Remarks by Assistant Secretary Irving at the Conference of Broadcast, Cable, and Media Industry Unions

The Impact of Convergence in the Media
Las Vegas, NV
April 19, 1999
"The Impact of Convergence in the Media"
Remarks by Larry Irving
Assistant Secretary for Communications and Information
National Telecommunications and Information Administration
U.S. Department of Commerce

at the

Conference of Broadcast, Cable, and Media Industry Unions
Department for Professional Employees, AFL-CIO

Las Vegas, NV
April 19, 1999

 



Good morning. I'd like to thank Jack Golodner and the Department for Professional Employees for inviting me to join the annual Conference of Broadcast, Cable and Media Industry Unions.

This year's theme - "convergence" - is illustrated at this conference in many ways. Simply driving around Las Vegas, of course, I'm reminded that the world itself can converge. Nowhere else on earth is New York, New York next door to the pyramids of Egypt, and down the road from an Italian villa!

When we look around, however, it's clear that another type of convergence is occurring in the broadcast industry. No longer are we talking only about newspapers, television and radio. Today, the media today embraces a far wider range of platforms: from television and open video systems (OVS), to cable and the Internet, to direct broadcast satellite (DBS) and multipoint multichannel distribution service (MMDS).

These platforms are all coming together through mergers, buy-outs, affiliations, or programming arrangements. Cable, newspaper and broadcast industries are exploring opportunities to provide Internet access. Broadcasters are providing content and data services over their digital spectrum. "Convergence" means that companies will migrate into other media platforms, and this will have significant consequences for us all -- whether we are employees, CEOs, unions, media subscribers, or consumers.

The Convergence of the Media

And what are the issues that unions should be exploring in this converging world? To begin with, while there are many exciting opportunities presented by new digital technologies, many challenges also lie ahead for companies and employees.

On the one hand, the digital world is providing new investment opportunities for the traditional media. The cable, broadcast, and newspaper industries are all establishing a significant online presence. CBS, for example, recently announced four new Web deals, on top of its existing investment stakes in online services such as "MarketWatch.com." Radio stations also are establishing online radio networks. "Broadcast.com," which was just sold for $5.5 billion, typifies the migration of traditional media to the Internet: it now airs live broadcasts from more than 385 radio stations and 40 TV and cable stations.

TV broadcasters also have new growth opportunities through datacasting, multiplexing, and Web TV. Today, I can view an infomercial and then go online to buy the product, or view a television program and find related information on the Net. The prospects for media in the realm of electronic commerce are significant, and will only become greater as e-commerce expands to a $ 1.4 trillion business in the next four years, according to Forrester Research.

But while new media are creating growth opportunities, they are also creating new questions for companies, unions, and employees. How will industries provide their workers with the necessary skill sets to handle new technologies? Should companies be obligated to train existing employees, or will they be able to hunt for new talent? What are the ramifications when convergence means consolidation or mergers? Is downsizing inevitable, or can companies find new positions for existing employees? These are issues that all of you are already facing, and which will only become more acute over time.

Multiple Ownership and Diversity

Another issue is multiple ownership and diversity. As you well know, the broadcast industry has undergone increasing concentration in the last few years. While the number of stations has increased, the number of owners has decreased, so that we are placing more stations in the hands of fewer owners.

The decline in the number of licensees has been most significant since the 1996 Telecommunications Act, which relaxed many of the structural barriers to ownership concentration. In 1995, for example, there were 508 full power commercial television station owners; by 1998, there were only 432 such owners - a decline of 15 percent over three years' time.

Radio has undergone even greater consolidation. In just one year after the passage of the Telecommunications Act, the top four publicly-owned radio groups increased their market share from 17.5% to 28.7%. While the number of radio stations grew 2.5 percent in the following year, the number of radio owners declined by 11.7 percent. Most recently, NTIA calculated that seven of the top ten radio group owners have as many as eight stations in a single market.

I understand that consolidation has been driven by the economics of today's marketplace, and that the need to achieve economies of scale has forced many stations to expand. Nevertheless, consolidation has serious ramifications for program content, as well as for worker stability and employment opportunities. In Washington, D.C., for example, two companies now provide virtually all the news for all radio listeners. Our options to hear different viewpoints, or different types of stories, are limited. If there were six companies or independent owners, or ten, you know that the range of editorial comments would be broader.

The declining number of owners and independently-owned companies is of concern to the Administration, just as - I am sure - it concerns many unions. This nation's broadcast policy has long been guided by the three principles: competition, viewpoint diversity, and localism. The opportunity to express diverse viewpoints is core to our democratic society. And we have relied on a multiplicity of sources to preserve such diversity, rather than engage in the review or restriction of content.

Today, however, localism and diversity are threatened by consolidation. As Stevie Wonder -- who owns KJLH-FM in Los Angeles -- recently explained to the FCC, it has become increasingly difficult for the single-station owner to compete against conglomerates. Many smaller owners are forced, by economic pressures, to sell out to the larger owners. And if independent stations disappear, communities will lose their local ties to their broadcast stations. Business decisions will no longer be made by Mary Jones down the street, but by Dow Jones on Wall Street.

Consolidation is taking an especially tough toll on minority owners. Since NTIA began collecting data on minority ownership of commercial broadcast stations, the totals have never exceeded 3.1% That's a disturbingly low percentage, given that minorities collectively represent nearly 30% of the total U.S. population.

This figure has only further declined in recent years in this tough, competitive market. As station prices increase, minority owners have found it increasingly difficult to purchase stations, and increasingly enticing to sell stations. Last year, three of the largest and most experienced minority television station owners sold their stations to majority-owned companies. Overall, the number of minority-owned commercial television stations decreased from 38 to 32.

Again, there are real implications for employment opportunities, as well as for diverse programming. Generally, we have found that minority owners are more likely to create employment opportunities for other minorities. A significant decline in minority owners is therefore likely to limit the role for other minorities in the media.

Preserving Existing Broadcast Ownership Rules

Despite these troubling trends, many in the broadcast industry want to further dismantle the broadcast ownership rules, which limit consolidation. Some networks and affiliates have urged that consolidation is necessary to economic survival. They point to decreasing profits, primetime audience, and advertising revenues as reasons to expand their size and diversify their businesses. They have also argued that new electronic media provide new venues for diverse voices, and that structural regulations are no longer necessary in this increasingly competitive marketplace.

We believe that the existing ownership rules are still necessary, if we are to preserve opportunities for multiple ownership and diversity of voices. Certainly, new technologies have created new venues. But, this ignores the fact that services, such as DBS and the Internet, are not locally based and may not deliver local programming. It also ignores the fact that, unlike free, over-the-air broadcasting, these services require a fee and are therefore beyond the reach of a significant percentage of our population.

Finally, broadcasters fail to mention that they now own many of the new media platforms -- an outgrowth of "convergence," as I explained before. Many of the news sites on the Internet, for example, are operated by large newspaper companies like the Washington Post and the New York Times. Indeed, six of the top ten, and twenty of the top thirty most frequently visited Internet sites are linked to broadcast licensees. New electronic media may provide new outlets, but this does not necessarily mean that they provide new viewpoints.

NTIA has urged the FCC to retain the existing structural regulations to preserve diversity, localism, and competition. For example, many networks are arguing that the national television ownership rule, which imposes a 35 percent audience reach cap on broadcasters, should be raised to 50 percent, or eliminated altogether.

We believe that the existing 35 percent cap is still necessary. We saw what happened when the Telecommunications Act raised the cap from 25 percent to 35 percent. In the last three years, we have seen increased consolidation and decreased minority ownership. To raise the cap further would only aggravate those trends.

We have also urged the FCC to retain the television duopoly rule, which prohibits common ownership or control of television stations with overlapping "Grade B" signal contours. We believe relaxation of this rule is appropriate only if local marketing agreements (LMAs) are eliminated. These arrangements have permitted station owners to lease the right to program and sell advertising to another station. Generally, LMAs have given large stations control over the programming of smaller, independent stations, and have diminished existing sources of viewpoint diversity. We have asked the FCC to permit only those LMAs which, in it its opinion, would create a distinct and separate editorial viewpoint.

Finally, we have encouraged the FCC to retain the daily newspaper/broadcast cross-ownership rule, which prohibits cross-ownership of daily newspaper and television or radio stations in the same community. Local broadcast news and daily newspapers are our chief sources of information. If they were allowed to consolidate, our diversity of opinions would be considerably reduced.

The Role for Unions

The fight over these issues has become heated, as the FCC embarks on its biennial review of these rules. NTIA is one of the few voices favoring the preservation of the existing rules. The networks and other broadcasters, on the other hand, have launched a vociferous campaign to eliminate or dilute the regulations.

We hope that unions will join us in deliberating these issues. Usually, you hear public officials say "I'm from the government, and I'm here to help." In actuality, I have to say that "I'm from the government and I need your help." Your input is critical on cross-ownership issues, the LMA issue, and on audience caps -- all of which can affect employees. Employees will be significantly affected by consolidations and mergers. Downsizing can mean the loss of jobs; mergers between different media may change a companies' needs; and the loss of minority owners may decrease opportunities for minorities in media.

Your input will be even more effective if you speak with one voice. I've talked about the different types of "convergence" evident at this conference. In some ways, the "convergence" of unions here today is the most significant of all. As a "union of unions," you can define your shared interests. And through your collaborative efforts and united voice, you can be an even stronger advocate.

Conclusion

Bobby Kennedy made a comment thirty years ago, which I think still holds true today:

[T]he time has come . . . when we must actively fight bigness and over concentration, and seek instead to bring the engines of government, of technology, of the economy, fully under the control of our citizens, to recapture and reinforce the values of a more human time and place . . .

That time has arrived, with regard to the media. I am confident that, with your help, we can keep our media open to diverse voices and local interests. We should work to ensure that, not only the large group-owners, but also the small, independent, and minority owners can still shape the messages we hear.

NTIA looks forward to working with you to meet these challenges, and to ensuring that the Age of Convergence is even richer, and more inclusive, than before.

Thank you.