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More Change for Radio Ownership Rules?

Subcaps are debated, while clamor for more ownership diversity draws attention    

Jessica Rosenworcel, now acting chairwoman of the FCC, is shown at a Senate committee hearing in 2018.
Jessica Rosenworcel, now acting chairwoman of the FCC, is shown at a Senate committee hearing in 2018. (Andrew Harrer/Bloomberg via Getty Images)

As the autumn of 2021 began, the FCC has been drawing closer to concluding its 2018 quadrennial review of media ownership rules.

The commission, now headed by Acting Chairwoman Jessica Rosenworcel, recently collected fresh comments from broadcasters and other interested parties.

Observers are watching to see if the FCC — under a Democratic president, but still lacking a full-time chairperson or a Democratic majority — will relax radio’s local common ownership rules. Those limit how many radio stations a company can own in a given market and how many of those can be in one service (meaning AM or FM, though raising limits on FM is the focus for most companies).

Broadcasters are not speaking with one voice on this question.

The largest radio broadcast group thinks lifting FM subcaps could devastate the AM band. Numerous other ownership groups say the FCC should ditch all ownership caps altogether except perhaps in the biggest markets.

Meanwhile some members of Congress have been pushing the FCC to do more to encourage minority ownership, a consideration that may influence its decision on ownership limits.

Drop the “fiction”

At the center of debate is a proposal from the National Association of Broadcasters to raise the FM limits and base the system on market size.

At present, in a market with 45+ radio stations, an entity may own eight, and no more than five in one service (AM or FM). In a market with 30–44 stations, an entity may own seven, and no more than four per service. In a market with 15–29, an entity may own six, no more than four in a service. And in a market with 14 or fewer, an entity may own five, and no more than three in a service, as long as it does not own more than half of the stations in the market.

But NAB has put forward the following proposal:

In Nielsen markets No. 1 through 75, it suggests that one entity be allowed to own as many as eight commercial FM stations — or 10 if the broadcaster is involved in the FCC’s incubator program to promote new and diverse owner entrants.

In markets 76 and smaller as well as in unrated markets, the NAB continues, there should be no cap on FM ownership at all; so one company could own all the FMs there.

And on the AM band, it says, companies also should face no cap in a given market.

The NAB made these recommendations in 2019 as part of the FCC’s 2018 pending quadrennial review process.

“These outdated media ownership rules, which no longer enable broadcasters to viably operate in a competitive market or effectively serve the public interest, are in more urgent need of reform than ever,” NAB said in its most recent filing.

In assessing competition, the NAB commented, the FCC can no longer maintain the “fiction” that broadcast stations compete only against other broadcast stations.

“The record compiled in 2019 showed that broadcasters compete against myriad traditional and digital platforms for both audiences and ad revenue,” NAB argues.

It cited data that shows consumers are acquiring more smart devices, from phones to watches to speakers, and that record numbers are streaming audio, paying for subscription music services and listening to podcasts. Those trends continue to fragment what once was a mass audience for AM/FM terrestrial radio.

A group of 10 broadcasters filing jointly, including Townsquare Media, Connoisseur Media and Midwest Communications, believe the decades-old rules hamper local radio broadcasters in competing for audience and advertisers against growing competitive threats from global tech companies. They asked the FCC to do away completely with all caps in all but the largest markets.

“As shown in earlier filings in this proceeding by the Joint Commenters and the NAB, particularly outside the top markets, there simply is no reason to retain ownership caps given the inconsequential share of the media market that these stations enjoy,” they wrote.

The joint filers continued: “To think that a radio company owning a sixth or seventh FM station in a big market, or even all the radio stations in a smaller market, will damage competition or harm the public interest is to ignore reality.”

Regulations adopted in a pre-digital world prior to 1996, they said, are outdated and “make no sense in today’s competitive media environment.” Therefore, “there simply is no reason to retain ownership caps given the inconsequential share of the media market that these stations enjoy.”

“Moderate” approach

However, industry biggie iHeartMedia is asking for a “targeted, moderate approach” to changing the rules. Notably, it thinks the NAB proposal could cause “potentially catastrophic harm” to owners of AM stations.

iHeartMedia has said on several occasions that relaxing current limits on FM ownership could lead to further devaluation of AM stations and hurt those owners, including women and minorities, by destroying the financial value of AM assets.

In its most recent comments, iHeartMedia wrote: “The commission should adopt a targeted, moderate approach to reforming the local radio ownership rules by eliminating only the limits on AM stations while retaining the current limits on FM stations. Doing so will avoid the potentially catastrophic harm that could befall AM stations were the commission to adopt the NAB proposal to deregulate substantially the FM band.

“Moreover, by maintaining the current FM subcap limits, the commission will ensure that the financial incentives essential to the success of the Incubator Program remain in place. The commission should be guided by the overarching principle of doing no harm.”

Salem Media Group, which owns and operates approximately 100 stations, has made similar arguments: “If the AM band ceases to be the destination for popular programming, AM traffic will greatly diminish and the value of AM radio will collapse,” it wrote.

The FCC “has spent considerable time and energy to revive AM radio, but doing away with subcaps cannot possibly further that end. Using great care and restraint on subcaps is critical,” Salem told the commission.

Some advocacy groups have been critical of the FCC’s handling of the issue and say arguments for relaxing the limits are not supported by facts.

The National Association of Black Owned Broadcasters (NABOB) believes any move by the FCC to relax the limits on local radio ownership would increase consolidation and have a significant negative impact on African Americans and other minority station owners and entrepreneurs.

President Jim Winston said in a statement: “The reasons given for eliminating or radically relaxing the commission’s local radio ownership rule are not adequate to justify increased consolidation of ownership in local radio markets. The AM radio industry would be greatly injured by the proposals that have been put forth.”

The Multicultural Media, Telecom and Internet Council (MMTC) says the FCC should keep the status quo for now and said relaxing the limits “would disadvantage more minority broadcasters” in the United States.

“Increased consolidation is not a fix for low minority ownership in broadcast,” MMTC wrote. “And adopting the NAB proposal would in essence deregulate the FM band.”

The MMTC points to data from the FCC’s latest ownership report, released in September, which shows only 2% of commercial FM radio stations and 3.3% of AM stations are majority black-owned.

“Minority and women-owned broadcast ownership is embarrassingly low,” MMTC commented. “New voices — not increased consolidation, less new entry and less minority ownership — are the answers to local advertising competition from Facebook and Google.”

Nonpartisan advocacy group Free Press told the FCC the “lack of ownership diversity” is the reason current limits must remain and offered advice to the FCC.

“As it prepares for the next quadrennial review in 2022, the commission should conduct a thorough analysis assessing the policies and market structures that are more likely to foster ownership by women and people of color, and before undertaking any rule changes should first analyze how such decisions will impact broadcast ownership diversity,” Free Press wrote.

In addition, it urges the FCC to close “loopholes” in its rules that allow owners to operate more stations than they’re allowed under dubious operating agreements.

“Consolidation has contributed to an ongoing pattern of big broadcasters transitioning resources away from low-income communities, rural areas and communities of color, and allocating them predominantly to white, wealthy and urban areas,” Free Press stated.

The FCC is facing fresh pressure to investigate how its policies have influenced a shrinking pool of minority media owners. Twenty-five members of Congress signed a letter sent to Acting Chairwoman Jessica Rosenworcel in June requesting that the FCC examine how its decisions and programs have disproportionately harmed African Americans and other minorities.

In September, Rosenworcel, commenting on the ownership report, said: “As has been the case for too long, this data makes clear that women and people of color are underrepresented in license ownership. This requires attention because what we see and hear over the public airwaves says so much about who we are as individuals, as communities, and as a nation.  However, changes in the law, technology and court decisions like FCC v. Prometheus Radio Project make addressing this complex.”

(In 2017 the FCC adopted rules to abolish bans on newspaper/broadcast and radio/TV cross ownership and to relax several local TV ownership regulations; but those changes were held up by a legal challenge from Prometheus Radio and other critics. A Supreme Court decision this year reversed a lower court’s ruling and reinstated the 2017 FCC media ownership rules.)

She concluded: “There is much to consider to encourage more diversity in this market, including reinstatement of the Minority Tax Certificate Program.”