Radio Industry Group Wants FCC to Eliminate Competition Rules Limiting Ownership

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With the Federal Communication Commission about to embark on the review it does every four years of whether its broadcast ownership rules remain necessary in the public interest of competition, the National Association of Broadcasters is encouraging the agency to relax, if not eliminate all together, any restrictions on how many stations a single owner can have in one market.

Currently, the FCC allows each radio broadcaster to own or control six FM stations and two AM stations in a major market (the FCC limits depend on size of markets).

In its review, FCC will look at the overall marketplace to decide if any adjustments are needed. As part of that review, it asks interested parties for comments; while that hasn't happened yet, the NAB and two music industry groups have pro-actively submitted comments in advance of the review process.

In a letter to the FCC and in comments to the agency, the NAB says it doesn't believe the existing radio ownership limits are needed to promote competition in today's audio marketplace.

In contrast, the Music First coalition of industry trade groups and the Future of Music, working together in a joint comment, are encouraging the FCC to keep restrictions in place, arguing that further consolidation will impact diversity of programming, and thus the public interest.

The NAB's argument is based on how the competition for listeners' time has changed dramatically due to new business models from satellite and digital radio, and on-demand services, let alone Facebook and YouTube. "The Commission cannot continue to ignore multiple major sources of competition for both listeners and advertisers in the audio marketplace," the NAB's letter says.

But the music industry counters that the radio industry already owns an advantage over all other audio delivery platforms in that terrestrial radio doesn't have to license and pay royalties to record labels and artists; while all the other audio content delivery platforms make such payments.

The NAB dismisses that component of the music industry's response as irrelevant because it has nothing to do with keeping a vibrant consumer offering through competition on behalf of the public interest. 

"The Coalitions' and record labels' frustration that Congress has refused to change copyright law by imposing performance rights fees on terrestrial radio stations is not a reason for the FCC to opine on a legislative matter outside the scope of its regulatory jurisdiction and expertise," the NAB said in its commentary. 

Yet, in its initial comments to the FCC, the NAB also brought into play a side issue/grievance too, noting that while it has made progress in its decade long campaign to get smart phone manufacturers and carriers to turn on the radio chip, "Apple has not yet provided its customers with this feature." 

Nevertheless, the NAB says of the music industry grievance, "Third parties' unhappiness over congressional decisions on copyright law is no reason for the FCC to disregard its statutory obligation under Section 202(h) of the 1996 Telecommunications Act to "ensure" that its radio ownership rules "keep pace with the competitive changes in the marketplace."

Consequently, in a letter to the FCC in June, the NAB said radio ownership limits are not needed to promote competition, adding it should be  "unencumbered by regulatory restrictions" in order for terrestrial radio to remain a meaningful competitor.

But if the FCC decides that it still needs to regulate broadcast radio ownership, then the limitations should be relaxed so that in the top 75 Nielsen Audio market -- the major metropolitan markets -- a single entity can own or control up to eight commercial FM stations with no limit on AM ownership.

Moreover, the NAB suggests that if an owner has reached the 8 FM stations it is proposing as the new limit, if that owner participates in the FCC incubator program it can be affiliated with 10 FM stations in one major market. (The FCC incubator program is designed to support new and diverse entrants into the radio broadcasting industry by encouraging established radio broadcasting operators to partner and assist those new players.)

Furthermore, outside the top 75 markets, the NAB argues there should be no restrictions whatsoever on radio station ownership in the smaller markets.

In addition to competing for ears, the NAB argues that it also goes up against gigantic internet services for advertising as well. As an example, it noted both Spotify and Google offer on-demand services and programmed content through playlists; and both are aggressively pursuing advertising dollars as well. In fact, Google is so successful that its advertising revenue swamps the radio industry, according to the NAB.

While Google in fiscal 2017 took in $95 billion in advertising revenue, or six times as large as the entire advertising revenue base of the $16 billion radio industry, Billboard estimates that Google's music related advertising revenue totals about $3 billion of the $95 million, if you consider Youtube's claim that it has paid out $1.8 billion to rights holders in the last 12 months; and extrapolate out from about 65 percent of revenue paid to content owners.

Regardless, the NAB argues if radio station ownership can be increased, broadcasters will be able to take advantage of economies of scale. It also claims that increased consolidation should enhance diversity of radio programming in its filings and letters to the FCC, which were mainly authored by Rick Kaplan  and Jerianne Timmerman.

In its joint comments, signed by musicFIRST executive director Chris Israel and Future of Music Coalition director Kevin Erickson and aided in the drafting by Rachel Stilwell of Law Offices of Rachel Stilwell, both organizations disagree with that assessment.

"Such consolidation… causes homogenization of AM/FM music playlists such that listeners of commercial AM/FM music-driven stations now hear a substantially less diverse swath of artists and recordings than before consolidation," the industry reps commented to the FCC.

Moreover, despite all the audio competition, terrestrial radio still has a "substantial percentage of the number of listeners who tune into audio delivery platforms, particularly in cars," those comments add.

Finally, the Music First/Future of Music response points out that one of radio's biggest owners, iHeart, as well as radio groups like The National Association of Black Owned Broadcasters and the Multicultural Media, Telecom and Internet Council are opposed to further deregulation of radio ownership.

The FCC has yet to begin the formal process for its review on radio competition. Sometime in December, the agency is expected to invite comments by formal notification via publishing its "Notice of  Proposed Rulemaking" in the Federal Register, the official daily journal of the U.S. Government. After that, interested parties will have 45 days to file initial comments.