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How Telecoms Got So Big

Erin Thompson May 21, 2007

By Erin Thompson

In 1996, under the guise of “promoting industry competition,” the U.S. Congress passed its first major telecommunications legislation since the 1930s. The landmark Telecommunications Act of 1996 reduced, or eliminated, barriers to corporate ownership of radio and television stations across the country. Although the internet has traditionally been seen as an open medium for dialogue and communication, the threat to net neutrality and the growing control of the internet’s infrastructure by a handful of media companies threatens to create a one-way flow of content similar to the informational monologue found in the traditional media sphere.

Radio: The 1996 Act completely removed the limit on the number of national commercial stations a company could own (previously a limit of 35) paving the way for the consolidation of the airwaves. By 2001, the number of radio station owners had dropped 25 percent, from 5,100 in 1996 to 3,800 in 2001. By 2005, four companies controlled all of the news format radio stations and at least 70 percent of the radio audience.

Television: The 1996 Act eliminated the number of individual TV stations a company could own and raised the national audience cap to 35 percent. Soon afterward, a wave of mergers consolidated the broadcast industry. By 2005, five companies (Viacom, Disney, AOL/ TimeWarner, Newscorp and NBC) controlled 75 percent of prime-time viewing.

Cable: The 1996 Act deregulated cable rates, supposedly to “benefit consumers.” Between 1996 to 2003, rates increased by 50 percent. On average, only one cable company serves 98 percent of households with access to cable. The Act also permitted the FCC to ease cable- broadcaster cross-ownership rules. As of 2005, 90 percent of the top 50 cable stations are owned by the same parent companies that own the broadcast networks (ABC, NBC, CBS and Fox).

Telephone Consolidation: The 1996 Act allowed local telephone companies to offer long-distance service outside of their own geographical areas immediately, and to offer long-distance service within their own areas after demonstrating that they had opened up their markets to competition. After passage of the Act, telephone companies initiated a wave of mergers and legally blocked enforcement of the legislation’s competition requirements.

Even as the industry consolidates, ordinary citizens and consumer groups are fighting back. In 2004, new FCC rules that would have further deregulated the industry were vocally opposed by millions of Americans and eventually tossed out by the federal courts. As the media advocacy organization Free Press notes, however, “The fight is far from over. While this historic victory invigorated a nascent media reform movement, it only has preserved the status quo. In fact, the stakes have only become higher.”