Radio Zoning: How A Limited National Ownership Cap Can Improve The Local Radio Landscape

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(By John Garziglia) Later this year, the FCC is expected to reconsider its radio ownership rules – the rules that now limit an owner to no greater than eight stations in larger markets, with no more than five of those stations being FM stations. In what is known as the 2018 quadrennial review, the FCC is required by the Telecommunications Act of 1996 to determine if its broadcast ownership rules remain “necessary in the public interest as the result of competition.”

Broadcasters in Radio Ink’s Deregulation Series state a number of reasons why a relaxation of the radio ownership rules may be good – larger radio groups will be able to better compete with infinitely bigger social media platforms, radio will better attract capital, there will be no undercutting of rates when local competition is eliminated, rules unchanged since 1996 are not relevant today, formats would not be duplicated, and media brokers would be enriched. Many in our industry argue for no numerical radio ownership limits whatsoever.

The National Association of Broadcasters, in a June 15, 2018 letter, proposed that FCC ownership restrictions be substantially removed from radio.  The NAB advocates no ownership restrictions in unrated radio markets and radio markets smaller than the top 75 Nielsen-rated markets. In the top 75 Nielsen-rated markets, a single entity would be able to own up to eight commercial FM stations, with no limit on AM ownership. The NAB bases its proposal on the “actual state of competition.” 

With a further relaxation of radio ownership rules, an existing local broadcaster will be put into the position of either being bought out by a large radio group, or watching as its competition is bought out and then competing against a national group that owns all of the other radio stations in the market. Unfettered ownership may help large radio groups compete with Google and Facebook, but to the extent smaller broadcasters do not sell out, it will decimate them.  

If radio stations could be erected like fast-food establishments and grocery stores, with no numerical limits imposed other than a businessperson’s risk tolerance, it would be difficult to argue for FCC-imposed ownership limits on radio. Indeed, a regulatory agency enacting numerical limitations on restaurants and grocery stores would likely not pass legal muster.  

But there are widely-enacted municipal limitations on just about every type of local business. The limitations are called “zoning” – the permitting or prohibiting of certain uses in certain areas to protect the character of the community.  

The FCC’s radio ownership rules can be thought of as a kind of radio zoning. In the same way as land-use zoning protects a community’s character, the FCC’s ownership rules permit or prohibit certain radio station combinations protecting the amorphous concept of the public interest.  

In 1996, radio was transformed at the local level by both the relaxation of local ownership rules and the removal of the national ownership cap. An interesting mental exercise is to speculate what radio would be like today if the national cap had remained with only local ownership restrictions being relaxed.  

One sure result if the national ownership cap had been retained would be far more radio station owners than now. Far more diversity in programming is also probable.  Bud Walters (whose radio group I represent) observes in the May 17, 2018 edition of Radio Ink that: “[i]t’s fair to say that not imposing national caps has caused significant disruption … .  The outcome is one national player with tentacles in many businesses (radio, outdoor, concerts, rep firm, consultant, network, etc.) who’s both a competitor (local and national) and a supplier to traditional radio licensees (and others).”  Competing with another local broadcaster is difficult if that broadcaster, through size and breadth, controls most available programming sources and advertising placements.  

The radio ownership relaxations proposed by the NAB would once again transform radio at the local level just as did the 1996 elimination of the national cap. Rather than there being multiple competitors in local markets, there would be the potential of one dominant national owner. And that dominant owner would be forever ensconced as there will never be additional full-market-coverage radio stations.  

One dominant owner in each radio market, and possibly the same dominant owner nationwide, would once again alter radio as we know it. That one dominant owner may ultimately prosper, but remaining owners and radio would suffer.  

With land-use zoning, communities maintain a distinct character, livability, aesthetic, and economic success by not bowing exclusively to the profit motive of land developers. Allowing several or fewer owners to own virtually all of the radio stations in the country would doom the specialness of our radio industry.  

Today, many radio stations remain community-based successful beacons of information. A radio station that still maintains a one-on-one connection to each listener through multiple daily touches is wholly different than a nationally formatted music-box radio station.  

Allowing some existing owners to become bigger and more profitable is not a reason in itself for the FCC to eliminate current radio ownership restrictions. Radio is not simply a several-decades-old passing vogue, sandwiched in between the advent of TV and the Internet.

Rather than only enabling the big to get bigger, the FCC should instead look at the public interest as a whole. The uniqueness of the radio industry through local ownership is unlike any other media. In radio, there are truly a limited number of outlets. Television long ago sold its audience franchise to cable, which has unlimited channels. Anyone can author a blog, design a website, or deliver radio-like music or talk programming over the Internet. But only FCC-licensed radio station owners can deliver content to the ubiquitous AM-FM radio receivers still found in just about every automobile, home, and office.  

Radio broadcasters should ask the FCC to respect the special licensing power it has over our limited number of radio stations. Rather than enabling the big to get bigger and squeezing out the small, the FCC should acknowledge the massive competitive advantages that large national radio entities owning hundreds of radio stations have over smaller broadcasters, and the often adverse effects upon the public interest.  

The FCC should entertain the concept of ownership zoning in the upcoming quadrennial review to preserve the local nature of radio. Ownership zoning can be done consistent with the NAB proposal by only allowing radio groups up to a certain national cap size to throw off the ownership shackles advocated by the NAB.  

A limited national cap in exchange for fewer ownership restrictions should be debated.  That national cap is certainly fewer than 100 stations, and likely fewer than 50 stations. Those radio groups that are larger than the limited national cap would continue to be restricted to current local ownership limitations. Those under it could take advantage of the ownership relaxations proposed by the NAB.  

Radio broadcasters would then have a choice. Be small, local, and hyper-focused in several markets, owning most or all of the stations in those markets. Or, be big but not own all of the radio stations in a market. The FCC adopting a 50-or-fewer national radio cap for broadcast groups to take advantage of local ownership rule relaxations would be radio zoning at its best.  

John Garziglia is a communications attorney at Womble Bond Dickinson and can be reached at (202) 857-4455 or John.Garziglia@wbd-us.com

8 COMMENTS

  1. I’m a free-market kind of guy, but broadcasting is different. As John says, “If radio stations could be erected like fast-food establishments and grocery stores, with no numerical limits imposed other than a businessperson’s risk tolerance, it would be difficult to argue for FCC-imposed ownership limits on radio.” But, they can’t be built by anyone with enough money. There is a natural scarcity, created by the laws of physics.
    Radio is, by nature, a local medium. Each station has a finite range. Even the big Class C’s are limited to, basically, an area the size of a TV DMA. Radio is never going to duplicate the national (and international) footprint of Facebook and Google. In some ways, we already do by means of networks and rep firms. To attempt to compete by allowing a handful of companies to buy everything in sight is folly.

    • Keep in mind this very same FCC is SELLING, not licensing, scarce spectrum space to Telecom companies. How many telecom companies do we have? I suggest far fewer than radio companies. If people are really concerned about selling scarce resources, we should begin by objecting to the sale of radio spectrum to Verizon and AT&T. Of course that won’t happen, but I’m just pointing it out.

  2. As we’ve seen, iHeart has already issued the message to its ‘local’ market managers saying that, if this NAB deregulation scheme is, in fact, adopted by the FCC, it will have no choice but to keep growing, gobbling up even more stations. This, while iHeart is still in the throes of bankruptcy reorganization because of its irrational gorging on as many stations as it could gobble up, across the country, in a very non-local way. Same with Cumulus. And think of all the others dozens and dozens of mainly medium-size radio groups that no longer exist because of their financially unsustainable station feeding frenzy. If this NAB proposal is enacted, ‘local radio’ is gone forever. Which is it Chairman Pai and Commissioners, the localism that you repeatedly profess, or not?

  3. Once again, a reminder who is running the FCC: Republicans. What did Republicans run on? Deregulation and smaller government. Not just radio. They want to deregulate everything, from health care to the environment. They’ve begun making those changes already. Every Republican FCC for the past 20 years has wanted to eliminate the ownership caps. This isn’t a new idea. The last time it happened, it took an act of a Democrat Congress to return the limits to where they were in 96. If you want more regulations and more government imposed limits, you won’t get them from anyone who calls themselves Republicans.

    • FYI, in 1996 the FCC Commissioners were Hundt (Democrat-Chairman) Ness (Democrat) Quello (Democrat)
      Barrett (Republican) and Chong (Republican). Just sayin’.

  4. Why is anyone surprised? Their name is National Association of Broadcasters, Not Local Association of Broadcasters. I believe the majority of radio broadcasters would admit that deregulation overall hurt radio. Now we want to go do it again? Makes no sense.

  5. Amen! We have a stand-alone FM in a market with two groups–6 stations in one, 4 in the other (I-Heart). The manager of the larger group complains about the rate cutting by I-Heart. He, at least has local staff. The I Heart cluster has one guy doing everything, while news casts are piped in from Cincinnati, and the local manager splits his time between three markets.

    With our single metro station–we have a live morning show and a full-time news director. And a station rep-Katz–but wait, that’s I Heart.

    What the NAB proposal will mean is the radio equivalent of block busting. The big groups will buy out any competition–then eliminate staff, out-source programming, and take whatever rate they can get to pay down the (new) massive debt. Since they can buy anything in the market, they won’t offer top dollar like they did the last time around. No–they’ll try to drive the independents out of business by matching their format, and undercutting their sales. It certainly won’t mean better radio.

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