Testimony

• Mr Adam Thierer
  Read statement

  Testimony

  Mr Adam Thierer

  Good morning, my name is Adam Thierer and I serve as Director of Telecommunications Studies at the Cato Institute. Thank you, Mr. Chairman, for your invitation to testify here this morning on the important issue of media ownership regulation. This hearing is especially timely for me since I have a new book on this issue due out early next year entitled, “Media Myths: Making Sense of the Debate over Media Ownership.” I chose that title because I have come to the conclusion that the debate over media ownership is being driven more by myth than reality. That is, while critics of media liberalization have had great success employing heated rhetoric and extremely emotional rationales for media regulation, claims about a lack of “diversity,” the end of “localism,” or the supposed “death of democracy” simply do not square with reality. Objective facts reveal that such rhetoric and claims are baseless. Indeed, by all impartial measures, citizens are better off today than they have ever been before. Regardless of what the underlying business structures or ownership patterns look like, the real question in this debate must be this: “Do citizens have more news, information, and entertainment choices at their disposal today than in the past?” The answer to that question is unambiguously “yes.” There are 7 leading myths about modern media. I’ll quickly summarize each one for you. Debunking the Media Myths The first, and probably most commonly repeated myth, is that diversity will disappear absent extensive government regulation of the media. The reality, however, could not be more different. Today’s media environment is more diverse than ever before and is characterized by information abundance, not scarcity. Citizens enjoy more news and entertainment options than at any other point in history. To the extent there is a media diversity problem today, it is that citizens suffer from “information overload.” The number of media options has become so overwhelming that most of us struggle to manage all the information at our disposal. Consider that in 1979 most households had 6 or fewer local television stations to choose from, but today the average U.S. household receives 7 broadcast television networks and an average of 102 cable or satellite channels per home. Also, the number of radio stations in America has roughly doubled from about 6,700 in 1970 to almost 13,500 today. And there are more magazines and periodicals being produced now than at any time in our nation’s history. In 2003, there were 17,254 magazines produced up from 14,302 in 1993. A second common myth is that “localism” in media is disappearing. The truth is, while we do not really know exactly how much local fare citizens demand, citizens still receive a wealth of information about developments in their communities. That is, although citizens are increasingly opting for more sources of national news and entertainment, local information and programming are still popular and will not disappear in a deregulated media marketplace. The third myth concerns concentration and the mistaken belief that only a few companies control the entire media universe. Contrary to this widely circulated myth, the media marketplace is vigorously competitive and not significantly more concentrated than in past decades. A McKinsey & Company analyst recently noted that “There are more than 100 media companies worldwide… and entertainment and media are still fragmented compared with other industries such as pharmaceuticals and aerospace.” An FCC survey of various media markets across America from 1960 to 2000 also showed that, “Collectively, the number of media outlets and owners increased tremendously over the 40-year period,” with an average of a 200 percent increase in the number of outlets and a 140 percent increase in the number of owners. Media expert Eli Noam of Columbia University has nicely summarized why we must understand that “bigness” is a relative term in media: “[W]hile the fish in the pond have grown in size, the pond did grow too, and there have been new fish and new ponds.” But, in any event, competition and concentration are not mutually exclusive. Citizens can have more choices even as the ownership grows slightly more concentrated as it has in some sectors in recent years. The fourth myth involves assertions about the future of our democracy somehow being at risk. These arguments strike me as quite preposterous since increased media availability and communications connectivity have given Americans the ability to learn and debate more about our democracy than ever before. More importantly, civil discourse and a healthy democracy are the product of a free and open society unconstrained by government restrictions on media structures or content. If government can simply ordain any ownership structures or business arrangements it wishes in the name of serving “democracy,” then it raises serious censorship concerns. A fifth myth is that regulation is needed to preserve high quality journalism and entertainment. I find these arguments very troubling since, at root, media quality is a subjective matter. Government should have no say over, or even attempt to influence the quality of news or entertainment in America. The good news, however, is that with so many media outlets available today, citizens have a wide range of options from which to choose, meaning they can decide for themselves what level of “quality” they desire. A sixth myth is that the First Amendment justifies extensive media ownership controls, or can be used as a regulatory tool to mandate access to media outlets. This is, without doubt, the most dangerous of all the media myths. In reality, the First Amendment was not written as a constraint on private speech or actions, but rather as a direct restraint on government actions as they relate to speech. If the First Amendment is to retain its force as a bulwark against government control of the press, it cannot be used to justify ownership rules or “media access” mandates. A seventh and final myth is that new technologies or media outlets, including the Internet, have little bearing on this debate or cannot be used as justification for relaxing existing media ownership rules at all. To the contrary, new technologies and outlets do have an important relationship to this debate and call into question the wisdom of existing media ownership restrictions. In particular, the rise of the Internet and the World Wide Web is radically changing the nature of modern media. (Anyone who thinks differently might want to ask Dan Rather what he thinks about the impact of new technologies on traditional media!) With 72% of Americans now online and spending an average of nine hours weekly on the Internet surfing through the 170 terabytes of information availalble online—which is seventeen times the size of the Library of Congress print collections —I do not see how anyone can seriously argue that the Internet is not fundamentally transforming our media universe. More generally, my research finds that all media compete in a broad sense and that citizens frequently substitute one type of media for another. What else explains cable stations stealing so much audience share from traditional broadcasters, or that 88% of Americans now subscribe to cable and satellite TV even though “free, over-the-air” television remains at their disposal? What else explains how satellite radio, an industry that did not even exist prior to December 2001, today boasts over 2 million subscribers and is rapidly eating into traditional radio’s market share? Or the fact that millions of Americans purchase daily editions of national newspapers such as the USA Today, The Wall Street Journal and The New York Times? In fact, 49 percent of The New York Times’ daily circulation is now outside the New York area and it offers home delivery in 275 markets. Such statistics reveal a healthy, competitive market at work; a market in which citizens exercise their right to be as finicky as they want in substituting one media option or outlet for another. Conclusion Our media world has changed, and changed in almost every way for the better. To the extent there was ever a “Golden Age” of American media, we are living in it today. There has never been a time in our nation’s history when citizens had access to more media outlets, more news and information, or more entertainment. This conclusion is supported by a solid factual record. Advocates of media regulation, by contrast, continue to base their case for government regulation on emotional appeals and baseless “Chicken Little” doomsday scenarios. In such an age of abundance, the question of who owns what, or how much they own, is irrelevant. No matter how large any given media outlet is today, it is ultimately just one of hundreds of sources of news, information and entertainment that we have at our disposal. “Indeed,” as the FCC concluded when revising these rules, “the question confronting media companies today is not whether they will be able to dominate the distribution of news and information in any market, but whether they will be able to be heard at all among the cacophony of voices vying for the attention of Americans.” I completely agree with the FCC. The media world has changed and so must the rules that govern it. Thank you for inviting me here today to discuss the facts about media in America. Table 2: Media Outlet Ownership in Select Markets Comparison of Media Outlets and Owners for 10 Selected Media Markets (1960-2000) 1960 1980 2000 % Change '60-'00 Market Rank City Outlets Owners Outlets Owners Outlets Owners Outlets Owners # 1 New York, NY 89 60 154 116 184 114 107% 90% # 29 Kansas City, MO 22 16 44 33 53 33 141% 106% # 57 Birmingham, AL 28 20 44 34 59 38 111% 90% # 85 Little Rock, AR 17 14 35 30 60 33 253% 136% # 113 Lancaster, PA 14 10 21 16 25 20 79% 100% # 141 Burlington, VT / Plattsburgh, NY 15 13 37 28 53 34 253% 162% # 169 Myrtle Beach, SC 6 6 22 16 38 23 533% 283% # 197 Terre Haute, IN 12 8 26 19 33 22 175% 175% #225 Charlottesville, VA 8 5 13 10 23 14 188% 180% # 253 Altoona, PA 11 9 19 12 23 15 109% 67% 195% 139% Source: Federal Communications Commission, Media Ownership Working Group, September 2002 Table 3: S-Curves for Various Technologies Table 4: The Relentless March of Technology 1970 1980 1990 2002-4 Percentage of households with TVs 95.3% 97.9% 98.2% 98.2% Total number of broadcast Television Stations 875 NA 1,470 1,744 Average number of TV sets per household 1.4 1.7 2.1 2.4 Average daily time spent viewing TV (hours & minutes) 5:56 6:36 6:53 7:44 Percentage of households with Radios 98.6% 99% 99% 99% Total number of broadcast Radio Stations 6,751 NA 10,819 13,476 Percentage of households with VCRs 0 1.1% 63% 87% Percentage of households with DVD players 0 0 0 50% Percentage of households with Cell Phones 0 0 5% 70% Total number of cell phones subscribers 0 NA 5.2 Million 158.7 Million Cell phone average monthly bill NA NA $80.90 $49.91 Percentage of homes subscribing to Cable Television 6.7% 19.9% 56.4% 68% Percentage of total households to which cable television is available NA 42% 93% 95% Estimated TV market share of “Big 3” (ABC, CBS, NBC) 55% 49% 31% 21% Estimated TV market share of Basic Cable 1% 3% 20% 35% Percentage of homes subscribing to Direct Broadcast Satellite (DBS) TV 0 0 1% 24% Percentage of homes with a Personal Computer 0 0 22% 66% Percentage of homes with Internet Access 0 0 0 74.9% Sources: Consumer Electronics Association, eBrain Market Research; Cellular Telecommunications and Internet Association; Statistical Abstract of the United States, 2003; Federal Communications Commission; Nielsen Media Research Table 5: Media Trends of Yesterday and Today circa 1970 today Extremely high barriers to entry Much lower entry barriers thanks to explosion of new technologies and media outlets High distribution costs Lower costs of distribution relative to past Primary business strategy = One-to-many; broadcasting; focus on appeasing mass audiences; less media specialization Primary business strategy = One-to-one; narrowcasting; focus on appeasing niche or splintered audiences; hyper-specialization of media Distinct media sectors with own sphere of influence Greater competition / substitution among media sources and outlets Limited media outlets; limited overall choices Explosion of both sheer number of media outlets and overall range of choices People complained about “information scarcity” People complain of “information overload” “Big 3” dominated television and control 90% of audience 7 broadcast TV networks and a 500-channel universe of cable and satellite choices 3 nightly national newscasts shown once per evening Dozens of national newscasts shown on a 24-7 basis, including foreign languages We had to go to the library to retrieve hard-to-find information The library comes to us via the Internet and online services Limited number of electronic communications or information devices in the home (phone, TV, radio) In addition to many phones, TVs and radios, each home today usually has at least a few of the following: CDs, DVDs, VCRs, computers, Internet access, interactive software, cell phones and other mobile communications devices, etc. 3 minute coast-to-coast long distance call cost $1.35 3 minute coast-to-coast long distance call cost roughly 15 cents Table 6: The Expanding Video Programming Marketplace On Cable and Satellite TV News: CNN, Fox News, MSNBC, C-Span, C-Span 2, C-Span 3, BBC America Sports: ESPN, ESPN News, Fox Sports, TNT, NBA TV, NFL Network, Golf Channel, Speed Channel, Outdoor Life Network Weather: The Weather Channel Home Renovation: Home & Garden Television, The Learning Channel, DIY Educational: The History Channel, The Biography Channel (A&E), The Learning Channel, Discovery Channel, National Geographic Channel, Animal Planet Travel: The Travel Channel, National Geographic Channel Financial: CNNfn, CNBC, Bloomberg Television Shopping: The Shopping Channel, Home Shopping Network, QVC Female-oriented: WE, Oxygen, Lifetime Male-oriented: Spike TV Family / Children-oriented: Nickelodeon, Disney Channel, Cartoon Network, WAM (movie channel for 8-16 year olds), Noggin (2-5 years)/The N Channel (9-14 years), PBS Kids, Hallmark Channel, Discovery Kids, Animal Planet, ABC Family, Boomerang, The Family Channel (FAM), HBO Family African-American: BET, Black Starz! Foreign / Foreign Language: Telemundo (Spanish), Univision (Spanish), Deutsche Welle (German), BBC America (British), TV Asia, ZEE-TV Asia (South Asia) ART: Arab Radio and Television, The Filipino Channel (Philippines), Saigon Broadcasting Network (Vietnam), The International Channel, HBO Latino Religious: Trinity Broadcasting Network, The Church Channel (TBN), World Harvest Television, Eternal Word Television Network Music: MTV, MTV 2, VH1, VH1 Classic, Fuse, Country Music Television, Great American Country, Gospel Music Television Network Movies: HBO, Showtime, Cinemax, Starz, Encore, The Movie Channel, Turner Classic Movies, AMC, IFC, Sundance, Bravo, (Action, Westerns, Mystery, Love Stories, etc...), Flix, Other or General Interest Programming: TBS, USA Network, TNT, SciFi Channel Table 7: 2003 New Magazine Launches by Interest Category Crafts / Games / Hobbies / Models (45) Computers (10) Teen (6) Metro / Regional / State (45) Women’s (10) TV / Radio / Communications / Electronics (6) Sports (33) Men’s (10) Art / Antiques (5) Automotive (29) Children’s (8) Business / Finance (5) Special Interest (23) Comics / Comic Technique (8) Motorcycles (5) Health (19) Entertainment / Performing Arts (7) Bridal (3) Home Service / Home (17) Literary Reviews / Writing (7) Aviation (2) Music (15) Photography (7) Gaming (2) Sex (13) Pop Culture (7) Gardening (2) Ethnic (11) Religious / Denominational (7) Military / Naval (2) Epicurean (11) Dogs / Pets (6) Science / Technology (2) Fashion / Beauty / Grooming (11) Dressmaking / Needlework (6) Media Personalities (1) Fitness (11) Fishing / Hunting (6) Mystery / Science Fiction (1) Travel (11) Political / Social Topics (6) TOTAL: 440 Table 8: A Clear Channel Radio Monopoly? Table 9: Internet Radio Stations LaunchCast (radio.yahoo.com) Rhapsody (www.listen.com) Live 365 (www.live365.com) Net Radio.com (www.netradio.com) eoRadio (www.eoradio.com) Totally Radio (www.totallyradio.com) Soul Patrol (http://www.soul-patrol.net) SnakeNet Metal Radio (www.snakenetmetalradio.com) Recovery Net (www.recoverynetradio.com) Beethoven.com (www.beethoven.com) Web-Radio (www.web-radio.fm) Radio@Netscape (www.spinner.com) NPR Online (www.npr.org) VH1’s SonicNet.com (http://www.sonicnet.com/) Table 10: Do the “Big 3” Own Everything? Table 11: Cable Ratings Share Now Tops Broadcasters Table 12: An Assortment of Media Fun Facts General Media Facts or Trends: ? “A weekday edition of the New York Times contains more information than the average person was likely to come across in a lifetime in seventeenth-century England.” A 1987 report estimated that more new information has been produced within the last 30 years than in the last 5000. ? According to Ben Bagdikian, there are 37,000 different media outlets in America. That number jumps to 54,000 if all weeklies, semiweeklies, advertising weeklies and all periodicals are included, and to 178,000 if all “information industries” are included. And yet Bagdikian is a leading critic of media deregulation and the title of his most recent book is The New Media Monopoly! ? An FCC survey of large and small media markets across America from 1960 to 2000 revealed that, “Collectively, the number of media outlets and owners increased tremendously over the 40-year period,” with an average of a 200 percent increase in the number of outlets and a 140 percent increase in the number of owners. ? By 2007, the average American will spend 3,874 hours per year using major consumer media, an increase of 792 hours per year from the 3,082 hours per year that the average person spent using consumer media in 1977. ? As of 2003, household penetration rates for various new media and communications technologies were very high and growing fast: VCR (88%); DVD (50%); DBS (24%); cell phones (70%); personal computers (66%); Internet access (75%). With the exception of VCRs, none of these technologies were in American homes in 1980. ? In 2002, the average consumer spent $212 for basic cable, $100 for books, $110 for home videos, $71 for music recordings, $58 for daily newspapers, $45 for magazines, $45 for online Internet services, and $36 on movies. ? A three minute coast-to-coast long-distance phone call which cost roughly $1.35 in 1970 only cost 15 cents in 2003. Television / Video Competition: ? 88% of Americans now subscribe to cable and satellite “pay TV” sources even though “free, over-the-air” television remains at their disposal. ? The FCC has found that, “In 1979, the vast majority of households had six or fewer local television stations to choose from, three of which were typically affiliated with a broadcast network. Today the average U.S. household receives seven broadcast television networks and an average of 102 channels per home.” ? There are more than 308 satellite-delivered national non-broadcast television networks available for carriage over cable, DBS and other systems today. The FCC concludes, “We are moving to a system served by literally hundreds of networks serving all conceivable interests.” Newspapers and Magazines: ? In 1900, the average newspaper had only 8 pages. In the year 2000, by contrast, according to the Encarta encyclopedia, “Daily general-circulation newspapers average[d] about 65 pages during the week and more than 200 pages in the weekend edition.” ? There were 17,254 magazines produced in 2003, up from 14,302 in 1993. “For virtually every human interest, there is a magazine.” ? There were 440 new magazine launches in 2003, up from 289 new launches in 2002. Another source puts the number much higher at 949 new launches last year. Radio: ? The number of radio stations in America has roughly doubled since 1970. As of March 2004, there were 13,486 radio stations in America, up from 6,751 in January 1970. ? Satellite radio (XM & Sirius), an industry that did not even exist prior to December 2001, today boasts over 2 million subscribers nationwide according to company reports. Internet / Online Services: ? 72% of Americans are now online and spend an average of nine hours weekly on the Internet. ? The World Wide Web contains about 170 terabytes of information on its surface; in volume this is seventeen times the size of the Library of Congress print collections. ? Although less than 10 years old, online auction giant E-Bay has grown so massive that it now handles more daily trading traffic than the Nasdaq Stock Market according to CEO Meg Whitman. ? Online search giant Google recently reported that its collection of 6 billion items includes “4.28 billion web pages, 880 million images, 845 million Usenet messages, and a growing collection of book-related information pages.” ? The Internet Archive “Wayback Machine” (www.archive.org) offers 30 billion web pages archived from 1996 to the present. It contains approximately 1 petabyte of data and is currently growing at a rate of 20 terabytes per month. The site notes, “This eclipses the amount of text contained in the world’s largest libraries, including the Library of Congress. If you tried to place the entire contents of the archive onto floppy disks… and laid them end to end, it would stretch from New York, past Los Angeles, and halfway to Hawaii.”

• Mr Ben Compaine

• Mr Geneva Overholser
  Read statement

  Testimony

  Mr Geneva Overholser

  Good morning, and thank you for this opportunity. It is an honor to be with you. I would like to make one primary point: The story of media in our country today is very much like the story of the American diet: We have more different kinds of food than ever, more widely available. Yet many Americans are failing to get adequate nutrients, even as we grow ever fatter. We are overfed, but we are undernourished. The same is true of media. There are ever more numerous ways to get information, but that is a very different thing from having an improved media diet. We are bombarded with information, but we are starving for journalism. It is journalism I hope this committee will concern itself with: the original production of content serving the public interest. This is expensive to produce, and it is produced only by owners who believe it worth investing in. Those owners are in decreasing supply. They are disappearing in large part because media company owners find themselves compelled to return profits few other industries can dream of. As longtime editor Harold Evans has put it, media companies are not having trouble staying in business. They are having trouble staying in journalism. The FCC has it in its hands to make matters worse by enabling media owners to take their companies still further from the concerns and needs of local citizens. I doubt that I need to prove to this of all groups that the presence of greater numbers of media outlets has not ensured improved media performance. Certainly the public thinks it has not. A new Gallup Poll found media credibility at its lowest point in decades. Fifty-five percent of respondents said they have either “not very much” confidence or “none at all” in the media’s fairness and accuracy. Nor do my colleagues in the academy report improved media performance. Again and again they find that straight news content has given way to celebrity and crime news. Stories with public-policy content decrease; conflict and sensation take their place. These trends hold across all media, in no small part because the new kinds of stories are far cheaper to produce. Now that the business of media is increasingly business, rather than news, cuts in newsgathering staff have become the norm – especially in television and radio and newsmagazines, but also in newspapers. There is a burgeoning of media outlets, but a constricting of journalism: As the report on the State of the News Media 2004 put it: “Much of the new investment in journalism today – much of the information revolution generally – is in disseminating the news, not in collecting it.” I am here to speak specifically about newspapers, whose decline in importance is GREATLY overstated. Newspapers continue to be important, first, in numbers of readers. On any given Super Bowl Sunday, more Americans read their Sunday paper than watch the game. I hear little talk of football’s demise. Newspapers continue to be important, too, in the influential role they play in citizens’ lives. A Consumers Union study this year found that Americans rely on newspapers much more than other media for local news and information. Finally, newspapers influence other media to a substantial degree because of the size of their newsgathering resources. Yet newspapers are undergoing great strains due to the pressure of maintaining high profit margins, which necessitate short-term business focus. As one observer has said, being a cash cow IS a strategy. Not only do we see lower-quality news, but we see companies unwilling to serve customers in whom advertisers have no interest. The F.C.C. is in a position to keep this situation from worsening. Newspaper companies are already reducing competition in communities across the country by what they call “clustering” – buying newspapers in adjoining markets, cutting their costs and doing away with previously independent voices – and newsrooms. The companies that own newspapers (and often other media, of course) do not need our assistance to further increase the returns to their mostly institutional investors while reducing the number of newsrooms and newsgatherers in any given town. Yet this is precisely what happens with greater consolidation. Let me say a word here about this gift of synergy that we will supposedly derive from so-called “convergence” of media. Convergence is indeed likely to be good for media business, but it is almost sure to be bad for journalism. Far from increasing the amount or quality of the newsgathering, convergence provides additional means of distribution. There is nothing wrong with that per se. But consider: You have a bloc of reporting by reporter A, who spends a given amount of time producing that reporting and a given amount of time putting it together for his newspaper. Now his employer asks him to disseminate the same report on the radio, on the Internet and on television. How much time does each new method of delivery require from him? Even if it’s only half an hour, that’s an hour and a half less time each day spent on reporting. And if you think companies will increase the staff to compensate for this loss in reporting time, I have many a story to share with you. The temptation to drop these savings to the bottom line is simply too great. My view is that diversity of ownership is important. We have fine newspapers from privately owned companies and fine newspapers from publicly held companies -- and bad newspapers from both as well. But there is a long-term trend toward disinvestment in journalism that needs addressing in every possible way. I welcome all models of ownership, from the few independent family owned papers remaining to institutional ownership such as the St. Petersburg Times enjoys, to nonprofit media such as NPR to foundation-supported investigative reporting like the Center for Public Integrity. I believe that a wide range of media will serve the public best, and I welcome the democratization we see with the proliferation of outlets on the Web. But we should be under no illusion about what media, by and large, are producing substantial, responsible, thorough, digging, edited news reports: Newspapers. Every time they are combined with a local television station, there is at the least one less TV reporter who might actually spy a story the profit-pressured newsroom did not. That means fewer nutrients into the local media diet. And when the newspaper and the broadcast outlets and the Web all join into one report, what values are likely to prevail? As Robert Haiman of the Poynter Institute put it, “There is going to be a tremendous clash of values – the journalism values of newspapers, the entertainment values of television and the no-holds-barred, raw, unedited, anarchic values of the Internet.” Let’s guess how likely it is that the values of journalism will win. I leave you with this thought: We have plenty of media today. We have an ever-declining supply of journalism. I ask you to keep that distinction in mind in the decisions before you. Thank you.

• Mr Edwin C. Baker
  Read statement

  Testimony

  Mr Edwin C. Baker

  Thank you. I very much appreciate the opportunity to testify today. The 3rd Circuit recently, I believe correctly, found that last year’s FCC order loosening limits on media concentration was inconsistent with the evidence, patently unreasonable, and internally and logically inconsistent. On that basis the 3rd Circuit stayed the FCC order and remanded to the FCC to come up with a more reasoned result or a better supported and reasoned explanation for its action. In itself, this 3rd Circuit decision creates no need for Congressional action. Still, I will outline four reasons why legal restricts on media concentration are vitally important in a democracy. If you agree, Congress could take steps that would give useful guidance to the FCC as it responds to the 3rd Circuit. First, the single most important reason to resist concentration of media ownership is a value judgment. True democracy implies as wide as practical a dispersal of power within public discourse. Diversity of ownership ought to be furthered by trying to assure that diverse sorts of people own or control media entities, an aim that the 3rd Circuit noted the FCC abandoned when it scrapped its only policy fostering minority televison ownership. Dispersal of ownership not only may empirically promote diverse content. More importantly, dispersal directly creates a fairer, more democratic allocation of communicative power. This distributive value, I suggest, was probably the single most significant consideration that prompted nearly two million people to write, petition, or email the FCC in opposition to reducing restrictions on concentration. Of course, value judgments are not matter of empirical investigation. Rather, without more, this provides a proper basis to impose any limit on media mergers and any policy designed to increase the number of separate owners of media entities. The Supreme Court approved the propriety of essentially this value judgment when it held that strict limits on media cross-ownership was appropriate to prevent an “undue concentration of economic power” in the communications realm. Second, the widest possible dispersal of media ownership provides two safeguards of inestimable democratic significance. Concentrated ownership creates the possibility of individual decision-maker exercising enormous unchecked, undemocratic potentially irresponsible power in whatever local, state, or national community in which the media is concentrated. Although this power may seldom be exercised, no democracy should risk the danger. Dispersal of ownership is the structural method to prevent this potential “Berlusconi” effect. Dispersal also increases safety by increasing the number of ultimate decision makers who have the power to commit journalistic resources to exposing government or corporate corruption or identifying other societal problems. As a former FCC, echoing the Supreme Court judgment noted above put it 35 years ago: “A proper objective is the maximum diversity of ownership... We are of the view that 60 different licensees are more desirable than 50, and even that 51 are more desirable than 50.... It might be the 51st licensee that would become the communication channel for a solution to a severe social crisis.” Third, is a largely economic argument that I develop in material submited along with my testimony. Economic theory predicts that media markets will radically fail to provide people with the media content they want. Two facts are important here. First, one reason media entities fail to provide what people want relates to what economists call externalities, both positive and negative. For example, if many non-readers of a newspaper benefit by the papers’ high quality investigative journalism that deters or exposes corruption, those benefits to the public do not provide revenue to the paper so it has to little profit-based incentive to produce good journalism. Second, successful media entities tend to have particularly high operating profits. In this context, the policy goal ought to be placing ownership in the hands of people most likely to devote a large portion of the media entities’ potentially high operating profits to providing better journalistic products rather than trying to maximize net profits. Sociologically, both high and mid-level executives of publicly traded large media companies predictably measure their success largely by how much profit they produce. In contrast, smaller, more local, more family based entities often identify with the quality of their journalistic efforts and their service to their communities. In any event, the undesirable focus on profit-maximiation is exacerbated by mergers. The purchaser most willing and able to capitalize the most potential profits of the purchased entity is able to make the high bid. But this locks in the purchaser to trying to maximize profits. In contrast, the original owner could choose to use that potential income to provide better quality products – hirer more journalists, provide more investigative journalism and more hard news. Fouth is a subtle point that must be put somewhat delicately. The content of idea legislative policy involving the media is debatable. However, if the country allows a few media entities to become too powerful, the likelihood diminishes that subsequent debates and legislative decisions will reflect members of Congress informed and thoughtful evaluation of the public interest. Rather, it becomes increasing likely that the economic interests (or ideological interests, as we see in Italy) of these huge media corporations will be able to largely control the political debate and political outcomes. *************** The 3rd Circuit rightly recognized that the FCC had not logically explained or justified its order. The FCC abandons logic and reality when it treats the Dutchess County Community College’s tv station as the equivalent in the communications realm of an ABC television station in NYC and more significant than the NY Times combined with the Times’ local radio station. Now the FCC must respond to the 3rd Circuit by showing that any rule changes are based on a realistic empirical industry analysis that takes account of market shares and actual industry conditions or, as I suggested, it could justify its position on defensible and consistent normative judgments. Congress can allow this process to run its course. Still, if you agreed with my arguments about media ownership, Congress could take actions to give the FCC greater guidance. I will put aside my own view of an ideal legislative policy concerning media ownership. Rather, I mention two moderate steps that you could make. First, by resolution, Congress could indicate its view that the public interest requires the FCC to seek to prevent excessive power due to ownership in any portion of the communications order and to try to promote the maximum feasible dispersal of ownership consistent with economic viability and quality media performance. Second, Congress could find, as the FCC once did, that cross-ownership of different sorts of media serving a single community – a newspaper/broadcasting combination, for example – creates unnecessary and potentially excessive power within local media systems. On this basis, Congress could prohibit such cross-ownership except where the FCC found them to be necessary for multi-media service to be economically feasible. I want to end by saying that, although the forms of democracy will survive, the quality, capacities, and wisdom of democracy are at stake in the political decisions that determine the structure of communication order, especially the decisions concerning the structural distribution of ownership and control over the mass media.