During the radio industry's infancy, the Secretary of Commerce and Labor issued licenses to broadcasters by authority of the Radio Act of 1912.⁽¹⁾ Although the Act's drafters established the licensing scheme, they did not authorize the Secretary to reject license applications under the Act because they failed to anticipate the need to ration radio spectrum.⁽²⁾ Consequently, the ensuing unregulated growth in radio stations, and broadcasters' self-help efforts to improve their signals by switching frequencies created intolerable interference. The resulting chaos prompted then Commerce Secretary Herbert Hoover to convene four annual conferences of radio industry representatives to encourage them to undertake self-regulation.⁽³⁾

In addition, grave concerns arose about monopolization of the airwaves by a consortium of vertically integrated companies. Consortium members General Electric, its RCA subsidiary, and Westinghouse controlled radio equipment manufacturing, while AT&T and Western Electric dominated transmitter equipment production and message transmission. Together, these companies controlled 70 of the 89 radio wavelengths available at the time.⁽⁴⁾ Commerce Secretary Hoover expressing his concerns at a radio conference meeting contended,

[I]t cannot be thought that any single person or group shall ever have the right to determine what communication may be made to the American people. . . We cannot allow any single person or group to place themselves in the position where they can censor the material which shall be broadcasted to the public.⁽⁵⁾

Congress reacted by passing the Radio Act of 1927, which established a temporary Federal Radio Commission (FRC) to implement a more stringent licensing scheme and to take actions as the "public convenience, interest, and necessity requires."⁽⁶⁾ Accordingly, the FRC awarded licenses as a "privilege" to those it deemed qualified to serve as "public trustees" of the Nation's scarce spectrum resources.⁽⁷⁾ Several years later, Congress enacted the Communications Act of 1934, the goal of which was "to make available, so far as possible, to all people of the United States a rapid, efficient, nation-wide, and world-wide radio communications service."⁽⁸⁾ The 1934 Act essentially

consolidated the licensing authority and industry oversight of the Secretary of Commerce and FRC in a successor agency, the Federal Communications Commission.⁽⁹⁾

As the new Commission developed broadcast regulations, it also began expressly articulating the industry's responsibility for presenting the voices of the Nation's previously unheard citizens. It issued in 1946 a staff report titled, Public Service Responsibility of Licensees, popularly known as the "Blue Book." In attempting to clarify the Commission's view of the public interest standard, staff wrote:

It has long been an established policy of broadcasters. . . and the [Federal Communications] Commission that the American system of broadcasting must serve significant minorities among our population.⁽¹⁰⁾

Despite the "long established" policy described in the Blue Book, broadcasters were not including minority viewpoints and ideas among those it aired to the public.

Within three years, however, two African Americans would rectify the absence of minority voices on the airwaves. In 1949, Jesse B. Blayton purchased all of the common stock of Radio Atlanta, which owned WERD.⁽¹¹⁾ The same year, Andrew "Skip" Carter acquired a license with the help of Kansas Governor Alf Landon who had read Carter's letter in "Broadcasting Magazine" challenging the FCC to issue him a license. Governor Landon also gave Mr. Carter an old radio transmitter, which he repaired, thus enabling KPRS-AM to begin broadcasting a year later.⁽¹²⁾

After almost twenty years of holding comparative hearings to select among mutually exclusive applications to award broadcast licenses, the Commission announced its 1965 Policy Statement on Comparative Broadcasting Hearings. There it reiterated:

Diversification of control is a public good in a free society, and is additionally desirable where a government licensing system limits access by the public to the use of radio and television facilities.⁽¹³⁾

The Commission justified the policy statement in part on the importance of radio and television stations in providing the public's news and opinions and on the need for the government to avoid concentrating station ownership in a few hands. It noted also the United States Supreme Court's observation that the First Amendment of the Constitution "rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public."⁽¹⁴⁾ Consequently, the Commission listed criteria by which it would evaluate competing applicants in comparative hearings. The criteria included diversification of control of mass media,

an owner's full time participation in station operations, the proposed program service, and the applicant's past broadcast record, among other factors.⁽¹⁵⁾

The year the statement issued, Comint Corporation sought to use it to obtain comparative credit for minority ownership. The Comint applicant group, which included two African-American owners with a combined 14 percent interest, filed for a television license in a community with 25 percent minority population. The Commission refused, however, to consider race as a factor in comparative hearings, stating "[B]lack ownership cannot and should not be an independent comparative factor."⁽¹⁶⁾

Following the racial unrest in 1967, the Kerner Commission appointed by President Lyndon Johnson issued a report identifying reasons for the disturbances and recommending measures to prevent their recurrence. The Kerner Commission Report of the National Advisory Committee on Civil Disorder among other things, criticized the media's failure to cover or accurately portray the African American community.⁽¹⁷⁾ In response to the report's findings, the FCC imposed on licensees equal employment and reporting requirements, and prohibited employment discrimination based on race, color, religion or national origin.⁽¹⁸⁾ The Commission believed the regulations were "necessary to enable the FCC to satisfy its obligation under the Communications Act of 1934 to ensure that its licensees' programming fairly reflects the tastes and viewpoints of minority groups."⁽¹⁹⁾ It also implemented rules obligating each licensee to ascertain "the needs, interests and problems of [its]

community" and to present programming responsive to the concerns expressed by community leaders and the general public, including minorities.⁽²⁰⁾

By the time the Commission imposed the ascertainment requirements in 1971, it was clear that underrepresentation of minorities in broadcasting was an intractable problem. That year, minorities owned only ten of the Nation's approximately 7500 radio station licenses,⁽²¹⁾ although more than twenty years earlier two African Americans had received the first licenses granted to minorities.⁽²²⁾ In 1973, the Commission awarded the first television construction permit to a minority-owned business for WGPR-TV, Channel 62 in Detroit.⁽²³⁾

Decisions of the D.C. Circuit Court of Appeals during the mid-1970s reflected an understanding that direct Commission action was necessary to promote viewpoint diversity through minority broadcast ownership. Therefore, the court's rulings helped elucidate the rationale for the Commission's authority to pursue the policy goal. The court advised the Commission to make public interest determinations that would support "certify[ing] as licensees those who would speak out with a fresh voice, (which) would most naturally initiate, encourage and expand diversity of approach and viewpoint."⁽²⁴⁾ In the court's view, broadcast ownership opportunities for previously excluded minorities could augment the public's access to a variety of opinions and ideas. A few years later, in its review of Comint's appeal of the FCC's decision to disallow comparative credit for minority ownership, the appeals court ruled minority applicants should receive additional merit consideration "when minority ownership is likely to increase the diversity of content, especially of opinion and view point."⁽²⁵⁾ Finally, the court rejected arguments suggesting any broadcaster was capable of presenting minorities' views, stating "[i]t is upon ownership that public policy places primary reliance upon diversification of content; and that historically has proven to be significantly influential with respect to editorial comment and the presentation of news."⁽²⁶⁾

The Commission held a conference on minority broadcast ownership on April 25-26, 1977. A conference report by the Commission's Minority Ownership Task Force stated:

Acute underrepresentation of minorities among the owners of broadcast properties is troublesome because it is the licensee who is ultimately responsible for identifying and serving the needs and interests of his or her audience. Unless minorities are encouraged to enter the mainstream of the commercial broadcasting business, a substantial proportion of our citizenry will remain underserved and the larger, non-minority audience will be deprived of the views of minorities.⁽²⁷⁾

When NTIA filed its 1978 petition urging the Commission to adopt a policy advancing opportunities for minority station ownership,⁽²⁸⁾ minority broadcasters owned a mere forty licenses, or .05 percent of the Nation's approximate 8500 radio stations.⁽²⁹⁾ Concluding the perspectives of racial minorities remained absent from broadcast programming despite equal employment and ascertainment initiatives,⁽³⁰⁾ the Commission issued a statement of its policy "commitment to increasing significantly minority ownership of broadcast facilities."⁽³¹⁾ It specifically stated an intention to issue tax certificates and approve distress sales to achieve the policy objective.

In September 1981, the Commission created an Advisory Committee comprised of representatives of the financial, telecommunications, and public and private industry sectors. The group's recommendations formed the basis of a 1982 policy statement in which the Commission reaffirmed its 1978 minority ownership policies. The Commission also extended the tax certificate and distress sale programs to include transfers to limited partnerships with minority general partners who exercised complete managerial control over station operations and owned more than 20 percent of the transferee, and to divestitures of interests in minority-controlled entities whenever the subject

transaction furthered minority ownership.⁽³²⁾ The Commission also delegated authority to the Mass Media Bureau to expedite processing and granting of distress sale petitions.⁽³³⁾

In the midst of a challenge to the Commission's female ownership preference in Steele v. FCC,⁽³⁴⁾ the agency expressed concern about the legality of both female and minority enhancement credits in comparative hearings. Several United States Supreme Court decisions on affirmative action programs implicated the Commission's race and gender preferences in comparative hearings, as well as the minority tax certificate and distress sale programs. As a result, the Commission initiated a proceeding to reexamine the programs.⁽³⁵⁾ It mailed questionnaires to all broadcast licensees requesting that they provide information about their racial and gender composition, and programming practices. Congress, however, issued a House Joint Resolution prohibiting the agency from using appropriated funds to repeal, amend or reexamine its programs to enhance mass media ownership by minorities and women.⁽³⁶⁾ Instead, the FCC sent the survey data to the Congressional Research Service (CRS) for analysis. The service issued a report tentatively concluding station ownership by a particular minority group tends to increase programming directed not only to members of that group, but also to other minorities.⁽³⁷⁾

Legislative support for minority ownership continued. Congress next directed the FCC to institute measures to increase diversification of mass media ownership in the new lottery procedure it authorized the Commission to use in awarding licenses and construction permits among competing applicants. An amended Section 309(i) of the Communications Act, which approved lotteries, stated "an additional significant preference shall be granted to any applicant controlled by a member or members of a minority group."⁽³⁸⁾ House conferees intended that the FCC extend to lotteries the minority preferences it used in comparative hearings, although not necessarily to duplicate them.⁽³⁹⁾ The Commission's lottery authorization expired on July 1, 1997, however.⁽⁴⁰⁾

A challenge to the Commission's minority enhancement credit in comparative hearings, as well as to the distress sale program, reached the United States Supreme Court in Metro Broadcasting, Inc. v. FCC.⁽⁴¹⁾ The Court, using an "intermediate scrutiny test," ruled the Commission's goal of "enhancing broadcast diversity" was an "important government objective." Such an important government interest justified the agency's use of race-based affirmative action programs to accomplish the objective even though the measures were not remedies for past discrimination. The Court relied on evidence suggesting an owner's minority status had "specific impact on the presentation of minority images in local news [in that] minority-owned stations tend to devote more news time to topics of minority interest and to avoid racial and ethnic stereotypes in portraying minorities."⁽⁴²⁾ Acknowledging differences may exist between programming by minorities and non-minorities, the Court upheld the FCC preference programs.

In 1993, a federal appeals court ruled the factors the Commission used in comparative hearings, including those related to race and gender, were "arbitrary and capricious."⁽⁴³⁾ Consequently, the Commission suspended all comparative hearings.⁽⁴⁴⁾ The same year, Congress passed an Omnibus Budget Reconciliation Act, which again amended the Commission's license award authority to add competitive bidding as a method of broadening spectrum ownership. The Act required the FCC to prescribe regulations for the new bidding process that would promote "economic

opportunity for a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women."⁽⁴⁵⁾

In the first application of its new authority, the Commission established eligibility rules for an auction of broadband Personal Communications Service (PCS) licenses for mobile telephone service. It designated spectrum in C and F blocks exclusively for "entrepreneurs" or small businesses meeting certain criteria, and allowed companies too large to qualify as bidders to hold 75 percent equity stakes in these small businesses. Additionally, the Commission awarded entrepreneurs a 10 percent bidding credit and devised an installment payment plan.⁽⁴⁶⁾ Minority and women-owned businesses received more favorable terms under the rules the Commission adopted in accordance with the Budget Act's requirement to enhance opportunities for their participation. Therefore, minorities and women bidders could have a passive, nonvoting investor contribute 49 percent of the bidder's equity. They were also eligible for a 15 percent bidding credit, tax certificates, and more liberal installment payment terms than other small businesses.⁽⁴⁷⁾

Just days before the FCC's filing deadline for C block auction applications, the Supreme Court announced in Adarand Constructors v. Pena⁽⁴⁸⁾ a strict scrutiny test to evaluate the constitutionality of government affirmative action programs. The Court held that federal race-based programs must be "narrowly tailored measures that further compelling governmental interests."⁽⁴⁹⁾ Thus, the Court in Adarand overruled the intermediate scrutiny review standard it used in Metro Broadcasting, and remanded the case to the lower court. The district court then interpreted the Supreme Court ruling as recognizing only remedying past discrimination as a compelling government interest that satisfied strict scrutiny's higher burden. Therefore, it is unclear whether the Commission's viewpoint diversity rationale for its minority and women ownership policies serve a compelling government interest.⁽⁵⁰⁾

The Commission responded quickly to the Adarand ruling by extending to all small businesses the favorable terms previously reserved for minority and women-owned firms.⁽⁵¹⁾ The appellate court in Omnipoint sustained the agency's actions, stating "the Commission, in adopting rules that eliminated race-and gender-based preferences by leveling benefits upward, did not act arbitrarily or capriciously."⁽⁵²⁾ The Commission has not, however, reinstituted special provisions to encourage minority or women-owned businesses to participate in auctions. Instead, it relies on race-

neutral rules to facilitate bidding by small businesses, including those owned by women and minorities.⁽⁵³⁾

In other efforts to maximize viewpoint diversity by increasing minority ownership, the Commission initiated a proposed rulemaking requesting comments on several suggestions. These included, among other things, a program for minorities and women that would offer incentives for mass media companies to assist new entrants; modifications of the broadcast ownership attribution rules to increase investment in minority and women-controlled properties; relaxation of station ownership limits for minorities and women; expansion of the tax certificate program to permit minorities to sell to non-minorities but reinvest proceeds in a more valuable mass media business,

and data collection on FCC broadcast ownership forms about the involvement of minorities and women.⁽⁵⁴⁾

Only a few months after the Commission announced its rule making on minority and women telecommunications ownership, Congress repealed the Commission's minority tax certificate program.⁽⁵⁵⁾ During the period between 1978 and March 1995, the Commission issued 359 tax certificates to promote minority ownership. Of these, 285 certificates involved radio station sales, 43 involved television deals, and 31 involved cable television transactions.⁽⁵⁶⁾ NTIA opposed outright abolition of the tax certificate program because it helped minorities to accumulate capital for station purchases, and would thereby increase the diversity of voices heard by the American public.⁽⁵⁷⁾ Repeal of the tax certificate and the subsequent Adarand decision greatly curtailed the Commission's ability directly to increase the variety of opinions and perspectives available to the public through mass media ownership by minorities and women.

These developments prompted the Commission to reexamine its telecommunications ownership programs for minorities and women to determine whether it has a compelling state interest under Adarand's strict scrutiny standard to justify the programs.⁽⁵⁸⁾ The Commission contracted for six studies under Section 257 of the Telecommunications Act of 1996, which obligates it to identify and remove market entry barriers for small telecommunications firms and businesses owned by minorities and women, and under Section 309(j) of the Communications Act of 1934,⁽⁵⁹⁾ which requires it to advance opportunities for minorities, women, and small businesses to participate in allocations for spectrum-based services.⁽⁶⁰⁾ The studies were designed to assess the sufficiency of viewpoint diversity and government remediation of past discrimination as compelling government interests to justify race and gender specific affirmative action programs.

One of the recently released studies⁽⁶¹⁾ probed the nexus between the race or ethnicity of broadcast owners and the programming content they provide to evaluate the viewpoint diversity rationale for race-based programs. In Diversity of Programming in the Broadcast Spectrum: Is There a Link between Owner Race or Ethnicity and News and Public Affairs Programming,⁽⁶²⁾ researchers found empirical evidence of such a link. Minority-owned radio stations and, to a lesser extent, television stations tended to select a format that appealed to a minority audience and delivered more news and public affairs programming focused on minority interests. Minority radio stations also reported more diversity among on-air talent, and greater integration and involvement of their owners in operations.⁽⁶³⁾ The researchers concluded that their findings "support Federal Communication Commission policies to increase numbers of minority owners and staffers in broadcast stations, a practice long-assumed to increase diversity within the broadcast spectrum."⁽⁶⁴⁾

The Changing Broadcast Industry

Multiple Ownership Rules

In the almost seventy years between passage of the Radio Act of 1927⁽⁶⁵⁾ and enactment of the Telecommunications Act of 1996,⁽⁶⁶⁾ the broadcast industry has restructured in response to market conditions and government policy. As discussed in the preceding section, the Commission's determination to promote viewpoint diversity by expanding the number of owners motivated its early rules. Accordingly, in 1938, the Commission adopted a strong presumption against duopolies resulting from common ownership of more than a single station in a community. Two years later, the Commission barred duopolies with a rule prohibiting a single network from owning two AM stations in the same market.⁽⁶⁷⁾ It also set a national limit of six FM and three television stations under common ownership.⁽⁶⁸⁾ The Commission intended the rules to promote competition and foster dissemination of diverse views by dispensing licenses to distinct owners.⁽⁶⁹⁾ In 1946, the Commission created a limit of seven commonly owned AM stations.⁽⁷⁰⁾

By the mid-1950s, the number of broadcast stations had grown. Therefore, the Commission relaxed its rules to permit a single entity to own seven AM, seven FM, and five television stations.⁽⁷¹⁾ In 1954, justifying its actions on a desire to enhance programming choices and prevent anticompetitive concentration of economic power, the Commission increased by two the number of television stations it allowed under common ownership. The resulting restriction became known as the "Seven Station Rule" because it allowed owners to amass seven stations in each service, although it proscribed VHF television station ownership at no more than five.⁽⁷²⁾

The Commission decided in 1964 to ban common ownership of radio stations with overlapping signals close enough for a substantial number of listeners in the market to receive both signals. It reasoned that stations so closely situated would compete with each other if owned by

different firms, and that the prohibition would minimize the likelihood of one person or group dominating political and editorial opinions in a region.⁽⁷³⁾

More than thirty years after adoption of the Seven-Station Rule, the Commission initiated a proceeding to assess the rule, although the agency did not disturb the duopoly prohibition or the "One-to-a-Market Rule."⁽⁷⁴⁾ In 1984, the FCC proposed to increase from seven to 12 the national ownership limits in each service during a six-year transitional period, after which the rule would expire and national ownership limits would disappear. The Commission noted dramatic changes in the broadcasting industry, especially the extraordinary growth in the number and types of mass media outlets at the public's disposal. For example, between 1953 when the Commission adopted the Seven-Station Rule and 1984, AM stations increased from 2,458 to 4,747; FM stations rose from 686 to 4,717; and TV stations grew from 199 to 1,169.⁽⁷⁵⁾ In addition, the Commission found the diverse programming and information sources offered by cable, multipoint distribution services (MDS), direct broadcast satellite (DBS), satellite television, (STV), low power television, newspapers, opinion magazines, and books also contributed to viewpoint diversity in the market.⁽⁷⁶⁾

The Commission also concluded that the market for ideas was primarily local. To the extent the market was national, the FCC considered the market to be sufficiently diverse such that elimination of the Seven-Station Rule would not adversely affect the national market. The Commission also perceived no danger to competition from economic concentration. Rather, it believed efficiencies could result from the rule's repeal and group owners could contribute to viewpoint diversity through the "quantity and quality" of their public affairs programming.⁽⁷⁷⁾ Unpersuaded by commenters' concerns that the proposed rule change would adversely affect minority ownership by raising station prices to unattainable levels, the Commission determined that a lack of capital was the primary barrier to minority ownership.⁽⁷⁸⁾ In its view, neither the Seven- Station Rule⁽⁷⁹⁾ nor the 12-station rule would render station prices within reach of prospective minority owners. The high cost of stations was no more likely to disadvantage minority owners than other small owners. Accordingly, the Commission stated it would focus its efforts on ensuring that financing was available to minority owners on the same terms as other owners.⁽⁸⁰⁾

On reconsideration, the Commission, at the urging of the National Black Media Coalition and the Motion Picture Association of America, adopted specific incentives in the final version of the 12 station ownership rule. Although the FCC repeated that the multiple ownership rules were not the "primary vehicle" by which the Commission promoted minority ownership, it adopted rules to encourage that end.⁽⁸¹⁾ Therefore, the Commission increased the ownership limit to 14 for anyone acquiring a cognizable interest in at least two minority-owned and controlled broadcast stations.⁽⁸²⁾ Within the context of the multiple ownership rules, the Commission established "a greater than 50 percent minority ownership interest as an appropriate and meaningful standard for permitting increases to the rules" it was adopting.⁽⁸³⁾ It also increased the newly imposed audience reach cap as measured by Arbitron Areas of Dominant Influence (ADI) rankings from 25 percent generally to 30 percent for owners with cognizable interests in minority stations, so long as the minority-controlled stations contributed at least 5 percent to the station group's aggregate reach.⁽⁸⁴⁾ Finally, the Commission decided against an automatic expiration of the national ownership rules after six years.⁽⁸⁵⁾

Further changes in the radio market led the Commission to increase the national ownership caps, liberalize local market limits, and modify time brokerage policies in 1992.⁽⁸⁶⁾ With a dramatic 39 percent growth between 1980 and 1991 in FM stations from 4,374 to 6,077, and an increase in AM stations from 4,589 to 4,985 during the same period, the Commission observed that the industry had become more diverse, competitive, and fragmented.⁽⁸⁷⁾ Greater numbers of stations, slower revenue growth, and increasing programming, sales, and general and administrative costs, resulted in sharp declines in operating margins for the average radio station during the five-year period from 1987 to 1992.⁽⁸⁸⁾ Under the circumstances, the Commission concluded that the industry's ability to serve the "public interest" was directly related to broadcasting's economic viability, which the agency determined was "substantially threatened." Small stations with sales less than $1 million were particularly hard hit.⁽⁸⁹⁾ Predicting that the trend's reversal was unlikely, the Commission initially raised the national ownership limits to 30 AM and 30 FM stations,⁽⁹⁰⁾ but on reconsideration modified the proposal to allow a single entity to own as many as 18 radio stations in each service, with an escalation to 20 AM and 20 FM stations after two years.⁽⁹¹⁾

As with the 1985 amendment to the national ownership caps, the Commission included an incentive for investments in minority-owned broadcast stations. It permitted entities to obtain a non-attributable interest in an additional three stations if minorities or small businesses owned them. The Commission extended the incentive to small businesses because limited capital access also prevented non-minority small business owners from entering the broadcast industry.⁽⁹²⁾ The agency also solicited comments on a proposal to authorize owners to exceed the established national ownership limits if they set up and operated successful incubator programs for small businesses or individuals, particularly minorities, seeking to enter the broadcast industry. The proposal required owners to demonstrate an ongoing commitment to advancing ownership diversity before they could obtain attributable interests above the applicable caps.⁽⁹³⁾

The Commission also relaxed the local ownership restrictions to permit broadcasters to realize "significant economies . . .from joint operations in the same market," so owners could cluster stations strategically to compete more effectively in the marketplace.⁽⁹⁴⁾ Therefore, in markets with 15 or more stations, the new rules authorized entities to own duopolies consisting of two AMs and two FMs in the same market if the stations' combined audience share did not exceed 25 percent. In markets with less than 15 stations, broadcasters could own up to three stations if they accounted for less than 50 percent of the total number of stations. Only two of the stations could share the same service, however.⁽⁹⁵⁾

In a second reconsideration of its radio rules and policies, the Commission generally affirmed the rules just described, which it adopted in the first reconsideration order. The second order again lifted the national radio ownership limits to permit minority owners to hold controlling interests in an additional five stations, and non-minority broadcasters to acquire non-controlling interests in as many stations for a total of up to 25 stations per service.⁽⁹⁶⁾ Over the objections of several organizations representing minority broadcasters and consumers, which had expressed concerns about industry consolidation, the Commission based its action on a contrary belief that "further national consolidation is appropriate."⁽⁹⁷⁾ It reasoned that expansion of the ownership rules could heighten competition, allow minorities to own more stations, and increase the incentive for large group owners to invest in stations owned by minorities or small businesses.⁽⁹⁸⁾ The Commission found unpersuasive arguments opposing the small business incentive because of fears that the incentive was a loophole that invited abuse and that its use would undermine the agency's efforts to increase minority ownership.⁽⁹⁹⁾ Therefore, it declined to repeal the small business incentive.⁽¹⁰⁰⁾

The Telecommunications Act of 1996 and the Aftermath of Consolidation

The broadcast industry's gradual deregulation began in 1954 with the Seven Station Rule and culminated with the Telecommunications Act of 1996. By that measure, Congress directed the Commission to remove the limits on the number of radio or television stations under common ownership nationally, and increased the national audience reach for television duopolies from 25 to 35 percent.⁽¹⁰¹⁾ Elimination of the national radio ownership caps "by necessity" resulted in the Commission's repeal of the provisions to encourage investment in minority-owned stations through a two-station allowance in the caps for such investments.⁽¹⁰²⁾ Section 202(b) of the Act again relaxed local rules by establishing tiered ownership limits based on a market's total number of stations.⁽¹⁰³⁾ Accordingly, the Commission adopted rules that allow combinations of: (1) up to 8 stations (with 5 or less in the same service) in markets of more than 45 commercial radio stations; (2) up to 7 stations (with 4 or less in the same service) in markets of 30 to 44 commercial stations; (3) up to 6 stations (with 4 or less in the same service) in markets of 15 to 29 commercial stations; and (4) up to 5 stations (with 3 or less in the same service) in markets of 14 or fewer commercial radio stations in which no entity controls more than half of the market's stations.⁽¹⁰⁴⁾

The Commission also relaxed the One-To-A-Market Rule, which generally prohibited common ownership of radio and television stations in the same market. It did so to enhance the benefits of television and radio cross-ownership. Under the new rule, a single owner may own, operate, or control combinations of up to seven radio stations and one television station in the market, depending on the number of independently owned media voices remaining in the market after the merger.⁽¹⁰⁵⁾ At the same time, the Commission modified its local television ownership rule to narrow the rule's geographic scope from grade B contours to DMAs, thus permitting common ownership of stations operating in separate DMAs. The new rule also allows an owner to operate a duopoly consisting of two stations in the same DMA if no grade B contour overlap exists, or if eight independently owned stations remain in the market post-merger, and one of them is not among the four top-ranked stations in the market.⁽¹⁰⁶⁾ Finally, in a related proceeding, the Commission determined for purposes of its multiple ownership rules to attribute time brokerage of another television station to a brokering station in the same market when the brokering station supplies more than 15 percent of the brokered station's weekly broadcast hours. The Commission adopted for television an attribution rule similar to one it applies to radio station time brokerage arrangements, which are also known as local marketing agreements⁽¹⁰⁷⁾

Since passage of the 1996 Act, the broadcast industry has experienced intense activity and consolidation. From 1995 to 1996, the FCC reported that television and radio station transfers totaling $25.362 billion grew in dollar terms by 121 percent for TV, 283 percent for FMs, and 99 percent for AMs.⁽¹⁰⁸⁾ Industry concentration increased as the number of owners declined nationally by 11.7 percent from March, 1996 to November, 1997. Mergers among existing owners resulted in a decrease from 5,105 to 4,507 owners during the period, despite a 2.5 percent increase in the number of radio stations.⁽¹⁰⁹⁾ Similarly, local markets lost an average of one owner per market, with top 10 markets averaging three exiting owners per market. The remaining top owners in each metro market generally accounted for a larger share of advertising revenue, however. For example, FCC staff calculated that the top four owners in each metro market represented 90 percent of advertising revenue compared to 80 percent in March 1996.⁽¹¹⁰⁾ They also observed consolidation's positive affect on the financial health of publicly traded radio companies.⁽¹¹¹⁾

Between 1995 and 1996, the number of broadcast station transactions increased from 849 to 1115. By comparison, 1067 transactions totaling $23.44 billion occurred in 1997, 952 transactions valued at $22.8 billion occurred in 1998, and 774 deals worth $33.32 billion occurred in 1999.⁽¹¹²⁾ Clear Channel Communication's $23.5 billion acquisition of AMFM, Inc.'s 124 AM and 318 FM stations in 97 ranked and 14 unranked markets accounted for about 70 percent of the value of all the transactions announced in 1999.⁽¹¹³⁾

As of mid-December 2000, a reported 449 television and radio transactions worth $7.017 billion occurred during the year. Of those, 35 were television deals, 122 involved AM stations, and 183 related to FM station transfers.⁽¹¹⁴⁾ Many of the radio transfers involved Clear Channel Communications, Inc., the Nation's largest radio group owner, which divested 108 stations to gain regulatory approval of its purchase of AMFM.⁽¹¹⁶⁾ Just since August, 2000, Clear Channel has announced plans to buy at least 55 new stations by the end of 2000 to obtain tax deferment for the $4.3 billion proceeds it received from the spinoffs.⁽¹¹⁷⁾

The Commission released in June 2000 its statutorily mandated review under the 1996 Telecommunications Act of whether certain broadcast rules were necessary in the public interest as a result of competition. It concluded that television industry consolidation was occurring under the 35 percent audience cap raised by the 1996 Act. Accordingly, the Commission declined to increase the limits further, preferring instead to monitor the impact of the new rules on diversity and competition.⁽¹¹⁸⁾ It also determined to initiate separate rulemaking proceedings on modifications to the dual network rule to permit common ownership of an established and an emerging television network, the newspaper/broadcast cross ownership rule, as well as the definition of local radio markets and the method of calculating station ownership in the application of the Commission's ownership rules.⁽¹¹⁹⁾ As part of this biennial review, the Commission assessed the continued efficacy of the local radio ownership rules, and determined that the rules serve the public interest. It stated:

In view of the large-scale consolidation in the radio industry, we believe that the existing local radio ownership limitations remain necessary to prevent further diminution of competition and diversity in the radio industry. It appears that while there may have been a number of salutary effects flowing from the consolidation that has taken place since 1996, largely in financial strength and enhanced efficiencies, it cannot be said that consolidation has enhanced competition or diversity, and indeed, may be having the opposite effect. There currently are hundreds of fewer licensees than there were four years ago and, in many communities, far fewer radio licensees compete against each other.⁽¹²⁰⁾

Many minority broadcasters believe that the consolidation wrought by the 1996 Act's less stringent ownership rules has in fact decreased competition and diversity. NTIA has consistently heard from minority owners about consolidation's detrimental impact on their ability to compete effectively against better-financed non-minority group station owners.⁽¹²¹⁾ During NTIA's Minority Ownership Roundtable, panel participants decried the adverse effects of consolidation on minority ownership.⁽¹²²⁾ Relaxation of the ownership rules and consolidation have contributed to higher broadcast station prices.⁽¹²³⁾ The skyrocketing prices, in some instances up to 20 times or more the amount of a station's actual cash flow,⁽¹²⁴⁾ have exacerbated minority broadcasters' historic difficulty accessing sufficient capital for entry or expansion.⁽¹²⁵⁾

Even minority entrepreneurs with capital find it difficult to find desirable properties,⁽¹²⁶⁾ obtain programming,⁽¹²⁷⁾ and generate reasonable advertising revenues.⁽¹²⁸⁾ An African-American former station owner explained how consolidation in the Syracuse radio market resulted in two large radio groups capturing 85 percent of the advertising revenue in that market. He and another black single-station owner found it impossible to compete against Clear Channel Communications Inc. and Citadel Communications Corp.⁽¹²⁹⁾ Ultimately, the difficulties they experienced forced both minority owners to sell their respective stations, thus leaving African Americans in Syracuse without service directed to their community's specific needs.⁽¹³⁰⁾

Other panelists echoed concerns about the loss of diverse sources of information relevant to minority communities and the lack of outlets for local issues.⁽¹³¹⁾ Some feared without media ownership, minorities are virtually powerless to present positive images of their communities.⁽¹³²⁾ Native Americans, who are the least represented minorities among broadcast owners, would like to use the power of mass media to improve community building, self-determination, and preservation and protection of cultural identity.⁽¹³³⁾ Industry consolidation, and the demographics of Native- American communities make commercial broadcasting of tribal formats infeasible, however. As a result, Native Americans usually rely on non-commercial station ownership to serve their communities.⁽¹³⁴⁾

1. 47 U.S.C. § 51 et seq. (1927).

2. Erwin G. Krasnow and Jack N. Goodman, The "Public Interest" Standard: The Search for the Holy Grail, 50 Fed. Comm. L. J. 605, 609 (1998).

3. For discussion of these conferences, see National Broadcasting Co. v. U.S., 319 U.S. 190 (1943).

4. Kofi Ofori, et al, Blackout! Media Ownership Concentration and the Future of Black Radio at 3 (The Dubois Bunche Center for Public Policy, Medgar Evers College, City Univ. of NY, 1997).

5. Id. at n.13 quoting Senator Davis reciting testimony of Secretary of Commerce Herbert Hoover, 68 Cong. Rec 5483 (1926).

6. 47 U.S.C. 81 et. seq., Pub. L. No. 69-632, 44 Stat. 1162 (repealed by Communications Act of 1934).

7. Krasnow and Goodman, supra n.60, at 4.

8. 47 U.S.C. § 151 (1934)(Emphasis added).

9. Id.

10. Public Service Responsibility of Broadcast Licensees, [The Blue Book] (1948) at 15, (reprinted in Report on Minority Ownership in Broadcasting, Minority Ownership Task Force Report, Federal Communications Commission, 1978) (Emphasis in original) [FCC Minority Ownership Report].

11. Antoinette Cook Bush and Marc S. Martin, The FCC's Minority Ownership Policies from Broadcasting to PCS, 48 Fed. Comm. L.J. 423, 424 (1996).

12. Sherman Kizart, Carter Broadcasting: 50 Years in the Business Keeping the Dream Alive, Radio Ink 23, 24 (2000).

13. FCC Policy Statement, 1 F.C.C.2d 393 at 394 (1965) [1965 Policy Statement].

14. Associated Press v. United States, 326 U.S. 1, 20 (1943).

15. 1965 Policy Statement, supra n.71.

16. Decision, In Re Applications of Mid-Florida Television Corp., et al., 33 F.C.C. 2d 1 (1972)