Washington Rethinking "Big Radio?"

The Telecommunications Act of 1996 loosened many long-established constraints on the ownership and operation of radio and television stations in the United States. The regulatory changes launched waves of mergers and acquisitions through the nation's broadcasting industry, consolidating what had been many regional companies into a few large conglomerates in just a few years. Backed by vice president Al Gore and the then chairman of the Federal Communications Commission (FCC), William Kennard, the changes were intended to make the broadcasting industry more responsive to the "free market."

Now lawmakers and regulators are wondering if the hands-off approach went too far, allowing a few big players to emerge and dominate, not only their broadcasting markets, but record labels and musicians, too. Representative Howard Berman, a Southern California Democrat, has initiated an investigation into possible ownership cap violations by Clear Channel Communications, Inc., owner/operator of approximately 1200 radio stations nationwide. With hundreds of stations on its roster, Viacom, Inc.'s Infinity Broadcasting is another major broadcaster likely to be scrutinized. Prior to 1996, the maximum number of stations that could be owned by any single company was only 40, with a limit of four stations in any major market. That limit was also raised, to eight. The number of radio station owners has dropped by 25% since the rules were changed.

The FCC is also examining the possibility that massive consolidation in the radio industry might have had a negative impact on competition or diversity in programming or hiring practices. The agency is considering whether broadcasters like Clear Channel and Infinity may have too much influence over stations they don't own by forging joint advertising deals. No specific investigation is being conducted against any particular broadcaster at this point, but the agency is asking plenty of questions. The FCC's current policy calls for closely reviewing any buyout that would give one company a 50% share of radio revenue in any market, or that would give two companies a 70% share. At the end of 2001, the agency was reviewing 128 ownership transfers. The National Association of Broadcasters has opposed any regulatory restriction of changes in station ownership or of market dominance, a position apparently also held by the new FCC chairman, Michael Powell.

Finally, Representative John Conyers of Michigan, the top Democrat on the House Judiciary Committee, has announced that he wants to investigate the phenomenon of record labels' paying radio stations to feature their artists. Known as "payola," the scheme was first investigated back in the 1950s, when disc jockey Alan Freed admitted that he had been paid to play records on the air. The practice has been banned by federal law ever since, but record companies have gotten around it by hiring "independent record promoters," who pay radio stations "promotional support" for playing recordings by certain artists. The record companies then reimburse these "indies" on a per-play basis. The third-party system is essentially payola, but the record companies are paying indirectly, and are therefore probably acting within the law—or so Conyers wants to determine.

Last year, Salon.com's Eric Boehlert wrote an in-depth exposé of the pay-for-play system that keeps American radio sounding so homogenous. Boehlert has also written extensively about Clear Channel Communications, a company he calls "Radio's Big Bully."