15.2 Government Regulation of Media

Federal Communications Commission

Since its creation by the Communications Act in 1934, the FCC has been “charged with regulating interstate and international communications by radio, television, wire, satellite and cable (Federal Communications Commission).” Part of the New Deal—President Franklin D. Roosevelt’s Great Depression–era suite of federal programs and agencies—the commission worked to establish “a rapid, efficient, Nation-wide, and world-wide wire and radio communication service (Museum of Broadcast Communications).”

The FCC has broad responsibilities, and throughout its long history the agency has enforced several laws that regulate media. A selection of these laws include the 1941 National TV Ownership Rule, which states that a broadcaster cannot own television stations that reach more than 35 percent of the nation’s homes; the 1970 Radio/TV Cross-Ownership Restriction, which prohibits a broadcaster from owning a radio station and a TV station in the same market; and the 1975 Newspaper/Broadcast Cross-Ownership Prohibition, which discourages ownership of a newspaper and a TV station in the same market (PBS, 2004).

Regulation Today

Today, the FCC continues to hold the primary responsibility for regulating media outlets, with the FTC taking on a smaller role. Although each commission holds different roles and duties, the overall purpose of governmental control remains to establish and bring order to the media industry while ensuring the promulgation of the public good. This section examines the modern duties of both commissions.

The Structure and Purposes of the FCC

The FCC contains three major divisions: broadcast, telegraph, and telephone. Within these branches, subdivisions allow the agency to more efficiently carry out its tasks. Presently, the FCC houses seven operating bureaus and 10 staff offices. Although the bureaus and offices have varying specialties, the bureaus’ general responsibilities include “processing applications for licenses and other filings; analyzing complaints; conducting investigations; developing and implementing regulatory programs; and taking part in hearings (Federal Communications Commission).” These key bureaus include the Media Bureau, the Wireline Competition Bureau, the Wireless Telecommunications Bureau, and the International Bureau.

The Media Bureau oversees licensing and regulation of broadcasting services. Specifically, the Media Bureau “develops, recommends and administers the policy and licensing programs relating to electronic media, including cable television, broadcast television, and radio in the United States and its territories (Federal Communications Commission).” Because it aids the FCC in its decisions to grant or withhold licenses from broadcast stations, the Media Bureau plays a particularly important role within the organization. They base such decisions on the “commission’s own evaluation of whether the station has served in the public interest,” and come primarily from the Media Bureau’s recommendations.

The Media Bureau has guided rulings on children’s programming and mandatory closed captioning.

The Wireline Competition Bureau (WCB) concerns itself with “rules and policies concerning telephone companies that provide interstate—and, under certain circumstances, intrastate—telecommunications services to the public through the use of wire-based transmission facilities (i.e. corded/cordless telephones) (Federal Communications Commission).” Despite the increasing market for wireless-based communications in the United States, the WCB maintains its large presence in the FCC by “ensuring choice, opportunity, and fairness in the development of wireline telecommunications services and markets (Federal Communications Commission).” In addition to this primary goal, the bureau’s objectives include “developing deregulatory initiatives; promoting economically efficient investment in wireline telecommunications services; and fostering economic growth (Federal Communications Commission).” The WCB ruled against Comcast regarding blocked online content to the public, causing many to question the amount of authority that the government has over the public and big businesses.

The Wireless Telecommunications Bureau (WTB) represents another prominent bureau within the FCC. The rough counterpart of the WCB, this bureau oversees mobile phones, pagers, and two-way radios, handling “all FCC domestic wireless telecommunications programs and policies, except those involving public safety, satellite communications or broadcasting, including licensing, enforcement, and regulatory functions (Federal Communications Commission).” The WTB balances the expansion and limitation of wireless networks, registers antenna and broadband use, and manages the radio frequencies for airplane, ship, and land communication. As U.S. wireless communication continues to grow, this bureau seems likely to continue to increase in both scope and importance.

Finally, the International Bureau represents the FCC in all satellite and international matters. A larger organization, the International Bureau attempts to “connect the globe for the good of consumers through prompt authorizations, innovative spectrum management and responsible global leadership (Federal Communications Commission).” To avoid international interference, the International Bureau coordinates with partners around the globe regarding frequency allocation and orbital assignments. It also concerns itself with foreign investment in the United States, ruling that outside governments, individuals, or corporations cannot own more than 20 percent of the stock in a U.S. broadcast, telephone, or radio company.

The Structure and Purposes of the FTC

Although the FCC provides most of the nation’s media regulations, the FTC also has a hand in the media industry. As previously discussed, the FTC primarily dedicates itself to eliminating unfair business practices; however, in the course of those duties, it has limited contact with media outlets.

The National Do Not Call Registry demonstrates an example of the FTC’s media regulatory responsibility. In 2004, the agency created this registry to prevent most telemarketing phone calls, exempting such groups as nonprofit charities and businesses with which a consumer has an existing relationship. Although originally intended for landline phones, the Do Not Call Registry allows individuals to register wireless telephones along with traditional wire-based numbers.

Role of Antitrust Legislation

As discussed in Chapter 13 “Economics  of Mass Media”, the federal government has long regulated companies’ business practices. Over the years, the government has passed several antitrust acts passed into law that discourage the formation of monopolies.

During the 1880s, Standard Oil started the practice of forming a trust (a unit of business made up of a board of trustees, formed to monopolize an industry), an “arrangement by which stockholders…transferred their shares to a single set of trustees (Our Documents, 1890).” With corporate trustees receiving profits from the component companies, Standard Oil functioned as a monopoly (a business that economically controls a product or a service). The enactment of the Sherman Antitrust Act in 1890 dissolved trusts such as these. The Act stated that any combination “in the form of trust or otherwise that was in restraint of trade or commerce among the several states, or with foreign nations” conducts business illegally (Our Documents, 1890).

The Sherman Antitrust Act served as a precedent for future antitrust regulation. As discussed in Chapter 13 “Economics of Mass  Media”, the 1914 Clayton Antitrust Act and the 1950 Celler-Kefauver Act expanded on the principles laid out in the Sherman Act.  The Clayton Act helped establish the foundation for many of today’s business and media competition regulatory practices. Although the Sherman Act established regulations in the United States, the Clayton Act further developed the rules surrounding antitrust, giving businesses a “fair warning” about the dangers of anticompetitive practice (Gongol, 2005). Specifically, the Clayton Act prohibits actions that may “substantially lessen competition or tend to create a monopoly in any line of commerce (Gongol, 2005).”

The Clayton Act had a problem. While it prohibited mergers, it offered a loophole in that companies could buy individual assets of competitors (such as stocks or patents), which could still lead to monopolies. Established in 1950 and often referred to as the Antimerger Act, the Cellar-Kefauver Act closed that loophole by giving the government the power to stop vertical mergers. (Vertical mergers happen when two companies in the same business but on different levels—such as a tire company and a car company—combine.) The act also banned asset acquisitions that reduced competition (Financial Dictionary).

These laws reflected growing concerns in the early and mid-20th century that the trend toward monopolization could lead to the extinction of competition. Government regulation of businesses increased until the 1980s, when the United States experienced a shift in mind-set and citizens called for less governmental power. The U.S. government responded as deregulation became the norm.

Move Toward Deregulation

Media deregulation began during the 1970s as the FCC shifted its approach to radio and television regulation. Begun as a way of clearing laws to make the FCC run more efficiently and cost-effectively, deregulation truly took off with the arrival of the Reagan administration and its new FCC chairman, Mark Fowler, in 1981. The FCC began overturning existing rules and experienced “an overall reduction in FCC oversight of station and network operations (Museum of Broadcast Communications).” Between 1981 and 1985, lawmakers dramatically altered laws and regulations to give more power to media licensees and to reduce that of the FCC. They expanded television licenses from three years to five, and corporations could own up to 12 separate TV stations.

The shift in regulatory control had a powerful effect on the media landscape. Whereas initially, laws had prohibited companies from owning media entities in more than one medium, consolidation created large mass-media companies that increasingly dominated the U.S. media system. Before the increase in deregulation, eight major companies controlled all phone services in different regions of the United States. Today, however, only four remain (Kimmelman ). Companies such as Viacom and Disney own television stations, record companies, and magazines. Bertelsmann alone owns more than 30 radio stations, 280 publishing outlets, and 15 record companies (Columbia Journalism Review).  Due to this rapid consolidation, Congress grew concerned about the costs of deregulation, and by the late 1980s, it began to slow the FCC’s release of control.

Today, deregulation remains a hotly debated topic. Some favor deregulation, believing that the public benefits from less governmental control. Others, however, argue that excessive consolidation of media ownership threatens the system of checks and balances. It remains likely that regulation of media will ebb and flow over the years, as it has since regulation first came into practice.