NAB: Ownership rules lacking in rationale

The rationale underlying several decades-old media ownership rules that broadcast television stations only compete against themselves in local markets is simply not true, the National Association of Broadcasters has said in comments filed with the FCC. The Commission should adjust its rules to better reflect today and tomorrow’s marketplace that features competition from rival industries as it weighs relaxing ownership restrictions, NAB said.

In its comments submitted to the FCC for its 2014 Quadrennial Ownership Review, NAB included an economic study by Economists Incorporated that tested the Department of Justice Antitrust Division’s position that broadcast TV stations do not face competition from cable and other media sources for local advertising revenue. The study found no evidence that in local markets where broadcasters are engaged in a joint sales agreement (JSA) or shared service agreement (SSA) are broadcasters able to charge higher advertising rates than in markets where these arrangements are not present.

“The presence of JSAs and SSAs is not statistically associated with increased advertising prices in local markets,” concluded the study, which was conducted by economists Hal J. Singer and Kevin W. Caves. “There is even some evidence that markets with JSAs and SSAs have prices approximately 16 per cent lower than other markets, suggesting that these arrangements benefit consumers by lowering costs.”

The study, which analysed pricing data from the past 10 years in 210 local markets, also found that in markets with a duopoly television station owner do not have higher advertising prices than in markets without a duopoly. “Increases in local television broadcast station concentration do not appear to have any effect on the advertising rates that broadcasters are able to charge,” the study concluded. That result “is consistent with the conclusion that local broadcasting prices re disciplined by non-broadcast alternatives,” the study found.

NAB also highlighted a number of other broadcast ownership rules that can no longer be rationally maintained in today’s marketplace. Cross-ownership rules that prevent common ownership of a radio station and TV station or broadcast entities and newspapers in the same market do not promote the Commission’s localism, competition or diversity goals, NAB said in its comments.

“The newspaper-broadcast cross ownership rule, in particular, should have been eliminated years ago,” said NAB. “Failure to do so has likely led to the hastened diminishment of the newspaper industry and should serve as a warning to the Commission of what can happen to the marketplace when it ignores its deregulatory mandate and waits too long to adjust its rules.”

Barriers that restrict access to capital are the cause of depressed female and minority ownership of broadcast radio and TV stations, NAB said. Ownership restrictions have not led to an increase in female and minority entities owning broadcast stations and in fact limit their ability to obtain sufficient capital to purchase and operate stations.

“Purposefully depressing the value of broadcast stations through ownership limitations only makes it more difficult for current licensees to maintain operating capital in order to compete or for possible new entries to secure funding,” said NAB. “It simply has not worked. The time has come for the Commission to consider better incentives-based alternatives.”

Posted by on Aug 8 2014. Filed under Articles, Broadcast, Markets, Policy, Regulation, Research.

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