Hearing of the Senate Committee on Commerce, Science and Transportation - Federal Communications Commission (FCC) Oversight

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SENATOR JOHN KERRY (D-MA): Thank you very much, Mr. Chairman.

I think Senator Rockefeller, obviously, raised a lot of very important points, a couple of which I want to sort of pursue in the form of questioning if I can a little bit.

Commissioner Copps, in response -- I mean, I heard Commissioner Tate talk about the period of time that's been taken, the numbers of witnesses that were heard, the 10 studies. I've also heard people call into question the propriety of those studies, and most of the information of the witnesses appears to be loaded against the decision that the commission appears to be moving on.

Can you comment on that? Can you help the committee to understand sort of why you or Commissioner Adelstein have a problem, perhaps, with the process to this moment?

MR. COPPS: Well, I think you have to start off with the premise that the industry that we are looking at here is probably the most important and influential industry in the United States of America from the standpoint of influencing our culture and our nourishing our democratic dialogue. So we need to take the time and ask the questions, and I think --

SEN. KERRY: Are you suggesting that it hasn't adequately been done?

MR. COPPS: Yes. I'm not just suggesting that; I'm stating it outrightly. I think when you're looking at an industry that controls half a trillion dollars of public airwaves and we're looking to see the future ownership pattern of this and who's going to have access to it, it doesn't impress me to have six hearings around the country and then we ignore a lot of the public comment. It doesn't impress me when you say we spend two or three or four hundred thousand dollars to come to terms with that. When I worked up here, I remember any industry that came in and wanted us to do something would always be brandishing a million-dollar or a $2 million study or something like that for a much more narrowly focused type of exercise.

So this is really big ticket. And yes, we did some studies, and yes, there was some initial contact about where those studies should go, but that's not where the studies went. They weren't as targeted. And so I think the process was deficient, and I think we are leaving these huge problems that have been pending even longer than media ownership -- minority ownership, public-interest obligations, localism -- leaving those for another day and rushing ahead to encourage more consolidation that has caused those other problems in the first place. So I think the process has not been a good one.

SEN. KERRY: Now, Commissioner Tate, you in your testimony said very clearly -- and I think I quote -- that "a modern communication system is critical to our country." We have gone from fourth to, depending on the study, 16th to 21st in broadband penetration in our country. That's, obviously, on its face, moving in the wrong direction. Other countries have far more efficient and have put far more efficient systems in place. You can go into a field in some countries in Europe and elsewhere and sit there and download into your computer at a rate that is unprecedented, and you can't even do it in major cities in America.

Shouldn't that be the primary focus of the commission right now, reaching all Americans with modern communications, not necessarily intervening in a dispute between owners over consolidation?

Consolidation certainly doesn't do what broadband would do for the country.

MS. TATE: Certainly, Senator Kerry, I agree that broadband is crucial to all of our economy.

SEN. KERRY: Well, why isn't there a plan in place after all these years to make it reach everybody, as the president said in 2004? He said, we will have it universally accessible by 2007. It's now the end of 2007 and there's still no plan.

MS. TATE: Well, it's interesting that in many parts of the country, for instance, I think that you probably know about the Connect Kentucky example where by the end of this year the state of Kentucky, which is a fairly rural and poor state, will have broadband access across the whole state. My state of Tennessee is also involved in that same initiative, called Connect Tennessee.

So I think that in many parts of the country, there is a lot of leadership and there are a lot of ideas.

SEN. KERRY: Regional and local, by and large. Would you say there is a national plan that's emanating from the FCC?

MS. TATE: Well, and I think through many of our other items that we take up, whether it's opening our video franchising so that we can get more competitors who can then also be broadband providers.

SEN. KERRY: Well, let me kind of get to the nub of this, if I can. Senator Lott, Senator Stevens, Senator Inouye, others on the committee of long experience in this committee, editorial comment across the country, countless numbers of organizations, countless numbers of witnesses have all objected to the way the FCC is about to proceed, Mr. Chairman.

We have actually passed out of this committee a request to have an extended period of time now to try to complete the localism and diversity issues before you consolidate. Now, you know, I mean, who is it who created the FCC, Mr. Chairman?

MR. MARTIN: Congress did.

SEN. KERRY: And Congress created the FCC for what purpose?

MR. MARTIN: To regulate the telecommunications and media area.

SEN. KERRY: In the interests of the American people.

MR. MARTIN: In the public interest. Yes.

SEN. KERRY: Correct. For their safety and security and for other purposes, correct?

MR. MARTIN: That's correct.

SEN. KERRY: And the Congress has expressed its will here with respect to this commission's potential action. Has it not?

MR. MARTIN: This committee has passed a bill out of the committee that says there should be a new process put in place for media ownership reviews.

SEN. KERRY: And you are hearing from a bipartisan chorus, are you not?

MR. MARTIN: Congress also expressed its will in 1996 where they required us to undergo a biannual review of our media ownership rules and to make any changes in those rules that we find -- when we find those rules are no longer necessary. So there's also been that part that we have an obligation to do as well.

SEN. KERRY: But nowhere in the FCC rules, either in 1934 or in 1996, is there anything that suggests that you have a rationale or a motivation to make a decision that saves newspapers. I mean, you've come into this committee today, and the first part of your testimony was an articulation of the trouble the newspapers are in.

Can you show me -- I mean, I went back and looked at it. Can you show me here where there's any mention of the word "newspapers" in '96 or '34?

MR. MARTIN: I think we have an obligation to understand what the impact of some of our rules have on the industries that we regulate, including when we put in place the rules back in the 1970s that prohibited a newspaper from purchasing a broadcast property, the impact that that may have had on -- inadvertently on newspapers. And I --

SEN. KERRY: But the purpose of that was not with respect to the regulation of the newspaper. The purpose of that was with respect to the consolidation of power in the dissemination of information.

MR. MARTIN: I think that's right, and that's reason why --

SEN. KERRY: Well, what does that have to do with people being fired or with loss of reporters or with the economics of the newspaper?

MR. MARTIN: I think it's also in making sure that the local newsgathering is occurring and robust, and I actually think that the commission has an obligation to understand what the impact of its rules are. And I think in this instance we do have an obligation to make sure and balance the importance of independent voices in the local community, which the commission has under its precedent traditionally looked at being beyond just the broadcasters, but also the newspapers and other independent voices.

SEN. KERRY: Well, let's get to that. If that's true and that is your obligation -- and I believe it is, part of it, but it doesn't go to the question of cross-ownership. The question of cross-ownership is to fulfill the larger obligation of the FCC to protect the sourcing of information to the American people so that you don't have a concentration of power.

Now, data in the official FCC record, particularly gathered from the 2000 Section 257 studies, indicates that the primary factors influencing female and minority broadcast ownership are media market concentration, access to capital and equity and access to deals. And as the markets become more concentrated, the cost of stations as acquisition targets become artificially inflated, driving away potential new entrants in favor of existing large chains.

So, in effect, the concentration has the effect of diminishing the ability of smaller and single-station owners to compete for advertising and programming contracts.

So you're in the middle of an analysis of this, the diversity and the localism; and notwithstanding that your responsibility is to the public to make sure that diversity and localism are well-served, you're about to make a decision -- for no absolutely understandable rationale and against the will of Congress and most of the witnesses -- to actually increase the concentration, which will make worse the localism and diversity issues without even having completed those studies.

So my question to you is, why would you not -- would you agree today, in the face of those realities and there are many more -- I can go on about what happens to the concentration and diversity. Would you agree with the opinion expressed from Senator Lott, Senator Stevens, the chairman, Senator Rockefeller and others to postpone this decision from several days from now and allow these next days to take place and complete the diversity and complete the localism analysis? Would you agree to that?

MR. MARTIN: No. And if I can respond, I'm not sure I agree with some of the other statements that were made in the beginning before you got up to the question as well. But I --

SEN. KERRY: Well, what is so compelling? What is so compelling that you have to move in several days?

MR. MARTIN: If I can respond. I think that there are several concerns that I would end up having with some of the statements you've made. First of all, in characterizing the overall consolidation that it may or may not have -- that may have occurred since the 1996 Telecommunications Act was put in place, we're not actually lifting any of those other rules as far as increasing or allowing any other further consolidation on radio, on television, at the national or the local level.

SEN. KERRY: I know that. I know what you're doing. You've got 20 cities that you've targeted, but you also have a waiver process in here, and that waiver process would allow you to make any kind of political decision you want with respect to the waiver.

MR. MARTIN: The commission has always had a waiver process. People can always come in with a waiver. Indeed, I think it's actually tightening it. And some of the comments that were filed in response to what I've put out actually said that the waiver process with a presumption against granting waivers is a tighter standard than we currently have when a waiver is provided.

SEN. KERRY: What do you say to that, Commissioner Copps?

MR. COPPS: I don't think we even have something that would qualify for the term of "waiver." This is just overcoming a finding with some very loose criteria: Is there financial distress? That's undefined. Will there be more local news produced? Is that two minutes or five minutes or ten minutes? So it's just so porous as to be, I think, meaningless.

SEN. KERRY: What do you say to that, Commissioner Adelstein?

MR. ADELSTEIN: I would agree. Another one of the conditions is financial condition. What does that mean? There's no definition in terms of what level of concentration a market wouldn't be allowed. There's no quantifiable standards anywhere, so three commissioners at will could do a waiver in any market, and no matter how small, including Jackson, Mississippi, or anywhere in West Virginia or Massachusetts, western Massachusetts. I think it opens the door everywhere.

We need to tighten those standards.

SEN. KERRY: Commissioner Martin, what I quoted to you in terms of what happens to the concentration of the market is, in fact, the official FCC record, which you're choosing to ignore.

MR. MARTIN: No, we're not ignoring it. I think that there is no question about the concentration that has occurred makes it more difficult for small businesses, including minorities and women, to be able to be active and involved in the media ownership.

SEN. KERRY: So why would you not want to wait until you understand the impact better of the diversity and localism analysis? What is so compelling in the face of all of the other imperatives of communications in America to move, you know, several days from now rather than 180 days from now, 90 days from now?

MR. MARTIN: We have not just proposed to change the newspaper/broadcast cross-ownership rule. I have also put forth proposals that would address both the localism study that this Congress has been encouraging us to complete and on the minority ownership proceeding, including adopting many of the recommendations that were put forth by our own diversity committee.

SEN. KERRY: But you realize the fundamental rationale that you gave when you came in here was the dilemma that newspapers are facing, which incidentally, a lot of people would contest. A lot of people would say that all across this country newspapers are making lots of money, doing quite well. They've had to retrench somewhat. Yes, they've had to adjust, but as in any business, they're finding their outlets and means of making money. In fact, one of the most profitable entities in America today are some of these small newspapers in cities and towns across America which are cash cows.

MR. MARTIN: I think that the newspaper industry is having a significant difficult time in continuing some of its local news gathering --

SEN. KERRY: But where is it in your jurisdiction, under the FCC, to put that ahead of the interest of diversity and localism, and to deal with the problem of concentration?

MR. MARTIN: I'm not putting that ahead. I think you have -- we have to put it in balance. And we have to take all of those things --

SEN. KERRY: Then why would you not take a few extra days, which is the will of the Congress, and the will on a bipartisan basis?

MR. MARTIN: I think it's important for us to try to move forward on all of these issues, both including what's involved in increasing the opportunities for minority ownership, and what's involved for responding to the concerns that have been raised on localism, and responding to the courts and the Commission's previous decision that said the absolute ban on cross-broadcast -- newspaper cross-ownership is no longer appropriate. And that --

SEN. KERRY: Yeah, but that court -- that's the Philadelphia decision you're referring to?

MR. MARTIN: Yeah.

SEN. KERRY: All right, well it's my understanding that parties on both sides believe you're in violation of the Administrative Act, as a consequence of not doing away entirely with it, as a consequence of that decision. So I mean, you just seem to be digging a hole deeper and deeper here, rather than trying to work this through in a logical way.

MR. MARTIN: You're right. The industry is saying that we're in violation of law --

SEN. KERRY: The Administrative Procedures Act.

MR. MARTIN: -- for not removing the ban in its entirety, and allowing for newspapers to buy any broadcast property, in any market around the country. But they're saying that that's the law that -- they're saying the3rd Circuit, and the law, will require that.

I think what we're trying to do is find a balance, as you said, between the concerns about how do we respond to the changing dynamic that occurred in the marketplace since our rule was put in place, which is what the statute requires us to do that was passed in 1996, and the concerns that have been raised about the impact of this on small markets and minority and women. And I think that's the very reason why I've put forth the proposal that I think balances both of those.

SEN. KERRY: Well, unfortunately most of the advocates on behalf of those entities do not share your view that you are, in fact, advancing their cause. And on the contrary, they feel that this is going to disadvantage them significantly. And what's very hard for me to understand is why you would, sort of, choose to swim against the tide, so to speak, in something that's important as what Senator Rockefeller and others have described this as. I mean, this is -- this is big stuff.

Last time you guys moved, sort of, on your own like this, there was a spontaneous grass roots revolution across the country. And the Republicans, who then ran the Congress, joined together with the Democrats and they overrode what you did. It would seem to me you'd want to try to find something that's just got a little better consensus, a sense of representing America's interests, not some sort of narrow interest.

And it disturbs me greatly that you're just, sort of, so headstrong about this that with even your own Commission, could split. I mean, why not try to get a unanimous Commission? Why not try to get a decision --

MR. MARTIN: I would -- I would -- I actually always work to try to gain a unanimous Commission, and this issue is no different. And I think that -- that you're absolutely right, it would be great if there were to be a consensus. I'm not convinced that on media ownership there ever will be a consensus.

Indeed, I've gone to my colleagues in the past, even on the process and the policy issues -- all of my colleagues -- and said, starting as late as last summer and early fall -- saying, let's discuss what would be a unanimous process? What would be a unanimous approach? And actually I'm not convinced that there's very -- there's much prospect of that.

Indeed, the concerns that have been raised about what they're characterizing as loopholes in the waiver process, I've said to them, then let's -- I'm happy to work with them to coordinate what those processes should end up being in any way they would like. But that would mean they would have to engage in the substance, not merely just demand additional process and additional time for the next six to nine months.

I think that -- and I'm happy to end up doing that, however I'm not -- I'm not yet convinced that we will ever reach a consensus on media ownership issue. I think it may be just too politically divisive. And I do think it's important that we have an obligation to respond, as Congress told us to, and the courts are waiting for more than three years now, and I think that that's what we should do.

SEN. KERRY: Well, my time -- I've used more than my share of time here, and I apologize for that. But I think you are inviting another Congressional response. And I regret enormously that -- I mean, -- I don't know -- Commissioners Adelstein and Copps, do you want to respond to what the possibilities are here?

MR. ADELSTEIN: This is, and should be, about substance. And where I have been on this has been no secret -- I think, to the chairman or any of my other colleagues on the Commission for months and months and months. And we are willing to vote on media ownership, when we deal with these long pending problems of minority ownership and the lack of localism, because they have caused a lot of the problems of consolidation. So I think it's not just about process, or division of process, or inability to get an agreement there, this goes to the -- to the substance of the matter.

Incidentally, I would add -- if I could just make a quick comment because it'll -- been a lot of argument to the contrary about the health of the newspaper industry. We are not the "Federal Newspaper Commission," I understand that, but I would just quote from a letter to the editor that the head of the Newspaper Association of America wrote to the Washington Post last July 2nd and said, "The reality is that newspaper companies remain solidly profitable and significant generators of free cash flow."

Operating profit margins seem to be near 20 percent, which is pretty good. I wish I had some investments that were doing 20 percent. So it's not a one-sided story. Of course there are challenges in necessities for adjustment, but that's just to balance out what was said earlier.

And the final point on divisiveness -- I'll tell you one place where this issue is not divisive and that is across the United States of America. There's a new poll out, just within the last couple of weeks, that show that 70 percent of Americans, regardless of political party, regardless of liberal or conservative affiliation, think that media consolidation is a problem -- 45 percent, I think, said it's a really serious problem; and 57 percent said Congress ought to legislate to prohibit newspaper-broadcast agreements in specific markets.

MR. COPPS: In terms of the process, I think, to respond, certainly we have laid out a process today that we could get agreement on. A bipartisan agreement -- the committee laid out a process which we endorsed today. So there is a deal that we could reach right now.

And I'm willing to talk to the chairman about an alternative process as well. He's been very good at building consensus. He's my friend. We have a good working relationship. Ninety-five percent of what we do is bipartisan, unanimous. So he's done a good job of building unanimous decisions. I don't see why we can't do that again here. I really don't think it's outside the scope of our possibility to work together to try to put aside our differences.

But in order to do that, we cannot, I think, operate in defiance of this committee's instruction that we not go forward on December 18th. I think we need to have time to do it right. We need to make sure that we get the elements of localism and the elements of diversity in place first -- that's going to take a little bit of time, not maybe every minute that the committee asks for, we could work with you.

And I'd like to work with the chairman in trying to see if we can't come up with an accommodation. We work best if we work together, and it's -- it's not too late.

SEN. KERRY: Well, Mr. Chairman, I wish you would heed all of these pleas. And I would just say to you in closing that it is really clear from the evidence that if the Commission intends to promote ownership diversity, you can't accomplish that goal while simultaneously increasing market concentration. It just doesn't -- it's just a complete contradiction. And with these analyses that we've requested outstanding, it just seems extraordinary to me that we're not able to have your agreement to wait a few days. Listen to American people. Listen to the Congress.

Thank you, Mr. Chairman.

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