Reforming The FCC

Recently, I attended a seminar on Reforming the Federal Communications Commission, held at the National Press Club. The question presented was whether the FCC is truly equipped to deal with immediate challenges that it will face.

The conference, presented by Silicon Flatirons, a center for law, technology and entrepreneurship at the University of Colorado, was premised on an understanding that the worlds of communications -- and especially the segments of broadcasting, print, telecommunications and the Internet -- are changing dramatically, and that the change is happening faster than we can comprehend. New entrants with new business models are emerging to confront the legacy businesses and challenge us to adapt and change. Further questions were raised on whether the new technologies, new business models and new policy challenges also require a new look at the regulatory framework at the FCC. That was the focal point of the seminar.

The seminar brought together an impressive panel of academics, industry veterans and policy wonks to consider ways to launch the dialogue. One of the papers was particularly interesting in its challenge to many of the regulatory directions of the past and its attempt to lay a path for a different approach to government interaction with the industry and its economy. The paper was presented by Mark Cooper, Director of Research at the Consumer Federation of America.

Cooper made the case that the so-called "public interest" mandate of the FCC has been largely ignored. In his view, past FCC administrations, such as that of Michael Powell, have tended to define the public interest in terms of "a quintessentially free-market ideology -- just get the government out of the way and let the market do its thing." Cooper contends that these chairmen, beginning with Mark Fowler, were dead wrong.

Cooper established that market fundamentalism is more the primary cause of the collapse of the many communications and telecommunications sectors, and that this must be recognized in establishing the foundation on which the new FCC sets its policy. The message couldn't come at a more opportune time, as there is relatively broad consensus that the free-market, regulatory-restraint approach has led the financial structure into the disastrous economic plight we now face along with the nation as a whole.

Cooper also makes the case that the pursuit of private profit is not necessarily synonymous with the public good. Indeed, he cites Alan Greenspan, "the leading apostle of free market ideology," who said in congressional testimony that the pursuit of private profit is not even synonymous with the private good, admitting that he "made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."

In fact, many broadcasters will agree (although some only privately) that the efficient market hypothesis has not worked to the benefit of broadcasting or their own concept of why they chose to earn their living in this profession. As we have seen, and as Mark Cooper pointed out, unregulated markets do not automatically create a stable, growing economy. That also means that the "less government is better" hypothesis will be under attack in the new FCC as the wrong approach.

Cooper calls for the regulatory agencies to restore the effective oversight across the infrastructure of the economy (finance, telecommunications, electricity, commodity markets) that was abandoned in the past couple of decades.

Some of that change will serve the public interest goals of broadcasters. While broadcasting may find itself subjected to more rigorous regulatory treatment, it may also be the beneficiary of a more deliberate regulation of other industries as well. Here are two examples:

• Stronger public interest regulation of technology standards may lead to the inclusion of radio broadcasting receiver technology in all satellite and auto radio receivers.
• Adoption of policies such Net Neutrality (to assure access to Internet delivery) may prevent barriers to entry by broadcasters to new transmission modes, despite the economic self-interest of some Internet service providers.

Why are these points important to broadcasters? Consider the recently released Deloitte study concluding that "Internet radio may not just reinvigorate the medium of radio ... it may reinvent it." It observes that online revenues have exploded in recent years while radio's spending levels have fallen, and further reports that "As radio becomes a more established medium online, it could become a powerful platform," with annual growth as high as 20%.

In his CBS Sunday Morning broadcast February 1st, CBS commentator Jeff Greenfield commented on the changing media landscape: "What has happened in the last five years can't even be captured by the word "change" -- it is as if the most fundamental laws of the media universe have been overthrown ... Where the last five years have brought a revolution is how information and entertainment is delivered, and where." Now (to use the buzzword) "convergence" is here.

So, what to make of all this? As we watch the Obama Administration make over the FCC, presumably under the leadership of Julius Genachowski, it will take thoughtful consideration by broadcasters whether to support a more active regulatory approach. While many broadcasters tend to view regulation as a threat, perhaps we should consider whether a more activist FCC working to assure that the public interest is served in the environment of a converged industry will ultimately prove to be best for broadcasting services.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.