Media Giants Have a Pal at the FCC

Published on January 25, 2001 in Newsday

All you need to know about Michael Powell, whom President George W. Bush promoted this week to chairman of the Federal Communications Commission, can be summed up by the statements of close FCC watchers.

“He’s a listener, an advocate, an effective policymaker,” said one.

“Michael Powell has demonstrated a keen intellect and a firm grasp on public policy issues,” said another. “It’s rare that you have somebody in public office who is so favorably regarded by all constituencies and competing industries,” added yet a third person.

Wow. This guy Michael Powell must be hot stuff, right? Wrong. The three quotes come from Gary Lytle, Eddie Fritts and Robert Sachs, the heads of the trade associations for the “Bell” telephone companies, commercial broadcasters and the cable television industry, respectively. These are the very industries Powell is commissioned to regulate in the public interest. They love Powell for a reason. He has a record of advancing their interests, not ours.

And, as a result of Powell’s tenure, their firms will grow much larger, much more powerful and much more profitable and operate in less competitive markets. It will be bad news for democracy.

Most Americans don’t know much about the FCC or what it does, but it is very important to setting the ground rules for the media and communications industries.

Radio, television and cable companies do not operate in traditional markets, where anyone with enough cash can enter. These are businesses built on government-granted monopoly rights to valuable broadcast frequencies, or local telephone or cable-TV monopolies. When the government awards licenses for these services, it isn’t setting the terms of competition—it is picking the winners.

That’s why these industries have such huge lobbies to make sure the politicians and regulators keep doling out the goodies to them. That’s why, in theory, the FCC sets conditions for these companies. If these firms are going to have semi-monopolistic licenses that make it possible for them to make piles of money, they should be required to serve the public interest.

Powell, who has been an FCC commissioner since 1997, doesn’t believe in that deal. He believes these firms should be “deregulated” and permitted to respond exclusively to market forces—that is, to exploit their status to rake in as much money as possible. Powell also is a fan of scrapping limitations on how much these companies can own and how big they can get. Powell claims that this will bring more competition to their industries, and that will make media more responsive to public concerns.

But all the evidence of ownership deregulation in communications over the past five years repeatedly shows the exact opposite. Radio ownership was relaxed in 1996, and since then over half the stations have been sold and the industry has been consolidated into the hands of a few giants, each owning hundreds of stations.

That’s great for those firms, but bad for the rest of us as we are increasingly subjected to standardized commercial radio fare marinated in advertising. Telephone companies have been freed to merge, too, since 1996, and the number of players has fallen in half. And complaints about lousy telephone service have skyrocketed in the past four years.

Let’s face it, if deregulation actually produced more bona fide competition, these firms would hate it. But it doesn’t, so they love it.

But don’t confuse Powell with the facts. “The oppressor here is regulation,” Powell recently told a conservative think tank forum. “We must foster competitive markets, unencumbered by intrusions and distortions from inept regulations.” This is the sort of drivel that gets corporate CEOs high-fiving each other in the aisles, as the government then hands the keys to the kingdom over to them.

Don’t for a second think that Powell wants real competition, real media diversity, any more than his corporate paymasters. In the past year, he opposed the FCC’s own cautious plan to open up radio to 1,000 low-power radio broadcasters to be operated by nonprofit groups. The proposal was opposed by the commercial giants who fear new competition for “their” listeners.

He also opposed setting conditions to the AOL-Time Warner deal, which created the largest media firm on Earth.

The AOL-Time Warner merger deliberations should have embarrassed Powell.

His father, Colin Powell, owns about $6 million in AOL stock. But by today’s standards of corruption, this barely registers a blip on the radar. So Powell did not recuse himself, and he strongly advocated the case for the company in which his inheritance is located.

Powell, like President Bush, has indicated he wishes to eliminate the few remaining ownership restrictions on broadcasters. The rule limiting companies to having TV stations in no more than one-third the nation is soon to be relaxed or eliminated. The prohibition on owning multiple TV stations in the same market, or a newspaper and TV station in the same town, also are possible casualties of this deregulatory jihad.

The net result will be a tidal wave of mergers and consolidation in the media industries that will make the last five years look like a stroll in the park.

Look for most of the few remaining newspaper companies and cable companies to become part of the huge media conglomerates like AOL-Time Warner, Disney, Viacom and News Corp. that already own all the major movie studios, all the TV networks, all the music companies, most of the cable-TV channels, and much, much more.

Needless to say, such a concentration of media power into so few hands violates every known theory of a free marketplace of ideas in a liberal democracy. But who has time for that mumbo jumbo when there is good money to be made? So it will be party time on Wall Street for Goldman Sachs and the other investment bankers who put together these deals. George W. Bush’s 2004 campaign coffers will be stuffed with tens of millions of dollars from the firms who benefit by these policies. And Michael Powell will have assured himself a long and lucrative career in the private sector upon leaving the FCC.