," said Gene Kimmelman,
Senior Director for Public Policy at Consumers Union. "We do not think
this is consistent with the Communications Act or the recent court decisions
on ownership rules."

FCC Chairman Powell has argued that
Federal Appeals court rulings that say that the current media ownership restrictions
lack sufficient legal basis require a loosening of longstanding rules aimed
at protecting the public from media concentration. CFA and CU dispute that assertion.

"The court just asked for rules
based on sound analysis of empirical data. The Medicare Modernization Act order ignores audience
size, actual patterns of media use and the dramatic difference between entertainment
and the dissemination of news and information," said Mark Cooper, Director
of Research at Consumer Federation of America and the principle author of the
critique.

The CFA/CU analysis shows that mergers
would be allowed in 140 concentrated local markets. In as many as 100 of these
local markets, representing nearly half the national population, there is one
dominant newspaper. Allowing a merger between a dominant newspaper and a large
TV station would create a local news giant that threatens alternative news viewpoints.
In these markets, one firm would have half of the total audience and employ
half the total news employees.

"Such a news and information
giant is a frightening prospect for democracy," stated Kimmelman. "Public
policy should err in favor of more competition rather than less so communities
can enjoy a greater diversity of viewpoints so critical to democratic dialogue
and debate."

The report
points out that the FCC’s mistake in opening markets to cross-ownership mergers
is not limited to small rural areas. One-paper cities include Atlanta, Louisville,
New Orleans, and San Antonio. In these localities the media giant would have
a 90 percent or larger share of the newspaper circulation and a merger would
also typically secure one-third of the TV audience. No second entity could come
close to matching this media power.

In typical two-newspaper markets
(such as Buffalo, Las Vegas, Little Rock, and Richmond) the dominant paper still
has, on average, five times the circulation of the number two paper. A merged
firm would have four-fifths of the newspaper market, and one-third of the TV
market.


According to CFA and CU, the FCC proposal:

· fails to properly define
product markets by ignoring the fact that almost half of all broadcast stations
do not provide news

· ignores the local market by counting stations and outlets that do
little, if any local news

· relies on an improper market structure analysis by failing to consider
the audience (market shares) of the media outlets

· sets a dangerously low standard for competition in local media markets-allowing
the count of major news media voices to decline as low as three or four in
many markets.

The report
charges that the FCC’s analysis is arbitrary and capricious as it applies logically
inconsistent approaches across media markets. This inconsistent treatment biases
the rules towards greater concentration and less diversity. It appears to be
driven by a results-oriented political agenda rather than sound analysis. For
example:

· UHF stations appear to
be discounted for the purposes of the national cap on network ownership of
local stations, but not for purposes of the cross-ownership and the duopoly
rule.

· The FCC recognizes the
importance of major TV voices by banning duopoly mergers 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 with a
newspaper.

CFA and CU contend that a responsible
approach, consistent with the record in this proceeding, would produce a set
of rules based on a rigorous analysis of the current media market structure
and would adopt a high public interest standard. They propose that:

· no mergers between TV
stations and newspapers should be allowed if the overall media market in a
locality is or would become concentrated because of the merger.

· no mergers involving TV
stations should be allowed if the TV market in a locality is or would become
highly concentrated because of the merger.

This approach would allow cross-ownership
mergers in ten of the largest markets.

Executive
Summary

Report

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The Consumer Federation of America
is the nation’s largest consumer advocacy group, composed of two hundred and
eighty state and local affiliates representing consumer, senior, citizen, low-income,
labor, farm, public power and cooperative organizations, with more than fifty
million individual members. CFA is online at www.consumerfed.org.

Consumers Union, publisher of
Consumer Reports, is an independent, nonprofit testing and information organization
serving only consumers. CU is comprehensive source for unbiased advice about
products and services, personal finance, health and nutrition, and other consumer
concerns. Since 1936, CU’s mission has been to test products, inform the public,
and protect consumers. CU’s income is derived solely from the sale of Consumer
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and fees.