• by adam.m , Michael Deibert , July 13, 2005

When the Federal Communications Commission (FCC) introduces its proposal to alter rules affecting media ownership in the United States tomorrow, marketplace participants and analysts expect the decision will further loosen the restriction on ownership consolidation.

The Telecommunications Act of 1996 mandated that the FCC review broadcast ownership rules on a biennial basis to determine whether any changes would be necessary. Having relaxed restrictions limiting ownership of stations to 40 or less to allow companies to buy more of the market, a June 2003 FCC proposal wanted to loosen regulation further. But, a June 2004 U.S. Appeals Court decision declared that wasn't justified. Sent back to the drawing board, the body has devised a proposal that will be unveiled tomorrow.

Public interest groups have voiced their opposition to changes aiming to further concentrate ownership in the hands of a few companies and media industry associations have been supportive of fewer restrictions on ownership. However, a report this month by MAGNA Global, a New York-based media services firm, suggests that any relaxation in the rules would have both positive and negative repercussions on the media advertising industry.

The report, entitled "A Consolidation of Information" states that the benefits to advertisers in content offering remain unclear, noting that, though advertisers may benefit from consolidation in that "one station (may be able) to focus on one audience and another station to focus on different, unduplicated degree... Benefits may be lost if combinations lead to excessive homogenization or automation." The report had a similarly neutral conclusion on product innovation, with no clear determination as to whether the likely changes would help media suppliers develop new technology.

Concentration of ownership may inhibit development, but it may also create an environment where new technologies will develop one way or another, according to Brian Wieser, MAGNA's vice president and director of industry analysis. He cites Craigslist as an example of the decimation of local classified ad markets. "One could make an argument that more integration will benefit consumers to the same extent. Most of the online players realize they need to have a strong content offering that today is really only available from the conglomerates," Wieser said.

Pluses for consolidation, not surprisingly, are seen as data integration. Consolidated media would be better able to afford EDI (electronic data interchange) technologies and speedier adaptation of ratings and readership standards. And, advertisers would be dealing with fewer platforms of data to integrate.

However, many think the logic behind the FCC's reasoning for changing broadcast regulations will be key in determining how sweeping and effective any proposed changes will be.

"The question is by what means will the FCC justify the loosening of regulations?" asks Wieser "If they can come up with a better process to define these issues, then they're less likely to lose appeals that will inevitably wind their way through the courts."