Senate Committee Zeroes in on Cross-Ownership

The scrap over media ownership rules continued on Capitol Hill this week, where several witnesses testified before the Senate Commerce Committee. The tenor of the argument remained the same--economics versus free speech--but a few details emerged, primarily based on the testimony of Eli Noam, director of the Columbia I
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The scrap over media ownership rules continued on Capitol Hill this week, where several witnesses testified before the Senate Commerce Committee. The tenor of the argument remained the same--economics versus free speech--but a few details emerged, primarily based on the testimony of Eli Noam, director of the Columbia Institute for Tele-Information, and professor of finance and economics. Citing Institute research, Noam demonstrated that cross-ownership had more anti-competitive potential than did audience-reach lids.

Noam pointed out that concentration at the local level declined over the last five years, and that increasing the national audience reach cap from 35 percent to 45 percent would have a marginal impact.

"If you extend reach of the top four television firms to 45 percent...in terms of audience and revenue, you'd go from 21 percent to 27 percent in a worst-case scenario."

Noam also said allowing more duopolies and triopolies would raise local media concentration from "1,409 to 1,483," on the HHI index, used by economists to determine when ownership concentration results in anti-competitive behavior. Noam said the duop/triop HHI was not cause for alarm.

"However, if we add to this the effect of newspaper/TV cross-ownership, if every large TV station buys a newspaper, that would rise from 1,409 to 1,945 HHI. As a practical matter, we would be troubled by such a potential. On the other hand, we would be much less troubled by national TV consolidation if the cap was raised to 45 percent."

Noam suggested that ownership limits be crafted on the basis of population-plus-HHI levels, or about 10 voices in a medium-sized market.

Noam's indictment of cross-ownership was something that Sen. John McCain, (R-Ariz.), was happy to latch onto, after listening to the usual litany of assertions from opposing interests. Mark Cooper, president of the Consumer Federation of America, for example, maintained that media should be held to tighter ownership standards than other businesses for the sake of free speech.

"If you let them, they will merge," Cooper said. "Anti-trust cannot deal with this market."

Next to Cooper, Victor Miller, a senior managing director and equity analyst from Bear, Stearns and Co., defended media concentration on the basis that broadcast revenues are declining in the face of cable competition and DVR deployment. Allowing greater concentration and thus sustaining revenues would benefit the "long-term health of free, over-the-air broadcasting," he said.

Miller went on to enumerate just how much broadcast revenues and margins had declined over the last few years, belaboring the point until he evoked a "McCain-ism."

"I was born at night, Mr. Miller, but not last night," he said. "Barry Diller once said, 'anybody who thinks the networks are in trouble hasn't ready their financial reports.' It's a hard cast to make that they're impoverished."

Sens. Brian Dorgan (D-N.D.) and Trent Lott (R-Mo.) appeared at the hearing, Dorgan being a prime mover behind the congressional veto against the new ownership rules. That veto now appears to be doomed in the House. Lott showed up long enough to deliver a rambling, nostalgic soliloquy about local radio before popping off to the Senate floor.

Meanwhile the attorneys at Media Access Project celebrated yet another victory in their own fight against the new ownership rules. The U.S. Court of Appeals in Philadelphia reaffirmed its decision to keep MAP's challenge there in the 3rdCircuit rather than transfer it back to Washington, D.C., where network lawyers got the old ownership rules overturned.