May 22, 2003
Members will hear additional testimony on issues relating to media ownership, particularly the television broadcast ownership rules currently being reviewed by the Federal Communications Commission (FCC) as well as testimony regarding competition in the video programming and distribution markets. Senator McCain will preside.
The Honorable Wayne Allard
Mr. Tom Fontana
First, I want to thank Chairman McCain, Senator Hollings and the members of the Committee for giving me the opportunity to speak. My name is Tom Fontana. I am a Council Member of the Writers Guild of America, East and a representative of the Caucus for Television Producers, Writers and Directors. In the past twenty-two years, I have produced and written numerous television programs, from the gritty realism of Oz and Homicide: Life on the Street to the religious fable The Fourth Wiseman to America: A Tribute to Heroes. I’d like to start by saying that for the first time in my life, I have a much greater appreciation of what you Senators go through to do your jobs. After it was decided that I would be appearing before this Committee, I started to hear from my constituency: I have been flooded with phone calls, emails, faxes, facts, figures – the amount of input is staggering. But the simple truth is this: I am a small businessman. Instead of running a bar, like my father, I have been blessed, doing work that I love. I am proud to be a part of the entertainment industry. Yes, I say industry. I know that television is a business. The question is what kind of business will it be in the years to come. The answer, as usual, lies in the past. Over twenty years ago, I worked for the best independent production company that ever existed – MTM - Mary Tyler Moore Enterprises. Mary and Rhoda, Bob Newhart, Hill Street Blues and, the series I did, St. Elsewhere. Ten years ago I started making Homicide for Reeves Entertainment. Six years ago, I created Oz for Rysher, Incorporated. What do these three independent production companies have in common? They are all out of business, swallowed up by conglomerates, in part, as a result of the elimination of the Fin-Syn rules. Eight years ago, after much public debate, the Fin-Syn rules were dropped. At the time, the heads of the major networks assured us that nothing would change. Here’s what has actually occurred: · In 1992, 15% of new prime time series were produced by the major networks; · By 2002, that number increased over 5 times to 77%; · In 2002, only one new series, Dinotopia, was completely produced independent of a conglomerate. It was soon cancelled. MTM was an independent not just because it wasn't owned by anyone else, but because Grant Tinker made decisions based on both business savvy and a passion for quality. Grant was fearless when fighting against the dumbing down of his products. He could afford to be strong, he had no corporate structure to answer to. His extraordinary vision nurtured several generations of TV's best talent, including many women and minorities. But, as I said, MTM is no more. Big is not necessarily bad. But sometimes by deregulating a big business, you can choke the life of a small one. And with that you lose energy, imagination and entrepreneurial spirit of that small business. Norman Lear’s landmark series, All In The Family, is another example of that spirit. Rejected by ABC, Mister Lear took his idea to CBS. Because ABC did not own or control Mister Lear’s production company he was free to take his show elsewhere and I think we are all richer for the freedom he enjoyed. Another example is The Cosby Show. When Marcy Carsey first presented The Cosby Show to network executives they wanted to turn Doctor Huxtable into a cigar smoking Las Vegas entertainer. Cosby and Carsey stuck to their guns and went to NBC. They could do that because they were protected by FCC rules. Without Fin-Syn, many other fundamental practices in our industry have corroded over time. So, rather than eliminate the rules we have, I encourage you to establish a Program Source Diversity Rule, which would require that broadcast networks and cable or satellite programming services purchase a specific percentage of their prime time programming from independent producers. By independent I mean, not owned in whole or, in part, by a company affiliated with a network or distributor. Without such a rule, competition and diversity will become a fiction. But simply adding a new rule is not enough: the rules currently in place must be maintained. In particular, the National TV Ownership cap must remain at 35% and the Duopoly Rule must remain intact in order to prevent the homogenization of local TV. The media giants are once again telling us that eliminating these rules will not hurt the industry. What else can they say? I think it’s unfair and unreasonable for us to expect businessmen to police themselves. To do so would contradict the very model of capitalism that dictates corporate growth. It is not the job of business to protect us, it’s the government’s. Television is democracy, it is our only national town hall. Television is where divergent points of view can be expressed, where conflicting opinions can be argued, not just within one segment of Meet The Press, but from program to program. The brutality of NYPD Blue is balanced by the spirituality of Touched By An Angel. Yet, NYPD Blue would have never made the CBS schedule and Touched by an Angel would have never aired on NBC. Certain shows can only exist at certain networks, either because of branding or because of some executive's individual taste. People will say there's diversity simply by the sheer number of networks currently available, both broadcast and cable. But those channels are owned and controlled by a smaller and smaller number of companies. And in reality, many series are now "repurposed", with episodes airing on cable several days after their broadcast premiere. These shows, however, are not offered for sale on the open market as has traditionally been done, but are automatically going to an entity tied corporately to the major network. For example, the ABC series Life With Bonnie was repurposed on the Family Channel because Disney owns both the broadcast network and the cable network. Back alley deals diminish a program's long-term value. But the need for diversity in television has an even larger reach. My series Oz is extremely popular in such countries as Israel, Canada and Italy. Entertainment is the second largest product exported by this country after aerospace. In order to maintain our leadership, in an industry so vital to our economy, we must ensure the quality of the product. And quality only comes through diversity and competition. By changing the rules, television will not get better. Not for me, as a writer and producer. Not for me, as a viewer. Not for me, as a stockholder. Not for me, as an American. So, I ask you to think long and hard before you allow history to be so dangerously rewritten. Five companies should not be permitted to own all of the voices on our airwaves. I wish to quote from a fellow Italian American more famous than I in these halls and ask you to listen to the advice of one the industry’s wisest statesman: “Unless we knowingly abuse the essentials of a free and living land, our government must, at all costs and in spite of all pressure, never allow a tiny group of corporate entities, no matter how seemingly benign the management, to establish dominion over what is seen on television. I agree with these sentiments that were originally presented to this Committee by Mr. Jack Valenti on June, 1989. Thank you for your kind attention.
Mr. Rupert Murdoch
Good Morning, Chairman McCain, Senator Hollings, and Members of the Committee. Thank you for the invitation to testify today regarding News Corporation’s proposed acquisition of a 34% interest in Hughes Electronics Corporation. Let me say at the outset that we believe that this acquisition has the potential to profoundly change the multichannel video marketplace in the United States to the ultimate benefit of all pay-TV customers, whether they are direct-to-home satellite or cable subscribers. It is my hope, and my goal, that as a result of this acquisition, Hughes’ DIRECTV operation will be infused with the strategic vision, expertise, and resources necessary for it to bring innovation and competition to the multichannel marketplace and, of course, to the televisions of tens of millions of American viewers. The public interest benefits of this transaction are manifold, but I would like to briefly touch on three key areas today: First, News Corporation’s outstanding track record of providing innovative new products and services to consumers, a track record that it is determined to replicate at Hughes and DIRECTV; Second, the specific consumer benefits that will be realized from this transaction, including improvements in local-into-local service, new and improved interactive services, and the many new diversity programs News Corporation will bring to Hughes; and Third, the absence of any horizontal or vertical merger concerns about this transaction. This transaction will only increase the already-intense competition in the programming and distribution markets, and market realities will compel our companies to continue the open and non-discriminatory practices each company has lived by. Nonetheless, to eliminate any possible concerns over the competitive effects of vertical integration, the parties have agreed as a matter of contract to significant program access commitments, and have asked the FCC to make those commitments an enforceable condition of the transfer of Hughes’ DBS license. News Corporation’s track record of innovation as a content provider and as a satellite broadcaster is without parallel. Our company has a history of challenging the established – and often stagnant – media with new products and services for television viewers around the world. Perhaps our first and best-known effort to offer new choices to consumers in the broadcasting arena came with the establishment of the FOX network in 1986. FOX brought much-needed competition to the “Big 3” broadcast networks at a time when conventional wisdom said it couldn’t be done. Seventeen years later, we have proved unambiguously that it could be done, with FOX reigning as the number one network so far this calendar year in the highly valued “adults 18-49” demographic. Along the way, we redefined the TV genre with shows like The Simpsons, In Living Color, The X-Files, and America’s Most Wanted, and more recently 24, Boston Public, Malcolm in the Middle, The Bernie Mac Show, and the biggest hit on American TV, American Idol. The FOX network was launched on the back of the Fox Television Stations group, an innovator in local news and informational programming since it was first formed. Today, Fox-owned stations air more than 800 hours of regularly scheduled local news each week – an average of 23 hours per station. We have increased the amount of news on these stations by 57 percent, on average, compared to the previous owners. Viewers demand more local news, and we provide it. Fox-owned stations were often the first – and in many markets are still the only – stations to offer multiple hours of local news and informational programming each weekday morning. This commitment to local news extends well beyond the stations we own. Since 1994, Fox has assisted more than 100 affiliates in launching local newscasts. In addition to providing greater choice and innovation in network entertainment and local news, we have also redefined the way Americans watch sports. With viewer-friendly innovations such as the “FOX Box” and the first “Surround Sound” stereo in NFL broadcasts, the catcher cam in baseball, the glowing puck in hockey, and the car-tracking graphic in NASCAR, FOX has made sports more accessible and exciting for the average fan. FOX Sports Net, launched in 1996, has provided the first and only competitive challenge to the incumbent sports channel, ESPN. Fox Sports Nets’ 19 regional sports channels, reaching 79 million homes, regularly beat ESPN in several key head-to-head battles. In 2002, Major League Baseball on ESPN averaged a 1.1 rating. On Fox Sports Net, baseball scored an average 3.5 rating in the markets it covers. The NBA on ESPN has averaged a 1.2 rating during the current season. In Fox Sports Net’s markets, it has rated a 2.2. The key to Fox Sports Net’s success is its delivery of what sports fans want most passionately: live, local games, whether at the professional, collegiate, or high school level, coupled with outstanding national sports events and programming. Perhaps News Corp.’s most stunning success against conventional wisdom—and our most innovative disruption of the status quo-- is the Fox News Channel, launched in 1996. A chorus of doubters said CNN owned the cable news space and no one could possibly compete. A scant five years later, Fox News Channel overtook CNN, and since early 2002 has consistently finished first among the cable news channels in total day ratings. Growing from 17 million subscribers at launch to almost 82 million subscribers this month, Fox News Channel boasts some of the most popular shows on cable and satellite. I think it is fair to say Fox transformed the cable news business, introducing innovative technology and programming, and bringing a fresh choice and perspective to American news viewers. Across the dial on American television are examples of where our challenges to the status quo have made a difference for viewers and proven we could be competitive against entrenched competition. We’ve launched and expanded FX, a general entertainment channel; we’ve launched the movie channel FXM; and we’ve re-launched and expanded the Speed Channel, a channel devoted to auto racing enthusiasts. And in January 2001, we launched National Geographic Channel with our partner, the National Geographic Society, into nine million homes. Today, Nat Geo is the fastest-growing cable network in the nation with 43 million subscribers and is making steady progress in the ratings against the established industry leader, The Discovery Channel. News Corp.’s track record of innovation is not limited to the United States. News Corp. will bring a wealth of innovation to Hughes and DIRECTV from its British DTH platform, BSkyB. We launched BSkyB in 1989 with only four channels of programming. In 1998, frustrated by the limitations of analog technology and determined to give viewers even wider choices, BSkyB launched a digital service that boasted 140 channels. In 1999, in order to speed the conversion to digital and to drive penetration, BSkyB offered free set-top boxes and dishes. The conversion to digital took three years and cost BSkyB nearly one billion dollars, but by 2001, when the transition to digital was complete, BSkyB’s subscriber base had grown to 5 million homes. Through BSkyB’s digital offering, BSkyB viewers may choose from 389 channels delivering programming 24 hours each day. They also have a vast array of new services, including world-first interactive innovations such as a TV news service that allows viewers to choose from multiple segments being broadcast simultaneously on a news channel, multiple camera angles during sporting events, or multiple screens of programming within a certain genre. In addition, BSkyB viewers have access to online shopping, banking, games, email, travel, tourism and information services. With the launch of Europe’s first fully integrated digital video recorder in 2001, BSkyB customers won access to even more interactive capabilities and viewing choices. Upon completion of this transaction, News Corp. will bring the same spirit of innovation to the DBS business in the U.S, in the process redefining the choices Americans have when they watch television. This spirit of never-say-die competition and News Corp.’s demonstrated determination to provide ever-expanding services to the public have the potential to re-energize the entire American multichannel video marketplace. To my second point about this transaction: its benefits to consumers. Apart from a history of bringing new competition and innovation to the television industry, News Corp. has been tremendously successful in bringing tangible benefits to consumers over nearly two decades of operating both here in the United States and abroad. This transaction will be no exception, enabling us to share our best practices across our platforms and across geographical boundaries to the benefit of consumers. These benefits will be very real, and often easily quantifiable. One of the first enhancements to DIRECTV’s service that News Corp.’s investment in Hughes will bring will be more local television stations for subscribers, offering consumers a more compelling alternative to cable. News Corp., as a leading U.S. broadcaster, was the first proponent of local-into-local service as part of our American Sky Broadcasting (“ASkyB”) satellite DTH venture six years ago. In fact, I testified before Congress on this very topic, urging passage of copyright legislation to allow the retransmission of local signals by DBS. ASkyB conceived and designed a DBS spot beam satellite to implement this previously unheard of idea. As a broadcast company, News Corp. was convinced then – as it is now - that DBS will be the strongest possible competitor to cable only if it can provide consumers with the local broadcast channels they have come to rely on for local news, weather, traffic and sports. With that in mind, News Corp. is committed to dramatically increasing DIRECTV’s present local-into-local commitment of 100 DMAs by providing local-into-local service in as many of the 210 DMAs as possible, and to do so as soon as economically and technologically feasible. To that end, we are already actively considering a number of alternative technologies, including using some of the Ka-band satellite capacity on Hughes Network Systems’ SPACEWAY system; seamlessly incorporating digital signals from local DTV stations into DIRECTV set-top boxes equipped with DTV tuners; and by exploring and developing other emerging technologies that could be used to deliver local signals, either alone or in combination with one of the above alternatives. In addition, News Corp. is exploring new technologies that promise to improve spectrum efficiency or otherwise increase available capacity so that DIRECTV can expand the amount of HDTV content. Options include use of Ka-band capacity, higher order modulation schemes, such as the 8PSK technology FOX uses for its broadcast distribution to affiliated stations, and further improvements in compression technology. News Corp. will urge DIRECTV to carry many more than the four HDTV channels it currently carries and the five channels that some cable operators carry. In this way, we hope to help drive the transition to digital television by providing compelling programming in a format that will encourage consumers to invest in digital television sets. As to broadband, News Corp. will work aggressively to build on the services already provided by Hughes to make broadband available throughout the U.S., particularly in rural areas. Broadband solutions for all Americans could come from partnering with other satellite broadband providers, DSL providers, or new potential broadband providers using broadband over power line systems, or from other emerging technologies. News Corp. believes it is critical that consumers have vibrant broadband choices that compete with cable’s video and broadband services on capability, quality and price. The public will also benefit from the efficiencies and economies of scope and scale that News Corporation will bring to DIRECTV. We believe by sharing “best practices,” and by using management and expertise from our worldwide satellite operations, we will be able to substantially reduce DIRECTV’s annual expenses by $65 to $135 million annually. Other efficiencies include sharing facilities of the various subsidiaries of News Corp. and Hughes in the U.S., and developing and efficiently deploying innovations, such as next-generation set-top boxes with upgraded interactive television and digital video recorder capabilities and state-of-the-art anti-piracy techniques. When Hughes becomes part of News Corp.’s global family of DTH affiliates, it will benefit from a number of scale economies that will more efficiently defray the enormous research and development costs associated with bringing new features and services to market. Moreover, common technology standards for both hardware and software across the News Corp. DTH platforms should help to drive down consumer equipment and software costs. Through these various cost savings, DIRECTV will be able to finance more innovations in programming and technology to ensure that it achieves and maintains the highest level of service for its customers at competitive prices. News Corp. also plans to bring to DIRECTV the “best practices” it has developed at its satellite operations in other countries. DIRECTV’s “churn rate” – that is, the rate at which customers discontinue use of the service – is around 18 percent, whereas BSkyB’s annual churn rate is currently 9.4 percent. By using BSkyB’s “best practices” and accelerating the pace of innovation, we predict that DIRECTV should experience a 2 to 3 percent decline in its annual churn rate. We calculate that every percentage point reduction in churn will add approximately $33 million to Hughes’ earnings. With these additional financial resources, DIRECTV will be able to finance additional initiatives in research, development and marketing. Another important element that News Corp. will bring to Hughes and DIRECTV is its deep and proven commitment to equal opportunity and diversity. Specifically, the diversity initiatives we will implement include: § A commitment to carry more programming on DIRECTV targeted at culturally, ethnically and linguistically diverse audiences; § An extensive training program for minority entrepreneurs seeking to develop program channels for carriage by multichannel video systems; § A program for actively hiring and promoting minorities for management positions; § An extensive internship programming for high school and college students; § Improved procurement practices that ensure outreach and opportunities for minority vendors; and § Upgraded internal and external communications, including the Hughes web site, to assist implementation of the above initiatives. Finally, to my third point: there are no horizontal or vertical merger concerns arising from this transaction. Because this transaction involves an investment in DIRECTV, a multichannel video programming distributor with no programming interests, by News Corp., a programmer with no multichannel distribution interests, no “horizontal” competition issues arise. There will be no decrease in the number of U.S. competitors in either the multichannel video distribution market or the programming market. To the contrary, because of News Corp.’s plans to bring “best practices” and innovations to DIRECTV, competition in these markets will intensify and consumers will be presented with more and better choices. The transaction does result in a “vertical” integration of assets because of the association of DIRECTV’s distribution platform and News Corp.’s programming assets. But this “vertical” integration is not anti-competitive for two reasons. First, neither News Corp. nor DIRECTV has sufficient power in its relevant market to be able to act in an anti-competitive manner. DIRECTV has a modest 12 percent of the national multichannel market, compared to as much as 29 percent of the market held by the largest cable operator. News Corp. has a modest 3.9 percent of the national programming channels, compared to the largest cable programmer at 15.2 percent of the channels. Second, rational business behavior will prevent News Corp. and DIRECTV from engaging in anti-competitive behavior. As a programmer, News Corp.’s business model is predicated on achieving the widest possible distribution for our programming in order to maximize advertising revenue and subscriber fees. Any diminution in distribution reduces our ability to maximize profit from that programming. Even if we were voluntarily willing to lower our earnings potential by withholding our programming from competing distributors, we would be precluded from doing so by the FCC’s program access rules. Similarly, DIRECTV has every economic incentive to draw from the widest spectrum of attractive programming, regardless of source, in order to maximize subscriber revenue. In short, it makes no business sense for either party to do anything to limit our potential customer base or our programming possibilities. Notwithstanding these strong economic and business incentives, News Corp. and Hughes have agreed – as a matter of contract – to a series of program access undertakings to eliminate any concerns over the competitive effects of the proposed transaction. We have asked the FCC to adopt these program access commitments, which are attached to my written testimony, as a condition of the approval of our Application for Transfer of Control that was filed at the FCC on May 2. These program access commitments are largely the same as those required of cable operators, but in some respects go further. These commitments will: § Prevent DIRECTV from discriminating against unaffiliated programmers; § Prevent DIRECTV from entering into an exclusive arrangement with any affiliated programmer, including News Corp.; and § Prevent News Corp. from offering any national or regional cable programming channels it controls on an exclusive basis to any distributor and from discriminating among distributors in price, terms or conditions. These extensive commitments apply for as long as the FCC’s program access rules remain in effect and News Corp. owns an interest in DIRECTV. They make it clear that News Corp. and Hughes are committed to fair, open and non-discriminatory program access practices that go well beyond what the law requires of DBS operators, cable programmers, and even cable operators. In any event, neither News Corp. nor Hughes is among the top five media companies, by expenditure, in the United States. As you can see in the chart attached to my testimony, News Corp. is sixth with 2.8 percent of total industry expenditures, and Hughes is eighth with 2.2 percent. Even combining the expenditures of News Corp. and Hughes would place the company fifth in expenditures behind AOL Time Warner with 10.1 percent, Viacom with 6.4 percent, Comcast with 6.3 percent, and Sony at 5.3 percent. If the expenditures from Disney’s theme parks were included in its total, the combination of News Corp. and Hughes would rank sixth in total “entertainment” revenues. In closing, I believe this transaction represents an exciting association between two companies with the assets, experience and history of innovation that will ensure DIRECTV can become an even more effective competitor in the multichannel market. There will be significant public interest benefits for consumers as a result of this transaction, including bringing more local channels to more markets, innovations such as set-top boxes with next generation interactive television and digital video recorder capabilities, and a diversity program that will set the standard for the rest of the entertainment industry. Thank you for your attention, and I look forward to your questions. Click here for a Microsoft version of a graph presented at the hearing by Mr. Murdoch. Click here for a Microsoft version of a graph presented at the hearing by Mr. Murdoch.
Mr. Kent W. Mikkelsen
I am pleased to have an opportunity to present an economist’s perspective on three media ownership issues now being considered by the Committee: the broadcast television national ownership cap, the so-called “duopoly” rule and the ban on newspaper-broadcast cross-ownership. A few brief words about my background would be in order. I received a Ph.D. in economics from Yale University in 1984. I was an economist in the Antitrust Division of the U.S. Department of Justice, analyzing competition issues. Since 1986 I have been employed by Economists Incorporated, an economic research and consulting firm located in Washington D.C., where I am a vice president. I have been examining competition and regulatory issues in media, including broadcast and newspapers, for 19 years. Economists Incorporated is currently retained by Fox, NBC and Viacom to conduct research and analysis related to the ownership rules now before the Federal Communications Commission. I have previously been retained by the Newspaper Association of America to analyze newspaper-broadcast cross-ownership issues. However, the views I express today are my own; I am here on behalf of none of my clients. Among economists, there is a general presumption that in a free market, the self-interested actions of individuals and firms will lead to socially desirable amounts and types of goods and services being produced as efficiently as possible. Exceptions to this general presumption can occur due to what economists call “market failure.” Market failure can occur, for instance, when too much or too little of some good is produced because economic actors do not fully internalize the costs or the benefits of their actions. Of particular interest today is another type of market failure referred to as problems of monopoly or market power. In many industries, firms could increase their profits by combining to reduce or eliminate competition among themselves. The participating firms get higher profits, but consumers suffer through higher prices and inferior products and services. For this reason, the antitrust laws were designed to discourage or prevent firms from significantly reducing competition. These laws are justified by this potential market failure. Economic theory teaches that competition can be threatened if economic activity in a market is concentrated into the hands of a small number of firms. Generally speaking, the larger the number of firms in the market, and the more similar the firms are in size, the greater is the likelihood that competition will prevail (other things being constant). Thus, there is a clear theoretical link between the structure of ownership in the market and the presence of competition. The U.S. Department of Justice and the Federal Trade Commission, the two main federal antitrust agencies, have developed a standard methodology to identify changes in ownership structure that can potentially reduce competition. Their “Horizontal Merger Guidelines” are also widely used elsewhere in analyzing competition issues. At the risk of oversimplification, I would like to very briefly describe the analytical process. · The first step is to determine all the products and services in which the merging parties compete. · Next, one determines who else competes. That is, one determines what other products and services are close substitutes in use and are available in the relevant geographic area. · Having identified the relevant products and competing providers, the next step is to assess the concentration of ownership among the providers. Concentration is usually measured using an index based on the market shares attributable to each separate owner in the market, using actual sales shares or shares based on capacity. · The measured concentration level is then compared with external standards. While there are other factors that are also considered, the federal agencies that routinely analyze mergers have identified as a minimum threshold the concentration level that would exist in a market with 5-6 equal-sized firms, or some larger number of unequal-sized firms, depending on the degree of inequality. · Based on the results of this analysis, an antitrust agency would decide whether a proposed merger was likely to result in a significant decrease in competition. If so, the agency would likely oppose or seek modification of the proposed merger. Please note that the antitrust agencies do not attempt to “maximize” the number of competitors. Against the possibility that competition would not be preserved if two firms merged, competition policy recognizes that mergers and joint ownership can yield benefits to consumers in the form of improved product offerings and lower costs. It is also recognized that economic freedom should not be curtailed unless there are clear, compelling benefits to be gained. For these reasons, the antitrust agencies only oppose those mergers that are judged likely to have a significant impact on competition. One of the reasons given for the FCC media ownership rules now under review is that they protect competition. In my view, they are not needed to serve this function. Competition among television stations to attract viewers and advertisers and to acquire local programming rights occurs at a local level. It is possible, particularly in smaller local markets with relatively few media outlets, that competition would be significantly reduced if two television stations that now have different owners were brought under common ownership. Competition might also be reduced in specific markets if a television station or radio station were to be acquired by the owner of a local newspaper. But these are precisely the issues of ownership concentration and competition that the antitrust agencies routinely deal with in enforcing the antitrust laws. There is no need for a separate set of competition standards for media. Nor is there any need for one-size-fits-all restrictions such as the “duopoly” rule and the cross-ownership ban. Joint ownership of two of the leading television stations in a market, or cross-ownership of a newspaper and a broadcast station, need not significantly reduce competition in local markets with many media outlets. In individual cases, joint ownership could be beneficial despite producing concentration levels that would appear troubling. If joint ownership or operation is necessary to bring stations on the air that would otherwise not be broadcasting or would be insignificant as a competitive force, joint ownership is probably not anticompetitive. Joint ownership or operation can also enable stations to provide superior services that would not be economical for either station to offer by itself on a stand-alone basis. Such gains may outweigh competitive concerns. But this can best be determined by looking at each specific case. Finally, the national television ownership cap does not bear significantly on any competition issues whatsoever. Competition among televisions stations and other media outlets occurs at a local level. Competition in one local market is not reduced if one of the stations in the local market is jointly owned with a station in another market. Another reason offered for the media ownership rules is to promote diversity. I find it instructive to contrast the competition and diversity rationales. First, the justification for a competition policy is “market failure.” I do not know of a corresponding rationale that demonstrates that the amount of diversity produced by economic agents in the market is or would tend to be too small. Second, unlike with competition, there is no sound theoretical basis for linking deconcentrated station ownership to the types of diversity the Commission is concerned about. It is presumed that, with a given number of stations, content diversity will be greatest if all stations are separately owned. However, it is equally plausible to believe that, if one party owned several stations, it would purposely diversify the offerings on its stations so as to increase the overall audience it would attract. The link between ownership diversity and viewpoint diversity is equally tenuous. Station owners do not typically enforce their viewpoint on their stations. If we assume profit-maximizing behavior, diversity in the audience seems to dictate that there will be diversity of viewpoints expressed on each station, as well as diversity across stations. Furthermore, station managers and news directors usually determine what is aired, not the corporate owners. Even if it could be demonstrated that deconcentrated ownership resulted in increased diversity, this would not justify what I will call an “absolutist” approach to diversity, i.e., if diversity is good, then a policy that leads to more diversity must be preferred to a policy that yields less diversity. Such an absolutist approach is not the basis for sound decision-making. To illustrate with an example, most people would agree that safety is a desirable goal. Nevertheless, we do not adopt policies that “maximize” the amount of safety. Mandating speed limits of 25 mph everywhere, or imposing restrictive licensing that would sharply reduce the number of cars on the road, would both likely increase traffic safety. We choose not to adopt these policies, however, because the cost in inefficiency and loss of personal freedom is judged to be too high. Similar balancing is needed in the pursuit of diversity or any other social goal. As with competition, it is difficult to find any connection at all between diversity concerns and the national television broadcast ownership cap. What matters to diversity is the range of viewpoints available to individuals. That range is not diminished when a local media outlet available to an individual is jointly owned with another media outlet in another geographic area that is not available to the individual. A third FCC objective is localism. I understand this objective to be that stations will provide programming, including news and public affairs programming, that serves the needs and interests of their community. All media outlets have strong economic incentives to respond to the needs of their local audiences. Local ownership is not required to achieve local responsiveness; if local ownership were necessary, the ownership rules under consideration would be very inefficient tools to bring it about. There is no reason to think that cross-ownership of a broadcast station and a newspaper in a market, or joint ownership of two television stations in a market, would decrease localism. To the contrary, there is evidence that a television station that is jointly owned or operated with another local television station is more likely to carry news and public affairs programming. No one has shown that lifting the national television broadcast ownership cap would lead to less localism. In conclusion, competition in media can be preserved using antitrust standards without the need for one-size-fits-all restrictions like the “duopoly” rule and the cross-ownership ban. If, in selected markets, ownership concentration were allowed to rise to somewhat higher levels consistent with competition standards, I see no reason to think that the associated amount of diversity provided by broadcast stations and other sources would be insufficient. No separate ownership standard based on diversity is warranted. The national television ownership cap, which serves neither competition nor diversity, should also be removed. None of the rules is needed to promote localism.