If the Broadcast/Newspaper Cross-Ownership Rule Falls, Will It Make a Sound?

While the perennial cliche is that the FCC is perpetually behind the curve in trying to keep up with new communications technologies, my experience has been that the FCC and its staff are pretty up to date on these developments. As a result, when we see a rule remain on the books after its usefulness has ended (or the discovery that it was never useful in the first place), it can usually be attributed to one of two possibilities: either fixing the rule hasn’t risen high enough on the FCC’s list of priorities to dedicate limited staff resources to the process (for example, modifying the FCC’s full power television rules to eliminate the rules and references applicable only to analog TV), or political pressures are impeding the process.

Rules that remain on the books because of a lack of staff resources tend to be addressed eventually. In contrast, rules that remain in place due to political pressures are well nigh immortal. In a 2010 C-SPAN interview with three former FCC chairmen regarding various issues, including the FCC’s media ownership rules, Chairman Hundt was quoted as saying “Why don’t we get an eraser and just get rid of them? None of us thought these rules made sense.” To which Chairman Powell responded “It’s a simple reason. It’s politics.” The third party to that conversation, Chairman Martin, had tried to slightly loosen the prohibition on broadcast/newspaper cross-ownership in 2008 in the nation’s largest markets, only to encounter a firestorm of protests and court appeals from media activists. As a result, the prohibition remains in place, although the FCC announced this past December that it is once again considering loosening the rule in the largest media markets (are you seeing a pattern here?).

Rules residing in political purgatory–those kept on political life support long after their purpose has ended–survive until the facts on the ground change to such an extreme degree that even those who reflexively defend the rule can no longer do so. While some would justifiably rail against that system and demand that the nature of politics change, with rules created, modified, or eliminated based upon the cold hard facts of the situation, the nature of politics is actually the most relevant cold hard fact, and realistically, the least likely to change. Many rules will outlive their usefulness, and in fact become harmful, long before their demise. The only question is how long it takes after that tipping point is reached before it becomes politically feasible for the FCC to modify or eliminate the rule.

Of course, none of this occurs in a vacuum, and both individuals and businesses living with a rule must adapt to the changing situation on the ground, even as the rule itself remains unchanged. Recent “adaptations” make me wonder if we haven’t reached the point where the broadcast/newspaper cross-ownership rule, which certainly had a reasonable purpose at one time, has reached the point where it can no longer be defended with a straight face.

In particular, I am thinking of two recent events which suggest the rule has outlived its time. The first is the announcement last month by Media General that it is selling its newspapers to Berkshire Hathaway in order to concentrate on its broadcast and digital content delivery. When a company that actually does have both broadcast and newspaper interests does not find the combination sufficiently compelling to retain its newspaper operations, the premise of the rule–a fear of powerful broadcast/newspaper combinations dominating the market–appears misplaced.

More interesting, however, is the recent announcement by Newhouse Newspapers that it will be scaling back its daily newspaper in New Orleans (the well-known Times-Picayune), as well as those in Mobile, Huntsville, and Birmingham, Alabama. According to the announcement, these daily newspapers will now be published only three times a week, with increased focus on website content.

Why the drastic cutback from seven days a week to just three, rather than the more measured approach perennially proposed by the U.S. Postal Service of ending only Saturday delivery as a cost saving measure? Given that daily newspapers make a substantial portion of their revenue from publishing legal notices (which are usually required by law to be published in a daily newspaper), these newspapers must have thought long and hard before ceasing daily publication and placing that significant revenue stream at risk.

However, there may be one other factor at play. While the FCC’s rule prohibits ownership of both a broadcast station and a daily newspaper in the same area, the FCC defines a “daily newspaper” as one that is published at least four times a week. Whether by accident or by design, the decision to scale these newspapers back to three days a week makes them exempt from the FCC’s ownership restrictions, thereby expanding the pool of potential buyers to include those most likely to be interested in taking on such an asset–local broadcast station owners.

Whether that fact played into the owner’s decision to publish only three times a week frankly doesn’t matter much. If it did enter into it, then the newspaper cross-ownership rule has become actively harmful, forcing a newspaper that might have been happy to publish four, five or six times a week to instead publish only three times a week to avoid being subject to the rule. If it didn’t, then Newhouse’s decision to cut back to three days a week is merely an indication of things to come in a struggling newspaper industry. Either way, the FCC’s newspaper cross-ownership rule is being mooted by factual changes on the ground.

The clock is therefore ticking on how long it takes for the political pressure to also fade, allowing the FCC to finally proceed with its plan to loosen (or perhaps eliminate) the rule. During that wait, the only question is whether the rule is merely a curious anachronism, or if it actually harms the newspaper industry, either by preventing broadcasters from investing in local newspapers, or by forcing newspapers to cut back to publishing three times a week in order to circumvent the FCC’s rule. Unfortunately, by the time the political pressures keeping the rule alive finally recede, the damage may already be done, with newspapers ceasing existence or scaling back publication until the FCC’s rule becomes irrelevant. If that happens, the rule’s elimination may turn out to be no more consequential than the FCC’s eventual elimination of analog TV rules–an act of administrative housekeeping done when the item regulated no longer exists.