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The second objection is that we live in a market-driven society and since this media system is the logical
result of the market, it is the best and most rational system for a free society. But the truth is that our media
system is not merely the result of competition in the marketplace. It is also the result of enormous
government subsidies and government sanctioned monopolies which have, in fact, created the winners in the
marketplace. What do I mean? Consider the gift of scarce radio and TV spectrum to commercial
broadcasters, valued in the hundreds of billions of dollars. This gift of spectrum effectively provided the
foundation for the networks NBC. ABC. CBS and Fox. which are all part of the largest media corporations
in the world. It is a case of unrivaled corporate welfare. Likewise, the government has authorized telephone
and cable television monopolies across the nation, hence elevating a handful of companies to super-
powerful status in our media and communications system.
And, finally, the Internet itself is a direct testament to shrewd public sector investment. It would have been
an irrational investment for a private firm, as no one could figure out how to make money off of it until
recently. The Internet is the result of 30 years of direct government subsidy and control. Only in the 1990s
has the system been effectively privatized and turned over to Wall Street and Madison Avenue. But we
should never forget its origins.
So, in my view, the people of this nation, acting through their elected government, have a right and a duty
to intervene in the media system to sec that it better serves their needs.
What are we to do?
I propose the following three measures
First, we need to have full public hearings on what we want the coming integrated digital communication
world to look like. The 1996 Telecommunications Reform Act permits firms to own more and enter into
new fields than they had previously been permitted to do. At the time, the public was told that this would
lead to intense market competition. Instead, deregulation has produced unprecedented concentration. So we
have larger and larger firms, and they are no longer subject to very much regulation. And as these firms get
larger, their already impressive political power grows that much larger, and makes the task of regulating
them that much more difficult. And the economic benefits of these mergers go almost entirely to the
shareholders in the form or reduced competition and lower risk. There is little apparent economic benefit
for the public. When one firm like Hicks, Muse can own 1,000 radio stations, for example, it permits that
firm to standardize its fare and reduce its commitment to local content. The company rakes in the profits,
but the public gets a lower quality product.
These hearings need to set guidelines for how much a single firm should be allowed to control in the digital
era. It would be wrong to follow the current path which is to let the market first develop, and then establish
regulation to protect the public interest, or, as is often the case, the dominance of the largest firms. As
media and telecommunications both shift to digital format, as represented most notably by the Internet, we
should expect the evolution of an integrated digital communication system, where the largest telecom,
computer and media companies merge. The AOL-Time Warner merger may well be the opening salvo in
what may be a five or 10 or 15 year process. We need to intervene now, before it is too late, to see that core
public interest values will be preserved in this emerging world. If we do not, we will possibly be looking at
a virtually unregulated global communication market dominated by anywhere from 5-7 firms at the low end
to as many as 12-14 firms at the high end by the year 2010 or 2015. If that is to be the case, the American
people should have the right to pass judgment upon it beforehand. After all, these huge firms have been
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"ocrText": "Page 3\nJanuary 20, 2000\nThe second objection is that we live in a market-driven society and since this media system is the logical\nresult of the market, it is the best and most rational system for a free society. But the truth is that our media\nsystem is not merely the result of competition in the marketplace. It is also the result of enormous\ngovernment subsidies and government sanctioned monopolies which have, in fact, created the winners in the\nmarketplace. What do I mean? Consider the gift of scarce radio and TV spectrum to commercial\nbroadcasters, valued in the hundreds of billions of dollars. This gift of spectrum effectively provided the\nfoundation for the networks NBC. ABC. CBS and Fox. which are all part of the largest media corporations\nin the world. It is a case of unrivaled corporate welfare. Likewise, the government has authorized telephone\nand cable television monopolies across the nation, hence elevating a handful of companies to super-\npowerful status in our media and communications system.\nAnd, finally, the Internet itself is a direct testament to shrewd public sector investment. It would have been\nan irrational investment for a private firm, as no one could figure out how to make money off of it until\nrecently. The Internet is the result of 30 years of direct government subsidy and control. Only in the 1990s\nhas the system been effectively privatized and turned over to Wall Street and Madison Avenue. But we\nshould never forget its origins.\nSo, in my view, the people of this nation, acting through their elected government, have a right and a duty\nto intervene in the media system to sec that it better serves their needs.\nWhat are we to do?\nI propose the following three measures\nFirst, we need to have full public hearings on what we want the coming integrated digital communication\nworld to look like. The 1996 Telecommunications Reform Act permits firms to own more and enter into\nnew fields than they had previously been permitted to do. At the time, the public was told that this would\nlead to intense market competition. Instead, deregulation has produced unprecedented concentration. So we\nhave larger and larger firms, and they are no longer subject to very much regulation. And as these firms get\nlarger, their already impressive political power grows that much larger, and makes the task of regulating\nthem that much more difficult. And the economic benefits of these mergers go almost entirely to the\nshareholders in the form or reduced competition and lower risk. There is little apparent economic benefit\nfor the public. When one firm like Hicks, Muse can own 1,000 radio stations, for example, it permits that\nfirm to standardize its fare and reduce its commitment to local content. The company rakes in the profits,\nbut the public gets a lower quality product.\nThese hearings need to set guidelines for how much a single firm should be allowed to control in the digital\nera. It would be wrong to follow the current path which is to let the market first develop, and then establish\nregulation to protect the public interest, or, as is often the case, the dominance of the largest firms. As\nmedia and telecommunications both shift to digital format, as represented most notably by the Internet, we\nshould expect the evolution of an integrated digital communication system, where the largest telecom,\ncomputer and media companies merge. The AOL-Time Warner merger may well be the opening salvo in\nwhat may be a five or 10 or 15 year process. We need to intervene now, before it is too late, to see that core\npublic interest values will be preserved in this emerging world. If we do not, we will possibly be looking at\na virtually unregulated global communication market dominated by anywhere from 5-7 firms at the low end\nto as many as 12-14 firms at the high end by the year 2010 or 2015. If that is to be the case, the American\npeople should have the right to pass judgment upon it beforehand. After all, these huge firms have been"
}