A Free Press or A Free Ride?

What should socially responsible investors—and society—expect from media companies? Federal policies officially demand public service in return for the free use of the public airways. However, those policies have lost much of their teeth as media goliaths influence policy in Washington and cable delivers TV directly into homes. Now a rapidly growing, bipartisan media reform movement—an movement that includes unlikely allies ranging from Republican members of Congress to labor union leaders and the National Rifle Association to socially responsible investment firms like Trillium Asset Management—is raising the issue of public obligation by media companies to a higher profile than ever before.
In the U.S., efforts to balance the commercial interests of media companies with the needs of a democratic society date back to the Communications Act of 1934. The act came in response to the explosion of radio broadcasting in the decade after the first radio station began broadcasting in Pittsburgh in 1920. The Act gave broadcasters free access to designated channels on the electromagnetic spectrum, but in return for this exclusive privilege, Congress required that broadcasters act as trustees of this powerful public asset. Broadcasters were explicitly required to operate in the “public interest and convenience.” In fact, Congress mentioned this public interest obligation over one hundred times in the law, which required broadcasters to fulfill specific public interest obligations such as educational programming and coverage of local and federal politics to ensure taxpayers got compensation for use of the public airwaves.
This free use of the public’s airwaves has been a boon for broadcast businesses. In 2000, for example, the broadcast television industry earned over $40 billion per year in ad revenue from its free use of the spectrum. Telecommunications companies, in contrast, were forced to pay billions of dollars for the use of far less spectrum, and have never attained the profitability of broadcast companies.
But despite the value of this lucrative arrangement, many critics argue that broadcasters failed to deliver their end of the bargain in meeting their public interest obligations. Instead, they have relied on aggressive and effective lobbying efforts to weaken the public interest requirements and gain new privileges. This culminated in the Telecommunications Act of 1996, which some critics call the “the greatest corporate giveaway of all time.” New digital technology allows broadcasters to fit six channels into the spectrum that one analog signal previously occupied. But rather than auctioning off this extra spectrum or reserving some of it for public interest programming, Congress simply gave it free of charge to existing broadcasters in the 1996 Telecommunications Act. Perhaps even more significantly, the Act loosened ownership rules designed to prevent a handful of companies from dominating the nation’s media and triggered a wave of consolidation in the industry.
More recently, in June of 2003, the GOP-led Federal Communications Commission (FCC) proposed new rules to finish the job. The proposed rule changes raised the cap on electronic media ownership and re-wrote the rules on cross ownership of media in a single market. This would allow a single company like Clear Channel Communications or News Corp., to buy the dominant newspaper, the local cable-television system, three local television stations and eight radio stations in a single market. In other words, the new rules were designed to encourage a handful of powerful and politically connected corporate giants to control virtually all the news and information outlets in this country.
The implications of this kind of consolidation in the media raise troubling questions. Opponents of consolidation (from both the Right and the Left) fear a further narrowing of viewpoints in the local and national media as most outlets fall under the ownership of a few large media companies that are more concerned with profits than reflecting the diverse cultural and political views in this country. Australian Rupert Murdoch’s News Corp. would be one of the biggest beneficiaries to any rule changes. Predictably, its Fox News channel covered the war in Iraq with the nationalistic fervor of a company trying to win political favor. This is standard operating procedure for News Corps, whose politics are tied to money not ideology. Some years ago, News Corp. removed the BBC News Service from its Chinese satellite package to win favor with the Chinese government. And then there is Clear Channel Corporation, which operates over 1,500 radio stations nationwide and has close ties to the Bush administration. When the Dixie Chicks, one of the country’s popular country music groups, spoke out against the war on Iraq, their songs were mysteriously dropped from some Clear Channel play lists. And more recently, CBS faced criticism for refusing to sell airtime to the political group MoveOn.org, which unsuccessfully sought a Super Bowl commerical slot to show the winning entry in a contest to develops ads criticizing the Bush Administration.
The complicity of Congress and the FCC with the interests of media, however, should come as no surprise. According to the political watchdog group Common Cause, in 1999 and 2000, the National Association of Broadcasters (NAB) gave $22 million to various candidates, including those on the most important media oversight committees in Congress. And like the other revolving doors that swing throughout the beltway, FCC staffers routinely go on to work for the NAB. In fact, less than six months after the FCC acted to loosen ownership rules, the chief of staff to FCC chairman Michael Powell took a high level post at the NAB.
But the influence of the NAB goes beyond just money. The NAB’s influence is unique among corporate lobbies because of the influence broadcasters have on elections. While the association fills election coffers, its members like News Corp. can simultaneously help any administration by aligning its editorial content with the administration’s agenda. And with the average political sound bite down to 7.3 seconds during the 2000 Presidential elections, electronic media can be the arbiter of which ideas see the light of day. Like, for example, campaign finance reform, perhaps the lynch pin issue of media’s role in American democracy.
The NAB has spent millions over the years in fervent opposition to campaign finance reform. This may be the finest example of the industry’s hostility toward public interests. The escalating price of elections, both local and federal, is due mostly to one thing: the cost of television advertising, which benefits NAB member companies. Broadcasters have even managed to find ways around the legal obligations to provide the lowest unit cost for political advertising. So on the one hand, they are using their lobbying power to keep special interest money pouring into political campaigns. On the other hand, they are then collecting that soft money by selling expensive TV ads to the campaigns. And they can provide favorable coverage to the parties and politicians that help their cause the most.
But despite their power, wealth, and Washington connections, media companies may have finally gone too far. When it comes to media consolidation, a growing number of the American public are echoing the classic line from Network, the 1976 movie satirizing the role of business in shaping the news industry: “I’m mad as hell and I’m not going to take it any more!” This summer, when the FCC proposed its new rules designed to allow greater media consolidation, 2.5 million Americans took the time to send back written comments protesting the changes. This number was so staggering, it forced the GOP-led Senate to postpone implementation of the rules approved by the GOP-led FCC commission. We think that outpouring is a prelude to much greater public scrutiny of the public interest obligations required by broadcast companies.
Trillium Asset Management has begun exploring ways we can support the growing media reform movement. Last spring, we called on Clear Channel to implement a corporate policy affirming freedom of expression. In December 2003, we wrote to the three major broadcast companies calling on them to boost their public interest programming in proportion with their increased digital channel capacity, and to support the FCC extending these requirements to cable for the first time. We also raised issues of media responsibility with Time Warner, the world’s largest media company, who agreed to discuss our issues later this year. We’ll keep you posted on our advocacy efforts on this issue, because as musician Gil Scott-Heron sung thirty years ago, this revolution “won’t be televised.” At least not until media reform becomes a reality.