Good Intentions/Bad Results: The FCC and the Law of Unintended Negative ConsequencesRichard E. Wiley
Winter 2002 | The Cornerstone Papers, The Media Institute, No. 5
There is an old saying that "the road to ruin is paved with good intentions." This principle has a particular application in the field of civil liberties. Indeed, in the words of Supreme Court Justice Louis Brandeis:
Experience should teach us to be most on our guard to protect liberty when the government’s purposes are beneficent. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.
Over the course of the past four decades, I have witnessed the unfolding of FCC regulatory policy from a number of different perspectives (as General Counsel, Commissioner, and Chairman, and, more recently, in the private practice of law). During this long period of time, I have seen numerous instances in which FCC commissioners acted to regulate broadcast "speech" with the very best and loftiest of intentions. All too often, however, their efforts came to naught when—in the light of actual experience—it became clear that these actions brought about unexpected negative consequences that were seriously detrimental to the interests of the listening and viewing public. Several notable examples are set forth below.
For several decades prior to its repeal in 1987, the Commission’s so-called "fairness doctrine" mandated that broadcast coverage of controversial issues be "fair" in the sense that each individual station was obligated to afford "reasonable opportunity for the presentation of contrasting viewpoints." The objective of this regulatory program was expressed in the most "beneficent" terms imaginable—i.e., promotion of "the paramount right of the public in a free society to be informed and to have presented to it for acceptance or rejection the different attitudes and viewpoints concerning" the vital issues of the day.
At the time, the FCC believed that this affirmative use of government power was needed to expand and enrich broadcast debate. The agency conceded that this policy raised a "striking paradox"—because "freedom of speech has traditionally implied an absence of governmental control or supervision." But it was thought that such regulation was needed in the broadcasting field to protect the overriding right of the viewing and listening public "to be informed."
This emphasis on the rights of listeners over those of speakers had the effect of turning the First Amendment on its head by elevating the power of government regulators over the liberty of individual citizens. The practical consequences of this policy were—by any standard—seriously inimical to the public welfare.
After several decades of experience with the administration of this policy, the Commission concluded that the results were very much the opposite of those intended. Specifically, the agency determined that the fairness doctrine actually had the effect of reducing the diversity of viewpoints presented to the public by establishing "substantial disincentives to broadcasters to cover controversial issues of importance in their community." In addition, it found that the very existence of the doctrine created a danger of politically motivated intimidation of broadcasters by government officials.
The potential for such intimidation is well illustrated by activities of both Democratic and Republican administrations. During the Kennedy and Johnson years, radio stations that broadcast anti-administration viewpoints were inundated with fairness doctrine complaints. As reported by Fred Friendly in his book appropriately entitled The Good Guys, the Bad Guys, and the First Amendment, this was part of a "massive strategy . . . to challenge and harass the right-wing broadcasters and hope that the challenges would be so costly to them that they would be inhibited, and decide it was too expensive to continue." This strategy was said to have been successful in almost all respects. Similarly, an official in the Nixon White House proposed to deal with his administration’s perception of unfair coverage by establishing an official monitoring system through the FCC.
Fortunately, these problems no longer afflict us because the fairness doctrine is now a mere relic of by-gone days.
For a number of years in the 1970s, the FCC administered a regulatory program that was intended to promote "diversity" in radio station entertainment formats (e.g., classical vs. country vs. rock music). Specifically, in cases where the proposed purchaser of a station planned to discontinue a format that was not otherwise available in the local market, the agency believed that it should hold evidentiary hearings to determine whether such discontinuance was consistent with the public interest.
However, after gaining substantial experience in implementing and enforcing this policy, the Commission ultimately concluded that it inescapably had a "chilling" effect on format innovation and experimentation. In addition, the FCC acknowledged that "allocating entertainment formats by market forces has a precious element of flexibility which no system of regulatory supervision could possibly approximate." Accordingly, the Commission abandoned this entire regulatory program—recognizing that it could not possibly match market forces in responding quickly and efficiently to shifting consumer tastes. And the agency’s determination was ultimately upheld by the U.S. Supreme Court.
For a period of more than a decade and a half, the FCC maintained the position that the broadcast of major-party candidate debates should entitle "fringe" party candidates to equal time. In one such case, the Commission ruled that coverage of a debate between the Republican and Democratic candidates for governor of Michigan mandated a grant of equal time for the candidate of the Socialist Labor Party, a party that in the previous election received only 1,479 votes out of a state-wide total of 3,255,991.
Once this and similar precedents came to be generally understood, the result was the virtual elimination of broadcast coverage of candidate debates. Fortunately, the agency ultimately came to its senses and reversed course in 1976. As a result, radio and TV coverage of debates has been a central feature in the American electoral process ever since that time.
Personal Attacks/Political Editorials
For many years, the Commission’s rules mandated that stations afford a "right of reply" to individuals who were subject to broadcast criticism of their honesty, integrity, or character. The rules also provided similar reply opportunities for candidates who were disadvantaged by broadcast station political editorials. As was the case with the fairness doctrine, policymakers envisioned that these rules would expand and supplement broadcast coverage of the matters in question.
But after more than a decade of litigation, the courts ultimately forced the FCC to abandon these rules in the face of compelling evidence that they resulted in "self-censorship" by broadcasters. Thus, as was the case with the fairness doctrine, these rules had the net overall effect of "reducing rather than enhancing speech."
For almost a quarter-century, the FCC’s so-called financial interest and syndication (fin/syn) rule severely restricted network ownership interests in TV programs. The rule generally limited these interests to the right to carry shows on the networks themselves - and foreclosed network investment in other uses of the same programming in foreign distribution, subsequent distribution in domestic re-runs, merchandising, etc. They also precluded direct network involvement in the syndication (i.e., marketing) of these shows to domestic and foreign television stations. A companion regulation, known as the prime time access rule (PTAR), generally precluded the airing of network programming during the first hour of prime time (7 - 8 p.m. Eastern Time). At the outset, the Commission hoped that these rules would strengthen independent sources of program supply and reduce "network dominance."
Over time, however, it became apparent that the actual effect of the fin/syn rule was the polar opposite of that which had been intended - i.e., it "hamper[ed] the entry of new firms into production by blocking an important mechanism (the sale of syndication rights) by which new firms might have shifted the extraordinary risks of their undertaking to the networks." After an intensive and protracted series of legal and administrative battles, the courts ultimately forced the Commission to face up to these realities and abandon the rule. Then the agency acted on its own to repeal PTAR—after finding, among other things, that the rule had reduced investment in "access" period programming by replacing network-quality programs with much more cheaply produced game shows.
The FCC has long maintained an array of regulations that limit the number of media outlets that can be owned by a single entity. The agency hoped that these so-called "structural" rules would indirectly promote "viewpoint" diversity. This was based on a belief that an increase in the number of editorial voices would likely bring about a corresponding increase in the diversity of views presented over the media.
Unfortunately for the Commission, there is very little evidence to support the accuracy of its basic premise. Indeed, a recent study sponsored by the agency itself showed that the odds were no better than 50/50 that the editorial position of a TV station would conform to that of a co-owned newspaper.
But regulatory limits on such media combinations are not merely ineffectual in achieving their stated aims; they have a substantial tendency to undermine the efficiency and viability of regulated media outlets. For example, by generally limiting television broadcasters to one channel per market, the rules have the effect of limiting the efficiency and competitiveness of free over-the-air broadcasting vis-à-vis cable, DBS, and other multi-channel video distribution services.
Moreover, in at least one important respect, the FCC is fundamentally misguided in its assertion that these so-called "structural" rules are less destructive of the freedom of expression than are the agency’s content-based regulations. In fact, while the content restrictions infringe on certain particular aspects of programming operations, the ownership rules totally obliterate the right of a speaker to utilize a given channel (or channels).
What should the FCC have learned from all of this? It seems to me that there are at least two important lessons:
(1) In virtually every case, FCC regulation of electronic media "speech" has resulted in substantial unforeseen negative consequences; and
(2) Even when these results became apparent to virtually all disinterested observers, the agency has historically been very slow in bringing about appropriate regulatory reforms.
In all likelihood, these problems are inherent in any effort to substitute government regulation for a free marketplace of ideas. The market for the dissemination of ideas and opinions is far too subtle and complex to be readily susceptible to bureaucratic analysis. This is especially true where the target of this analysis is a hypothetical environment in which the behavior of entrepreneurs is to be altered by regulatory policy.
In addition, even after the FCC gains experience through actual administration of a regulatory regime, it is painfully difficult and time-consuming for the agency to effectuate needed reforms. As has been demonstrated by economists Roger Noll and Bruce Owen, agency "regulation itself benefits certain firms at the expense of others, thereby creating and destroying the very interest groups that participate in debates on deregulation." Politicians also frequently develop a powerful attachment to maintenance of the regulatory status quo.
As a result, once enacted, a rule tends to take on a life of its own. Even when the original rationale for its enactment is thoroughly discredited, there is commonly a far-reaching search for any substitute theory that could conceivably provide support for the rule’s retention. In such circumstances, decision-makers are often unwilling to let go of their grip on a rule until every alternative theory (no matter how far-fetched) is fully and exhaustively explored. All too often—as was the case with the personal attack and political editorial rules—it takes years of protracted litigation to force the FCC to finally face up to reality and enact the appropriate regulatory revisions.
A Way Out
Given the inherent difficulties that infect government regulation in this field, it would be most helpful if the Commission and the courts would recognize an analytic framework that would facilitate regulatory reform. In an ideal world, an application of conventional First Amendment principles would provide such a framework. Unfortunately, this isn’t an ideal world. In the 1969 Red Lion decision, the Supreme Court determined that broadcasters are not entitled to full First Amendment protection comparable to that enjoyed by the print media. And in the ensuing years, the courts have not generally demonstrated an inclination to alter this situation.
However, a promising development arose earlier this year with the release of the opinion of the U.S. Court of Appeals for the District of Columbia Circuit in Fox Television Stations, Inc. v. FCC. In that case, the court explained that the FCC’s "content-based" regulations must be subjected to heightened First Amendment scrutiny—i.e., that they can be upheld only if they are "narrowly tailored to further a substantial governmental interest."
The court also discussed a provision in the 1996 Telecom Act in which Congress applied a somewhat similar standard to the Commission’s "structural" media ownership regulations. Specifically, the 1996 Act provides that, on a biennial basis, the FCC must reexamine each of its ownership rules and determine whether such rules continue to be "necessary in the public interest as the result of competition." It also provides that "the Commission shall repeal or modify any regulation it determined to be no longer in the public interest."
In its opinion in the Fox case, the D.C. Circuit held that the Act "carries with it a presumption in favor of repealing or modifying the ownership rules." The court also reached an initial determination that the term "necessary in the public interest" requires much more than a showing that a rule is simply useful for, or consonant with, the public interest. The appellate panel found that to be considered necessary, a rule must be "required" or "indispensable." Ultimately, however, at the FCC’s request, the court decided to leave the meaning of the term "necessary" open for resolution in later proceedings. At this point, we can only hope that future FCC and court decisions will firmly establish the need for a strict showing of necessity as a prerequisite for retention of the media ownership rules.
But regardless of the final resolution of this particular issue, it appears that the D.C. Circuit has provided a road map that will be instructive in showing a way out of this long-standing regulatory quagmire. Indeed, the cause of freedom of expression is likely to be substantially strengthened through the combination of heightened First Amendment scrutiny for the FCC’s content-based rules and the statutory "presumption" favoring repeal of the media ownership rules.
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