Ch. 7 – Structural Limitations
• Rules designed to constrain the power of television networks like ABC, NBC, and CBS, in particular with an eye toward increasing the viability of unaffiliated broadcast licensees and independent content producers
• Rules focusing on the number of broadcast outlets owned by a single party, limiting the number of stations that can come under combined control
1.14 Television Networks and Vertical Integration
• Broadcast television networks were permitted to own some local television licensees, but the majority had to be owned by separate entities.
• Networks could produce some of their own programming, but much had to come from independent producers. In essence produce some programming, buy lots of programming from outside sources
• “Chain broadcast” rules created in 1941 and upheld in NBC v. United States, 319 US 190 (1943) imposed restrictions on television networks relationships with affiliates.
o Rules stated that licensees may not enter into agreements with networks that prohibit them from acquiring programs from another network;
o that hinderother local stations from airing programs offered by the networks that the licensee declined to air;
o that allow a network to control when a program is aired;
o that hinder the licensee from rejecting a network program “which the station reasonably believes to be unsatisfactory or unsuitable or contrary to public interest
• In effect the program supply industry is much more decentralized and structurally competitive than the broadcasting industry itself
• Despite this, the FCC opted in early 1970s to regulate the relationship between program suppliers and networks on the grounds that television networks could exercise market power by using their leverage as distributors to distort competition in the program supply market
o Prime time access rule (PTAR) limited the big networks to a four hour primetime time block. For every 1 primtime hour each not, network affiliates had to turn to a third party supplier or in house talent for program content.
PTAR was defended because it carved out a market for independent producers to sell their programs directly to network affiliates, and increased profits to unaffiliated stations.
o PTAR was repealed by the FCC in 1995 stating that the major networks relevant to PTAR do not dominate the market, and entry by small businesses is now relatively easy.
1.15 Ownership Restrictions
• “Multiple-ownership” rules - restrict ownership within the same service or closely connected services
o Can apply nationally or locally
o Set caps by stipulating maximum number of licenses, maximum percentage of audience, or both
• “Cross-ownership” rules – restrict ownership across different telecommunications services
o Regulations preventing a single entity from owning both a television station and more than a specific number of radio stations in a given locality
o Can include non-broadcast properties as well, such as newspaper
o Congress raised the maximum number of radio broadcasting stations a single licensee could own in a geographic area in the T-com Act of 96, reducing the FCCs power in this regard
o In 1999 FCC eliminated strict prohibition against consolidation of broadcasters in the same market, and allowed local station mergers under certain conditions
o 2001 FCC amended rules to permit one of the four major television networks to own, operate, maintain, or control one or both of the emerging networks (UPN and WB)
• During Fox Television v. FCC 280 F.3d 1027 (D.C. Cir. 2002) the court found that FCC failed to provide any basis for retaining either the national television station ownership limit or the cable/broadcasting cross ownership prohibition. Outright vacated the rule.
• During Sinclair Broadcast Group v. FCC, 284 F.3d 148, 152 (D.C. Cir. 2002) court held that the FCC had failed to justify its remaining local broadcast station ownership limits, specifically they had erred by insufficiently justifying its exclusion of non-broadcast media from eight “voices” that must be left in a market in order for local station merger to be permitted
• FCC attempted to institute new media ownership rules in 2003, see Prometheus Radio Project v. FCC case for more info