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What's in the 'Public Interest'?

In September, the FCC launched "the most comprehensive look at media ownership regulations" it has ever undertaken. The proceeding follows two paradigm-shattering decisions in which the D.C. Circuit Court interpreted the Telecommunications Act of 1996 to require that the FCC eliminate ownership rules that are not shown to be "necessary in the public interest." Mere theories and speculation that consolidation of ownership leads to inflated advertising rates or reduces programming diversity and quality are not enough.

Sometimes, when the FCC has tested the theories underlying its rules, the facts have proved surprising. Until about 20 years ago applicants for radio-license renewal had to conform to "processing standards," among them limits on the number of commercial minutes they could broadcast. In theory, over-commercialization was a devil only regulation could combat. When the FCC conducted a study, it discovered that stations, on average, were broadcasting fewer commercial minutes per hour than the standards allowed. With the proliferation of FM stations, competitive pressures had proved a far more effective lash than FCC oversight. The FCC then eliminated those rules.

Surely, there are notable examples of excellence in large media companies. Have we forgotten the days when an embattled Nixon administration tried to discredit The Washington Post's Watergate reporting as the liberal bias of an elitist conglomerate?

Under such intense pressure, a company with fewer resources than Post-Newsweek might have backed off the story. It was under Nixon that the FCC proposed the newspaper-broadcast cross-ownership rule now under review. An apprehensive Post-Newsweek, already facing challenges to its licenses by Nixon cronies, prepared for the worst and reluctantly sold its Washington TV station. (As it turned out, the rules adopted would have grandfathered in that combination.) The rulemaking turned up no clear evidence of abuses of power by media owners. However, the Nixon administration's motives have provided grist for speculation about the potential for government abuse of power in regulating media ownership.

It may be that competition (and existing antitrust laws) would insure localism, diversity and other desirable outcomes in the absence of ownership rules—not because that is what government dictates, but because that is what consumers demand. On the other hand, the data might provide evidence that markets have failed. What the 1996 statute mandates, as the circuit court sees it, is an on-going examination of real-world empirical data to justify retention of rules adopted largely on untested assumptions and theories about how station owners, advertisers and consumers interact in the media marketplace.

All this may come down to a redefinition of the Communication Act's touchstone of "public interest, convenience and necessity," with a new twist that regulations must be shown first to be necessary before they can be deemed to be in the public interest. The answer to that is likely to shape the structure of the industry for years to come.