W. KENNETH FERREE, CHIEF
MEDIA BUREAU BUREAU
FEDERAL COMMUNICATIONS COMMISSION
AT THE

NAB ABA AND FCBA SEMINAR

“2002 MEDIA OWNERSHIP RULES AWARDS”

SUNDAY, APRIL 7, 2002

REMARKS AS PREPARED FOR DELIVERY


Good afternoon.  I want to thank Jerry for that kind introduction 
and thank NAB for inviting me. I’m pleased to be here with you 
here in Las Vegas today.

T.S. Eliot said that April is the cruelest month.  That certainly is 
the case in Washington.  You’re just about ready for Spring to 
spring, and the cold air descend upon the city again.  This past 
week we had several nights of hard freeze…and I’ve already put 
away my cold weather gear for the motorcycle, so I’ve had some 
cold rides in to the Commission the past few days.

In any event, as Jerry noted in his introduction, I am chief of the 
Media Bureau of the FCC.  If you have not been following closely 
the FCC’s reorganization efforts, which you likely have not, the 
Media Bureau is responsible for cable, Direct Broadcast Satellite, 
and broadcast television and radio policy.  

So there is a lot on our plates, and a lot of topics that I could 
discuss here today.

Given that I have limited time, however, and to stay within a realm 
of reasonable interest for this audience, I’m going to confine my 
remarks today to the FCC’s recent approach to media ownership 
rules and policies.

Now, even that topic opens itself to hours of debate and discussion, 
so I intend to keep these remarks at a fairly high level of 
abstraction.  

Avoiding specifics also helps keep me out of trouble with my boss. 

But an overly vague, heavily bureaucratic talk about FCC 
ownership policies might leave even the most patient and 
uncomplaining among you with leaden eyelids.

So I’ve tried to add a bit of color to my remarks.

While I was thinking about the material that I would cover today, 
the Academy of Motion Pictures Arts and Sciences announced 
their annual awards for excellence in the motion picture business.  

I’ve often thought that these kinds of self-laudatory awards shows 
that the entertainment industries seem to like to hold are rather 
gratuitous.  

They also, however, are proliferating.   

We not only now have the major awards shows like the Academy 
awards, the EMMY Awards, the TONY Awards, and the Grammy 
Awards, but also:
 
The People’s Choice Awards, 
The Golden Globe Awards, 
The Screen Actors Guild Awards, 
The American Music Awards, 
The Country Music Awards, 
The MTV Video Music Awards, 
The Soul Train Music Awards, 

And so many others that they defy listing.

Moreover, others, outside of the entertainment industries, are 
getting on the bandwagon.  

There are the Webby Awards for web sites.
The CLIO Awards for advertising.
The Reuben Awards for cartoonists.

And it only gets more arcane from there.  

There is, for example, the Masaoka Shiki International Haiku 
Award.  

But my favorite and one that I am hoping to receive, is the Arthur 
S. Flemming Award honoring outstanding Federal employees.  I’ll 
bet you didn’t know there was such a thing, right? — As such an 
award, not as an outstanding Federal employee!

Of course, you won’t see any of these other awards ceremonies on 
prime time television.  

The networks reserve that time for really compelling programming 
like the Playmate Fear Factor, or the Victoria’s Secret Fashion 
Show, or the latest version of Survivor.

To be fair, I should recognize that the American Bar Association 
doesn’t have an award show for lawyers.  The problem is that the 
categories would have to be things like, “Best use of media to 
prejudice the jury pool,” or “Best obfuscation before a 
Congressional Committee.”

I have some thoughts on nominees for that award.

In any event, in the spirit of this year’s Academy awards, I’d like 
to offer some awards relating to the FCC’s media ownership rules.

The first category today is for “Best commitment to diversity, 
localism, and competition.”

The nominees are:

Charlie Ergen for SHREIK — A gentle ogre named Charlie and 
his talkative sidekick donkey David (Charlie’s lobbyist), kidnap 
the beautiful and spirited Princess Carrie Must. Despite his early 
revulsion to Princess Carrie, Charlie later comes to profess his love 
for her.  Yet, without warning, he whisks her away to the hidden 
land of the second dish where few will ever find her. 

The Network Affiliated Stations Alliance for MONSTER 
NETWORKS, INC. — In the land of Monster networks, the 
affiliates attempt to increase network viewership, yet the 
ungrateful networks forbid them from preempting network 
programming.  Surprising things happen when the affiliates ask the 
FCC to protect them from the monster networks.

Finally, FCC Chairman Michael Powell for MICHAEL 
NEUTRON POWELL: BOY GENIUS — Michael Neutron Powell 
is a brilliant young Chairman with a talent for protecting the public 
interest through limited regulation.  When actual market 
developments overtake the FCC’s outdated media regulations, 
Michael is forced to establish a task force.

And the award goes to Chairman Michael Powell.

The Chairman wins this award for establishing the Media 
Ownership Working Group.

In setting up the Media Ownership Working Group, Chairman 
Powell has, more so than he ever could with mere words, 
reaffirmed the FCC’s commitment to its traditional goals of 
promoting diversity, localism, and competition in the broadcast 
industry.

The Media Ownership Working Group is charged with the 
daunting, but critically important task of rebuilding the very 
foundations of the Commission’s media ownership rules and 
policies. 

It will do this by delving unrelentingly and un-apologetically into 
the facts of how the media markets work, how consumers view and 
use various media, and how the FCC’s existing rules and policies 
have affected market performance.  

This kind of sweeping review is long overdue.  Most of the current 
rules applicable to media services were written to address 
perceived harms and to optimize market performance at a time 
when the prevailing conditions in the media market were quite 
different than they are today.  

As a result, the structure of our rules today rests on foundational 
assumptions about the market that are, at best, questionable and, at 
worst, patently invalid.  

No structure can stand for long after its underlying foundation has 
begun to crumble.

Nor can we just stand by and hope that the gradual disintegration 
of the factual underpinning to the FCC’s media ownership rules 
will slow or stop.  

To the contrary, the changes that are taking place in this space are 
accelerating, rather than slowing.

This is no time to be in denial.  

The time has come to construct a set of contemporary media 
ownership rules and policies to promote a diverse and robustly 
competitive media market.

And where do we begin but at the foundation.  

That is where the people with the hard hats and the heavy 
equipment come into action.  

At the FCC, those people are the Media Ownership Working 
Group.  

They’ll need to start with front shovels, trenchers, and track 
loaders to dig deeply into the media landscape, and then backfill 
with information garnered in their studies about how the media 
markets actually work today.  

Only then can we begin to build and develop new ownership 
policies that will guard against anti-competitive or anti-consumer 
conduct, while optimizing market performance.

The digging must be focused and direct. 

The Media Ownership Working Group has started by gathering 
data on the ways in which the current market structures and FCC 
rules are working to either promote or frustrate the FCC’s 
traditional goals of competition, diversity, and localism.  

But the work can’t end there.  Broadcasters cannot continue to 
serve the public, if broadcasting, as a service, cannot compete in an 
increasingly diverse and fragmented media marketplace.

Inefficient rules reduce the incentives to invest in broadcast 
television.  They also reduce the ability of radio and television 
broadcasting to compete against the growing number of outlets for 
video programming distribution.  

We simply are kidding ourselves if we think that broadcasters can 
go on providing the same service they were providing in 1960 and 
remain relevant and viable in 2002 and beyond.

Broadcasters must have the ability to use their valuable public 
spectrum in new, efficient, and compelling ways; and they must 
have the flexibility to develop their business models to match 
advances in technology, the evolution in consumer preferences, 
and changes in the competitive landscape. 

The time has come, therefore — if we care about broadcasting, if 
we want to see the service thrive — to see whether the 
broadcasting industry is adapting to the new information 
marketplace, or whether it is being held back by restraints that 
were placed upon it when different market conditions prevailed.  

In saying this, I am in no sense prejudging any particular approach.  

In private, off-the-record sessions with broadcasters, I’ve heard a 
number of interesting, sometimes revolutionary, suggestions about 
ways in which the service might evolve if one or another set of 
rules obtains. 

I don’t know which, if any, of these suggestions are realistic, I 
don’t have any favorites among them, and I don’t know whether 
they even have much appeal beyond the particular proponent of the 
model.  

The regulatory point, however, is, to the extent possible without 
abandoning our responsibility to protect the public from harm, we 
should allow business men and women who hold broadcast 
licenses to adjust their market activities in response to competitive 
forces.  

For example, it may be that, by allowing certain combinations that 
previously were “unthinkable,” licensees may realize operational 
efficiencies that produce higher quality programming for the 
public.

And I am deliberately avoiding the normative question of what 
“higher quality” means.  For my purposes, it is whatever produces 
the maximum consumer welfare as measured by traditional market 
mechanisms — even if that is “Survivor Guantanamo Bay” rather 
than “I, Claudius.”  

For better or worse, we do not, in this country, require or expect 
broadcasters (or any other media conduit) to elevate consumer 
preferences. And this is not the forum to debate whether that is the 
right approach or whether some more heavy-handed interventionist 
model might make us all better as human beings.  

The time has come to recognize that some of our own rules, even 
those that once were quite important and sensible, may be 
inhibiting the free flow of information and the delivery of 
programming to the public.

For example, if stations are not able to realize cost savings through 
operational efficiencies, they may turn to other measures to remain 
afloat, such as decreasing the amount of locally produced news and 
information programming, or reducing programming expenditures 
in general.

Neither of these outcomes, it seems to me, can be said to benefit 
the public in general.

There also may be ways, if our rules at the FCC were slightly 
different, that broadcast licensees might aggregate spectrum to 
provide new, more competitive, and perhaps in some cases 
subscription-based services.  

This might not only allow broadcasters to better compete in the 
marketplace, it might also play a part in improving the quality and 
diversity of programming available to the public, again reserving 
the question of what constitutes quality programming.

And so, the time has come to evaluate in as rigorous and thorough 
a manner as possible, how the media markets operate and how the 
FCC’s rules affect those markets.

Chairman Powell’s willingness to take on this responsibility, amid 
sometimes harsh criticism, more than merits our respect, 
recognition, and support.

Which leads me to my second award today.  This one is in the 
category of “Best Supporting Precedent.”  

This category recognizes the authoritative body that has done the 
most to require the Commission to be rigorous in justifying its 
media ownership rules and policies.

And the nominees are:

The U.S. Supreme Court’s Red Lion decision in “LEON ROUGE” 
— Set in 1969, this musical follows a struggling independent 
agency that falls for a beautiful and tempting legal theory named 
“Scarcity,” who exists in a quasi-fantasy world of the agency’s 
own creation.  The lovers must keep their affair hidden from the 
powerful Duke of Free Speech.

The 104th Congress for GROSS-BILL PARK — In this art house 
picture, a large party of house members and senators assemble to 
pass the 1996 Telecommunications Act.  The Act leads to a 
biennial review of media regulation.  Mayhem ensues. 

The DC Circuit’s decision on the horizontal cable concentration 
limits Court in CABLE CAP DOWN — An elite team of 
government litigators is air-dropped into the US Courthouse in 
Washington on a mission to uphold the cable ownership cap.  
When the cap is shot down, the government finds itself trapped in 
an endless remand and fighting a desperate battle against a 
changed ownership landscape.

The DC Circuit’s national audience reach cap decision in 
VANILLA SKY’S THE LIMIT — The National Association of 
Broadcasters appears to lead a charmed life.  Powerful and well 
funded, NAB’s freewheeling existence is enchanted.  
Complications arise when NAB pursues a relationship with the 
Fox television stations.  The NAB finds itself on a mind-bending 
search for its soul and discovers the precious, ephemeral nature of 
the network-affiliate relationship.

And the DC Circuit yet again for its TV duopoly decision in 
Remanding Day — Bill Kennard is a rookie chairman at the FCC. 
His first day on the job, he is sent to adopt ownership limits with 
the veteran Roy Stewart.  Stewart pushes his young charge to draw 
arbitrary lines and bend rules. Kennard's misgivings about Stewart 
grow as he begins to suspect that Stewart does not simply push the 
boundaries...he ignores them completely.

And the award goes to the D.C. Circuit for Cable Cap Down, 
Vanilla Sky’s The Limit, and Remanding Day.

This was a tough category in which to pick a winner.  
The fact of the matter is, both Congress and the Courts have made 
it quite clear that, even if the Commission wanted to avoid a top-
to-bottom media ownership review, that is today a legal 
impossibility. 

In the 1996 Act, Congress made it clear that our media ownership 
rules cannot rest on ancient and unsupported assumptions.  

The biennial review provisions require us to re-evaluate our media 
ownership restrictions every two years in light of changes in the 
media market, and to justify our media ownership rules on the 
record. 

We are in the process of trying to figure out exactly how to do that.  
In the meantime, however, the judicial branch has weighed in just 
to be certain that we did not miss the message: we can’t impose 
ownership limits based on anecdote and assumption. 

The winner in this category, the D.C. Circuit, has fired more than a 
warning shot across our bows.  

Different panels of that court have now said, in no uncertain terms, 
that the FCC must be prepared to justify its media ownership rules 
and policies on a substantial factual record.  

For example, with regard to the Commission’s former 40% 
channel occupancy rule, the Court complained that the FCC 
"seems to have plucked the 40% limit out of thin air."  

Just a few weeks ago, that same court issued a major decision in 
the Fox case. The court characterized the FCC’s analysis of 
today’s market as “totally inadequate” for determining whether the 
35% audience reach cap is still needed.  

And with regard to the FCC’s decision to retain the TV-cable 
cross-ownership ban, the court called our reasoning “flimsy” and 
“half-hearted.”

That stings and I’ve made a personal commitment not to have a 
case remanded on my watch with similarly dismissive language.  

There is no secret to how that will be done.  With better analysis of 
today’s media market, we can reach ownership decisions that will 
once again receive the judicial deference due an expert agency.

And the cases are coming to prove it.  Three ownership 
proceedings are already in the pipeline at the FCC, and there is a 
fair chance that one or all of them, once complete, will be subject 
to judicial review. 

Those three are the cable caps remand proceeding, the broadcast-
newspaper cross-ownership proceeding, and the NPRM on local 
radio caps.  

Further, now that the DC Circuit has remanded the FCC’s 35% 
national broadcast audience cap and our TV duopoly rule, we have 
additional work to do in those areas.

The time is fast approaching, therefore, when we will be back in 
front of a panel of the D.C. Circuit trying to justify our rules.  And 
there is no way to fake it in that court.  One can argue about the 
law, but either we will have record evidence to back-up our rules 
or we will not.  

Now that’s not to say that the evidence must lead to a single 
incontrovertible answer.  The Commission is permitted to make 
judgment calls, and even predictive judgment calls, so long as they 
are informed judgment calls.  And again, that requires facts on the 
record.

And as the Scottish satirical novelist Tobias Smollett noted, “facts 
are stubborn things.”  It is that stubbornness and resiliency that 
ultimately will be our best shield, whether we are defending 
policies in a court of law, or in the court of public opinion.  

So we have no alternative.  This is not ideological; it’s not 
political, it’s not merely for show.  We are on a mission to develop 
facts about the media market.  

Which brings me to my third and final award today.  One area in 
which a lot of this work is going to hit the ground will be in the 
FCC’s review of merger applications.  

So, the third category is for “Best Corporate Combination.”  The 
nominees are:

EchoStar and DirecTV for “THE LORD OF THE DISH” — In an 
ancient world of sorcerers, elves and the Justice Department, a 
timid hobbit named Charlie undertakes a perilous mission.  Charlie 
must merge his company with a competitor before it falls into the 
hands of the Dark Lord Murdoch.

Comcast and AT&T Broadband for A BEAUTIFUL MERGER — 
A behemoth telecommunications company struggles with 
schizophrenia and tries to explain what M life is.  The love of a 
strong and committed partner rescues the company from its peril.

Telemundo and NBC for IN THE BOARDROOM — A young 
Spanish network’s affair with an older mature network upsets the 
network’s fiancée, Bud. The strife that results allows many 
attorneys to buy new Mercedes.

And the winner goes to…  Oh my, the CPA firm, Arthur Andersen, 
has not finished tabulating the results. I guess they’ve been busy 
lately.  We will have to wait and see whether any of these proposed 
combinations are winners. 

Thank you for your attention today and for indulging my fantasy of 
presenting at the Academy Awards.  


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