BOND & PECARO

The Basis for Your Decisions

A Short Course on Broadcast Ownership Regulations and Anti-Trust Issues

BOND & PECARO
By Tim Pecaro


Pre-History

  •  1842 Samuel Morse patents the telegraph 
  • 1897 Marconi forms the Marconi Wireless Telegraph Co. which was later assumed by RCA
  • 1913 US closes private radio facilities and assumes control of the airwaves for war purposes
  • 1920 First radio broadcast for general reception by 8XK in Wilkensburg, Pa., and the first radio news broadcast of election returns by KDKA in Pittsburgh

History 101

  • 1926 National Broadcasting Company (NBC) is formed and the first live television broadcast is shown in England
  • 1927 NBC sets up two radio networks, the RED Network and the BLUE Network
  • 1934 Communications Act of 1934 Establishes Federal Communications Commission.
  • 1939 First regular television broadcast in United States. President Franklin Roosevelt at the New York World’s Fair.
  • 1941 FCC designates frequencies and authorizes FM

The Story behind the RED and BLUE Networks -- RCA (Radio Corporation of America) launches NBC (National Broadcasting Company) NBC controlled the RED Network derived from the Telephone Group and the BLUE Network derived from the Radio Group. In 1940s the FCC orders NBC to sell one of the Networks. In 1943 Edward J. Noble buys BLUE Network for $8 million, (Edward J. Noble inventor LifeSavers) and the BLUE Network becomes ABC (American Broadcasting Company)

  • 1953 ABC attempts to merge with Paramount Studios. The merger is objected to by two FCC Commissioners because of a erceived monopoly threat. More monopoly threats ensue in 1966 when ITT tries to take over ABC. The merger is approved, because RCA already owns NBC, but ITT withdraws over possible litigation.
  • 1979 FCC issues licenses for low-power UHF and VHF television stations
  • 1984 Cable Communications Policy Act -- Ended local regulation of cable and deregulated cable rates
  • 1992 The Internet is completed by the National Science Foundation
  • 1996 The Telecommunications Act -- Mergers in Telecom industry begin

Broadcast Deregulation

  • In the 1970’s Licensees were limited to a total of 7 television licenses, 7 AM radio licenses, and 7 FM radio licenses nationwide; known as the 7-7-7 rule.
  • 1985 the 7-7-7 rule was upgraded to the 12-12-12 rule. •    1992 saw the rules relaxed even further to the 12-18-18 rule.

Rules From The FCC

Telecommunications Act of 1996 changed regulation so that a single company cannot own more than eight radio stations in a given market, however, there is no limit on the number of radio stations one company can own nationwide.

In August 1999 the FCC created the “eight voices” test and the 35% rule. The rule said that Locally-a company may own two TV stations in the same market (a duopoly) as long as eight individual voices still exist. Nationally- No company may own more than 35% of the nation’s TV audience

FCC Ownership Challenges

  • The “eight voices” rule recently was challenged successfully by Sinclair Broadcasting Co. vs. FCC.
  • Viacom, Fox and NBC have successfully challenged the 35% rule.
  • Time-Warner successfully challenged the cable/broadcast cross-ownership rule.

Additional Rules From The FCC

Newspaper/Broadcast cross-ownership restriction -- Prohibits the same company from owning a newspaper and broadcast station in the same market. However, the FCC has permitted exceptions to this rule by allowing News Corporation and Tribune to acquire television stations in markets where they own newspapers, subject to future review.