Hearing of the Senate Committee on Commerce, Science and Transportation - Federal Communications Commission (FCC) Oversight

Interview

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SEN. MARIA CANTWELL (D-WA): Thank you, Senator Boxer.

Chairman Martin, I want to just pick up on a point that Senator Kerry made and just ask you a question. Do you see any circumstances in which you'd be willing to delay the vote for this proposed rule change before the hearing? Do you see any circumstances in which you would change that?

MR. MARTIN: Oh, I'm sure. Listen, I think that my -- what I've said is that my plan is to end up moving forward. I'm going to continue to have my discussions with all the commissioners and all the colleagues about a consensus, not just on the process, but on the substance. So sure, there's the potential and possibility. There could be circumstances, but at this point I would say that no, I anticipate that we would end up moving forward, and that at this point, that's my plan.

SEN. CANTWELL: In your testimony, you talk about listening to your colleagues and you said that you incorporated input from them. What input did you incorporate?

MR. MARTIN: When we were beginning the process of the study, during the notice of proposed rulemaking that we released in July of '06, I -- all of the commissioners voted on what would be the topic. After that, I approached all of the commissioners and said what would you like the topics of the studies to be?

No commissioners gave us anything in writing. Several had suggested -- made suggestions orally about what they wanted to extend, and expand the number of topics. We incorporated that. I put that in a written memo. I circulated it to all my colleagues, again asked for input. Several of the commissioners -- no one gave me any written comments. One of the commissioners said he wanted to make sure and again expand some of the topics, which we then incorporated again.

When we then went forward and said we wanted to wanted to identify what individuals, if they had any, to do -- to perform the studies. I relied upon the chief economist at the time to try to come up with academics who would be around the country to do it. Several of my colleagues had suggestions of people they wanted to do some of the studies. Every suggestion that -- by any of my colleagues of any individual in the country who they wanted to do a study we contacted to see if they'd be willing to do a study.

Several of them said no; several of them said yes. The ones who said yes we contracted with, asked them to do studies. One of the ones -- one of the people who --

SEN. CANTWELL: (Inaudible) -- I don't want to take as much time as my colleague, Senator Kerry, did. Could I ask them to respond to that, because that was a pretty good elaboration.

MR. COPPS: I would take exception to trying to portray this as a completely open and participatory process. There was some initial outreach on subjects of studies. I think we responded, I thought we had, with a list of about 12 or 15 very targeted kinds of studies. And that was kind of the end of that, until we saw what the studies that were selected were going to be.

And most of them were kind of ill-targeted, I thought. Several of them went to the robustness of this or that and really didn't ask the important questions that needed to be asked in the context of media ownership. So while I think there was some outreach, to imply that this was a small-d democratic, fully participatory, "we all make the decisions about who's going to be the study and what gets studied," I think is not 100 percent accurate.

SEN. CANTWELL: Commissioner Adelstein.

MR. ADELSTEIN: I didn't find my ability to give meaningful input really afforded. I felt that there was very little time between the time we were asked about it and the time that all of a sudden, just several days later, a whole list of authors appeared. I mean, clearly, all the work had already been done about who they wanted to ask. And by the time these decisions were made, I had no meaningful input into the authors.

And the authors were not, for the most part, except for one that was suggested by Commissioner Copps, experts in the field of media ownership. They were, in fact, broad generalists in economics, and a lot of the best experts that were -- I heard asked about whether they wanted to participate were given conditions to operate under in which they felt they couldn't possibly do the right level of work.

I mean, the initial take on the ownership studies was by our chief economist, who wrote a memo which was -- (inaudible) -- that said that she was offering thoughts and ideas about, quote, "how the FCC can approach relaxing newspaper-broadcast cross-ownership restrictions."

So the whole person who put together the concept of how these studies would be done did it with an outcome in mind.

I think that if you look at the studies, they weren't properly peer-reviewed. Federal law requires in the Data Quality Act that all these studies go through a peer review before they're disseminated, and we didn't -- that wasn't done until afterwards. And a lot of the peer reviewers that were consulting back and forth with the office, in violation of federal guidelines.

So this process I don't think was conducted with transparency. I don't think it was conducted properly. I know that there are questions being asked over in the other body, in the investigative committees there. I don't think that the studies really accurately reflect the knowledge base that's available in academia about these issues.

And, in fact, consumer groups looking at the studies found major flaws in them, even though they were given very little time. They were given a very short period of time to review them. They weren't given the proper data to review until later in the process, under very restrictive conditions. So I don't think that this process was open and transparent.

SEN. CANTWELL: The reason I'm asking that is it seems like we are taking one piece of data and trying to twist it or use it as a scapegoat to come to a conclusion. And I guess, Chairman Martin, I'm directing this at you. Your statement says, "Allowing very limited cross-ownership may help forestall the erosion in local news coverage by enabling companies to share these local news gatherings across multi-media platforms."

And it seems as if you are trying to use the Internet as a scapegoat to say that somehow the competition that the Internet is providing to the newspaper industry, that technology that's provided a new distribution channel for print media now to be online, is somehow blowing up their business model and that the solution to that is that you ought to allow big media companies to get bigger.

And I would say that this change in technology, which is a benefit to the underlying notion of allowing 1,000 flowers to bloom and lots of different opinions, is going to be change and that many newspapers are working through those new business models. Technology change does mean that some existing business models are challenged, but it doesn't mean that you should throw the baby out with the bath water. So you're basically saying, yeah, let big media companies own newspapers because somehow the Internet is making (it more challenging ?).

Now, Commissioner Copps came up with those statistics, or one of -- I think it was Commissioner Copps, and I would just like to note that in 2006, supposedly a very disastrous year for newspapers, they did average profit margins for publicly traded companies at 17.8 percent. And if you contrast that for the rest of corporate America, that's about -- over the last 25 years, 8.3 percent. So something's not right here.

Yeah, I can imagine with those numbers, 17.8 percent, yeah, I could imagine a lot of big media companies would like to own newspapers. The truth is their numbers aren't so bad. And as a distribution channel, they still represent a very interesting delivery system, and one that I say should still have a shot as they try to broaden into their online distribution business models.

But to say that the consolidation, which will bring about a concentration of voices, is somehow -- that that particular logic is keeping in the notion of competition, diversity, and localism, I'm having a very tough time understanding. So I'm happy to hear your response to that.

MR. COPPS: Sure. I think that it's Congress, actually, in the 1996 act, that required the Commission to review its rules and modify and eliminate them -- the ownership rules -- to the extent that the competition had changed the marketplace. And I believe that that is -- and that's one of the things that Congress charged the Commission with doing, updating its rules and actually removing them when they were no longer necessary because of competition.

The rule that we put in place 1975, the media marketplace has -- no doubt has changed dramatically since then in terms of the -- and the Internet is one significant part of it. So is the number of opportunities in terms of broadcast outlets, so is the opportunities in terms of cable television and satellite television that were not available in 1975 when the rule was put in place.

The Commission has in the past, and actually almost every chairman at the Commission since 1996, both Republican and Democrat, have all concluded that there needs to be some modification to the newspaper-broadcast cross-ownership role, in light of the changes in the marketplace that have occurred since 1975, and the fact that this is the only rule that has not been changed since 1996.

All of the rest of our ownership rules have been, and this is the only one that hasn't. And as a result, I think it's Congress that actually charged us with that. Yes, the Internet competition does demand that we reevaluate our rules to see if they're still necessary, and I think that it's harder to make the case that they're still necessary in the top 20 markets for a newspaper to be prohibited from buying the number (of ?) five, six, seven broadcast stations in those markets.

SEN. CANTWELL: I think you're getting it absolutely wrong. And I don't see a logic in your answer of why big broadcast corporations ought to consolidate and own more media because of the Internet. That doesn't make any sense.

The Internet is about competition, but at this point in time, we're talking still about nascent business models. And you're saying let's allow some of the big corporations gobble up one other distribution channel, just because you're going to use the Internet as a bogeyman in this case. And when the truth is that what you're doing is allowing for more consolidation of existing distribution channels that are a lot more mature than the nascent Internet. Even though it's been around, the business models are still developing.

So I have, like my colleagues, a great deal of concern about this proposal, and think that the basis for it -- I am troubled by the studies and the analysis. Your fellow colleagues there are saying that there hasn't been enough -- particularly consumer content.

Because the one thing that I think is clear here, that as the digital age continues to play out, the one thing that has to be in place, the one thing that absolutely has to be in place is stronger consumer protection. But this seems to be going in the absolute wrong direction.

Mr. Chairman, I think I'll actually stop with that, and turn it over to my colleague, or allow you to turn it over to him.

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