Trust, but Verify

We don't frequently agree with Democratic FCC Commissioner Michael Copps, for whom almost any deregulation is a bad thing. His monotone sky-is-falling rhetoric has been a regular feature of the commission since 2001. Usually, the sky is just fine.

But we think he is on to something with what seems to us a reasonable suggestion that the FCC at least look into the potential impact of venture capital investment on the media marketplace. Copps' plea last week was a little melodramatic, bracketing his request with alarmist evocations of 1929 and the Great Depression, but the idea was right on.

The general economy is getting scary, and simultaneously media companies have become an increasingly attractive target for venture capital firms—think the $20 billion Clear Channel buy, or check out the Website of Providence Equity Partners for its holdings, including Freedom Communications and Univision. The newly acquired Tribune Co. is heavily leveraged at a time when its newspapers are sinking like great big rocks.

Copps made the suggestion of a study last week, actually renewing an earlier request, during the FCC's “state of the commission” public meeting at which various bureau chiefs talked about the commission's priorities for the new year and reviewed “accomplishments” of the old. (We have one “needs improvement” suggestion: Start meetings on time.)

Looking into the impact of the venture capital markets on the media was not on that list of priorities, Copps noted. In fact, FCC Chairman Kevin Martin conceded last week that the FCC has never studied the structuring of media deals. While he said the FCC has strict rules about ownership and attribution, he is not convinced, and said he has seen no evidence, that private equity ownership was any different than other kind. But then again, the FCC has never studied it. It seems plain, though, that venture capitalists may arrive at a station with an accelerated timetable for profits that doesn't always dovetail with the public interest.

“We need to understand better than we do what factors are very important slice of the American economy,” Copps said. The FCC needs to know who owns companies that may break a rule or disserve the public, he added, or what to do if they go hat in hand to overseas interests for a bailout.

Copps was not prejudging any deal or owner. But isn't it worth at least asking the question in the face of what is happening in the economy at large? We think so. We aren't advocating any new rules for venture capitalists. However, some systemic investigation of financial worthiness is certainly within the oversight role of the commission.The sickly economy may force some broadcasters to fold their tents, and sell to less-than-munificent buyers. It is in our public interest for the FCC to be looking closely at the financial health of the new would-be owners.