The FCC licenses all non-governmental broadcasting stations in the United States. Broadcast licenses are assigned to specific locales or regions of the United States, related to allocation tables that show coverage areas and areas of potential interference. Applicants must make a license application after determining whether a frequency is available for the desired community. For many years, the Commission was obliged to determine the character of the applicant, ascertain-ing qualifications such as citizenship, character, civic involvement in the community of license, prior experience in broadcasting, and other related factors. During the 1990s, the FCC streamlined the licensing and renewal process. Today, while the FCC still needs to determine the suitability of the applicant, rules concerning licensing have been relaxed. When there are competing applications for the same frequency assignment the Commission resolves the difficulty by means of an auction process, as mandated in the Telecommunications Act of 1996.

Historically, the FCC asserted a “scarcity theory” rationale for limiting the number of licenses that any entity could own. For example, the FCC imposed national limits on television station ownership and promulgated various rules designed to limit media companies from co-owning a television license and other media property such as a cable company, a newspaper, or a telephone service in the same market. During the 1960s, the Commission placed limits on ownership and restricted group licenses to a maximum of 5 VHF stations; later rules were relaxed to include 7 stations, then increased to 12 stations or 25 percent of the national audience. The FCC also promulgated the “duopoly rule” that limited a single owner to one AM, one FM and one TV license in a single local market. When the Commission instituted this rule in 1964, the U.S. television marketplace consisted only of 649 television stations and a small number of cable systems, which retransmitted the signals of over-the-air broadcast stations. Numerical limits were coupled with cross-ownership restrictions as a means of ensuring that the viewing public would be exposed to the widest variety of viewpoints within the local community.

Since its earliest days, the FCC has acted on the belief that diversification of media ownership generally served the public interest. Originally, numerical restrictions limiting ownership were developed to ensure that no one entity gained control of too many broadcasting stations. Additionally, limiting the number of stations that a broadcast entity could own effectively limited the power of the three original networks (ABC, CBS, and NBC) to reach into the local community. In 1975, the Commission adopted regulations prohibiting cross-media ownership between television stations and co-located newspapers. Although the FCC permitted a number of markets to continue with a co-owned newspaper-television station combination under a grandfather clause, the Commission asserted a public interest in enforcing a policy of diversification of media ownership. Even though the number of commercial television stations doubled in the thirty year period between 1966 and 1996, restrictive ownership policies remained a basic tenet of FCC policy.

The Telecommunications Act of 1996 fundamentally changed U.S. communications policy by abolishing the numerical restrictions on ownership, although it placed a maximum on national audience penetration of 35 percent. Terms for licenses changed as well. Until 1981, broadcast licenses were granted for a period of three years. During the 1980s the FCC eased license restrictions somewhat, but the Act increased license terms to 8 years. Additionally, section 202 of the Act required the Commission to execute a biennial review of rules and regulations with the presumption favoring the repeal or modification of unnecessary rules.

Growth of the industry, coupled with Congress’s legislative mandate in the 1996 Act to ease national ownership restrictions, have changed the media landscape in the United States, particularly in the area of radio ownership and operation. As the new millennium began, the use of the “scarcity” argument, originally offered by the Commission as the rationale for licensing and limiting ownership, has come under increasing scrutiny, particularly as the growth of broadcast outlets, cable, and satellite outlets spawned an unprecedented growth of new video services during the late 1980s and 1990s. With the passage of the 1996 Act, the FCC eased some rules and restrictions regarding local television ownership and local management agreement rules. The industry petitioned the Commission to make sweeping reforms during the 1998 biennial review, but the FCC declined to make broad changes to the rules at that time.

In 2001, Chairman Michael Powell created the Media Ownership Working Group. The group undertook a number of studies that focused on determining whether various broadcast ownership rules needed to be changed or modified under section 202 of the 1996 Act. Also, two significant cases, FOX TV Stations v. FCC and Sinclair Broadcast Group v. FCC, left the Commission with the task of either defending the current rules with substantive evidence or modifying some or all of the various ownership rules.

During the later part of 2002 the Commission released 12 studies conducted by the Media Ownership Working Group on various aspects of the ownership rules. The various ownership rules under consideration included:

1. newspaper/broadcast cross-ownership prohibition

2. local radio ownership

3. national television ownership limits

4. local TV multiple ownership rules

5. radio/TV cross-ownership restrictions

6. dual television network restrictions

Public comment was invited and the Commission set early 2003 as the time for reply. During this period various outside groups, reflecting both industry and consumer viewpoints, filed a voluminous number of comments regarding the status of the FCC rules. In June, voting along partisan lines, Powell and two other Commissioners voted to increase the ownership cap from 35 percent to 45 percent and to relax cross-ownership restrictions for newspaper ownership in all but the smallest TV markets. The Commission also lifted local ownership rules, allowing dual and triple ownership of stations in medium and large-sized television markets.

Following the Commission’s announcement, a firestorm of protests moved Congress to form a bipartisan coalition aimed at repealing the ownership caps. In the autumn of 2003, a compromise raising the cap to 39 percent was announced in the Senate. However, as the rules were set to be implemented, a federal appeals court in Philadelphia suspended all the FCC-adopted ownership changes. As this publication went to press, it was unclear whether the courts would sustain the FCC rule changes.

Proponents of relaxing ownership rules point to the increasing competition from cable and the Internet as the reason changes are necessary, but the increasing convergence of media properties has many media critics worried that the number of diverse voices in the local marketplace is decreasing. Critics of the proposed rule changes have pointed to a sharp decrease in the number of independent newspaper and television owners over the last quarter century. Some claim that relaxation in ownership rules will allow large media conglomerates to fortify their market power, although television network owners say that changes are necessary to sustain current standards of programming. Due to economies of scale and the convergence of new digital media, consolidation of television ownership may be inevitable.