Senate Commerce, Science and Transportation Committee Holds Hearing on Competition in the Telecommunications Industry

WYDEN:
Thank you, Mr. Chairman. I'll be brief because I have really only one point right now.

The Senators have noted that there are a host of telecommunications issues coming down the track at the Federal Communications Commission. And my concern is that the big and powerful seem to be driving the train, and that the consumer is being left in the caboose. And specifically, if you look at the key issues, the big media companies want the freedom to get even bigger. The big phone companies want changes to the telecommunications rules. Big Wall Street interests are weighing in hoping to boost lagging share prices. And what I hope the Federal Communications Commission will address this morning is how these changes are going to benefit the consumer, because that's what the '96 act was all about. I certainly don't support needless regulations. There are areas that are ripe for innovation, but it just looks to me like the consumer is being left in the caboose on the telecommunications track. And I'd like to see how their interests are being protected in the course of these debates.
Thank you, Mr. Chairman.

WYDEN:
Thank you, Mr. Chairman.
Begin with you, Chairman Powell, but I'd like other commission members involved in this as well, and that's the question of media concentration. Today there are five companies that drive American broadcasting in America, Disney, Newscorp, Viacomm, Clear Channel and AOL Time Warner. And the commission is looking at relaxing a number of rules on media concentration. And it seems to be that there is a very real possibility that what the commission is going to do is shift policies so that basically one company could own everything in town. One company could own the paper, and several TVs, and the radios, and the Internet network, and essentially the whole ballgame. And I'd like to hear how the-sky's-the-limit policy is going to help the consumer, because I think that today's telecommunication's policy has got to be seen through a consumer prism.

And why don't we start with you, Mr. Chairman. And I'd like to engage the other members of the commission as well, because I think this is going to say a whole lot about what communication is going to look like for our kids and our grandkids. And with five rules on the line this spring, we need to know where the commission stands on media concentration.

If we could begin with you, Mr. Chairman.

POWELL:
I think it's an excellent question, and worthy of debate. The first thing that I would say is a little bit to take on the premise which is kenzly (ph), I don't believe anything coming out of the commission's decision has been result in the ability for one person to own everything. And I think that's a straw man...

WYDEN:
I'm talking about one company, essentially, owning everything in town. You'll oppose a policy like that?

POWELL:
First of all, you'd have to be a policy would be, one, be able to pass the muster of anti-trust division review; two, whether that would be able to muster of a market transaction review in the public interest standard at the commission. But we don't know what the outcomes of the rules are yet. It's important to note that that's an ongoing deliberation.

I am skeptical, however, that some of the more, sort of, melodramatic versions of what's likely to come out of the commission are actually an accurate reflection of the way the majority of the commission thinks about that. You have me at a disadvantage because I can't tell the rules will be or not.

I would emphasize we're reviewing them, mostly, because this body told us we had to—that we had to every two years, and that we had to justify them. Whether regrettable or not, the court has interpreted that division to require us to prove that they have the benefits we assert in order to justify them. And if we don't, the court has said that it will vacate them, and indeed has vacated a number of them. Of the last four major media cases in court, we lost all four, either on constitutional or arbitrate capricious grounds.

So what I think we're doing is, number one, a response to your mandate to go through the binding review and look at rules in the context of the modern market marketplace. I don't think anything we've suggested diminishes the importance of the values like diversity, localism, view point variety. I have never suggested that those are less critical values in the modern American media marketplace as they've ever been. The question is what body of rules will most promote those objectives, and pass judicial scrutiny, and be faithful to your biannual review provision.

And I would leave you only with the one point, most of our rules are 30 to 40 years old. That's not to say that they're outdated in and of themselves in terms of what they're trying to achieve, but the can-do truth is they are somewhat incoherent as matched against the actual media marketplace. Forty years ago there was not even cable television, yet 85 percent of Americans today get their news information media from cable. The court looks at us and says, "How can you just write that out of your consideration of ownership limits?" And I think the commission has to, sort of, come up with a coherent way to look at the marketplace, and empirical justification for its rules, and whatever it can do in that context, it will do.

WYDEN:
Are you at all troubled by the fact that Clear Channel went from 40 stations to 1,240 stations in just a few years?

POWELL:
Candidly, I am troubled. And I think that's a consequence of statutory deregulation. And we are often criticized as the institution that did that. Much of that deregulation is a consequence of the section of the statute.

I would also note, though, that I could demonstrate our concern even though this was a principle focus of the previous commissions. The commission under my leadership has moved to block a number of radio transactions, and previous commissions never moved to block a single one. I was commissioner before for three years. There was never a single radio merger designated for hearing. Presently, under our leadership, there are a number of them currently in hearing.
I am concerned about the concentration, particularly in radio. And I think that we are not constructing a regime that will not provide a meaningful filter for undue...
(CROSS-TALK)

WYDEN:
How do you do the proceeding involving these five regulations so as to produce a different regime? I mean, what you've said, frankly, encourages me—I came here as always with the greatest respect for you, but very troubled about where the commission is headed. You've told me, "Don't sweat it. We're not going to go out there and take the brakes off everything." I'd like to have you amplify a little bit...

POWELL:
Well...

WYDEN:
... on your thoughts about a new regime.

POWELL:
I would be disingenuous, sir, if I would say that, you know, when we're done you will love everything we did, but I will say that I do think that's the characterization of our activity, not the one that's popular, sort of, in the newspapers about, sort of, rabid deregulation of the media industry.

What do I think? I think that we have to start looking at the media marketplace through the eyes and ears of consumers. We talk a lot about consumers. Part of the what the empirical study is designed to do is to try to put substance on how consumers actually access information as opposed to seeing them through the historical battles of broadcasters versus cable guy versus satellite guy, which I think presents a very warped perception of the ways consumers actually access media.
If, for example, cable is a significant medium by which consumers actually watch television, I think we have to include that in the base of how we determine media viewpoints in concentration. So I think we have to have a broader of what constitutes the media marketplace.

I also think that we need to be more calibrated. That is, a couple of our rules, in my opinion, are sort of three-cushion shots to a problem, that when you get through the gyrations of trying to stop, you realize there's a better way you could do that, much more directly and much more simply. A lot of times, for example, the strongest arguments about the national ownership limit are about really trying to preserve localism. In many ways, I often wonder well then why don't we specifically focus on the rules about what you can own locally, rather than trying to do it through a number of three-cushion shots to the problem. So that's another thing we're looking at. We're looking at whether there's a more direct, cleaner, sustainable way to do the same thing.

And I would submit if—this is another area where I feel a profound obligation because these things have constitutional import (ph). Whether we like the media companies or not, we are being measured against the first amendment standard.
If I really didn't care about media ownership, I'd do nothing and let—the courts will vacate every last rule before I'm done. That's where we're headed at the moment.

WYDEN:
Could we just get the other commission members on the record, Mr. Chairman, on this? I think this media concentration issues is so critical. I'd just like to hear from the other commission members.
Yes?

(UNKNOWN)
Senator, I'm not going to tell you don't sweat it. I hope you will sweat it.

WYDEN:
I...

(UNKNOWN)
And I'd...

WYDEN:
I will tell you, Chairman Powell has told me that he doesn't want to see one company call the shots in a given town, but I am still very troubled about the prospect of where we're headed. And that's why I'd like you all on the record.

(UNKNOWN)
Well, I don't think we're being melodramatic in saying that some of the changes that have been suggested for our consideration, although we don't have an item on this yet, obviously, can fundamentally remake the media communications landscape.

(UNKNOWN)
And that's pretty important, I think, to every American citizen. It goes to the kind of entertainment you get, to the homogenization of programming that we've seen, and the debates with the music list, and how do you get if you're a creative artist in a town, or how do you get your music played. And in an era of consolidation and the short answer, some have suggested is—that's it's becoming increasingly difficult. It goes to the whole nature of our democratic process, sustaining that marketplace of ideas. And it's not—obviously, if we're going to do away with these rules—Chairman says we're not going to do away with them, but if you do away with something newspaper cross ownership—newspaper/broadcast cross ownership, you do create some pretty far reaching ownership opportunities in that particular localities.

But even if you don't go that far, if you're going to increase the caps by 5 percent, 10 percent, or 15 percent, is that minor or is that major? We don't know. We haven't teed that up for consideration yet. I think it's a pretty major question. Could be that that 10 percent can fundamentally remake what's going on in a town in your state.

So it goes to the fundamentals, and that's why I said I am so committed to trying to energize and spark a national debate. This should not be an inside-the-Beltway issue, because it goes to the rights of every citizen in this country on the kind of entertainment they and their kids are going to have, the kind of democratic dialogue, the openness to ideas that they're going to have. There's nothing as important as this on our agenda. And as I say, I hope—I hope you and your colleagues will sweat it because it's important.

WYDEN:
Other commission members?

(UNKNOWN)
I agree with the concerns that have been raised about the level of media concentration that has occurred in some sectors and that could occur. And I do think that we do need to be cognoscente of the important of localism and diversity, and maintaining those as core principles and core values the commission has tried to foster in our media ownership roles in the past.

That being said, I do think we need to respond to the courts direction that we justify those rules going forward, and that we take into account the new voices that are out. And I think there's a way to do that and still maintain that localism and diversity.

And finally, I'll just say in response to some of your concerns about the radio consolidation, that I think they commission should also be cognoscente of unintended consequences that could potentially occur with the way our rules interact. One of the things that may have occurred in the radio context is that they way we define the market, they have actually allowed for increased consolidation beyond the level at which we—beyond the level of which Congress may have envisioned when it changed the law in the Telecommunications Act. And I think that that may have had some consequence as well that would allow for relatively small markets to be treated as larger markets than they actually are, the way we've defined them. And I think that's something else that the commission needs to be aware of as it goes forward and considers these rules.

WYDEN:
And I want to hear from the other commissioners. And my point is that is a valid concern, but to go from 40 stations to 1,240 stations in a few years is why this Congress has got to be concerned about it, and we're going to go after this every day.
The other commissioners, if we could.

ABERNATHY:
Yes, this—the media concentration proceeding is a critical proceeding for us, because unlike in the telecom arena where technology continues to drive products and services to consumers, and hopefully we don't mess it up too much. I think in the media consolidation area, we have our fingers on exactly how we're going to be receiving information in the future.
Having said that, the idea that all of our existing, as they were written for an entirely different environment, that they shouldn't be changed, that they shouldn't be adapted to ensure that we promote diversity and localism in competition. I think that would also be naive.

So we're committed to a diverse source of media information for consumers. I think our goal is to gather as much critical data as possible, assimilate it, understand it, understand what's driving the market, and then figure out what's the best way to achieve diversity and localism, and how all of the different media interact with each other in delivering product and services to consumers.

(UNKNOWN)
Senator Wyden, your question goes to the very heart of our democracy in how our citizens receive information, entertainment, news, local public affairs. I can't imagine a more important issue that we're going to undertake as a commission than this one. I do believe the commission is undertaking it with all the seriousness which it deserves.
You pointed to the issue of radio consolidation, which is a large concern of mine as well. And as the Chairman pointed out, that was a result of the Telecommunications Act of 1996, which entirely eliminated the cap on radio ownership—that one owner could have.

You know, if you don't like that, that's like a canary in the mine. If that's an outcome of concern, and it may well be. The canary in the mine was something that would warn the miners whether it was safe to go forward and to enter in. And the question here is—is it safe for us to go forward with this kind of thing in other areas of the media? We're looking at cable, and television and newspaper/television cross ownership. Do we want to go down that path in those areas? We need to make a very careful determination about that.

WYDEN:
My time's up, but I'm going to be on the canary alert, folks, because I think this is just about as serious as dues (ph) guest (ph).

Thank you, Mr. Chairman.