Wednesday, February 28, 2007

Calling Mr. Rehr.....Calling Mr. Rehr

February 28, 2007

In doing a bit of research I came across some interesting perspectives from the NAB as it relates to ownership of radio stations, competition, and serving consumers:

Below is the Executive Summary of NAB's ownership filing. (SSG Comments In Blue)

The National Association of Broadcasters (“NAB”) hereby submits its comments responding to the Further Notice of Proposed Rulemaking in MB Docket 06-121, addressing the Commission's broadcast ownership rules. As all parties to the many ownership proceedings conducted at the Commission have recognized, broadcasting is an important part of our American culture. Local broadcasters provide national and local news, information and entertainment to the American public free of charge. Broadcasters participate in their local communities – they understand the needs of their audiences and work every day to provide programming to address those needs. As our record demonstrates, broadcasters recognize and embrace their obligation to serve the public interest. In light of this important role, NAB urges the Commission to approach its review of the broadcast ownership regulations with an eye toward maintaining the vibrancy of the broadcast industry so that it can continue to provide the vital service that all Americans have come to expect.

So Mr. Rehr......Would I be correct in my understanding that you feel that ownership should be viewed with an eye towards ensuring that vital services can be delivered to Americans, and if in doing so, that ownership is bettered by a change in ownership regulations?

As an initial matter, NAB emphasizes that the Commission has a clear duty, under both general administrative law and Section 202(h) of the 1996 Telecommunications Act, to reevaluate the broadcast ownership rules to ensure they still serve the public interest in a rapidly changing media marketplace.

Correct me if I am wrong, but you seem to be indicating that there is law that states that the ownership issues are in place to ensure that the public interest is served....not the interest of any particular organization. I would also like to stress here that you seem to recognize that the marketplace is rapidly changing.

Section 202(h) explicitly requires the repeal or modification of the existing ownership regulations if they are no longer necessary in the public interest as the result of competition. In this regard, the Commission must recognize the continuing proliferation of media outlets accessible to American consumers and the profound impact such proliferation has had on the broadcast industry and the need for continued ownership regulation.

Here you seem to clearly state that there is a proliferation of competition, and further you seem to state that the commission is "required to repeal or modify existing ownership regulations" My question is this Mr. Rehr: Would a similar stance not also apply to the licence restrictions originally placed on satellite radio?

The Commission originally adopted its local broadcast ownership restrictions decades ago in a very different media environment.

A very true statement. Would you not agree that even in the last 10 years even more substantial changes have happened?

Technological advancements, the growth of multichannel video and audio outlets and the Internet, and an expansion in the number of broadcast outlets in the past several decades have altered the media marketplace in two fundamental ways. First, consumers nationally and in local markets of all sizes now have access to a vast array of information and entertainment from broadcast and nonbroadcast outlets. Numerous surveys, including a very recent one conducted by BIA Financial Network (“BIA”), have documented this proliferation of media outlets in local markets, and a further BIA study demonstrated that consumers routinely access many additional “out-of-market” outlets. Second, due to this explosion of outlets, as the Commission found even four years ago, traditional broadcasters are struggling to maintain their audience and advertising shares “in a sea of competition.”

Seems that you recognize that there are indeed many forms of competition in this sector.

NAB herein documents how the more recent development of broadband and new video and audio Internet applications have exponentially increased the number of sources for information, opinion and entertainment, and created new and growing competitors for the advertising support that is crucial to free over-the-air media.

So the competition threatens the advertising model used by the NAB membership. Perhaps the NAB should focus some efforts on making their memberships products and content more compelling and diverse.

In light of these technological and marketplace developments, the Commission must seriously consider whether the current broadcast ownership rules continue to serve the agency’s stated goals of competition, diversity and localism. NAB believes that they do not.

Seems that you feel that current ownership regulations do not fit the world of today. Mr. Rehr, might this also apply to satellite radio?

Competition
In a multichannel environment dominated by consolidated cable and satellite system operators, broadcasters are clearly unable to obtain and exercise any undue market power. For this reason, the traditional competition rationale for maintaining a regulatory regime applicable only to local broadcasters and not their competitors is not a proper basis for keeping the current rules. Indeed, the primary competition-related concern in today’s digital, multichannel marketplace is the continued ability of local broadcasters to compete effectively and to offer free, over-the-air entertainment and informational programming that American citizens rely upon. NAB documents, in detail, the audience fragmentation and increasing competition for advertising revenue experienced by broadcast stations, as the result of new entry by cable television, satellite television and radio, numerous Internet video and audio applications, and mobile devices such as MP3 players. To best achieve the Commission’s goals of a competitive media marketplace that provides lower prices, better service and greater innovation to consumers, the Commission should now structure its local ownership rules so that traditional broadcasters and newer programming distributors can all compete on an equitable playing field.

So what are you asking for here? Do you want to begin to pay RIAA fees? Or perhaps you are asking that any content, be it national or local be available to anyone who is broadcasting entertainment and informational services.

A level regulatory playing field is particularly urgent, given that local broadcasters’ most prominent competitors enjoy dual revenue streams of both subscriber fees and advertising revenues.

I see that you spoke about the revenue side of things. Perhaps you could speak to the cost side. Radio subsidies in satellite. The fees paid to the RIAA. The substantial cost of launching satellites, etc. These are costs that the NAB membership do not have to deal with.

Broadcasters, of course, are almost solely dependent on advertising, and local stations today must struggle to maintain needed revenues in a vastly more competitive advertising market.

Did you say "vastly more competitive marketplace"?

Any realistic assessment of today’s media marketplace leads to the conclusion that competition considerations dictate change in the broadcast ownership rules.

Ever consider a change in business model? Ever consider delivering what the consumer wants?

Diversity
NAB submits that the Commission must also consider whether its existing ownership rules are necessary to the traditional goal of promoting diversity. The proliferation of broadcast outlets and the rise of new multichannel video and audio programming distributors and the Internet have produced an exponential increase in programming and service choices available to viewers and listeners. Strong evidence shows that the public’s interest in receiving diverse content is therefore being met both nationally and on a market basis. Numerous studies, including one just completed by BIA, have confirmed that the post-1996 ownership changes within local broadcast markets, especially among radio stations, have enhanced the diversity of programming offered by local stations. This new BIA study also showed that radio stations are providing a wide range of programming targeted for diverse audiences, including minority groups and groups with niche tastes and interests. Moreover, both older and more recent studies indicate that the joint ownership of media outlets in local markets does not significantly inhibit the expression of diverse viewpoints by these commonly owned outlets.

So commonly owned media outlets is a good thing in your opinion. Does that apply to satellite radio as well?

The ability of consumers to obtain diverse programming and viewpoints is only enhanced by the growing level of substitutability between media for both entertainment and informational purposes. Studies previously conducted for the Commission and more recent surveys on media usage reveal considerable substitutability between media for various uses.

To be clear here......You seem to be saying that consumers utilize various formats for their needs.

Indeed, the recent studies showed that multichannel outlets and the Internet compete with – and substitute for – the use of traditional media including broadcast and newspapers for both entertainment and information, especially among younger consumers.

Seems you outline that there is plenty of competition in this area, and that due to that competition you want the ability to "consolidate" ownership.

Localism
As shown by NAB in the Commission’s pending localism proceeding, local stations provide a wealth of local news and public affairs programming, political information, emergency information, other locally produced and responsive programming, and additional, unique community service. But given the relentless competition for audience and advertising shares from the vast array of other media outlets, the real threat today to the extensive locally-oriented service offered by television and radio broadcasters is not the group ownership of stations. Rather, it is the challenge stations face in maintaining their economic viability in a market dominated by consolidated multichannel providers and other competitors. If the Commission seeks to maintain a system of viable commercial broadcast stations offering free, over-the-air service to local communities, then stations must be allowed to form efficient and financially sustainable ownership structures.

So efficient and financially sustainable ownership structures is good for NAB members. Would this "level playing field" situation deliver this as well? Shouldn't others be able to participate in this?

Local Radio Ownership
The Commission must reject calls for stringent ownership restrictions on local radio. Numerous studies have demonstrated that radio programming diversity has continued to increase since Congress opened the door to more efficient and economically viable radio ownership structures in 1996. Stations today serve very diverse audiences, including minority groups, with entertainment and informational programming targeted to their needs and interests. Radio stations also clearly operate in an increasingly competitive marketplace and face continuing audience fragmentation such that even market leading stations must find new ways to earn audience and advertising revenue share.

Imagine that. NAB stations are seeking out an improved business model.

Several previous studies moreover found no evidence that post-1996 ownership changes have lead to increases in the price of radio advertising or other exercises of market power by station groups.

HMMMMM.....So a change in regulation regarding ownership had no impact on advertising fees. Perhaps something similar is then quite possible with subscription prices for satellite radio.

Perhaps most interestingly, two empirical studies have concluded that any potential exercise of market power by radio groups can be countered by the ability of other stations, including smaller groups and individual stations, to gain substantial increases in listening share through programming changes.

Wow, a powerful statement here. might I re-word it a bit? "Perhaps most interestingly any potential exercise of market power bay a satellite radio merger can be countered by the ability of terrestrial radio, internet radio, streaming cell content, WIFI, WIMAX and MP3 services to gain substantial increases in listening share through programming changes". Is that a fair statement?

And, finally, a further NAB study demonstrated that, despite the post-1996 changes in the radio industry, large numbers of radio stations either remain “standalones,” or are part of local duopolies, in their respective markets.

In this current competitive marketplace, NAB supports continuing relaxation of the radio ownership rules.

Perhaps a relaxation in satellite rules is also appropriate

Congress adopted the existing numerical station limits in 1996 before the emergence of satellite radio, Internet streaming of radio stations, the development of Internet applications such as podcasting, on-line music sites, music file-sharing and downloading, and the growth of mobile audio technologies such as MP3 players and even mobile phones.

Seems you agree that there is plenty of competition out there.

XM and Siruis alone now put hundreds of channels of music, news, talk and sports into every local market in the United States, and earn dual revenue streams from subscriber fees and advertisers, all without being subject to comparable ownership restrictions.

You forgot the cost side of things again Mr. Rehr. The cost of implementing these services is fully considered in the scheme of things.

In the Internet age, every local radio station is potentially competing against thousands of radio stations from around the country or the world, and estimated monthly audiences for Internet radio are over 52 million.

Global competition........thanks, I am sure Sirius and XM will use that. Can they quote you directly?

With satellite radio and a host of mobile gadgets, terrestrial radio stations now also face growing competition for listeners while consumers are in automobiles or outside the home or office.

Because past changes in ownership structures have enhanced local stations’ abilities to serve diverse audiences and their communities, without resulting in the exercise of undue market power by radio groups, the Commission should find that a further liberalization of the decade-old radio ownership restrictions would serve the public interest.

So in your own words Mr. Rehr, consolidation can happen without causing undue market power in this hugely competitive market place. Is that correct?

Local Television Ownership
The Commission should reform the television duopoly rule to reflect the current competitive television marketplace and allow more freely the formation of duopolies in markets of all sizes.

More pro-consolidation......HMMMMM

As shown by NAB’s analysis of television market revenues, medium and small market stations compete for disproportionately smaller revenues than stations in large markets. Other specific factors – including the costs of the digital television transition and the decline of network compensation – have combined to further squeeze the profits of local television broadcasters, especially in medium and small markets. A new report on television station finances confirmed the declining financial position of small market television stations, particularly for those stations not among the ratings leaders in their markets. And given the considerable and growing expense of maintaining local news operations, some television stations (even in larger markets) have already been forced by financial considerations to cut back on or forego entirely the provision of local news. These numbers will only continue to grow if local stations are not allowed greater flexibility in ownership structures.

So in the face steep competition, ownership regulations should be relaxed so as to allow better services. A novel concept. I bet it would be applicable to satellite radio as well.

Freely permitting local television duopolies is necessary to preserve and enhance television broadcasters’ ability to serve their viewers and communities in markets of all sizes. As the Commission recognized (and the court affirmed) in the last ownership review, multiple studies and persuasive anecdotal evidence have shown that television duopolies result in efficiencies that produce public interest benefits, such as improved news, sports, weather and other local programming, in all markets including large ones.

There you go.....Production of efficiencies that produce public interest benefits. Seems to me that this is exactly what Sirius and XM are saying. Again, can Sirius and XM quote you directly?

A new BIA study confirmed that stations in local combinations in medium-sized markets are stronger financially and offer more programming preferred by local viewers.

I would bet that a BIA study on a satellite radio merger would conclude that a combination of Sirius and XM woulkd make them stronger financially and allow them to offer more programming preferred by consumers. Can you forward the contact information of someone at the BIA to us? We will be more than happy to pass that along to the folks at Sirius and XM.

The Commission must therefore recognize the positive benefits of reforming the current duopoly rule. Further, it must recognize that the rule, including the top-four restriction, is not necessary in the public interest as the result of competition. The top-four prohibition unduly prevents the formation of duopolies, including those combinations involving financially struggling stations, which would enable stations to compete successfully in local video markets. A strict duopoly rule containing this restriction also fails to properly take into account the competition presented by cable and satellite outlets in local markets, both for viewers and for advertisers. Multiple studies have demonstrated how the competitive position of local television stations has been impacted by increases in cable and satellite viewing and the growth of local cable operators’ share of television ad revenues in local markets. The existing duopoly rule, which remains unduly focused on broadcast television stations alone, simply defies marketplace reality.

Seems there is a lot of competition.

Cross-Media Ownership
As NAB has previously shown, the case for repealing the anachronistic ban on joint ownership of newspapers and broadcast outlets is clear and compelling. The ban inhibits the development of new innovative media services, especially on-line and digital services, and precludes struggling broadcast and newspaper entities, particularly those in smaller markets, from joining together to improve, or at least maintain, existing local news operations. In fact, numerous previous studies spanning several decades have demonstrated that broadcast television stations co-owned with newspapers offer greater amounts of local programming generally, and more local news and public affairs programming specifically, than non-newspaper owned stations. Clearly, the Commission and the court were correct in the last ownership review when they agreed that the blanket ban on newspaper/broadcast cross-ownership no longer served the public interest. In light of ever-increasing new media competition for viewers, listeners, readers and advertisers, this rule – which NAB opposed as unnecessary even in the much less competitive and diverse media market of the 1970s – should not be retained today.

Now there is an interesting business model. Radio, television and print. Seems like something viable.

The radio/television cross-ownership rule similarly does nothing to advance the public interest under current marketplace conditions. The rule is no longer needed to ensure diversity in local markets, but in its current form primarily serves to limit radio station ownership arbitrarily. With television and radio broadcasters facing unprecedented competition from cable, satellite television and radio, and audio and video Internet applications, a cross-ownership rule applicable only to local radio and television broadcast stations is inequitable and outdated.

We agree. The competition is substantial, and there are numerous players in the field of play. So is your argument against a satellite merger because it is in the best interest of you membership or is your concern consumer based? Your arguments here, and in the congressional committee on the satellite radio merger seem to differ......HMMMMM

Particularly if the Commission retains the local radio ownership rule and the television duopoly rule in some form, no plausible reason exists to also retain the cross-ownership rule, as any diversity or competition concerns can be addressed more directly by these other local rules.
Finally, in response to the Commission’s request for comment on proposals to foster ownership of broadcast outlets by minorities, women and small businesses, NAB reiterates its long held belief that the Commission should pursue constitutionally sustainable programs to further opportunities for such groups. NAB recognizes that improving access to capital is key to this effort and suggests ways to achieve this goal, including reform of attribution and auction rules.

For all these reasons set forth in detail in NAB’s comments, the Commission should reform its local ownership rules to reflect the vast technological and marketplace changes that have already occurred and are only accelerating today. Ensuring that local broadcasters are not hampered by outmoded regulation in their efforts to compete and serve their audiences in today’s digital, multichannel environment would clearly be in the public interest.

So, why is it you feel localized programming on satellite radio would not be in the public interest? You want a level playing field on only certain fronts, and that is crystal clear. Mr. Rehr, who's interest do you really have in mind?

Labels: merger, nab, rehr, sirius, xm