Both sides of the FCC debate on media "dereg" are wrong

Thomas W. Hazlett and Richard A. Epstein, two men I admire a great deal, tag team it in this piece in the FT, decrying both sides of the debate over the FCC's recent decision to loosen some of the regulations media ownership. Theories of excessive media conglomeration when unchecked by regulators are all well and good on paper, but the history of FCC regulation has proven just the opposite: the FCC, far from serving the "public interest" as is its justification for being, is in fact the incumbents' (read: vested interests) best friend, which is why the National Association of Broadcasters has fought AGAINST relaxing the regulations.

The government, subject to the influence of large, special interests, has controlled who gets access to broadcasting licenses and radio spectrum. This has empowered the large interests, retarded innovation, and discouraged entrepreneurialism. The solution: treat the airwaves as property.

From Hazlett:

Radio and TV regulation is tidily explained by the "capture" theory (in which the agency is controlled by the entities it is supposed to regulate). Rules limit competitive entry, making licences more valuable. Those lucky enough to get a licence take this policy to the bank. Policymakers are happy because it puts them in the loop, yielding political clout in assigning and regulating licensees. But consumers are left out, as competition is reduced and innovative technologies blocked via too-tight spectrum allocations.

Free speech is another loser. Policymakers are adept at making speeches about monopolies thwarted, diversity gained, or localism empowered. But the history of FCC content regulation is a sad one. In fact, the ban on newspaper ownership of broadcast facilities first arose in the 1930s, when FDR was convinced that publishers were anti-New Deal. In 1940, the FCC actually banned radio stations from editorialising (the Mayflower Doctrine). In 1949, the FCC reversed course with the Fairness Doctrine, mandating that radio and TV outlets cover controversial issues from balanced perspectives. But the result was a "chilling effect", as broadcasters chose bland content rather than risking requests for (free) equal time. When the Doctrine was abolished in 1987, informational radio formats increased fourfold in just six years.

Economic restrictions may be even more deleterious than content regulation, however. By suppressing competition, regulators deprive the public of valuable new information sources and free choice in media markets. Take the TV Allocation Table of 1952. The plan killed the fourth network, DuMont, by dishing out insufficient licences to allow survival against the Big Three. DuMont protested strenuously but regulators acted on the public interest in "localism", denying additional stations in big city markets to scatter licences widely.

The emergence of just three national viewing choices was an appalling result that cable TV operators soon attempted to remedy by providing the additional channels consumers demanded. The FCC, despite Chairman Newton Minow’s headline-grabbing speech in 1961 railing against TV’s "vast wasteland", rushed to the broadcasters' defence. Cable's advance was crushed in a series of rulings beginning in1962, and broadcasting remained unchallenged until deregulation in the late 1970s.
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The campaign against relaxation is led by the National Association of Broadcasters, which joined FCC lawyers in defending the old rules in court, still arguing the "public interest" after all these years. But, as the D.C. Circuit Court of Appeals wrote in 2002: "the Commission has adduced not a single valid reason to believe the [National Television Station Ownership] rule is in the public interest."

Liberalising just a fraction of the TV band to allow deployment of high-speed broadband would swamp any possible kick from tweaking the TV station ownership rules. But neither the FCC nor its critics seems interested in producing more than grunts and groans in a show fit for pay-per-view.

From Epstein:

The source of much of this mischief lies in the Supreme Court’s case law, culminating in its 1969 decision in the Red Lion case, which treated the spectrum as different from newspapers, specifically for first amendment law, and practically everywhere else. The argument du jour was that the scarce space in the spectrum meant that the usual rules on freedom of speech had to be suspended in favour of system that allowed the FCC to rig and run national debate in order to insure balance in the media presentation. But at the same time the restrictive rules on the deployment of spectrum only prolonged the scarcities that were said to justify the government imposition in the first place. Today the idea that scarcity of spectrum really matters is falsified by every cable that snakes underground or dish antenna that pokes up over the roof line. Yet the FCC and its critics are still fighting over which set of special rules should govern the spectrum. The right approach is to start over, and to create property rights in spectrum that can be allocated for whatever purpose the owner chooses subject only to the constraints of the antitrust law. The current mess only confirms the simple truth that there never was any case for special treatment of the spectrum in the first place.